Vertical integration info

In this era of corporate mergers, mega companies, and minimized competition, the film industry giants are looking for new ways to profit in an ever changing marketplace.   But as they search for innovation, they are discovering that there is an expanding opening because of mass business deregulation over the past eight years of casino capitalism.  Because of this deregulation, they are beginning to return to some classic business models instead such as being a vertically integrated industry.  Think of big oil for the best example of what vertical integration is and can do.  The oil giants produce, refine, distribute, and retail their product.  They control all aspects of their business from start to finish, maximizing profits and allowing for price gouging when appropriate.  For the film industry, being vertically integrated means producing the  films, distributing the films, and exhibiting the films.  Several media conglomerates are practicing vertically integrated models with no legal consequences for their monopolistic activities.   This is bad news for independent filmmakers across the country including those of us in Tucson.

Many companies possess two of the three elements needed for vertical integration.  But recently, instances of companies having all three of the elements in place are on the rise.  This is especially true when the company has a strong international presence.  For example, Time Warner has vertically integrated itself by keeping its Warner Bros. International Cinemas an international venture only.  Do the math and you realize Warner Bros. exhibits almost all of their U.S. releases internationally.  Time Warner has long had a powerful presence in film production and distribution in this country.  Time Warner’s holdings include Warner Bros. Entertainment Group, Castle Rock (big hit was Seinfeld), Warner Independent Pictures (an oxymoron if there ever was one), and New Line Cinema among others.  So if Time Warner owned theaters in the U.S., it would in theory be in violation of anti-trust laws. Cable giant Viacom, who counts among its holdings MTV, VH1, Comedy Central, and film production giant Paramount Pictures, has a similar setup.  They own a 50% interest in Mann Theaters, which seem by rational investigation to be located in the U.S.  This seems to be something the U.S. Justice Department should be looking into because the holdings of  Time Warner and Viacom resemble corporations involved in monopolistic business practices that violate anti-trust laws laid out as early as 1948 in the United States v. Paramount Pictures.

Upon further examination, on some level, vertical integration monopolies are legal now as long as your exhibition rights are on network television or cable.   Corporations like G.E. (NBC’s parent), Walt Disney (ABC’s parent), CBS, and News Corp. (Fox’s parent) have long held television network outlets, newspapers, film and television production companies, publishing houses, and radio networks.  This arrangement is attempting to squeeze out small companies or swallow them up in a merger or straight buyout.  This is bad news for independent filmmakers of Tucson unless the enforcement of anti-trust laws improves and the penalties for the violation of the laws become more punitive.  Try and think of these issues the next time you fork over your $9 for a movie and it is the quality of Transformers 2.  It may be that way because we all reap what we sow.