Daniel Hopkins

MEDIA COMPANY CASE STUDY

TASK 1 UNDERSTAND THE STRUCTURE AND OWNERSHIP OF

THE MEDIA SECTOR

In general terms, private ownership refers to a business not owned by the state. This may mean it is owned by a non-governmental organization or by a small amount of stockholders. Private companies shares are not sold on the stock market, but are rather sold or exchanged privately between individuals or groups. Some companies may be private because they are family owned and have been commonly passed down the generations for years, with all stock-holders coming from the same family and their close friends. This type of ownership also allows for less stricter regulations in terms of trading and security among other things, as they do not have to conform to the requirements of public companies.

Rolex is a privately owned company and maker of luxury watches. They make huge profits each year and as they are private and no numerous stockholders to give money to, they share the money out between employees and give large amounts to charity, as well as sponsoring certain events. Boots is also owned by a private company: Alliance Boots. They were criticized for moving their company’s HQ to Switzerland, where they could save millions in UK tax. This is somewhat of an advantage for privately held companies, as they can move to countries where tax laws are much less stricter. These companies are usually known as ‘tax exiles’.

Advantages of private ownership include the fact that it easy to control, with only one person needed to start and dissolve a company. The few people who do run the company can also make strategic decisions without having to answer to shareholders. They can also decide what to do with profits, using them for either financial gain or to assist in company growth. Disadvantages include not being able to earn large amounts of capital through issuing shares, as they cannot issue share to the public. They may also lose all of their funding, as it is usually from individuals rather than groups.

TYPES OF OWNERSHIP: PRIVATE OWNERSHIP

A public service is a type of service that is usually provided by the government to people within its jurisdiction and is usually financed through a diverse range of funding. They are sometimes simple provisions, which many agree should be readily available to all, regardless of income. Examples of public services are healthcare, education and public broadcasting. Other services that fall under public services also include the police, fire brigade and military, which are financed by taxes, which includes wages, equipment and training.

The BBC is a public service, providing a variety of television channels and radio stations. This is because it is funded through license fees- an annual £145.50 fee that provides people with the above services- meaning it has to cater for a variety of people. Other public services may be financed through direct government funds or individual contributions.

Describe it and give an example

Advantages for public service include essential services being provided, everyone having some form of benefit or gain from it and wasteful duplication of sources is limited. However as with all types of ownership there are many disadvantages. There is a risk of heavy political interference, which can greatly change how it runs and what its output is. Losses must also be met by a taxpayer as it is a public service and so must be covered by the people. Employees may also lack incentive to work, if they are not getting shares in the company they are running or being awarded bonuses.

TYPES OF OWNERSHIP: PUBLIC SERVICE

Independent ownership is a form of private ownership but, it could be an independently owned franchise of a larger group. Independent companies will not have multiple locations throughout a country which is common with privately owned businesses. Independent businesses are all private but, not all private businesses are independent.

Typically, an independent business will be small in the majority of circumstances and could be anything ranging from a corner shop to a market stall selling handmade goods. However, there are larger independent companies, especially in the world of film. Independent film companies will usually only produce small budget films due to limited investment and ones that appeal to a specific audience. Samuel Goldwyn is an independent film company, which produces a variety of films and documentaries, it is based in New York City. Advantages of independent ownership include deciding what to do and making your own decisions by yourself or with other owners. It is also relatively easy to set up a business and means you can choose what area of work you want to do and when. Disadvantages include the fact that it is easy to set up, as thousands of likeminded people will be doing the same. This may restrict finances and starting off, it will be hard to maintain a profitable company.

TYPES OF OWNERSHIP: INDEPENDENT

A media conglomerate is a company that owns large numbers of companies in various mass media such as television, radio, publishing, movies, and the Internet. This can give them huge control in certain markets as they may own many successful divisions of one media sector. Conglomerates are effectively a large company composed of many smaller companies, which would seem to be engaged in unrelated business.

