The media majors
This case study outlines the major organisations in the global media industries. After a period in which ‘consolidation’ into a small group of conglomerates controlling all the media industries seemed inevitable, there have been several changes of ownership recently and shifts in operating policies.
Time Warner (2009 Revenue: $25.79 billion)
Time Warner was established in its present form by Stephen J. Ross who bought the ailing Warner Bros. film studio in 1969 and over the next twenty years built up a vertically integrated media conglomerate through various acquisitions (e.g. DC Comics in 1969) and new ventures, culminating in the 1990 acquisition of Time Inc. the leading American magazine publisher and cable TV company.
Warner Bros., first incorporated in 1923, was one of the original five ‘film studio majors’, but by the late 1960s it had fallen into the hands of Kinney Enterprises, a company which made money from activities as diverse as funeral parlours and car parks. After the death of Ross, the acquisitions continued with the absorption of, first, Ted Turner’s media company in 1996 and then the merger with America Online (AOL) in 2000. This merger saw Time Warner as the junior partner with AOL’s financial worth vastly overvalued during the period of ‘dot.com mania’. Only three years later ‘AOL’ had disappeared from the new company’s name and in December 2009, AOL was ‘spun off’ by Time Warner to be a standalone company again.
Like most of the Hollywood studios, Warner Bros made films in the UK during the 1930s (at its studio at Teddington). In 1945 Warner Bros became the principal shareholder in the vertically integrated UK studio ABPC (Associated British Picture Corporation, running ABC cinemas). This lasted until 1968 and was an early example of what has become commonplace in recent years.
Warner Bros returned to the UK as a major exhibitor in the 1990s through a partnership with the Australian cinema chain Village Roadshow. Warner Village Cinemas was eventually sold to the UK chain Vue in 2004. This pattern is set to be repeated in other territories through Warner Bros International Cinemas (WBIC). (China, Japan, Italy and Spain currently have WBIC chains). Time Warner bought the leading UK consumer magazine group IPC in 2001.
In America, Warner Bros consolidated its strength in television with the establishment of ‘the WB’ as a national TV network in 1995 (focusing on younger audiences) – the WB is now an online service. Warner Bros Television claims to be the biggest provider of ‘primetime series’ to US television networks. The post-AOL merger experience was difficult for the company financially and in 2003 it sold the Warner Music Group, which is now a standalone company. Other sales included sports franchises and a half share in the cable TV station Comedy Central.
In 2010 Time Warner was organised into four main divisions:
Time Inc (including IPC, DC Comics)
Warner Bros. film and television production/distribution
Sony (2009 Revenue: $78.9 billion)
Compared to the other media conglomerates, Sony is a relatively young company, set up in 1946. It is unusual in being primarily an electronics manufacturing and systems company including both ‘consumer’ and ‘professional’ media equipment in its product range.
Sony is a genuine global company with offices and manufacturing or distribution plants in all major countries. Its innovations are well known and the VCR, Walkman etc. would make it an important corporation in any study of the media industries. But it was Sony’s acquisition of CBS Records in 1988 and Columbia Pictures Entertainment in 1989 that announced a new strategy for the company.
With the purchase of MCA-Universal in 1986 by Matsushita (Panasonic, JVC etc.), this move signaled the strength of the fast-growing Japanese economy at a time of American downturn. Libraries of films and recorded music were now available to help Sony exploit its new consumer media technologies. However, the promised synergy has proved difficult to exploit, even with the launch of a third synergised technology, the Playstation in the mid 1990s.
Columbia Pictures, with its distinctive logo of a woman in classical garb holding a torch aloft, dates from the 1920s. Throughout the studio period, Columbia was one of the ‘little three’ studios without the financial support offered by ownership of a cinema chain. Although there is a large library of classic films, it is somewhat less glamorous than that held by Warner Bros. Columbia was however the first Hollywood studio to get involved in television production, in 1948, and in 1982 it set up a second producing studio specifically to make films for cable television with HBO and CBS. This became Tri-Star which was then merged with Columbia to form Columbia-TriStar as part of Sony Pictures Entertainment. A significant move for a film company owned by a Japanese conglomerate was the establishment of Sony Pictures operations in Asian markets including India and China, involving major film productions and television networks.
Columbia Records is the oldest surviving brand name in recorded sound going back to 1888. The company helped set up the Columbia Broadcasting System (CBS) in 1927 and was in turn bought by CBS in 1938, before being sold to Sony in 1988. Sony then acquired the rights to the Columbia name outside North America (owned by EMI) and promoted the new worldwide brand. In 2004 Sony merged its music interests with Bertelsmann (see below) to form Sony BMG.
