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Mass Media Giants and the Big Six Power Point by Reeves Medaglia-Miller, Ph. D. Mass Media Giants and the Big Six Power Point by Reeves Medaglia-Miller, Ph. D. for GHUM 1180, Pop Culture, GBC 1

Mass Media Giants l l l l I began to compile this Power Point Mass Media Giants l l l l I began to compile this Power Point for in-class usage back in 2001, when I first taught Pop Culture. The ‘Big Six’ was a relatively fresh concept back then. I have been updating the PPT ever since. It seems that every year, membership in the titans of media changes and some new entity emerges. One year, it is the ‘Big Six. ’ Next year, it is the ‘Big Eight. ’ The following year, it will be the ‘Big Five. ’ It depends on who’s selling off what, from year to year. With the exception of GE and the addition of Comcast, the basic pantheon of the giants is almost the same today as it was a decade ago: Disney, Viacom, NBCUniversal/Comcast, Time Warner, News Corporation, Sony, Vivendi, and Bertelsmann. Yet, even this has been modified since 2004 and 2006, with the emergence of web giants like Facebook, Google, and Youtube. In 2010, as you will see, Comcast comes on the scene and in 2013, GE makes its final bow. The two rules are: don’t expect things to remain the same from one year to the next. There always newcomers. And: once as high as fifty, with increased consolidation, the number will never again rise above ten. 2

The Giants Peat Giant Image by Faugar at Santharia. com 3 The Giants Peat Giant Image by Faugar at Santharia. com 3

The Giants Depending on whom you ask, the term “the Big Six” has been The Giants Depending on whom you ask, the term “the Big Six” has been used, on and off over the last decade, to nickname both the roster of American media giants and that of all international media leaders. l At the beginning of the 21 st century, the international Big Seven were Disney, Viacom, General Electric, Time Warner, News Corporation, Sony and Bertelsmann (remembered with the mnemonic DVG TNSB). l For about half the decade, Bertelsmann and Sony attempted to merge their music media, which would have made them the international 800 pound gorilla (DVG TN S/B), and solidified a ‘big six. ’ l The S/B venture lasted about four years. In 2008, the merger was overturned by the EU court since its vast size was considered to be unfair competition. l Notably, by 2011, the owners of 90% of all American media still closely resembled that same group (Disney, Viacom, General Electric, Time Warner, Newscorp, CBS, and Comcast = DVG TNCC). l In 2013, GE, for the most part, got out of the entertainment business when it sold the remainder of its NBC Universal holdings to Comcast. l Internationally, then, there’s a Big Eight today: DV TNCC SB. l 4

The Big Six in 2013 l Today, the term ‘Big Six’ (if you have The Big Six in 2013 l Today, the term ‘Big Six’ (if you have to choose just six) is usually used to refer to the largest media conglomerates dominating the American realm, those who engage in extensive media cross-ownership: Disney, Viacom, NBCUniversal/Comcast, Time Warner, News Corporation, and CBS. l See Wikipedia, Media cross-ownership in the United States l See Wikipedia, Concentration of media ownership 5

Relative sizes and assets of the giants l Many of the following dozen slides Relative sizes and assets of the giants l Many of the following dozen slides are a decade old, so that we may see the relative sizes of the international media giants at that time, and how their assets were allocated. For the first three shown, Disney, Viacom, and Time Warner, you will find a complete comparison between 2000 and 2012. Also provided are links to each company’s 2012 annual report, so you can see recent bottom line results for the rest of the giants, and draw comparisons for yourself. It is interesting to note that each of the multinationals owns apparatus for the distribution of an entertainment product at each level of its consumption (movie-making, movie exhibition, pay tv, video sales, television, internet, etc. ). In other words, each of the giants is vertically integrated. l (see slides 35 -49 for more on vertical integration) l l 6

DISNEY 2000 Studio Entertainment accounts for 23. 6 percent of the revenue that Disney's DISNEY 2000 Studio Entertainment accounts for 23. 6 percent of the revenue that Disney's top business segments generate, and only 2. 7 percent of their operating income. Business Segment Revenue (millions) Operating Income (millions) Media Networks 9615 2298 Studio Entertainment* 5944 (23. 6%) 110 (2. 7%) Parks and Resorts 6803 1620 Consumer Products 2622 455 Internet Group 368 (402) Combined 25402 4081 *Includes Walt Disney Pictures, Touchstone Pictures, Walt Disney Feature Animation, Walt Disney Television Animation, Buena Vista Theatrical Group, Miramax Source: The Walt Disney Company Annual Report 2000 7

DISNEY 2012 Compare the year’s results on the previous slide with these results from DISNEY 2012 Compare the year’s results on the previous slide with these results from 2012. Business Segment Revenue (millions) Operating Income (millions) Media Networks 19, 436 6, 619 Studio Entertainment* 5, 825 722 Parks and Resorts 12, 920 1, 902 Consumer Products 3, 252 937 Interactive 845 (216) Combined 42, 278 9, 964 Source: The Walt Disney Company Annual Report 2012 • See Disney's 2012 Annual Report • See Disney 2012 Yearly Earnings 8

VIACOM 2000 Entertainment accounts for 13. 5 percent of the revenue that Viacom's top VIACOM 2000 Entertainment accounts for 13. 5 percent of the revenue that Viacom's top business segments generate, and 8. 9 percent of their operating income. Business Segment Revenue (millions) Cable Networks 3895 Television 5382 Infinity 2765 Entertainment* 2758 (13. 5%) Video 4960 Publishing 596 Online 101 Combined 20457 Operating Income (millions) 1250 431 589 210 (8. 9%) 76 50 (257) 2349 *Includes Paramount Pictures, Paramount Parks, movie theater and music publishing operations Source: Viacom Annual Report 2000 9

VIACOM 2012 Viacom 2012 results report considerably less revenue than at the beginning of VIACOM 2012 Viacom 2012 results report considerably less revenue than at the beginning of the decade. This is, in large part due to Sumner Redstone’s division of the huge company into two separate entities, Viacom and CBS, in order to avoid antitrust penalties. Business Segment Revenue (millions) Media Networks 9, 194 Filmed Entertainment* 4, 820 Eliminations (127) Expenses Combined 13, 887 Operating Income (millions) 3, 889 325 1 (314) 3, 901 Source: Viacom Annual Report 2012 • See Viacom's 2012 Annual Report 10

