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Commentary, Film History, Movies

Vertical Exploitation: The Six Companies That Control Your Life, Part II

If you’ve read Part I of this article, you’re already familiar with the 6 companies that exert a disproportionately great influence over the contemporary media landscape: Comcast, Disney, National Amusements, News Corporation, Sony, and Time Warner. I encourage you to take another look at the lists of important corporate assets that I included alongside the description of each company, because in order to understand the inherent dangers of media consolidation it’s first necessary to understand how these companies are structured.

If you take a look at the lists I presented in Part I, you’ll notice that there are a great many commonalities in the types of assets that each of these companies control. Since this is a film and television blog, I’ll be focusing mostly on the subsidiaries that are involved in the Hollywood system: the TV networks, movie studios, and so on. For each of the major media conglomerates, these subsidiaries work together like a well-oiled machine in the name of the one thing that Big Media holds dear: synergy. In order to understand how these dynamics work, let’s use Comcast and its subsidiary NBCUniversal as an example.

For some of Comcast’s assets, the synergistic opportunities are pretty obvious: Universal Studios makes a movie, the Universal Studios theme parks opens a ride based on that movie, and everybody makes money. For the core Hollywood assets, though – the movie studios, broadcast TV networks, cable TV channels, and television production companies – things are often not so simple.

NBCUniversal’s major movie studio is obviously Universal Studios. Like News Corporation’s 20th Century Fox, Sony’s Columbia Pictures, and so on, Universal is responsible for the big-budget, blockbuster movies that NBCUniversal produces – films like Cowboys & Aliens, Salt, and Little Fockers. To make these movies, major studios will usually enter into partnerships with independent production companies like Judd Apatow’s Apatow Productions or Ron Howard and Brian Grazer’s Imagine Entertainment. This serves to spread the costs of the movie around a bit and give key people like producers, directors and star actors (who often have their own production company, like Brad Pitt’s Plan B Entertainment) a direct stake in their films.

Just another part of the Comcast/NBCUniversal family.

Most of the major media companies also own at least one smaller movie studio that is used to finance and/or distribute smaller-budget pictures, including genre movies and independent/art house type films. Focus Features serves this role for NBCUniversal, and they’re behind such movies as Brokeback Mountain, Atonement, and Milk. Paramount Vantage does the same thing for National Amusements/Viacom, Fox Searchlight does it for News Corporation, and so on. Some conglomerates (but not NBCUniversal) also have animated film subsidiaries; Pixar (the makers of the Up!, the Toy Story movies, and much more) is one of Disney’s, and Blue Rock Studios (the people behind such movies as the Ice Age series and Rio) does it for News Corp.

One of the primary concerns for big movie studios is figuring out ways to make money off of their film library once the movies leave theaters. Enter television. Through their ownership of both major film studios and broadcast and cable networks, major media conglomerates are able to kill two birds with one stone: they ensure ongoing profits for their movies while simultaneously providing quality programming for their TV properties. It not quite as simple as it sounds – all of these subsidiaries are independent companies to some extent, so there has to be some degree of market competition involved to make sure that no one runs afoul of antitrust laws – but more often than not, Big Media companies essentially pay themselves for the right to re-air the films they’ve made on the TV channels they own.

In terms of television shows themselves, the production process is similar to that of movies. Each of the major media companies has its own in-house TV production company. For NBCUniversal, that company is Universal Television, and it produces most of the scripted shows on the NBC network and the NBCUniversal cable channels (like USA Network and Syfy). ABC Studios does the same thing for Disney, CBS Television Studios does it for CBS Corporation, 20th Century Fox Television does it for News Corporation, and so on. These TV production companies work like movie studios: they put up most of the money involved in making the show (the networks also kick in some) and provide the actual studio space required. Each TV studio also has a number of writer/producers under special contracts called “overall deals”. If you follow Hollywood and entertainment news really closely, you’ll hear about someone signing an overall deal with some production company virtually every day. Overall deals essentially pay the writer/producer to come up with ideas for new TV shows for that particular TV production company, in addition to usually working on an ongoing series. At NBCUniversal, for instance, Paul Lieberstein is under an overall deal with Universal Television to create new shows and serve as the showrunner (head writer and producer) for The Office. For various reasons, mostly having to do with money and available network time, Big Media TV production companies will sometimes sell their shows to networks owned by rival Big Media companies; House, for instance, is produced by Comcast/NBCUniversal’s Universal Television but airs on News Corporation’s FOX Network.


After the TV shows are produced and air on a major network or cable channel, there’s one final step of the process: syndication. In Part I, I omitted each major media company’s television distribution arm from the lists of their assets, mostly because there’s nothing more boring to read about than distribution deals. Nonetheless, distribution companies like NBCUniversal Television Distribution play an important role in the process by finding a home for a TV studio’s series after they have already aired on a network for a certain amount of time. Believe it or not, this is actually how TV production companies make most of their money, because the vast majority of the revenue generated by first-run TV series is earned by the networks themselves through the selling of commercial time. (These concerns have become less important in recent years because networks and TV production companies are now usually under the same corporate umbrella.) The promise of the riches of syndication is the main reason why many TV shows are able to stay on the air for an extra season or two even if their ratings are slipping – shows usually have to get to about 80 or 100 episodes for them to be viable syndication properties, and for shows like FOX’s Fringe or NBC’s Chuck, the money lost in the production of the extra episodes will be more than made up for by the syndication deals that are ultimately signed. I’m personally hoping that this exact scenario will allow NBC’s Community to survive for at least one more season.

So now that we’ve (not so briefly) outlined how the whole process works, the question must be asked: how is this bad for consumers? And how does it affect the people that actually work in Hollywood? For that answer, we have to go back in time to the 1930s and 40s – the heyday of the studio system.

