Understanding the television & film industries

Sam Goodfellow

THE BACKGROUND INFORMATION

• In the television and film industry, all of the main production companies are owned by different investors and companies.
• There are 6 major film studies. They are Warner Brothers, Paramount, 21^st Century Fox, Walt Disney Pictures, Columbia Pictures and Universal Pictures.
• These studios control 90% of all film.
• The News Corporation is the largest media company in the UK, they have the most power. They own a large share of Sky Television as well as newspapers such as The times and The Sun.

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Subsidiaries

• A subsidiary is a company which has full ownership of another company.

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• Many of the 6 major film companies are subsidiary owned.

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• Warner Brothers is a subsidiary of Time Warner. They are a formation of Warner Communications and Time Inc. As well as the assets of a third party called Turner Broadcasting System. 

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• The major media conglomerate company Viacom is a subsidiary owner of Paramount Pictures. The Famous Players-Lasky Corporation was formerly a distribution and motion picture company.

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NETFLIX

• On demand internet streaming platforms are becoming more and more popular by the minute. With Netflix being the most popular out of them all.
• Netflix was started up in 1997, subscription payment was started as of 1999 for DVDs.
• Netflix was in popular demand for postal DVD rentals but as of 2007 they became an on demand video service.
• Red Envelope Entertainment is a division which through their license, Netflix distributes independent films such as formally Sherrybaby.
• All of Netflix’s films and television shows are distributed through online streaming wherever you are on their service. They charge their customers £5.99 per month so to provide their service. Netflix also produce their own independent shows. Such as House Of Cards and Orange Is The New Black. By June 30^th 2013 Netflix’ retained earnings was $472,242 million.

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NETFLIX OWNERSHIP

In terms of ownership for Netflix, the two founders Reed Hastings and Marc Randolph were the

original owners. On the 29th of May 2002, Netflix started a public offering, selling 5.5 million

shares of their common stock. Splitting the ownership, meaning the bigger share bought, the

larger the amount of ownership the subject has. Netflix is owned by institutional investors as

opposed to having a specific owner. One of the main stakeholders in the company, having the

biggest ownership include, TCS Management. However one of the largest shares invested in

Netflix is by the company Goldman Sachs Asset Management. They have a 10.1% stake in the

company, one of the largest owned. The Vanguard institution also own a large stake in Netflix.

By giving the option to spread out the ownership to the public via shares is a risk, but it can also

be a potentially wealthy investment. As different companies can earn their mark and give

something different to the company. This is also an example of branching out their horizontal

integration, by this I mean that different investors and production companies who buy a large

share in Netflix can then start to develop programs and films which can then be sold to the online

streaming site for Netflix.

THE BBC

• The BBC is a public service broadcaster, they get their money from peoples annual television license payment. They are owned by the government and the public as we the public pay for what is provided.
• The cost of the TV license fee is set by the British government annually, further agreed by parliament.
• A distributor is an organization or a person who will represent your film at festivals and markets around the world. As well as attempting to sell it to television.
• The BBC distribute films and television shows through airing them on their channels, as well as streaming them on iPlayer, an online catch up service. The BBC also produce their own films which are either shown on television or the cinema.
• The BBC also have a promise to develop original British dramas and comedies as well as educational programming, so to appeal to a wider audience . BBC Films produce feature films for the BBC. Some of their most successful British work are Billy Elliot, Nativity, Alan Partridge: Alpha Papa and Jane Eyre. Among many others. They produce around 8 films a year. Working with UK and international distributors.

SKY

• Sky television is a monthly subscription based broadband television and telephone service which provides satellite channels. Their full name which they are known by is British Sky Broadcasting Group (BSkyB). They are a subsidiary of 21^st Century Fox. They formed in 1990.

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• The biggest shareholder in BSkyB is News Corporation which is a company owned by Rupert Murdoch who are a subsidiary of 21^st Century Fox. He has the biggest share of 39.1%. Sky’s adjusted operating profit excluding exceptional items as of the 30^th of June 2013 was £595 million.
• Sky also invested by the 30^th of June £1,313 million in programming.

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• Sky distribute their films through an extra subscription payment for Sky Movies, at the cost of an extra £21.50 a month. This service provides 11 Movie channels along with 100s of films on the demand service.