TIME WARNER 2000 (called AOL Time Warner in 2000) Filmed Entertainment accounts for 21. TIME WARNER 2000 (called AOL Time Warner in 2000) Filmed Entertainment accounts for 21. 7 percent of the revenue that AOL Time Warner's top business segments generate, and only 9. 1 percent of their operating income*. Business Segment Revenue (millions) AOL 7703 Cable 6054 Filmed Entertainment** 8119 (21. 7%) Networks 6802 Music 4148 Publishing 4645 Combined 37471 Operating Income (millions) 2350 2831 796 (9. 1%) 1502 518 747 8744 Figures are projected; estimations for operating income are before depreciation and amortization. ** Includes Warner Brothers Pictures, New Line Productions , Fine Line Features, Warner Home Video, Warner Bros. Television Source: AOL Time Warner Annual Report 2000 11

The Rise and Fall of AOL Diagram from Yarrow, 2009 12 The Rise and Fall of AOL Diagram from Yarrow, 2009 12

TIME WARNER 2012 Note that TW Cable is now a separate entity from Time TIME WARNER 2012 Note that TW Cable is now a separate entity from Time Warner, (as with Viacom) also for the purposes of avoiding antitrust penalties. Note the current size of TW Cable. Business Segment Revenue (millions) Operating Income (millions) Filmed Entertainment** 12, 018 1, 228 Networks 14, 204 4, 719 Publishing 3, 436 420 Eliminations (929) (97) Corporate (352) Combined 28, 729 5, 918 Source: AOL Time Warner Annual Report 2012 TW Cable 21, 386 4, 445 • See Time Warner's 2012 Annual Report • See TW Cable 2012 Revenues 13

GENERAL ELECTRIC and its brief adventure in entertainment In 1986 GE reacquired RCA, primarily GENERAL ELECTRIC and its brief adventure in entertainment In 1986 GE reacquired RCA, primarily for the NBC television network (also parent of Telemundo Communications Group). The remainder was sold to various companies, including Bertelsmann (Bertelsmann acquired RCA Records) and Thomson SA which traces its roots to Thomson-Houston, one of the original components of GE. l In 2004, GE bought 80% of Universal Pictures from Vivendi bought 20% of NBC forming the company NBCUniversal. GE then owned 80% of NBC Universal and Vivendi owned 20%. l On December 3, 2009, it was announced that NBCUniversal will become a joint venture between GE and cable television operator Comcast. The cable giant will hold a controlling interest (51%) in the company, while GE retains a 49% stake and will buy out shares currently owned by Vivendi. l By January 28, 2011, GE owned 49% and Comcast 51%. On March 19, 2013, Comcast bought GE's shares in NBCU for $16. 7 billion. l Source: Wikipedia, General Electric • See GE's 2012 Annual Report 14

VIVENDI (called Vivendi Universal in 2000) TV/Film accounts for 31. 2 percent of the VIVENDI (called Vivendi Universal in 2000) TV/Film accounts for 31. 2 percent of the revenue that Vivendi's top business segments generate, and only 23. 6 percent of their operating income*. Business Segment Revenue (millions) Operating Income (millions) Music 495 94 Publishing 3540 493 TV/Film** 4248 (31. 2%) 526 (23. 6%) Telecoms 5270 1303 Internet 48 (184) Combined 13601 2232 *Figures for operating income are before depreciation and amortization. **Includes Universal Pictures, Studio. Canal, Universal Studios Recreation Group, Canal+, Universal Television & Networks Group Source: Vivendi Annual Report 2000 • See Vivendi's 2012 Annual Report 15

NEWS CORPORATION Filmed Entertainment accounts for 27 percent of the sales revenue that News NEWS CORPORATION Filmed Entertainment accounts for 27 percent of the sales revenue that News Corp. 's top business segments generate, and 15. 5 percent of their operating income. Business Segment Revenue (millions) Operating Income (millions) Filmed Entertainment* 6625 (27. 0%) 503 (15. 5%) Television 7008 991 Cable/Network 2696 197 Magazines and Inserts 1675 437 Newspapers 4600 904 Book Publishing 1907 205 Combined 24511 3237 • Includes Twentieth Century Fox Film Corp. , Fox 2000 Pictures, Fox Searchlight Pictures, Twentieth Century Fox Home Entertainment Source: News Corp. Annual Report 2001 • See News Corporation's 2012 Annual Report 16

Here’s an excellent visual of News Corp’s holdings today… News Corp vertical integration diagram: Here’s an excellent visual of News Corp’s holdings today… News Corp vertical integration diagram: Media. edusites 17

SONY Pictures account for 7. 7 percent of the sales and operating revenue that SONY Pictures account for 7. 7 percent of the sales and operating revenue that Sony's top business segments generate, and only 1. 8 percent of their operating income. Business Segment Revenue (millions) Operating Income (millions) Electronics 39989 1989 Game 5169 (409) Music 4568 164 Pictures* 4442 (7. 7%) 35 (1. 8%) Insurance 3415 143 Combined 57583 1922 *Includes Sony Pictures Entertainment, Sony Pictures Classics, Columbia Pictures, Columbia Tri. Star Television Source: Sony Annual Report 2001 • See Sony's 2012 Annual Report 18