Sony Pictures Entertainment is a much bigger studio than Columbia ever was and has had major success with blockbusters such as the Spider-Man franchise. If the conglomerate has a weakness it is that it doesn’t have an outlet in North America via television, broadcast or cable/online.
In 2010, Sony Corporation of America lists its four spheres of operation as:
- Online Games
- Music & Movies
Perhaps because of its Japanese roots and its hardware roots, Sony lists two separate interests in gaming and tends to downplay its filmed entertainment output. Out of the six conglomerates that control major Hollywood studios, Sony is the one with least commitment to its studio brand, now usually using ‘Sony Pictures’ or ‘Sony Music’ rather than ‘Columbia’.
Viacom (Revenue 2009: $13.62 billion)
Unique amongst US media conglomerates, Viacom is a major corporation effectively controlled by a private company, National Amusements Inc. This family firm, headed by Sumner Redstone, runs cinema exhibition chains in various territories, including Showcase in the UK. It is what is known in America as a ‘closely held corporation’.
Viacom itself was originally a small company set up by CBS, the US television network. Redstone used Viacom as a vehicle to acquire a ‘portfolio’ of well known American media brands such as MTV, Blockbuster (sold to shareholders in 2004), Paramount and CBS as well as major interests in book publishing, other television and radio broadcasting and outdoor advertising.
Paramount Pictures was one of the first of the five major Hollywood studios, founded in 1912 by small distributors and quickly merged with cinema chains Famous Players and Lasky’s. It was this market strength that was attacked in 1948 by the US Supreme Court decision to force a de-merger of the studio and its cinemas.
Paramount then struggled as a producing studio until the 1970s when under the ownership of Gulf + Western it produced big hits such as The Godfather (US 1971). Since Viacom purchased the studio, Paramount has been run as a ‘lean and mean’ studio looking to profit from synergies with other Viacom companies but not spending as heavily on blockbusters as other studios.
A classic Paramount move was to earn $300-400 million as a late partner on the release of Titanic when Fox became frightened at the spiralling costs of production. Paramount tended to make money from small films (i.e. low budgets, relatively big box office) such as The Rugrats movies (from Nickelodeon) and Save The Last Dance (from MTV).
In 2005 Sumner Redstone led a ‘de-merging’ of Viacom’s consolidated businesses to produce better returns for shareholders. Two new corporations, Viacom Inc. and CBS Inc. (see below) were created on 1st January 2006. Viacom retained Paramount and the cable television networks MTV (including Nickelodeon) and Black Entertainment Television.
At the same time, Paramount took effective control of DreamWorks the independent studio set up by Steven Spielberg, ex-Disney executive Jeffery Katzenberg and record label owner David Geffen in 1994. DreamWorks Animation was made into a separate corporation but its films are distributed by Paramount. In 2008, DreamWorks left Paramount to become half-owned by the Indian media conglomerate Reliance BIG Entertainment. DreamWorks Animation still releases via Paramount.
Disney (Revenue 2009: $36.15 billion)
The early history of Disney can be found here.
In the late 1990s, Disney grew as a company when it acquired ABC, the third national television network in the US. This was a major boost to Disney’s existing television interests and also added the sports cable networks under the ESPN brand. Disney is now organised around four distinct ‘activity centres’:
- Studio Entertainment
- Parks and Resorts
- Consumer Products
- Media Networks.
As a film studio Disney has a more humble background than any of the other majors. The animation studio started by Walt Disney in the 1920s was originally a small independent with feature films from 1937 being distributed by the then major studio RKO. It wasn’t until 1955 that a new Disney subsidiary, Buena Vista, became the sole distributor of Disney films, which now included live action.
In the 1990s, Disney developed two more studio brands, Touchstone and Hollywood Pictures to make films outside the ‘family entertainment’ ethos of Walt Disney Pictures. Disney’s acquisition of the ‘independent’ studio Miramax proved controversial when Pulp Fiction became a big hit in 1994, calling into question Disney’s ‘family’ focus.
The creators of Miramax, the Weinstein brothers, split from Disney in 2005, leaving behind the brand and a 600 film library, but taking the Dimension brand for horror films with them. Disney has also benefited from a long association with the innovatory animation company Pixar (Toy Story, The Incredibles etc.) but in 2005 this too seemed to be ending. However, in 2006 Disney and Pixar merged. The owner of Pixar at this point was Steve Jobs of Apple, who now occupies a seat on the Disney board.