VIEWING FIGURES/STATISTICS

• BBC One’s quarterly reach viewing figures equates to 56725 thousand and in percent this is 98.3%
• Sky One’s quarterly reach viewing figures come to 25614, making a percentage of 44.4%
• Sky Movies Premiere has a percentage quarterly viewing reach of 14% with an audience of 8106 thousand.
• By the end of 2013 Netflix had over 44 million subscribers, by the 31st of December 2013 Netflix’ retained earnings came in at $605,
• The BBC made an annual profit by the end of 2012 through TV licenses £3,706 million.

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THE POSITIVES AND NEGATIVES OF THE 6 MAJOR STUDIOS

• Having 6 major film studios has its positives – for example it means that more films can be made with a much better budget.
• This can also have it’s downsides, as having 6 major studios means that many of their film releases will follow the same structure and narrative. Therefore there is no creativity.
• These companies are all accompanied by highly trained filmmakers who have time to invest their passion into the project making it the best it possibly can be.
• Because these companies are mainly owned by a wealthy media mogul or the state it means that many opposing biased views will be put across subtly into their films. This can change many peoples perceptions of the film.

OLIGOPOLY

• An oligopoly is when a market is owned by two or more smaller firms. The companies in the oligopoly can agree to price collision, creating a barrier for newcomers to enter.
• In America the big 6 studios that control 95% of all films are an oligopoly, this is because they are all subsidiaries of smaller companies.

MONOPOLY

• The difference with a monopoly to an oligopoly is that a monopoly is when a market is only owned by one company.
• One of the UKs only and biggest monopoly’s would be Sky TV because they practically own the cable TV network. Virgin come closely second to owning the cable TV market, however Sky have the biggest revenue.
• Realistically a monopoly does not exist because if there is not competition the price will rise because of business while the output falls to increase profits.

FUNDING

• There are many different ways in which Hank can get funding for Instant Smash Films. For example he could go for the conventional approach of getting sponsorships. However this does mean there is a threat he will lose control of the whole film.
• Hank could also use merchandising as well as also a subscription service which could help him get funding.

HORIZONTAL/VERTICAL INTEGRATION

• Horizontal integration is where there are various companies which work together to put together a production. This is the case for many films and television shows in which production companies work together to produce the project.
• A company which would be an example of horizontal integration is YouTube. They are owned by Google, mainly because of their strong and loyal fan base.
• Horizontal integration is key because it lowers competition while increasing the share of the market.
• Vertical Integration is the opposite of horizontal integration and this is where there is one company that is in charge of a production. Vertical integration is becoming more and more popular, as companies are trying to streamline their business by creating their own independent brand of film and television. A prime example would be Netflix, developing their own shows such as Orange Is The New Black and Derek.

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Horizontal integration however is becoming less popular amongst production companies. This is

because companies like to produce their own productions as it brings in more money for their company,

as opposed to having to fund to get another production company to produce something for them.

This would be another example of horizontal integration, a company which often use horizontal

integration would be Channel 4. Channel 4 are a commercially funded broadcasting company,

they get the majority of their income from external productions and advertisements.

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They invest a lot of their money on other production companies productions as they like to be different

from the rest and showcase raw filmmaking talent. Channel 4 promote themselves as being “Born

Risky”, they were a new cutting edge channel that like to experiment, provoke and entertain. They like

to put their profits in different programmes, programmes which bring creative risks. One of the most

controversial and risk taking horizontal programme which Channel 4 funded and was aired in 2013 was

the 6 part conspiracy thriller Utopia. This was produced by British independent production company

Kudos Film and Television. Kudos approached writer Dennis Kelly with their proposal for this new show,

Kelly was very interested in the idea and keen to write it for them. With some of the ideas being

changed. Kudos then proposed this idea to various broadcasting channels, until Channel 4 got on

board and commissioned a 6 episode series, along with funding to make this project.

CONTINUED

This was a wise but risky investment for Channel 4, as it showcases some real quality filmmaking

talent. However it also came with risks in terms of controversial themes. This is no shock to Channel 4

though as it’s in their company policy to produce these types of shows. Hence why they are more

inclined to horizontal productions.

For example they like to fund other production companies to make shows for them that

showcase undiscovered talent, making films about controversial subjects and alternate voices,

whereas the BBC are more vertically integrated as they fund a lot of inhouse productions such as

Doctor Who, Eastenders and Call The Midwife.

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These are all highly established flagship programmes in the BBC and this is how they make a lot of

their money. As they can sell their vertically integrated programmes abroad, as well as making money

through merchandising and advertising. Because the BBC are funded by the public, making more

controversial and risk taking shows isn’t so high up in their agenda, as they want to appeal to all

audiences, while not putting people off. It’s in their best interest to stay safe and keep the public

happy. Because the public is what keeps them funded.

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