BERTELSMANN l Broadcasting - RTL Group ¡ Radio, RTL Radio France, RTL 2, FUN BERTELSMANN l Broadcasting - RTL Group ¡ Radio, RTL Radio France, RTL 2, FUN RADIO, RTL Radio Deutschland, 104. 6 RTL (Berlin), ANTENNE BAYERN (Germany), Radio Hamburg, radio NRW (Germany), RADIO 21 (Germany), big. FM (Germany), Radio Regenbogen (Germany), Radio Dresden, HITRADIO RTL SACHSEN (Germany), Hit-Radio Antenne (Germany), ANTENNE MECKLENBURG-VORPOMMERN (Germany), Radio Brocken (Germany), 89. 0 RTL (Germany), ANTENNE THÜRINGEN (Germany), BB RADIO (Germany), 105'5 Spreeradio (Germany), radio TOP 40 (Germany), Oldie 95 (Germany), ROCK ANTENNE's (Germany), RTL Radio Lëtzebuerg, Bel RTL, Radio Contact (Belgium), Mint (Belgium), Onda Cero (Spain), Europa FM (Spain), Television, RTL Television, M 6 (France), Five (UK), ANTENA 3 (Spain), RTL 4 (The Netherlands), RTL 5 (The Netherlands), RTL 7 (The Netherlands), RTL TVI (Belgium), RTL Klub (Hungary), RTL Televizija (Croatia), Télé Lëtzebuerg, VOX (Germany), RTL II (Germany), Super RTL (Germany), n-tv (Germany), Den 2. RTL (Luxembourg), RTL Shop (Germany), Traumpartner TV (Germany), RTL TVI (Belgium), Plug TV (Belgium), RTL 9 (France), REN TV (Russia), Fun TV (France), Téva (France), Paris Première, Série Club (France), TF 6 (France), W 9 (France), M 6 Music Rock (France), M 6 Music Black (France), M 6 Music Hits (France), Antena 3 (Spain), Antena. Nova (Spain), Five US (UK), Five Life (UK) Programming ¡ l Fremantle. Media, UFA Film & TV Produktion, UFA Fernsehproduktion, UFA Filmproduktion, UFA Entertainment, Grundy UFA, GRUNDY Light Entertainment, Karlheinz Brunnemann. team. Worx, Universum Film, talkback. THAMES, Crackerjack, Blue Circle, Blu, Home Shopping Service, SND, CLT-UFA, ENEX Publishing ¡ Books: Random House, Inc. , Ballantine Books, Ballantine Reader's Circle, Del Rey/Lucas. Books, Fawcett, Ivy, One World, Wellspring, Bantam Dell Publishing Group, Bantam Hardcover, Bantam Mass Market, Bantam Trade Paperbacks, Crimeline, Delacorte Press, Dell, Delta, Domain, DTP, Fanfare, Island, Spectra, The Dial Press, Crown Publishing Group, Bell Tower, Clarkson Potter, Crown Business, Crown Publishers Inc. , Harmony Books, Prime, Shaye Areheart Books, Three Rivers Press, Doubleday Broadway Publishing Group, Broadway Books, Currency, Doubleday, Doubleday Image, Doubleday Religious Publishing, Main Street Books, Nan A. Talese, Harlem Moon, Knopf Publishing Group, Alfred A. Knopf, Anchor, Everyman's Library, Pantheon Books, Schocken Books, Vintage, Random House Audio Publishing Group, Villard Books, The Modern Library, RH Trade Paperbacks, Striver's Row Books, Random House Children's Books, Dell/Delacorte/Dell Young Reader's Group, Alfred A. Knopf, Bantam, Crown, David Fickling Books, Delacorte Press, Dell Dragonfly, Dell Laurel-Leaf, Dell Yearling Books, Doubleday, Wendy Lamb Books, Random House Diversified Publishing Group, RH Value Publishing, Random House Information Group, Fodor's Travel Publications, Living Language, Prima Games, Princeton Review, RH Espanol, RH Puzzles and Games, RH Reference Publishing , Waterbrook Press , Shaw Books, Fisherman Bible Study Guides • See Bertelsmann's 2012 Annual Report 19

BERTELSMANN Magazines: GRUNER, JAHR, ALLAKSTE YEFSIS, ART, ASTROLOGOS, AUTOREVUE, AVTO MAGAZIN, BIEN DANS MA BERTELSMANN Magazines: GRUNER, JAHR, ALLAKSTE YEFSIS, ART, ASTROLOGOS, AUTOREVUE, AVTO MAGAZIN, BIEN DANS MA VIE, BÖRSE ONLINE, BRIGITTE, BÜHNE, ÇA M'INTéRESSE, CAPITAL, CAR & MOTOR, CLAUDIA, CONNECT, COSMOPOLITAN, CUISINE ACTUELLE, CUISINE GOURMANDE, DB MOBIL, DECORATION, DIVA, DOGS, E&T - FÜR JEDEN TAG, ELLE, ELTERN FAMILY, ELTERN ARZT & SCHWANGERSCHAFT, ELTERN UNSER BAB, EMEDIA, EMOTION, ESSEN & TRINKEN, EXODOS, FEMME ACTUELLE, FITNESS, FLORA GARTEN, FOCUS, FORMAT, FRAU IM SPIEGEL, FOCUS, FUSHI MEIRONG, GALA, GEO, GLAMOUR, GOLFREVUE, GUIDE CUISINE, GUSTO, HÄUSER, HEALTHY LIVING, HOW TO SPEND IT, IKIA & DIAKOSMISI, IMPULSE, JACK, JASMIN, JIAJU, JOY, KLIK, LEA, LISA, LIVING AT HOME, LUFTHANSA EXCLUSIVE, MANAGEMENT, MARIE CLAIRE, MEN'S HEALTH, MIA, MOJ LEPI VRT, MOJA LEPA BA TA, MOJE DIJETE, MOJE GOTOWANIE, MUY INTERESANTE, NAJ, NATIONAL GEOGRAPHIC, NEON, NEWS, NOVA, PAIDI & NEI GONIS, PARENTS FUMU, PARK AVENUE, P. M. , PRIMA, PROFIL, QUEST, RODZICE, SCHÖNER WOHNEN, SER PADRES, STARS, STERN, STORY, SWAROVSKI MAGAZIN, TéLé LOISIRS, TOP GIRL, TREND, TV-MEDIA, VIEW, VIVA!, VOICI, VSD, VW MAGAZIN, WOMAN, XIANFENG, Xpress, YACHTREVUE, YI REN, YO COCINO Newspapers: CHEMNITZER MORGENPOST, DRESDNER MORGENPOST, FINANCIAL TIMES DEUTSCHLAND, MORGENPOST AM SONNTAG, SÄCHSISCHE ZEITUNG Music: Sony BMG Arista, Bluebird, BNA, Burgundy, Columbia, Epic, Jive, J Records, Legacy, Masterworks, Provident, RCA, Windam Hill, Zomba 20

Here’s an excellent visual of Bertelsmann’s holdings today… Organigram of Bertelsmann: cached at Zusas Here’s an excellent visual of Bertelsmann’s holdings today… Organigram of Bertelsmann: cached at Zusas 21

