Page 121 - Battleground The Media Volume 1 and 2

100 | Conglomerat on and Med a Monopol es

Horizontal and vertical integration are defining characteristics in media con-
solidation since the 1980s. With horizontal integration, firms acquire additional
business units at the same level of production, distribution, or exhibition. Such
consolidation enables conglomerates to extend their control and maximize
economies of scale through the use of shared resources. With vertical integra-
tion, firms acquire additional business units at different points in the process.
This allows them to control the supply and cost of essential materials and en-
ables them to rationalize production and increase their control over the market.
Using vertical and horizontal integration, media conglomerates gain far
greater control over the marketplace, but such economic strategies limit mar-
ket access for independent producers and distributors. This is most evident in
the motion picture and television industries. Independent film distributors were
prominent in the late 1980s, but a decade later the major conglomerates had
swallowed most of these firms while large theater chains had overtaken small
movie houses. By 1997, six corporations accounted for over 92 percent of box
office revenue, and the blockbuster and the multiplex came to define the Ameri-
can moviegoing experience. The same pattern is evident with prime-time tele-
vision. As networks exerted greater control over television production, fewer
programs originated from outside of conglomerates focused on financial control
and less risky programs became appealing. Numerous versions of profitable for-
mulas multiply in seemingly endless spin-offs, as the dearth of original, innova-
tive television productions become more evident.
These practices extend to foreign markets as well, and the impact of Holly-
wood on indigenous production is a long-standing concern. The U.S. govern-
ment promotes the export of media products across borders, and one of the
justifications for the relaxation of ownership restrictions at home is the argu-
ment that the media conglomerates need to be massive to succeed overseas. This
contributes to a general mindset that firms that do not grow through mergers

the CongloMeration oF MiCkey Mouse

The transformation of The Walt Disney Company from a struggling studio operating in the
shadow of its related theme parks into a sprawling corporation provides one of the clearest
examples of conglomeration. The first step was the creation of production units to develop
a diversified slate of films. In 1983, combined domestic and foreign box office receipts for its
motion pictures totaled just $82.5 million. A decade later the filmed entertainment division
of Disney generated $3.67 billion in revenue. The diversification into related businesses was
the next and most significant step. The biggest headlines came in 1996 with the acquisition
of Capital Cities/ABC Inc. This created vertical integration between ABC and the produc-
tion units within Disney, links that were most evident a decade later when three shows from
Touchstone Television, Lost, Desperate Housewives, and Grey’s Anatomy, fueled a resur-
gence of the network. That merger also included ESPN, which became the most lucrative
unit in the Disney empire. In 2004, the diversified conglomerate generated over $30 billion
in revenue, 20 times what it did in 1984.