Task 1 ownership case study

Media Company Case Study

Task 1 Understand the structure

and ownership of the media sector

Chloe Kyriacou

This is when a companies' ownership is private; they have complete control over legal rights. No government or public body is involved with them. Since they are private they do not need to meet the strict securities or exchange filling requirements of public companies. They shares they make to not need to be issued through a public offering.

Private ownership in the media industry has both it’s positive and negative sides. Advantages:Due to the competition, private ownership can result in better quality products. The threat of loosing shares to a competitor forces them to put forward their most popular products.The government has no say in what they do. “large media firms achieve efficiencies due to economies of scale.”

Disadvantages:Private ownership means that most media companies value profit over the public interest. When a media company is privately owned they tend to have there own ideology which is the only one they present to the public; they homogenize popular media.When companies come to face financial problems they will be the ones to suffer the losses.

An example of a privately owned company is ITV; it was formed after granada and Carlton- two independent companies- merged together as one.

Types of ownership: private ownership

Public services provide a ‘service for the public’; in the media industry this is done through public broadcasting. They are there to meet the needs and demands of the general population; broadcasting may be national or local. There funding comes from the licensing we pay or in some very rare cases commercial financing. Here in the UK public broadcasting is run by a single organization- the BBC. They are the largest public broadcasters in the world; in 1932 they launches a work service. They are funded by the TV license fees we pay annually; this means they need to appeal to a diverse mix of cultures and interests. Channel 4 are also a public service station, however they are commercially funded meaning they don’t have the same freedom as the BBC nor do they have to provide us a service. Public services may be ran by a single or multiple organizations- more commonly in other countries.

Types of ownership: public service

Types of ownership: independent

In the media industry allot of production companies and record labels are independently owned- this refers privately held organizations. They are usually one of a kind business that are not part of a chain or larger organizations like some privately owned companies are. An independent company usually only has one sole owner who can legally not be separated from his company. Unlike privately owned companies they have no shares in the stock market- the owner is responsible for all it’s liabilities and profit.

Advantages:The owner of the company is able to start fresh with complete control of the shape the business will take.If the company was previously owned by someone they do not have to follow the legal requirements set by that person. They are able to launch a product or service which protected by trademark or copyright meaning there is the possibility for them to rule a particular market.

Disadvantages:The is nobody supporting them financially for example if you were to set up an independent production company the money you need to start up and develop your company can be extensive amounts. Suffering from financial losses and going into debt.When first starting out your business you will be responsible for everything meaning there will be an extensive amount of work.

In the media industry there are allot of independent companies such as record labels and production companies. Matchlight is an independent TV production company that was formed in 2009- they specialize in documentaries on history, art and current affairs. They independently produce TV shows which the BBC, ITV, Channel 4, Channel 5 and many more hen buy off them.

In the media industry there are allot of large companies that own other smaller companies within different sectors such TV, Radio, Film, Music and Publishing. This is known as conglomerate ownership. A very good example of this is the Walt Disney company- they are the worlds second biggest conglomerate media company in the world. They own record labels, theme parks, TV networks, studios, sports networks, cable channels, news channels and publishing companies all across the world.

Advantages: The possibility of growing and developing a company leading to larger profits.If one or two of the smaller companies are doing badly one year, you still have an income coming in from the others. You don't have to worry about investment risks as much.Creates diversity.

Disadvantages:A smaller company which has been taken over can loose it’s true values.Culture clash between companies. There isn’t always he possibility of development

Types of ownership: conglomerate

Horizontal integration is when one company takes over another similar competitive company. It’s usually most common among conglomerates. Horizontal integration can be achieve by external or internal expansion through mergers.

Advantages:Increase in market power can be achieved.Reduction in the cost f international trade.Economies of scope- sharing resources.Economies of scale- selling more of a product.

Disadvantages:Concerns on whether anticipated economic gains will materialize. Anti-trust issues may arise between other companies. A business can get to big too quickly causing issues between management.

An example of horizontal integration is when Universal Music Group completed their acquisition of EMI on September 12th 2012.