COMCAST l In 2010, cable and internet giant Comcast becomes the new kid on COMCAST l In 2010, cable and internet giant Comcast becomes the new kid on the media block with the purchase (from GE) of half of NBC Universal. l “In December 2009, Comcast announced its intent to acquire a majority stake in the media conglomerate NBC Universal from GE. The planned acquisition was subject to scrutiny from activists and government officials; their concerns primarily surrounded the potential effects of the vertical integration that the merger could create, as Comcast is also heavily involved in cable television and internet services in many media markets. The deal went through, resulting in Comcast owning 51% of the company until March 2013, when GE divested its stake; Comcast now owns 100% of NBC Universal. ” l Text from Wiki, Comcast NBC merger. 22

l Television NBC Universal (January 2010) l Cable ¡ Comcast Cable l Programming ¡ l Television NBC Universal (January 2010) l Cable ¡ Comcast Cable l Programming ¡ E! Entertainment, Style, Comcast Sports. Net Philadelphia, Comcast Sports. Net Mid-Atlantic, Comcast Sports. Net Chicago, Comcast Sports. Net West, Sports. Net New York (partial), The Golf Channel, Versus Network, AZN Television, PBS KIDS Sprout, TV One, G 4 l Sport Franchises ¡ Philadelphia 76 ers, Philadelphia Flyers, Philadelphia Phantoms, Philadelphia Charge, Frederick Keys, Delmarva Shorebirds, Bowie Baysox l Other ¡ Through Comcast Spectator, Wachovia Center, Wachovia Spectrum, Ovations Food Services, New Era Tickets, Front Row Marketing Services • See Comcast's 2012 Annual Report 23

Comcast has become a major player since buying up NBC Universal’s television and movie Comcast has become a major player since buying up NBC Universal’s television and movie holdings. Comcast vertical integration diagram: seekingalpha. com 24

Consolidation and Mergers 25 Consolidation and Mergers 25

What is a merger? What is an acquisition? l “From a legal point of What is a merger? What is an acquisition? l “From a legal point of view, a merger is a legal consolidation of two companies into one entity, whereas an acquisition occurs when one company takes over another and completely establishes itself as the new owner (in which case the target company still exists as an independent legal entity controlled by the acquirer). Either structure can result in the economic and financial consolidation of the two entities. ” Wiki. Today, large corporations and multinationals (like Sony) function as hunters, taking down or acquiring the most vulnerable elk who are struggling at the rear of the herd. l 26

Case study: the takeover of EMI For example, in 2012, Sony completed its acquisition Case study: the takeover of EMI For example, in 2012, Sony completed its acquisition of EMI Music Publishing, giving it a global market share of about 31% of all music publishing worldwide. l Meanwhile, Vivendi's Universal Music Group won European and U. S. approval for its $1. 9 billion purchase of EMI's recorded music business. l Effectively, EMI, once one of the world’s largest, most prestigious music publishing companies (eg. the Beatles, the Rolling Stones, Queen, David Bowie, Pink Floyd) was no longer an autonomous entity. l Practically divided in half, it is now a subsidiary of (a) Sony and of (b) Vivendi. l 27

Why Media Mergers matter “Having a few huge corporations control our outlets of expression Why Media Mergers matter “Having a few huge corporations control our outlets of expression could lead to less aggressive news coverage and a more muted marketplace of ideas. ” Rifka Rosenwein, Why Media Mergers Matter, Brill’s Content, Dec. 1999 Gagged man photo: Daily. Tech. com 28

Charles Lewis “If media moguls control media content and media distribution, then they have Charles Lewis “If media moguls control media content and media distribution, then they have a lock on the extent and range of diverse views and information, ” says Charles Lewis, [executive director of the Centre for Public Integrity]. “That kind of grip on commercial and political power is potentially dangerous for any democracy. ” Miren Gutierrez. (2004). Fewer Players, Less Freedom. 29

Consolidation and Consumerism Rosenwein’s and Lewis’ predictions came to pass some years ago. Viewpoints Consolidation and Consumerism Rosenwein’s and Lewis’ predictions came to pass some years ago. Viewpoints represented in the American media are so similar in both content and philosophy that it is essentially irrelevant where consumers go to get their news and to gain access to differing worldviews. l Despite their pretense of ideological war, the philosophical differences between the worldviews of even Newscorp’s Fox News and CBS or NBC are so slight, it is clear that the North American way of life has become a monoculture, steeped in the language and practices of consumerism. l 30

What is Consumerism? l l “Consumerism is a social and economic order that encourages What is Consumerism? l l “Consumerism is a social and economic order that encourages the purchase of goods and services in ever-greater amounts. ” Wiki, Consumerism 31

How do large corporations encourage consumerism? The few corporations that control 90% of our How do large corporations encourage consumerism? The few corporations that control 90% of our media foster consumerism by gaining control of all aspects of the distribution of a media product. l By embedding overt consumerist messages and product placement in the media product’s distribution, at each level of consumption, the consumer is literally immersed in a pervasive philosophy of consumerism. l Remember Marshall Mc. Luhan’s fish? Corporations use the propaganda of advertisement to prompt our desires for virtually everything we long for: movies, cars, houses, boats, vacations, food. l 32

How does a corporation gain access to every level of our consumption? l l How does a corporation gain access to every level of our consumption? l l l Using vertical integration. Through vertical integration, a media conglomerate owns each corporation in the chain of media dissemination, from the actual devices we use to consume our media to the media we consume. From the movies we watch to the popcorn and chocolate we eat while watching those movies. Ask yourself, how much media and entertainment do I consume in a single day? How much do I watch movies, television, and so on, even if it is online? How many of these choices were made by me and how many were prompted by corporate advertising? The last one is a trick question: because of Mc. Luhan’s fish, none of us has the knowledge to answer that question. 33

How much time do you spend each day consuming media? How much time do you spend each day consuming media? "The average young American now spends practically every waking minute — except for the time in school — using a smart phone, computer, television or other electronic device, according to a new study from the Kaiser Family Foundation. " l "Those ages 8 to 18 spend more than seven and a half hours a day with such devices, compared with less than six and a half hours five years ago, when the study was last conducted. And that does not count the hour and a half that youths spend texting, or the half-hour they talk on their cellphones. " l “And because so many of them are multitasking — say, surfing the Internet while listening to music — they pack on average nearly 11 hours of media content into that seven and a half hours. ” l “I feel like my days would be boring without it, ” said Francisco Sepulveda, a 14 -year-old Bronx eighth grader who uses his smart phone to surf the Web, watch videos, listen to music — and send or receive about 500 texts a day” l Levin, Tamar. (January 20, 2010). If Your Kids are Awake, They're Probably Online. New York Times. l Schulten, Katherine. (January 22, 2010). How Much Time Do You Spend Consuming Media Every Day? New York Times. l 34

