Structure and Strategy

Question 1

What have made media corporations even larger?

Answer 1

Mergers and buyouts

Question 2

What is horizontal integration?

Answer 2

When a business moves into owning multiple forms of media businesses (a producer of films also owning radio stations). Essentially, it is the process of acquiring or merging with competitors, leading to industry consolidation

Question 3

What is vertical integration?

Answer 3

Vertical integration is when a business owns different stages of the production, distribution, exhibition and sales of media products, and any related products too. Vertical integration can be forwards, backwards or balanced, depending on the stages acquired by the parent company

Question 4

What is globalisation?

Answer 4

The way in which media conglomerates have grown to become global entities

Question 5

What is concentration of ownership?

Answer 5

The way in which mainstream media has become increasingly concentrated through the major players’ acquisition of media holdings

Question 6

What are the four broad developments that have occurred in structural trends?

Answer 6

Growth
Integration
Globalisation
Concentration of ownership

Question 7

What has occurred in the past 25 years?

Answer 7

Media growth at an unprecedented rate, not only growth in the numbers of media outlets, but the size of the organisations themselves too

Question 8

Why have we seen the trend of organisations growing?

Answer 8

There is a belief that large corporations are more powerful and have more available capital at hand to finance increasingly expensive media projects

Question 9

Large corporations that own multiple businesses have the potential to what?

Answer 9

Create syngery e.g. packaging a single idea or product across a variety of media forms

Question 10

What is a potential issue with growth?

Answer 10

Some are concerned that the scale of growth could have negative effects on control

Question 11

What is unprecedented, in relation to the media empires?

Answer 11

The scale of contemporary conglomerates

Question 12

What do the media conglomerates do?

Answer 12

Incorporates a vast variety of media, all acting under one name

Question 13

What is an example of a media conglomerate?

Answer 13

News Corporation

Question 14

What can media conglomerates do with horizontal integration?

Answer 14

They can use them to cross-promote products and services or for content streaming, which is a trend being enhanced by new technology

Question 15

What is concerning about vertical integration?

Answer 15

Consumers are often unaware of the level of domination that the media giants have

Question 16

What practice are more and more media players getting involved with?

Answer 16

Targeting the global marketplace with their products

Question 17

Why do media companies attempt to grow beyond domestic markets?

Answer 17

Because the domestic markets are saturated with media products, and the media giants see global markets as their key to expansion

Question 18

What can media products do to tap into a lucrative source of revenue at virtually no additional cost?

Answer 18

Distribute their media products to foreign markets (e.g. the market for American films in China, where the latest Fast and the Furious movie grossed nearly $400,000,000)

Question 19

What happens when media companies grow, integrate and pursue global strategies?

Answer 19

Ownership becomes concentrated in the hands of these new media giants, a phenomenon that applies to the industry as a whole

Question 20

What is the concern surrounding the concentration of ownership?

Answer 20

The fact that the revenue of the industry as a whole is being channellef into just a handful of organisations

Question 21

What are some of the strategies of the new media giants?

Answer 21

Cost and economies of scale (the way in which the giants can afford to finance more expensive projects than independents because they have access to enormous amounts of investment capital)
Synergy (both cross-development and cross-promotion)
Branding
Segementation and specialisation
Diversification
Globalisation
Reducing competition and risk

Question 22

What is an advantage of owning a media giant?

Answer 22

You have the ability to absorb a significant loss on certain project without being affected (‘47 Ronin’ losing $147 million at the box office and not crippling Universal Studios. In fact, they profited $3.7 billion worldwide in 2013)

Question 23

Which elements are key to the public sphere model ideal?

Answer 23

Diversity
Innovation
Substance
Independence

Question 24

What sort of impact does growth strategy have on content?

Answer 24

There is a move towards the homogenisation of content, that imitates successful ideas and tends to be formulaic

Localism is in decline, as a result of this move towards ‘sure-fire hits’

There is an increase in trivialisation and sensationalism

‘News Lite’ - the tendency to make news about scandal and entertainment to boost ratings, as opposed to being about serious issues

The disappearing line that separates journalism from commerce - ‘advertorials’

Corporate censorship and the pursuit of organisational interests over public interest

Advertiser influence on content and the conflict of interest that arises from this

Question 25

Structures have moved from stable arrangements to what?

Answer 25

Increasingly fluid arrangements

Question 26

What are the benefits of one-off projects

Answer 26

They integrate different types of knowledge and skills in an attempt to reduce cost

Question 27

What are problems related to one-off projects?

Answer 27

They can be threatened by corporate boundaries or by autonomous decision making - hence the need for clear communication throughout the project

Question 28

What is the benefit of partnership activity?

Answer 28

Allows increased speed and agility, meaning that organisations can faster adapt to environmental challenges and opportunities

Question 29

What is an example of vertical integration?

Answer 29

Comcast buying out NBC. Some were concerned about this huge buyout because it meant that Comcast could prevent online distributors from accessing NBC-owned content and hike up the prices for television providers who wanted to show NBC

Question 30

What is an example of horizontal integrations?

Answer 30

Disney and their acquisition of Marvel Entertainment, gaining the rights to all 5,000 Marvel characters and creating a wealth of merchandising opportunities for themselves

Question 31

What are some advantages of horizontal integration?

Answer 31

1) Lower costs - The result of HI is one larger company, which produces more services and products. The higher output leads to greater economies of scale and higher efficiency.
2) Increased differentiation - The combined company can offer more product or service features
3) Increased market power - The larger company has more power over its suppliers and distributors/customers.
4) - Reduced competition. The result of industry consolidation is fewer companies operating in the industry and less intense competition.
5) Access to new markets. New markets and distribution channels can be accessed by integrating with a company that produces the same goods but operates in a different region or serves different market segment.

Question 32

What are some disadvantages of horizontal integration?

Answer 32

1) Destroyed value - Mergers and acquisitions rarely add value to the companies. More often, M&A fail and destroy the value of the companies involved in it because expected synergies never materialize.
2) Legal repercussions - Horizontal integration can lead to a monopoly, which is highly discouraged by many governments due to lack of competition. Therefore, governments usually have to approve any larger M&A before they can happen.
3) Reduced flexibility - Large organizations are harder to manage and they are less flexible in introducing innovations to the market

Question 33

What are some advantages of vertical integration?

Answer 33

1) Lower costs due to eliminated market transaction costs
2) Improved quality of supplies
3) Critical resources can be acquired through VI
4) Improved coordination in supply chain
5) Greater market share
6) Secured distribution channels
7) Facilitates investment in specialized assets (site, physical-assets and human-assets)

Question 34

What are some disadvantages of vertical integration?

Answer 34

1) Higher costs if the company is incapable to manage new activities efficiently
2) The ownership of supply and distribution channels may lead to lower quality products and reduced efficiency because of the lack of competition
3) Increased bureaucracy and higher investments leads to reduced flexibility
4) Higher potential for legal repercussion due to size (An organization may become a monopoly)