Vertical Integration of the Film Industry
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Hollywood Why is Hollywood such a successful film industry? Hollywood Vertical integration of the Hollywood film industry Vertical integration was a key feature of the Hollywood studio system up to 1948. The ‘Big Five’ studios were: "The Big Five," major studios realized they could maximize their profits by controlling each stage of a film's life: • production (making the film), • distribution (getting the film out to people), • exhibition (owning first-run cinemas in major cities). • "The Little Three" studios also made pictures, but each lacked one of the crucial elements of vertical integration. • Together these eight companies essentially controlled the entire market. They also controlled the terms under which you could see their films. Prestige or “A-Movies” used studio stars and lavish production values, and then could only be seen initially in studio-owned, first-run cinemas. When the studios released these films to cinemas they didn't own, they forced those owners to buy A-pictures in combination with a number of, often mediocre, B- pictures (no stars, bargain-basement genre pictures) and shorts, a practice called "block booking." Moreover, the studios often made the exhibitors buy the films blind, not allowing them to see what they were getting before they got it. The end of Hollywood's Golden Age In 1948 the studios were ordered to give up their cinemas, opening the market to smaller producers. This, coupled with the advent of television in the 1950s, seriously compromised the studio system's power and profits. Hence, 1930 and 1948 are generally considered bookends to Hollywood's Golden Age, the period when these eight companies secured 95 percent of all film rentals and close to 70 percent of all box-office receipts. So, Vertical integration has gone, making the Hollywood studios more competitive? Case study: All owned by Rupert Murdoch Type Subsidiary of News Corporation Industry Film [1] Founded May 31, 1935, by merger of Fox Films (founded in 1915) and 20th Century Pictures, Inc. (founded in 1929) Founder(s) William Fox Joseph M. Schenck Darryl F. Zanuck Raymond Griffith William Goetz Headquarters Fox Plaza, Century City, Los Angeles, California, United States Products Motion pictures, television films Owner(s) Independent (1915–1985) News Corporation (1985–present) Parent Fox Entertainment Group Divisions 20th Century Fox Animation Fox Animation Studios Fox 2000 Pictures Subsidiaries Fox Searchlight Pictures Fox Atomic Fox Interactive 20th Century Fox Home Entertainment Fox Television Studios Blue Sky Studios 20th Television/20th Century Fox Television Fox Star Studios Website www.foxmovies.com Type Subsidiary of News Corporation Industry Film, television Founded 1990s Headquarters Fox Plaza, Century City, Los Angeles, California, United States Key people Jim Gianopulos, Chairman, CEO Products Motion pictures, Television programs Revenue $13.28 billion USD (2004) Operating income $2.9 billion USD (2004) Net income $1.85 billion USD (2004) Owner(s) News Corporation Employees 12,500 (2004) Parent News Corporation Type Public Traded as NASDAQ: NWS NASDAQ: NWSA ASX: NWS ASX: NWSLV NASDAQ-100 Component S&P 500 Component S&P/ASX 50 Component Industry Mass media [1][2] Founded Adelaide, Australia (1979) Delaware, United States [3] (12 November 2004) Founder(s) Rupert Murdoch Headquarters 1211 Avenue of the Americas, New York, NY 10036, USA Area served Worldwide Key people Rupert Murdoch (Chairman and CEO) Chase Carey (President & COO) Products Cable network programming, filmed entertainment, television, direct broadcast satellite television,publishing, and other [4] Revenue US$ 33.706 billion (2012) [4] Operating income US$ 2.212 billion (2012) [4] Net income US$ 1.179 billion (2012) [4] Total assets US$ 56.663 billion (2012) [4] Total equity US$ 24.684 billion (2012) [4] Employees 48,000 (2012) Subsidiaries List of subsidiaries Website NewsCorp.com Some of those names for this year: • BV = Buena Vista – a subsidiary of Disney • P/DW = Paramount Dreamworks • Gold = Samuel Goldwyn Studios (ex- MGM) The interesting one: • LGF = Lionsgate – (Canada) the most commercially successful independent company in North America Type Public Traded as NYSE: TWX S&P 500 Component Industry Mass media Predecessor(s) Time Inc. Warner Communications Founded 1990 Headquarters Time Warner Center, 10 Columbus Circle, New York City, New York,United States Area served Worldwide Key people Jeffrey L. Bewkes (Chairman & CEO) Products Television, movies, entertainment, cable,broadcasting, radio, web portals Revenue US$ 28.7 billion (2012)[1] Operating income US$ 6.1 billion (2012)[1] Net income US$ 3.5 billion (2012)[1] Total assets US$ 68.304 billion (2012)[1] Total equity US$ 29.954 billion (2011)[1] Employees 34,000 (2012)[1] Subsidiaries List of subsidiaries Website www.TimeWarner.com US Weekend box office February 15-17, 2013 UK Box Office for 2012 • Momentum Pictures – a successful British film Distributer ……Owned by Paramount Pictures. British Involvement? • Most of these films have British actors, many in the lead role. • Is it important to British audiences to see British stars on screen? Media Ownership • Have the big studios managed to find a modern equivalent of vertical integration? • Why do you think that the big studios own smaller production companies? • Why not just focus on making big, mainstream releases? • Can the British film industry compete? Case Studies • Find out what information you can about at least one American film production company. Do they have links to wider media ownership? • Do the same for a UK film production company hint: Aardman, Film4, New Line Cinema, etc Look at co-productions.