Vertical Integration NBC/CBS vertical integration diagram: Learning. Design 35 Vertical Integration NBC/CBS vertical integration diagram: Learning. Design 35

What is Vertical Integration? l Free Dictionary defines Vertical Integration as follows: “The merging What is Vertical Integration? l Free Dictionary defines Vertical Integration as follows: “The merging of companies that are within the chain of companies that handle a single item from raw material production to retail sale. ” l Investopedia writes: “When a company expands its business into areas that are at different points on the same production path, such as when a manufacturer owns its supplier and/or distributor. ” l Diagram: Cambridge Towel. com 36

Business Dictionary defines ‘vertical integration’ as follows: l “Merger of companies at different stages Business Dictionary defines ‘vertical integration’ as follows: l “Merger of companies at different stages of production and/ or distribution in the same industry. When a company acquires its input supplier, it is called backward integration. When it acquires companies in its distribution chain, it is called forward integration. ” l “For example, a vertically integrated oil company may end up owning oilfields, refineries, tankers, trucks, and gas (petrol) filling stations. Also called vertical merger. ” 37

Vertical Integration in Media “Media concentration is… promoted through vertical integration, which denotes owning Vertical Integration in Media “Media concentration is… promoted through vertical integration, which denotes owning both the content and the conduits to distribute that content. It has manifested itself in U. S. media over the past fifteen years, and the recent merger of General Electric's NEC and Vivendi means that all commercial TV networks are owned by a media corporation that also owns a major Hollywood film studio. Each firm also owns TV show production studios as well as cable TV channels. ” (Mc. Chesney, 2004) l l Read Robert Mc. Chesney's The Problem of the Media. 38

Vertical Integration in Media Many of the large media company owners are entertainment companies Vertical Integration in Media Many of the large media company owners are entertainment companies and have vertical integration (i. e. own operations and businesses) across various industries and verticals, such as distribution networks, toys and clothing manufacture and/or retailing etc. That means that while this is good for their business, the diversity of opinions and issues we can see being discussed by them l will be less well covered. 39

Vertical Integration in Media One cannot expect Disney, for example, to talk too much Vertical Integration in Media One cannot expect Disney, for example, to talk too much about sweatshop labor when it is accused of being involved in such things itself. l The wider ramifications are highlighted well in this following quote: “Vertical Integration was once looked upon with alarm by government. It was understood that corporations which have control of a total process, from raw material to fabrication to sales, also have few motives for genuine innovation and the power to seize out anyone else who tries to compete. This situation distorts the economy with monopolistic control over prices. Today, government has become sympathetic to dominant vertical corporations that have merged into ever larger total systems. These corporations, including those in the media, have remained largely unrestrained. ” Ben H. Bagdikian, The Media Monopoly, Sixth Edition, (Beacon Press, 2000), p. xvii Image: Mickey Mouse picture from Dooby. Brain. com 40

Here’s a diagram of a 10 -stage vertical integration process in the distribution of Here’s a diagram of a 10 -stage vertical integration process in the distribution of a movie product (continued on the next slide) Vertical Integration diagram template: slidegeeks. com 41

Vertical Integration diagram template: slidegeeks. com 42 Vertical Integration diagram template: slidegeeks. com 42

Windows of Exhibition l Another model for understanding how media corporations are vertically integrated Windows of Exhibition l Another model for understanding how media corporations are vertically integrated has been called the “windows of exhibition. ” l When a corporation owns all of the companies required to distribute an entertainment product (from its initial showing in theatres through each and every other method by which the (from its initial showing in theatres through each entertainment product is shown to the public), and every other method by which the each opportunity to exhibit the product is entertainment product is shown to the public), referred to as a “windows of exhibition. ” each opportunity to exhibit the product is referred to as a “window of exhibition. ” l 43

Windows of Exhibition • • Hollywood movies are shown not only on the big Windows of Exhibition • • Hollywood movies are shown not only on the big screen--they're exhibited on video and DVD, on network and cable TV, on pay-per-view, and on airplanes. Hollywood films continue to make money for the studios across all of these platforms, known as "windows of exhibition, " years after their theatrical release. In a very real way, this diagram is a horizontal illustration of vertical integration. 2001, pbs online and wgbh/frontline Diagram and concept from PBS. org. (2001). The Monster that ate Hollywood. 44

l Thus, even if a movie is initially unsuccessful in its theatrical release, the l Thus, even if a movie is initially unsuccessful in its theatrical release, the corporation will still make huge profits when it distributes the product through the subsequent windows of exhibition. 45

Where Hollywood Films make Money * Includes domestic and international revenue sources; Where Hollywood Films make Money * Includes domestic and international revenue sources; "TV" includes all related revenue streams, including pay-per -view, network TV, and premium cable Source: Filmspace: Behind the Scenes, ABN Amro, Sept. 12, 2000 Diagram and concept from PBS. org. (2001). The Monster that ate Hollywood. 46

Windows of Exhibition Read more about ‘windows’ at The Monster that ate Hollywood (PBS, Windows of Exhibition Read more about ‘windows’ at The Monster that ate Hollywood (PBS, 2001). l l Windows 47

Vertical Integration and the Indies What effect does vertical integration of the major studios Vertical Integration and the Indies What effect does vertical integration of the major studios and distributors have on the independent producers, distributors, and exhibitors? l In a word, devastation and ultimate buyout. l In the mainstream, with notable exceptions like Spielberg’s Dreamworks, there is virtually no longer such a thing as an independent film company, producer, or distributor. l 1990 s independent film companies like Miramax and Castle Rock were ultimately acquired by the giants. l In 2012, even billionaire George Lucas sold his renowned indie, Lucasfilm, to Disney. l George Lucas photo: Wikipedia 48