Types of Companies:Horizontal Integration

Vertical integration is when a company expands it’s business into other areas that are following the same production path. Different companies are involved in the development of one product or service. There are three types of vertical integration; Backward integration- when a company owns an input companyForward Integration- when one company owns the post-production areas of a business (distribution)Balanced integration- a mix of the two f the aboveAdvantages:Cost defective.More Control.Differentiation.

Disadvantages:Lack of supplier competition meaning higher costs due to low efficiencies.Less economies scale- different part of production and distribution are at different stages.

An example of vertical integration is ‘The Big Five’ which included  MGM, Warner Brothers, 20th Century Fox, Paramount pictures, and RKO. They produce and distribute films whilst also owning movie theatres.

Types of Companies: Vertical Integration

Cross media convergence is they way in which different products are produced and distributed across different platforms. A lot of the technology we use is moving towards one single platform which delivers a multi media output- for example a Ps3 is primarily for gaming, however you can download and watch films and music videos whilst also string Images and catching up on TV shows.

Media convergence can happen in production, distribution or exhibition. An example of this is when the music and film industry came together to produce the James bond film- in which Adele's hit single ‘Skyfall’ was used in It.

There's is a chance to make a lot of money in cross media convergence- particularly when two well known brands, companies or individuals are coming together. It’s also a big advantage for companies, brands or individuals who are not very well known but move toward a platform that is.

Cross Media convergence

This is when two companies come together to produce a product or service such as a film that would have a greater combined effect than they would individually. An example of this is they synergy between a music artist and a record label. There is a bigger financial benefit achieved through the combining of the companies; this can be due to increased revenue, combined talent, cost reduction and better technology.

Companies will work together to promote a linked product across different media platforms- usually the products will promote each other. For example when ‘Harry Potter and the Philosophers Stone’ was released a soundtrack was also made. Both products promoted each other- the soundtrack persuaded you to buy the film and vise versa.

Synergy

The diagram is an example of the music industries organisational structure. *Continue to next slide.

Describe the Structure and Ownership of Either The Film, TV, Gaming or Music Industry

The industry itself is made up of numerous organisations, individuals and companies which will each come into place at one point or another when producing a song. The key to the entire music industry is the artist- without them it wouldn’t exist. For them to be ‘stars’ they need a good composer- the better the song the richer the composer will become. The manager comes in next, they are in charge of controlling and organising the artist. The manager will represent the artist in dealing with record producers and publishing companies- without them the artist would have no career. A manager will usually also employ on behalf of the artist. Production companies are usually ones that try to ‘create’ artist with the help of managers, musicians and composers- they then try to sell there material to record labels. However it’s a very tricky business and the artist are usually never picked up with only a handful ‘making’ it.

Once a composer has written a song they will sign a ‘publishing deal’ which means that they own all copyrights to the song. The publishing company then licenses the use of these copyrights to record labels for there artists. When the artist decides they are ready to release the song, all copies sold of it will generate a ‘mechanical publishing royalty’. The record company will then give this to the ‘MCPS’ who then pass it onto the publishers. The publishers job is to ensure that the composer get’s there cut of the money- usually around 15% of the royalties. Publishers can also license the song’s to film and advertisement makers to generate a bigger income. Publishers have the right to sue someone if piracy is to take place.(*CONTINUE TO NEXT SLIDE)

The record label are the brand or trademark associated with an artist. They facilitate an artist and support then in everyway possible, such as with there recording and financially. They also help manufacture, distribute and promote the artist and there work. They will usually invest a lot of money into an artist. Like any business, they only want the best- they want to generate as much income from the artist as possible. The success of an artist’s song is down to the record company; they need to get the right exposure on TV, radio and in magazines. Most record companies will follow the same manufacturing and distributing structure with all of there artists- if there method isn’t broken, they’re not going to fix it. Independent companies without access to these structures, often fail to succeed- they aim to grab the attention of major record companies to help them. To distribute the song the record label need to acquire a licence of the ‘MCPS’. The ‘MCPS’ job in the music industry is tome oversee the collection and distribution of CD’s. Retail acts a front line to the entire music industry- without no money would be made.