TYPES OF OWNERSHIP: CONGLOMERATE

The biggest six conglomerates (known as the big 6) are The Walt Disney company, NewsCorp, Time Warner, CBS Corporation, Viacom and 21st Century Fox. These six dominate the film, television and film industry, with many major companies being owned by one of them. For example, The Walt Disney company is the largest media conglomerate and as can be seen above owns many different TV channels such as ESPN, ABC and The Disney Channel. They are all unrelated channel types and is good example of how far conglomerates reach into the media world, as well as how much they can control. The Walt Disney company also owns Marvel Comics, the Disney music group and the Walt Disney theme parks.

A benefit of a media conglomerate is that it owns so many things and can intertwine its own media. For example, a TV show successful on the channel Fox may be then turned into a movie, which would then be distributed by 21st Century Fox. As conglomerates have a wide range in the media spectrum, they will make enormous amounts of money and will often have large profits which they may use to fund new creative output or to purchase a new company to join its conglomerate. Disadvantages include the fact they do control a wide range of companies and may be more loyal to sponsors rather than public interest. They may also manipulate prices as much as they want.

Horizontal integration is a business strategy where a company acquires or creates a production unit to assist with their output. For example, a company may produce something but, use a third-party to distribute and market it for them. It involves the addition of other business activities at the same level of the value chain.

TYPES OF COMPANIES:HORIZONTAL INTEGRATION

By combining operations with other companies, perhaps even competitors, it saves money and increases income. If a company develops into other areas of one industry they will be able to benefit from other markets. This can be done by developing a company in that area of production (like producing films) by buying out/taking over another company in the same stage of production. This means that they will not have competition whilst making money from both markets. Other examples of horizontal integration include where an oil company may purchase a group of new oil refineries or a jeweller buys more jewellery shops. Advantages include cost advantage and having a stronger presence on the market. It also means that a company can expand without having to build something new from scratch. Disadvantages include the business getting too big which may lead to resources being managed improperly. They may also have doubles of staff, which would lead to redundancies and a lack of communication between each sector.

This is when a company has the ownership of the means of production, distribution and exhibition of a media product. Due to owning all branches of the supply chain, the company will subsequently receive all of the profit. An example I found was Time Warner and their distribution of the film ‘Harry Potter and The Deathly Hallows Part 2’. Time Warner, as mentioned are a conglomerate and many of the smaller companies they own will be able to perform the certain tasks in the supply chain of the film. The film was created, funded and oversaw by Warner Bros. Pictures, distributed by Warner Bros. distribution and marketed on several of Time Warner’s TV channels. HBO and CNN ran a series of adverts and behind the scenes shows in the run up to the film, which will assist it’s owning company. The film was released in Warner Bros. cinemas and the TV premiere was on HBO. An advantage of vertical integration is that a company doesn’t have to seek the help of other companies, as the supply chain is all catered for within the company. This will save the company the money of hiring someone else to do the work. Disadvantages include the fact the company will have to cover the finances themselves if any mistakes occur along the supply chain. Also, though not affecting themselves vertical integration affects independent films who cannot afford to complete the stages of production within their own company and so will not be able to compete with larger companies.

TYPES OF COMPANIES: VERTICAL INTEGRATION

Cross media convergence is the combination of two mediums in the media industry, these could include music, TV, film, video games and magazines. The use of cross-media convergence helps to bring more money in as buyers of one media product may then but the media convergent. An example of a prolific person in cross media convergence is the rapper and sometime actor, Eminem.

Eminem has starred in a film called “8 Mile” with him writing several of the songs featured in the soundtrack. He also won The Academy Award for best original song for “Lose Yourself”. This increases awareness of him in the world of film, with casual movie-goers watching the film and possibly becoming a fan. He will have made money from his acting role as well as money from the soundtrack and promotional appearances for the film. The cross media convergence here is between the movie and the CD soundtrack.

Eminem has also worked twice with the ‘Call of Duty’ series, which are first-person action video games. In 2010 on ‘Call of Duty: Black Ops” one of his songs, ‘Wont Back Down’, was featured in the game as an accessible song to accompany the players gaming. In 2013 he again worked with Call of Duty, this time on their new game ‘Call of Duty: Ghosts’. The song ‘Survival’ from his new album was featured in the game’s trailer and in the game. During Survival’s music video, gameplay from Call of Duty can be seen in the background along with its logo, which is prominently shown. The idea is to attract rap fans to gaming and vice-versa, with Eminem earning himself lots of money due to the songs appearance in the game. The convergence here is between music and video games.