If you are an independent, well-known film maker, like Spike Lee, for example, it If you are an independent, well-known film maker, like Spike Lee, for example, it may be a manageable task to raise enough money to make a picture. l The difficulty will be when it comes time to get the movie shown. If you cannot access a distributor and, hence, an exhibitor, your movie is doomed to obscurity. l Because of vertical integration, the giants own their own movie companies, distributors, and theatre chains. l Whose movie will Viacom show in its movie house? Your small movie or one made by Paramount, a major movie company that is owned by Viacom? l It’s a rhetorical question. l Spike Lee photo: imdb. com 49

Landmarks in the History of Vertical Integration of the Majors 50 Landmarks in the History of Vertical Integration of the Majors 50

Paramount Consent Decrees of 1948 “United States v. Paramount Pictures, Inc. , 334 US Paramount Consent Decrees of 1948 “United States v. Paramount Pictures, Inc. , 334 US 131 (1948) (also known as the Hollywood Antitrust Case of 1948, the Paramount Case, the Paramount Decision or the Paramount Decree) was a landmark United States Supreme Court antitrust case that decided the fate of movie studios owning their own theatres and holding exclusivity rights on which theatres would show their films. l It would also change the way Hollywood movies were produced, distributed, and exhibited. l The Court held in this case that the existing distribution scheme was in violation of the antitrust laws of the United States, which prohibit certain exclusive dealing arrangements. l The case is important both in U. S. antitrust law and film history. In the former, it remains a landmark decision in vertical integration cases; in the latter, it is seen as the first nail in the coffin of the old Hollywood studio system. ” l l The above text is from Wiki, US vs. Paramount Pictures 51

The effect of the Paramount Decrees Yet, even though the Paramount Consent Decrees (prohibiting The effect of the Paramount Decrees Yet, even though the Paramount Consent Decrees (prohibiting vertical integration in media) were still in effect as late as the early 1990 s, the giants recommenced their efforts toward vertical integration. l This is due to politicians, particularly in the Reagan era, overlooking the illegal mergers. l Thus, three decades after the decrees, in 1980, the effect of the Paramount Consent Decrees was irrelevant and minimal, and did little to prevent the giants from pursuing extensive vertical integration. l 52

1980 -1990 s • In 1983, fifty corporations dominated most of every mass medium 1980 -1990 s • In 1983, fifty corporations dominated most of every mass medium and the biggest media merger in history was a $340 million deal. … In 1987, the fifty companies had shrunk to twenty-nine. … In 1990, the twenty-nine had shrunk to twenty three. … In 1997, the biggest firms numbered ten and involved the $19 billion Disney -ABC deal, at the time the biggest media merger ever. … In 2000, AOL Time Warner’s $350 billion merged corporation was more than 1, 000 times larger [than the biggest deal of 1983]. • Ben H. Bagdikian, The Media Monopoly, Sixth Edition, (Beacon Press, 2000), pp. xx—xxi 53

1990 s Disney bought ABC in 1995 for $19. 6 billion. Time Warner acquired 1990 s Disney bought ABC in 1995 for $19. 6 billion. Time Warner acquired Turner Broadcasting System in 1996 (including CNN). l Viacom buys out CBS in 1999 for around $37 billion. l In 2000, a new company called AOL Time Warner, with Steve Case as chairman, was created when AOL purchased Time Warner for US$164 billion. It was the largest corporate merger in history. l l 54

The failure of the AOL Time Warner merger The AOL Time Warner merger was The failure of the AOL Time Warner merger The AOL Time Warner merger was one of the greatest failures in the history of media mergers. l It turned out that, although AOL had a powerful stock price at first, it didn’t have the assets to back it up. Its stock was vastly overvalued. It was a house of cards. l Conversely, Time Warner had vast holdings, but not a powerful stock profile. Time Warner merged with the young web company in order to expand its profile. It was a costly mistake. l Read more about the famous failure. l See Verma, Kamal. (2010). The AOL/Time Warner Merger: Where Traditional Media Met New Media. l 55

The end of the 1990 s At the end of the 1990 s, there The end of the 1990 s At the end of the 1990 s, there were 9 corporations (mainly U. S. ) that dominated the media world: q AOL Time Warner q Disney q Bertelsmann q Viacom q News Corporation q TCI (Tele-Communications Inc) q General Electric (owner of NBC) q Sony (owner of Columbia and Tri. Star Pictures and major recording interests), and q Seagram (owner of Universal film and music interests). 56

The Big Six in 2000 57 Big Six diagram: New. Internationalist The Big Six in 2000 57 Big Six diagram: New. Internationalist

The Big Six in 2000 It is the second largest global media conglomerate, after The Big Six in 2000 It is the second largest global media conglomerate, after AOL Time Warner. Rupert Murdoch's News Corporation Ltd. has media holdings in the U. S. , Canada, Europe, Australia, Latin America and Asia. It's the third largest global media conglomerate. FY 2000 revenues topped $25 billion. The $165 billion mega-merger between AOL and Time Warner, approved by the FCC in January 2001, is the largest media merger in history. The new company promises to offer a powerhouse of integrated communication, media and entertainment across all platforms -- computer, phone, television and handheld wireless devices. This privatelyowned German media conglomerate has interests in 600 companies in 53 countries. This giant's subsidiary Universal Music Group is the number one music company in the world, with roughly 22% of the 1999 global market. Sony made its name with electronics, but it now has more than 1, 000 subsidaries worldwide, many of them key media 2001 pbs online and wgbh/frontline partners. 58

2002 The top ten media companies were now… l AOL Time Warner (TW splits 2002 The top ten media companies were now… l AOL Time Warner (TW splits from AOL in 2009) l Disney l General Electric (merged with Vivendi-Universal in 2003) l News Corporation l Viacom l Vivendi-Universal l Sony (Sony-BMG Music formed in 2003) l Bertelsmann l AT&T (absorbed TCI in 1999) l Liberty Media 59

How the big 50 became The Big Six Big 50 to Big Six diagram: How the big 50 became The Big Six Big 50 to Big Six diagram: corporations. org Read more at Media Reform Information Center 60

2004 -2005 On February 4, 2004, Mark Zuckerberg launched 2004 -2005 On February 4, 2004, Mark Zuckerberg launched "The facebook, ” originally located at thefacebook. com (later called ‘Facebook’). l The News Corp. chairman Rupert Murdoch paid just $580 million for the social media giant Myspace in 2005. l l In 2005, Google acquired online video source You. Tube for an estimated $1. 65 billion dollars. 61

2005 -2006 62 2005 -2006 62

2006 l l l l l Even with the new power of search engine 2006 l l l l l Even with the new power of search engine giants like Yahoo and Google, by the end of 2006, there are still only 8 giant media companies dominating the US media, from which most people get their news and information: Disney (market value: $72. 8 billion) AOL-Time Warner (market value: $90. 7 billion) Viacom (market value: $53. 9 billion) General Electric (owner of NBC, market value: $390. 6 billion) News Corporation (market value: $56. 7 billion) Yahoo! (market value: $40. 1 billion) Microsoft (market value: $306. 8 billion) Google (market value: $154. 6 billion) 63

Here’s the state of the American media industry, as of 2011… (Diagrams on 57 Here’s the state of the American media industry, as of 2011… (Diagrams on 57 -65, See Lutz, 2012) 64

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Definitions 73 Definitions 73

What is an anchor product? In the jargon of the media giants, the anchor What is an anchor product? In the jargon of the media giants, the anchor product is the key attention-getting product at the hub of a wheel of many other products. l While Nike sells hundreds of products, including hats, jackets, and socks, the Nike running shoe is Nike’s anchor product. l In the media world, while a kids’ movie, like Monsters Inc. , The Smurfs, or Shrek, sells piles of related merchandise, from tote bags to toys, the movie itself is the anchor product that attracts consumers to the swag. l Likewise, although consumers can buy ‘Bazinga!’ t-shirts, Leonard mugs, and bobbleheads of the whole gang, it is the TV show, ‘The Big Bang Theory’ that is the anchor product. l 74

Anchor Product 75 Anchor Product 75

Terms you should know l l l l Hollywoodism Vertical Integration Windows of Exhibition Terms you should know l l l l Hollywoodism Vertical Integration Windows of Exhibition Conglomerates Monopoly Majors Independents Distributors • • • Exhibitors Anchor Product Merchandising Product Placement Paramount Consent Decrees • Anti-Trust Laws • Consolidation • The Edison Trust 76

l Conglomeration: The process of corporations purchasing other companies and thus becoming much larger l Conglomeration: The process of corporations purchasing other companies and thus becoming much larger and usually more diverse, often to include both media and non -media firms. (Croteau & Hoynes, 2007) l Conglomerate: 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. Media conglomerates strive for policies that facilitate their control of the markets around the world. (Wikipedia) l Globalization: The distribution of media products across national boundaries; large media conglomerates now own and distribute media across the globe. (Croteau & Hoynes, 2007) l Horizontal integration: An ownership structure in which one conglomerate owns or operates different kinds of media (for example, movie studios, television networks, music labels and radio stations), concentrating ownership across the different segments of the media industry. (Croteau & Hoynes, 2007) l Vertical integration: An ownership structure in which one conglomerate owns or operates all aspects of production and distribution within a single segment of the media industry; for example, movie studio, talent agency, movie theatres, DVD manufacturing plant and video rental stores. (Croteau & Hoynes, 2007) l Windows of Exhibition: When a corporation owns all of the companies required to distribute an entertainment product (from its initial showing in theatres through each and every other method by which the product is shown to the public), each opportunity to exhibit the product is referred to as a ‘window of exhibition. ’ (PBS, 2001) 77

l Monopoly: A monopoly…exists when a specific person or enterprise is the only l l Monopoly: A monopoly…exists when a specific person or enterprise is the only l Major: A major film studio is a production and distribution company that releases a l Independent film: An independent film is a professional film production resulting in l Distributor: A film distributor is a company or individual responsible for the marketing supplier of a particular commodity (this contrasts with a monopsony which relates to a single entity's control of a market to purchase a good or service, and with oligopoly which consists of a few entities dominating an industry). Monopolies are thus characterized by a lack of economic competition to produce the good or service and a lack of viable substitute goods. (Wikipedia) substantial number of films annually and consistently commands a significant share of box-office revenues in a given market. In the North American, Western, and global markets, the major film studios, often simply known as the majors, are commonly regarded as the six diversified media conglomerates whose various movie production and distribution subsidiaries command approximately 90 percent of the U. S. and Canadian box office. (Wikipedia) a feature film that is produced mostly or completely outside of the major film studio system. In addition to being produced and distributed by independent entertainment companies, independent films are also produced and/or distributed by subsidiaries of major film studios. (Wikipedia) of a film. The distributor may set the release date of a film and the method by which a film is to be exhibited or made available for viewing: for example, directly to the public either theatrically or for home viewing (DVD, video-on-demand, download, television programs through broadcast syndication etc. ). (Wikipedia) 78

l Exhibitor: An exhibitor is a company, like Cineplex, that owns and operates the l Exhibitor: An exhibitor is a company, like Cineplex, that owns and operates the l Anchor product: The anchor product is the key attention-getting product at the hub l Merchandising: licensing: In marketing, one of the definitions of merchandising is l Product placement: Product placement, or embedded marketing, is according to movie theaters which exhibit a motion picture product. of a wheel of many other product. Usually, the name, theme, characters, and/or logo of the anchor product is on the products it inspires. For products like ‘Bazinga’ t-shirts, the TV show ‘The Big Theory’ is the anchor product. the practice in which the brand or image from one product or service is used to sell another. Trademarked brand names, logos, or character images are licensed to manufacturers of products such as toys or clothing, which then make items in or emblazoned with the image of the license, hoping they'll sell better than the same item with no such image. For the owners of the IP (intellectual property) in question, merchandising is a very popular source of revenue, due to the low cost of letting a third party manufacture the merchandise, while the IP owners collect the merchandising fees. (Wikipedia) the European Union "any form of audiovisual commercial communication consisting of the inclusion of or reference to a product, a service or the trade mark thereof so that it is featured within a programme. ” (Wikipedia) 79