The ‘Disneyland’ theme parks began life in the 1950s alongside associated television programmes and the characters from the animated films also became the basis for the Consumer Products division. Disney is very much a global brand with theme parks across the world – the fifth Disney resort, in Hong Kong, opened in September 2005. A further resort is scheduled to open in Shanghai in 2014. Global deals also include a distribution agreement with Studio Ghibli in Japan to release films like Princess Mononoke and Spirited Away in the West.
Disney has been a focus for news stories and analysis by media academics partly because of its strong ‘family image’ and involvement in several instances of ‘self-censorship’ and also because of the personality of the Disneys themselves (especially Walt and his nephew Roy) and its chief executive Michael Eisner, who in 2004 announced his retirement after over twenty years as head of the corporation.
In 2007 Disney replaced its long-serving ‘Buena Vista’ brand for film distribution. The conglomerate’s films are now distributed outside North America by Walt Disney Studios Motion Pictures International – must be difficult for the marketeers!
News Corporation (Revenue 2009: $30,42 billion)
Perhaps the most discussed media organisation in UK media studies, News Corporation is the result of the Australian-American Rupert Murdoch’s project to build a global media major. Apart from the music industry, News Corp. has significant holdings in all the other media industries and it is indeed a global company with strengths in Australia, Asia and the Pacific Rim as well as Europe and North America.
The initial power base was in the Australian newspaper business. The focus on Murdoch (rather than on some of the other ‘media moguls’) in the UK has been because of the large share of the UK media market controlled by News International, the confusingly named UK company responsible for the Sun, News of the World, Times etc. News Corporation also has the biggest share in British Sky Broadcasting (35%) and the potential for Murdoch to exert ‘too much’ power over UK media has meant that regulatory decisions have often seemed to hinge on preventing him gaining access to a terrestrial television station such as Five.
In the US it has been the purchase of 20th Century Fox film and television interests and the development of Fox TV as the fourth major network that has helped Murdoch to gain notoriety, especially for the ‘hawkish’ (i.e. pro-war) and ‘neo conservative’ stance adopted by Fox News. The lack of objectivity of this station is compounded for many critics by the onscreen claim that its news reporting is ‘Fair and Balanced’.
Fox News (and the whole question of political power wielded by media corporations) is explored in the documentary Outfoxed (US 2003) which is subtitled ‘Rupert Murdoch’s War on Journalism’. Details of this film can be found on www.outfoxed.org. Murdoch himself is a combative figure, who frequently criticises regulatory regimes in the UK and elsewhere in Europe, but there is a danger in ‘demonising’ him as an individual and failing to study how a large corporation like News Corp. actually operates.
20th Century Fox was one of the original five Hollywood studio majors, famous for the introduction of CinemaScope in 1953. It has often been associated with very large scale films such as the Star Wars series, Titanic and recently Avatar, but it has also gained a reputation for clever marketing of the smaller films distributed by its classics division, Fox Searchlight (e.g. Juno in 2007 and Slumdog Millionaire in 2008). News Corp. also has strength in book publishing through Harper Collins.
Bertelsmann (Revenue 2009: Euros 15.36 billion ($20.46 billion))
Bertelsmann is a traditional German printing company celebrating its 175th anniversary in 2010. Its core business focuses on book clubs and magazine publishing in the large German-speaking market. During the 1990s it began a major expansion under a management team seeking to match American multinationals, but recently it has re-trenched around its more traditional businesses. The company is owned by a private trust set up Reinhard Mohn (who died in 2009) which owns 77.4% of the shares and the Mohn family which owns 22.6%.
Having sold its extensive music industry assets to Sony, Bertlelsmann has to some extent retreated to Europe. It operates through five divisions:
Random House – the largest international publishing house for ‘general interest’.
Gruner + Jahr – a leading European magazine publisher.
Direct Group – book and media clubs, retail and marketing across Europe.
Arvago AG – a world leader in media services.
Vivendi (Revenue 2009: Euros 27.13 billion ($36.14 billion))
Like Bertelsmann, Vivendi expanded in the 1990s using the American model, but it became over-extended and re-organised in 2006. Vivendi’s roots go back to a 19th century French water company which in the 1980s began to diversify into other services such as waste management and eventually into the new field of cable television and eventually into the new world of de-regulated telecommunications.
In 1999 Vivendi merged with the famous French film company Pathé and a year later took over Canal +, divested itself of the non-media businesses and purchased the Universal entertainment assets from Seagram. With Universal’s Hollywood studio and music companies, Vivendi became a major international player – but it couldn’t last.
In 2006, Vivendi sold 80% of Universal to General Electric (see below) and restructured. In 2007, the slimmed down company made a significant move by merging with Activision to produce a major company in the videogames industry.