A late-40s Hollywood dialogue. Movies: "What time is it?" Television: "It's Howdy Doody Time, bitch."

The essence of the studio system can be described in only two words: vertical integration. These words sound innocuous, but during the studio era they were synonymous with strong-arm tactics, anti-competitive practices, and the exploitation of employees. During the 30s and 40s, 5 major studios (dubbed the “Big 5”) dominated Hollywood: Paramount, Warner Bros., 20th Century Fox, MGM, and RKO. (If the “Big 5” sounds suspiciously like today’s 6 major media companies… congratulations, you’ve stumbled upon my entire thesis.) In contrast to many of the smaller studios of the time (Columbia, United Artists, Universal, etc.), the Big 5 were characterized by total control over both their product AND its distribution. On the production side, each studio employed a fleet of actors, directors, writers and crew. They were signed to exclusive and highly restrictive contracts; the studio had near-total control of what kind of movies were made, who starred in them, who directed them, and so forth. It was an assembly line approach to filmmaking, and because of the restrictive contracts and collusion between the studios, film artists of all types suffered both creatively and monetarily. In terms of distribution, each of the Big 5 studios owned theater chains of varying sizes. The studios were able to distribute their own movies to these theaters while shutting out their competition. In addition, the Big 5 aggressively strong-armed independent theater operators through the practice of block booking, which mandated that theater operators buy the rights to screen several less desirable films from a given studio if they wanted to be able to screen a bigger, more anticipated movie. A pleasant side-effect of this system was the era of double-features, in which theaters would screen a big-budget A picture, a lower-budget B picture (which was often a genre film, like a science-fiction or gangster movie), as well as a cartoon and a newsreel before the show, all produced and distributed by the same studio. While this was nice for movie-goers, block booking gave theater owners virtually no choice over the movies they were able to show, thus limiting the choice of movies that consumers could go see. Overall, block booking severely limited competition in the marketplace and denied theaters the potential profits to be made from a more open system. Moreover, the studios themselves got stuck in a system that did nothing to encourage innovation or evolution – after all, if they forced the theater owners to screen all of their movies regardless of quality or appeal, there was no incentive to try new and potentially exciting things. This came back to haunt them when television arrived on the scene, as the Big 5 suddenly found themselves competing with a new form of entertainment that had a comparable level of quality to many of the studio films, was free to view over the air, and didn’t even require the customer to leave their living room.

Pour one out for RKO.

Block booking was not long for this world, however. The entire studio system came to a crashing halt in 1948 with the famous Paramount Decree, a U.S. Supreme Court decision that contributed to the implosion of one of the Big 5 (RKO) and left the others severely weakened. In the decision, the Court ruled that the practice of block booking violated federal antitrust law and that the Big 5 should be forced to sell off their associated theater chains. For the moment, vertical integration in the movie business was dead.

Which brings us back to the present day and the vertical integration of the major media conglomerates. Instead of owning their own theater chains*, the modern-day Big 6 now controls a different medium of distribution: television. With their movie studios, television production companies, animated film studios, over-the-air TV networks, and cable TV channels, Big Media conglomerates are right back in that assembly line model – one-stop shopping for all of your entertainment needs. The left hands sells something to the right hand, the right hand gives the left hand a good bargain on the deal – after all, they’re our corporate brethren! – and consumers and professionals working in Hollywood suffer, because there’s less incentive to innovate and more concentration of power. On top of all that is the fact that, as screenwriter J. Michael Stracyznski points out in his book The Complete Book of Scriptwriting, actors, directors, writers and the like all derive part of their income from residuals (deferred payment owed to the artists as the years go by and the projects they work on continue to make money), and if one corporate subsidiary sells the rights to something to another subsidiary for below market value, that means that anyone whose earnings are dependent on the project’s profits just took a major financial haircut.

(*Though National Amusements, parent company of Viacom and CBS Corporation, is itself a theater chain, which is just as messed up.)

I’m a capitalist. I encourage people and companies to make money, and I’m certainly not opposed to success. Going hand-and-hand with this philosophy, though, is a fundamental preference for competition over oligopoly. When 6 companies have this much power we ALL suffer, both for the reasons I’ve already outlined and because of one simple truth: 6 minds, no matter how great, will never be as great as 60 minds, or 600 minds, or 6000 minds. The good news – and there is SOME good news – is that as undesirable as media consolidation is, Hollywood is still better off than it was during the dictatorial studio system. On top of that, there are still some companies out there – The Weinstein Company, Lions Gate Entertainment, and more – that generally stick to what they do best: making movies and TV shows. Unfortunately, many of these types of companies wind up getting swallowed alive by Big Media; witness the Weinstein brothers’ previous company, Miramax, which spent years under Disney control and is now a shell of its former self.

Vertical integration. It doesn’t sound so bad, right? America prides itself on being the bastion of the free market, but as consumers stroll through the entertainment market these days, there are only 6 storefronts. And they’re all selling apples.

Now tell me: what does a guy have to do to get a damn papaya?


About A.J. Simpson

Creator and moderator of I Wonder if You Wonder.


One thought on “Vertical Exploitation: The Six Companies That Control Your Life, Part II

  1. Hi would you mind sharing which blog platform you’re using?
    I’m planning to start my own blog soon but I’m having a tough time
    selecting between BlogEngine/Wordpress/B2evolution and Drupal.
    The reason I ask is because your design and style seems different then most blogs and I’m looking for something completely unique.

    P.S My apologies for being off-topic but I had to ask!

    Posted by bird repellent | September 14, 2013, 3:27 pm

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