An advantage of cross media convergence is that a company can make more money and bring in new fans/buyers/supporters from different media preferences. A disadvantage is that it may not be successful and fans of certain types of media may be disappointed at the convergence with others.

CROSS MEDIA CONVERGENCE

Synergy’s are the interconnecting marketing and distribution of media across a wide range of platforms. It involves the promotion and sale of a product through various subsidiaries. It gives a person or company a chance to expand their market and monetary income, through appealing to different people with different tastes in media. The difference between synergy’s and cross media convergence is that cross media convergence involves just media products and platforms, whereas synergy’s can expand to many other fields. In the world of music, synergy's are very prominent as many different types of merchandise can be created, to be sold to fans of the artist/band.One band who have a successful synergy are One Direction. They are an extremely popular boy-band appealing to young children up until teenagers. Due to this they have a wide range of 1D related products on the market. These include music videos, documentary movies, CD’s, toys, clothing, jewellery, posters and even things such as stationary sets and sporting equipment. They are so popular it was most likely deemed to be a wise move to produce many goods associated with them, as it would increase their income. Each product will help promote the others, with some more so than others.This is a major advantage for a synergy. By expanding to different types of markets and selling many things to die hard fans, the extension of income through extension of outlets will be extremely large. A disadvantage is that people may think that a company is ‘milking it’ and selling pointless products for financial gain. This may lead to people buying less products in the future.

SYNERGY

The music industry is a complex system of many different organizations, firms and individuals who contribute to different processes. There are many elements to the music industry from creating the song to distributing it . Firstly, someone will come up with and then write a song. This is usually either the singer themselves or a lyricist who provides songs for many different people. The song will then have to be recorded in a studio, which will require audio technicians and directors among others. Next, the song will then have to be released, so it will be advertised through many different means including TV, newspapers and magazines. It then may need to be created in CD form so it will have to be manufactured in a factory. It will then need to be distributed, which will be done through many different stores and online. These are only a few key components of the process, as the industry employs many more people in a huge amount of roles. Many bigger music companies will be horizontally integrated, as they can acquire other businesses in the industry. However, smaller, independent companies wont be able to do this, instead being vertically integrated. This means that they control all aspects of the production phases including creation, marketing and distribution. Some music companies are independent yet still very successful such as the Domino Recording Company. Larger successful ones such as Aftermath records are owned by Universal Music Group, who are a subsidiary of universal.

MUSIC INDUSTRY

OWNERSHIP STRUCTURE

My case study is on the huge international and well-known media company, The Walt Disney Company. It doesn’t belong to any one media sector as it owns many smaller businesses and companies, as well as having many subsidiaries. It has huge influence in film, creating and producing its own films, as well as owning Marvel Comics(meaning it also owns marvel films) and LucasFilms (StarWars).

The company is a conglomerate, as it owns large numbers of companies in many different forms of media. These include ABC, ESPN, The Walt Disney Theme Parks, Hulu and Marvel Comics among many others. It is generally seen as a children’s company, though that is what it merely started out as. It has retained its highly recognizable name and logo for many years.

Disney is now a global competitor considered one of the big 6 in the media industry, alongside NewsCorp, Time Warner, CBS Corporation, Viacom and 21st Century Fox.

THE WALT DISNEY COMPANY

The company was founded in 1923 by Walt Disney and Roy O. Disney. It currently has stock on the stock exchange, which are available for purchase by the public. Currently, there are millions of stock holders. The current CEO and COO of The Disney Company is Bob Iger. He will make the big decisions along with the help if a board of people. Though the company is owned by millions of people, this does not mean that they have a role within the company’s running or output. This may only apply to holders of large amount of stock such as below.

Here is a list of the top 5 owners of stocks in The Walt Disney Company:

OWNERSHIP

The company is both vertically and horizontally integrated. The Walt Disney Company owns many studio entertainment, consumer product companies, and media networks. However, it also plans, produces, advertises, and distributes some of its products on its own.

