Learning objectives.To understand how Media industries use horizontal and vertical integration.
Key Words-Conglomerate
-Parent company
-Subsidiary
-Vertical integration
-Horizontal integration
Integration- Merging, convergence, BEING TOGETHER
Vertical Integration
žA situation when two firms in the same industry but at different stages of production come together.
žThis could be through the two businesses merging together or through one firm taking over another.
žFor example a baker could buy a wheat farm or a television studio may buy up a production company which produces some of its television programmes.
Integration- make the film, advertise the film, show the film
How is vertical and horizontal integration important in media industry?
Vertical integration for example, is when two firms in the same industry, (such as Film) come together, but they are at different stages of production. The companies can merge together, or the other company can take over theirs. Vertical integration is the whole production to distribution, in the film industry.
Horizontal integration is where a company expands themselves into other areas into the industry, this means they can develop in a particular area of production, or they can buy out other companies that deals with these areas. Horizontal integration is just one part of the process, so just the making of the film including sound, animation and acting.
A reason why Vertical integration is important to the media industry is because it means that the company that is vertically integrated, such as Warner Bro's Entertainment, they call themselves a fully integrated broad based entertainment company, this would mean that they fully cover every part of the elements of the film industry, such as the production of a film, Marketing and Distribution. This can be done by owning a company in this part of the film industry, such as Time Warner owns Warner Bro’s spotlight which means that they can produce and make the film with none of the film revenue going to a film producer that isn’t owned by them, this way it means they make more money/revenue.
Horizontal Integration is important in the Film Industry because it allows a company to have a varied amount of away of producing a film, for example If I film company such as Disney wanted to create a film that was animated they would need certain ways to create it, such as Editing, story boarding (sketches) writers and many more, Because Disney already owns many institutions that will cover everything they need to make a film. This will speed the process up of making a film as they already have all the needs to do so. It also means that more money from revenue will be contributed towards Disney as there are no payments needed for hiring other companies to help with the creating of the film, such as a Editing company or a song writer.
Another reason of why Vertical integration is important in the media industry is because it allows a hierarchy, the company that owns the other companies (parent company) such as Time Warner own many companies that will so a more specific job such as editing, and because of hierarchy Time Warner can tell the companies that they own, exactly want they want doing and when it has to be done by, this will allow a more smooth production of a film being produced as the companies have deadlines and standards set by their parent company.
Another reason of why horizontal integration is important in the film industry is because it allows the companies to work together, unlike Vertical integration where one company own others and they have to do what the parent company tells them to do, Horizontal integration allows small companies to work together to produce a film for example that has a varied amount of media/ production methods.
Horizontal Integration is important in the Film Industry because it allows a company to have a varied amount of away of producing a film, for example If I film company such as Disney wanted to create a film that was animated they would need certain ways to create it, such as Editing, story boarding (sketches) writers and many more, Because Disney already owns many institutions that will cover everything they need to make a film. This will speed the process up of making a film as they already have all the needs to do so. It also means that more money from revenue will be contributed towards Disney as there are no payments needed for hiring other companies to help with the creating of the film, such as a Editing company or a song writer.
Another reason of why Vertical integration is important in the media industry is because it allows a hierarchy, the company that owns the other companies (parent company) such as Time Warner own many companies that will so a more specific job such as editing, and because of hierarchy Time Warner can tell the companies that they own, exactly want they want doing and when it has to be done by, this will allow a more smooth production of a film being produced as the companies have deadlines and standards set by their parent company.
Another reason of why horizontal integration is important in the film industry is because it allows the companies to work together, unlike Vertical integration where one company own others and they have to do what the parent company tells them to do, Horizontal integration allows small companies to work together to produce a film for example that has a varied amount of media/ production methods.
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