l Paramount Consent Decrees: United States v. Paramount Pictures, Inc. , 334 US l l Paramount Consent Decrees: United States v. Paramount Pictures, Inc. , 334 US l Antitrust Law: United States antitrust law is a collection of federal and state government laws, l Consolidation: In business, consolidation or amalgamation is the merger and acquisition of l Edison Trust: In December 1908, Edison led the formation of the Motion Picture Patents 131 (1948) (also known as the Hollywood Antitrust Case of 1948, the Paramount Case, the Paramount Decision or the Paramount Decree) was a landmark United States Supreme Court antitrust case that decided the fate of movie studios owning their own theatres and holding exclusivity rights on which theatres would show their films. It would also change the way Hollywood movies were produced, distributed, and exhibited. The Court held in this case that the existing distribution scheme was in violation of the antitrust laws of the United States, which prohibit certain exclusive dealing arrangements. (Wikipedia, United States vs. Paramount) which regulates the conduct and organization of business corporations, generally to promote fair competition for the benefit of consumers. The main statutes are the Sherman Act 1890, the Clayton Act 1914 and the Federal Trade Commission Act 1914. These Acts, first, restrict the formation of cartels and prohibit other collusive practices regarded as being in restraint of trade. Second, they restrict the mergers and acquisitions of organizations which could substantially lessen competition. Third, they prohibit the creation of a monopoly and the abuse of monopoly power. (Wikipedia, United States Antitrust Law) many smaller companies into much larger ones. (Wikipedia) Company in an attempt to control the industry and shut out smaller producers. [2] The "Edison Trust, ” as it was nicknamed, was made up of Edison, Biograph, Essanay Studios, Kalem Company, George Kleine Productions, Lubin Studios, Georges Méliès, Pathé, Selig Studios, and Vitagraph Studios, and dominated distribution through the General Film Company. The Motion Picture Patents Co. and the General Film Co. were found guilty of antitrust violation in October 1915, and were dissolved. (Wikipedia, MPPC, Edison Studios) 80

Movie Business Definitions (Wiki) l l l l l Antitrust: antitrust Conglomerate: conglomerate Consolidation: Movie Business Definitions (Wiki) l l l l l Antitrust: antitrust Conglomerate: conglomerate Consolidation: consolidation Consumerism: consumerism Distributor: distributors Edison Studios: Edison Studios Edison Trust: Motion Picture Patents Company Independent film: independent Major: major Hollywood film studio Media consolidation: media consolidation Media concentration: media concentration Merger: merger MPPC: Motion Picture Patents Company Paramount Consent Decrees: Paramount Consent Decrees Product placement: product placement Vertical integration: vertical integration Windows of exhibition (PBS): windows of exhibition 81

Wiki Links (in order of their appearance in the Power. Point) Disney, Viacom, General Wiki Links (in order of their appearance in the Power. Point) Disney, Viacom, General Electric, Time Warner, News Corporation, Bertelsmann, CBS, Comcast, Media cross-ownership in the United States Concentration of media ownership, vertical integration, Touchstone Pictures, Buena Vista, Paramount Parks, Studio. Canal, Warner Brothers, New Line Productions, Twentieth Century Fox, Fox Searchlight, Sony Pictures Classics, Sony Pictures Entertainment, Columbia Pictures, Columbia Tri. Star, NBC Universal, conglomerate, cable TV , merger, acquisition, consolidation, multinationals, Sony, EMI Music Publishing, Vivendi, Universal Music Group, EMI’s recorded music business, the Beatles, the Rolling Stones, Queen, David Bowie, Pink Floyd, media moguls, Charles Lewis, Centre for Public Integrity, Fox News, NBC, monoculture, consumerism, product placement, Marshall Mc. Luhan, propaganda, advertisement, backward integration, forward integration, media consolidation, media concentration, NEC, major Hollywood film studio, channels, sweatshop, windows of exhibition, The Monster that ate Hollywood, distributors, Steven Spielberg, Dreamworks, Miramax, Castle Rock, George Lucas, Lucasfilm, independent, Spike Lee, Paramount, antitrust, US vs. Paramount Pictures, Paramount Consent Decrees, studio system, Ronald Reagan, ABC, AOL Time Warner, AOL, Steve Case, Turner Broadcasting, CNN, TCI, Seagram, AT&T, Liberty Media, Vivendi-Universal, Facebook, Mark Zuckerberg, Rupert. Murdoch, Myspace, Google, You. Tube, Yahoo, Microsoft, Com cast, Nike, Monsters Inc. , The Smurfs, Shrek, merchandise, The Big Bang Theory l 82

Sources 83 Sources 83

l l l l l ABN Amro. (2000). Filmspace: Behind the Scenes. Bagdikian, Ben. l l l l l ABN Amro. (2000). Filmspace: Behind the Scenes. Bagdikian, Ben. (2000). The Media Monopoly, Sixth Edition. Beacon Press. Croteau, David & William Hoynes. (2007). The Media Industry: Structure, Strategy, and Debates. Sage Publishing. Dignan, Larry. (2009). Comcast, NBC Merger: Will it Work? Seeking Alpha. Gent, Richard. (2011) Vertical and Horizontal Integration. media. edusites. co. uk Gutierrez, Miren. (2004). Fewer Players, Less Freedom. Inter Press Service. March 20, 2004. Hanssen, Andrew. (2007). Vertical Integration during the Hollywood Studio Era. Montana State University. Levin, Tamar. (January 20, 2010). If Your Kids are Awake, They're Probably Online. New York Times. Lutz, Ashley. (2012). These 6 Corporations Control 90% Of The Media In America. Business Insider. Mc. Chesney, Robert. (2004). The Problem of the Media: U. S. communication politics in the Twenty-First century. New York: Monthly Review Press. New Internationalist Online. (2001). Big Six Diagram. PBS. org. (2001). The Monster that ate Hollywood. Frontline. Rosenwein, Rifka. (1999). Why Media Mergers Matter, Brill’s Content. Shah, Anup. (2009). Media Conglomerates, Mergers, Concentration of Ownership. Global Issues. Schulten, Katherine. (January 22, 2010). How Much Time Do You Spend Consuming Media Every Day? New York Times. Verma, Kamal. (2010). The AOL/Time Warner Merger: Where Traditional Media Met New Media. Yarrow, Jay. (2009). The Rise and Fall of AOL. Business Insider. 84

Links used as text sources l l l l Vertical Integration: Free Dictionary Vertical Links used as text sources l l l l Vertical Integration: Free Dictionary Vertical Integration: Investopedia Vertical Integration: Business Dictionary Wiki, Comcast NBC merger Wiki, General Electric Wiki, Mergers and acquisitions Wiki, United States v. Paramount Pictures 85

Sources for slides 64 -72 See also Ashley Lutz. (2012). These 6 Corporations Control Sources for slides 64 -72 See also Ashley Lutz. (2012). These 6 Corporations Control 90% Of The Media In America. Business Insider. 86