The Walt Disney company owns many film making businesses such as Marvel Entertainment, LucasFilm, Hollywood Pictures, Miramax films and Pixar. These companies will do things on behalf of The Walt Disney Company, such as making films that appeal to different audiences and ones that cannot feature the Walt Disney Logo at the start. For example a horror film wouldn’t look so scary if the Disney castle opening was at the start of it.

However, it also creates and produces its own films, such as Walt Disney Animations. These are the hallmark of the Disney Company and so they will often want to take part in the full process of the film themselves.

As Disney is one of the ‘big 6’ the five others members of this group are its main competitors, with each of the conglomerates owning various types of media that compete against one another. This can affect income as each own respective international organizations in different types of media, such as film, TV, music, theme parks and video websites. Due to this Disney- as will all the other companies- will strive to make their respective markets as popular and as good as possible.

Disney will often change its output depending on what is currently popular and also try and replicate the successful products of other companies. For example, if Universal released a highly successful animated film, Disney might respond with a bigger and better film two years later. This is to try and show that they have dominance over that area of the media. Disney then make a ride out of a film at their theme parks, depending on its success.

Disney will also have to compete against illegal things that also harm the industry as whole, such as illegal downloading and film copies. They will have large range of copyright and trademark laws that prevent people rom using it, which will result in possible prison sentences for those involved. They may also have a group of people who go online themselves and filter through all of the illegal copies of their work, reporting the sites to the service provider.

COMPETITORS

Though there are no exact figures for how many people have purchased Disney products over the past 80 years, it will run into the millions and even hundreds of millions. This involves the dozens of films they have released, the television shows, the theme parks and all of the accompanying merchandise. This will generate billions in revenue for them, with a statistic I found stating that they make approximately $35 billion a year. This means that it has most likely made over $1 trillion dollars in its history.

The audience for Disney is generally aimed at children as they have theme parks based on children’s animated movies and The Disney Channel, which features many different comedy shows. However, they are not the sole demographics, as many people will enjoy Disney films and the theme parks. The majority of their output however, will be aimed at children. As a conglomerate and not just looking at things Disney-related, the company owns ESPN, ABC and numerous film companies. This means that their audience can stretch to sports fans, casual TV viewers and many different film audiences. These include superhero (Marvel) and Science Fiction (LucasFilm).

AUDIENCE

In 2011, Walt Disney Parks and Resorts Chairman Al Weiss stood down and was succeeded by tom Staggs, who decided to change the leadership at the parks. Staggs’ decisions included changing the structure of how they all ran and to make the hierarchy more simple. This was a step in the company’s One Disney approach. This involved merging all of the divisions finances such as revenue and marketing into one.

Currently, Disney has a president for each of its sectors, who will regularly meet to discuss business plans and investments. Presidents include the chairman of Disney, president of Disney interactive and president of Disney consumer products.

STRUCTURAL CHANGES

Disney has had many controversies over the years, with varying levels of offensiveness and problems for the company. A historic controversy was from when Walt Disney was alive and accused of holding National-Socialist beliefs and was believed to have attended anti-Semitic meetings. He was also accused of racism, as some of his motion pictures from the 30’s, 40’s and 50’s featured racially insensitive material. Some recent films have also been accused of having sexual references in them. For example, in the film ‘The Lion King’ it is widely believed that stars in the sky form to make the word ‘sex’. However, it supposedly says ‘SFX’, which is a nod to the special effects team on the movie. Despite claims of this, it still remains a controversy. In recent years some of their stars have been accused of being sexually provocative and not fit for the viewing of a child. Former Disney stars such as Miley Cyrus have made headlines for a wide range of things such as drugs, delinquency and in Miley’s case being sexually provocative- by ‘twerking’. Some of their films have intense, frightening scenes in them which many parents deem inappropriate.

CONTROVERSIES

http://www.diszine.com/content/disney-leadership-undergoes-major-structural-changes-in-the-wake-of-al-weiss-departure

http://uk.ask.com/question/how-much-money-does-disney-make

http://thewaltdisneycompany.com/ http://www.slideshare.net/hollycrossleyturner/media-

ownership http://www.revisionworld.com/a2-level-level-revision/

sociology/mass-media-0/ownership-and-control-media http://bizdharma.com/blog/what-is-vertical-and-horizontal-

integration/

BIBLIOGRAPHY