Vivendi currently operates through these divisions:
Universal Music – the largest international music group
Canal +SFR (telecomms)
GVT (Brazil telecomms)
ZaOza (Vivendi mobile entertainment)
NBC-Universal (Revenue 2009: $15.44 billion)
Universal was one of the first Hollywood studios, founded in 1912. Like Columbia (see above) Universal lacked the cinema chain that would have made it a vertically integrated major studio. As one of the ‘little three’ (United Artists was the third), Universal became well known for inexpensive genre cycles including the Dracula and Frankenstein films, musicals and comedies.
In 1952 the studio was bought by the Decca Record Company and in 1962 Decca was in turn acquired by MCA – the company headed by Lew Wasserman that grew out of a talent booking agency. This was a sign of the changing power base in Hollywood. As a film and television producer/distributor, Universal became more powerful in the 1970s and 1980s but was sold again to Matsushita in 1986 and to the Seagram Drinks Group in 1995.
Seagram then acquired another would be film and music ‘major’ in the form of Polygram (originally part of Philips) but then sold the whole company to the French conglomerate Vivendi in 2000. Vivendi eventually set up a deal with NBC, the US network television broadcasting subsidiary of the giant General Electric Company. This saw Universal split into a film and television operation controlled by NBC with the music interests remaining with Vivendi.
NBC-Universal is owned 80% by General Electric and 20% by Vivendi. It comprises the film and television studios, television network and theme parks in the US and overseas. In December 2009 General Electric proposed a deal which would see NBC-Universal merged with the major US cable company, Comcast. As part of the deal, GE would purchase Vivendi’s 20% stake. In 2009 both the films division and broadcaster NBC performed poorly, but the portfolio of cable channels such as Bravo, and Syfy showed more promise.
The four divisions of the current group are:
- Digital Media
- Parks and Resorts
CBS Corporation (Revenue 2009: $13.01 billion)
CBS is one of the four network broadcasters in the US. In 2006 it was re-established as a separate company following the splitting of Viacom (see above). CBS now controls the broadcasting businesses plus Showtime cable, publisher Simon and Schuster, outdoor advertising and various other ancillary activities.
Apart from Vivendi and Bertelsmann, there are several other major players in Europe, primarily concerned with broadcasting and print. (This part of the case study will be completed later. For now here are just the two leading UK broadcasters.)
BBC (Revenue 2009: £4.9 billion ($7.52 billion))
The BBC is an important media brand, recognisable worldwide, but perhaps in danger of being overshadowed by CNN, Fox News and the other brands of the majors outside the UK.
The Corporation gains some advantages from its public sector position in the UK – not least the financial security of a guaranteed income via the licence fee. But this status also constrains the BBC’s activities since any profit from sales (such as programme rights or advertising on cable channels such as BBC America) must be used to support public service broadcasting. The BBC is not allowed to use its position to compete commercially (as it was deemed to do so with some of its digital services, resulting in criticism by the Department for Culture, Media and Sport).
BSkyB (Revenue 2009: £5.32 billion ($8.16 billion))
Now, in revenue terms, the number 1 UK broadcaster, BSkyB is available in over 50 per cent of UK homes and also in Ireland. BSkyB is effectively controlled by its founder and major shareholder, Rupert Murdoch’s News Corporation. In 2004 Murdoch’s son, James, became the new Chief Executive. Most of BSkyB’s subscription revenue comes from sport and movies – compared to the BBC and ITV, BSkyB does not produce (or commission) very much original programmimg.
A special case
Microsoft (Revenue 2009: $58.44 billion)
Apple (Revenue 2009: $36.54 billion)
If we wanted to represent the powerful corporations with interests in the broader telecommunications or ‘information industries, we would have to include many more corporations. However, these two computer companies have both got a direct interest in the media industries.
Apple is the computer platform of choice for many media professionals in design, music and video production with software such as Final Cut Pro used by video producers. Apple has had a major impact on consumer media use via the iPod, iPhone and now iPad. What iTunes software has achieved with music is now being replicated perhaps with movie downloads and in the future online print products.
Microsoft has had less success in these areas, but with Windows 7 it may be able to match something of Apple’s software success. Microsoft has also become a significant presence in videogaming. Both corporations could at any time enter into relationships with other media majors and significantly alter the balance of power in media markets.
Media corporations outside North America and Europe
The majors are generally concerned with English language media. The exceptions are those European companies with strengths in local print and broadcasting markets. In other parts of the world, there are dominant local players in print media and broadcasting, but film and video and music tend to be dominated by subsidiaries of the global majors.
This part of the website will be developed later this year. In the meantime, here are two links to the itpworld blog covering film and media conglomerates in India and film studios in Japan: