Vertical and horizontal integration (Ownership)

Vertical & Horizontal Integration

Richard Gent | Tuesday July 19, 2011

Categories: Key Concepts, Institutions, Censorship & Regulation, Ownership, New Media, Integration, News, News Ownership

Vertical Integration

Commercial institutions try to combat the power of the BBC by becoming larger and creating vertical integration. This is where an institution has shares or owns each part of the production and distribution process. For example: Warner Bros Entertainment calls itself a fully integrated broad based entertainment company which owns film studios and the means to distribute the films as well as some of the cinemas in which they are shown. Warner Bros in itself is part of an even bigger conglomerate called Time Warner which is a huge media conglomerate institution which uses horizontal Integration to consolidate its power and profits.
BBC | Dragons’ Den Definition:

A situation when two firms in the same industry but at different stages of production come together.
This could be through the two businesses merging together or through one firm taking over another.
For 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.

Horizontal Integration

Horizontal Integration is where an organisation develops by buying up competitors in the same section of the market e.g. one music publisher buys out other smaller music publishers.
BBC | Dragons’ Den Definition:

A situation when two firms in the same industry and at the same stage of production come together.
This could be through the two businesses merging together or through one firm taking over another.
For example two chocolate companies or two estate agents may decide to join together.

Time Warner describes itself:
Time Warner Inc. is a leading media and entertainment company, whose businesses include interactive services, cable systems, filmed entertainment, television networks and publishing.

‘Whether measured by quality, popularity or financial results, our divisions are at the top of their categories. AOL, Time Inc., Time Warner Cable, Home Box Office, New Line Cinema, Turner Broadcasting System and Warner Bros. Entertainment maintain unrivalled reputations for creativity and excellence as they keep people informed, entertained and connected.
Our enterprise is more than a collection of great brands that are owned under one roof. Time Warner’s businesses strive to gain competitive advantage from opportunities for constructive collaboration.’

There are issues that you can discuss such as whether the size of ownership affects the product, and how a very large institution may become too distant from its artists and audiences.
Some music artists, like George Michael, have taken their music company to court – is this to do with issues about institutions?
The rise of very large global institutions raises issue of ownership as decisions about the variety, quality and range of media products available to media audiences are controlled by a few large companies.

Useful Links

Link: Horizontal Integration: http://en.wikipedia.org/wiki/Horizontal_integration
Link: Vertical Integration: http://en.wikipedia.org/wiki/Vertical_integration
Link: eJumpCut on Media Empires: http://www.ejumpcut.org/currentissue/MeehanCorporate/index.html
Link: The News Corporation via http://www.pgsm.co.uk: The News Corporation [PDF]
Link: News Ownership: News Ownership on MediaEdu
Link: Free Online Research Papers on Media Globalisation and its Effects: Media Globalisation and its Effects
Link: The Media Industry: Structure, Strategy and Debates 2 by David Croteau and William Hoynes