The music industry is vertically integrated; the industry is expanded into other areas that are following the same production path. Different parts of the industry are involved in the development of the artist and song.

Disney originate from the TV and film sector of the media industry, however years later they now own theme parks, a Disney radio station, Disney stores selling Disney products, Disney record labels, publishing companies and numerous other unrelated companies and organisations. They are behind the creation of some of the world most known movies such as ‘Snow White’, ‘The Hunchback of Notre dame’ and ‘Hercules’ as well as kids TV shows.

Disney is the seconds largest conglomerate company in the world; they a are large company which owns numerous smaller companies and businesses.’

‘Disney is divided into five major sectors: media networks, parks and resorts, studio entertainment, consumer products and interactive media.’

Ownership

Walt Disney and co-finder Roy O. Disney founded Disney in 1923. Mr Walt Disney acted as president from 1923 right up until 1945. Since then six different males have followed in his footsteps and acted as president of the company- one of which was Mr Roy O. Disney. Currently Robert Iger holds the president position and has done for fourteen years now.

Robert Iger does not own any other company himself- although he had a brief stint with Pixar. Disney itself however owns numerous companies from ‘ABC’ all the way too ‘Marvel’.

Whilst Disney is a conglomerate, they are a horizontally integrated company. They have taken over a number of smaller competitive business's, organisations and companies to generate a bigger income and create market power.

It owns and has share in over one hundred different companies including ‘Marvel, ‘Pixar’, Cruise lines and TV networks.

Competitors

Disney has four main competitors: ‘Twenty-First Century Fox, Inc.’, ‘Time Warner Inc., ‘NBC Universal Media, LLC’ and ‘Dreamworks.’ All three of these companies- like Disney- are conglomerate and horizontally integrated, together owning over 65% of the TV market.

Disney has the advantage in that it is a household name known by generations, it’s a trusted brand with a very big advertising campaign backing it! They’re the only company to own theme parks and there own channel by the company name which helps immensely.

AudienceDisney is a household name that generally appeals to all ages. However there main priority is children aged 0-11 and tweens aged 12-14. They have ninety-five entertainment channels which are distributed in over thirty languages meaning there reaching a large scale of people in one hundred and sixty-eight countries. Each week over thirty thousand hours of programming is distributed.

They are very diverse in that they aim to appeal to all races, ages, sex and nationality. For example in 2009 Disney XD was launched which is aimed at young males and pre-teens under 14, Whilst Disney Junior aims to appeal to children under the age of five.

Disney has a ‘secondary’ audience- 35-55 year olds. These are the people that most likely have families and have experience Disney first hand as children.

Disney recently celebrated the fact they were No.1 network for primetime TV for kids aged 6-11.

The only major structure changes Disney has undergone is in leadership positions- the changing of presidents, vice president and board of directors.

Disney has had quite a few controversies over the years in regards to some of the animations and language in there films. Whilst the issues where resolved in all cases, they were never proven. An example of this is, is when Disney were accused of having ‘hidden sexual innuendo or references hidden in some of the movies, such as the ‘The little Mermaid’. Audiences claimed there was a drawing of something closely resembling a penis on the artwork for the front cover. The object was later removed on an updated version of the cover.

Controversies

http://csimarket.com/stocks/competitionSEG2.php?code=DIS

http://www.marketwatch.com/investing/stock/dis/financials

http://elitedaily.com/money/the-worlds-10-largest-media-conglomerates/

http://www.studymode.com/essays/The-Walt-Disney-Company-The-Entertainment-200155.html

http://www.nasdaq.com/symbol/dis/ownership-summary

http://thewaltdisneycompany.com/about-disney/leadership/ceo/robert-iger

http://thewaltdisneycompany.com/disney-companies

http://www.disneyabctv.com/division/index_media.shtml

http://www.therichest.com/rich-list/the-biggest/the-10-biggest-disney-controversies/

Bibliography