Starter TaskMake a list of as many film studios as you can What is the job of film studios? How do film studios make their money?
Learning ObjectivesComplete short history of Hollywood Identify key terms: Vertical Integration Horizontal Integration Synergy Case Study Two: Film studios
‘Golden Age’Hollywood was established as the film making centreof the world during the early past of the 20th centuryHowever, Hollywood was not always the centreof filmmaking excellenceDuring the first 20 years of the 20th Centurymost of the cinemas pioneers operated inEurope, specifically GermanyIn an effort to escape war andpersecution, many filmmakers and Hungarian bornfuture studio bosses fled to the USA ADOLF ZUKOR –as political refugees founder of ‘Paramount Pictures’
‘Golden Age’During the Golden Age Hollywood was dominated and controlled bythe so-called ‘BIG FIVE’ MGM Paramount RKO FOX (later Warner Bros. 20th Century FOX)… and THREE‘minors’
Studio SystemAs these EIGHT studios controlled almost all output fromHollywood they were able to establish the Business modeland rules for the industry they controlledKey aspects of the ‘Golden Age’ studio system were:• Studios were ‘Vertically Integrated’• Factory like process – they produced standardised products (reliance on stars and genre)• Each aspect of production controlled by the studio• Little scope for self expression and artistic flair• Trouble makers were punished and ‘black listed’
Vertical IntegrationWhat is ‘Vertical Integration’?The process in which several steps inthe production and/or distribution ofa product or service are controlled bya single company or entity Film ProductionThe studio will plan, film andcomplete post production in studiosthey own with equipment, personaland departments they also own.Every aspect of the films productionwill be carried out by the studio
Vertical IntegrationWhat is ‘Vertical Integration’?The process in which several steps inthe production and/or distribution ofa product or service are controlled bya single company or entity Film ProductionThe same studio will create the‘reel’s’ that are sent to cinemas.They will produce marketing Distributionmaterials (posters etc) and transportthe film to theatres
Vertical IntegrationWhat is ‘Vertical Integration’?The process in which several steps inthe production and/or distribution ofa product or service are controlled bya single company or entity Film ProductionThe film will be played (exhibited) incinema chains owned by the studio.The cinemas will only play filmsmade by the same studio. They are Distributionalso responsible for all premiers /public screening etcVertical Integration gives completecontrol and ownership to the Studio Exhibitionthat produced the film
Vertical IntegrationWhat are the Pro’s and Con’s of ‘Vertical Integration?
Decline of the Golden AgeUntil 1945 Hollywood enjoyed great successunder the ‘Vertically Integrated’ Studio modelThey maintained total control over theirproducts and collected 100% of the profits However after WWII Hollywood saw a fall in profits, less people attending cinemas and the established studio systems existence came under threat Several factors contributed to the sudden demise of ‘Old’ Hollywood Can you think of any?
Decline of the Golden AgePost WWII there was a ‘Baby Boom’ – a sudden anddramatic increase in the number of children beingbornThe increase in the number of families led to a shiftin entertainment, with many families opting for‘home entertainment’The population also led to the urbanisation ofAmericaThe Paramount Decree Read the ‘Paramount Decree’ Article
Decline of the Golden AgeAfter WWII America’s Economy exploded and theinvention and sale of consumer electronics increaseddramaticallyThe most popular of these inventions was the HomeTV Set 1947 – 14,000 Households owned TV sets 1950 – over 4,000,000 (million) TV Sets ownedPost war Americas were attracted to new MediaTechnologies and newer forms of entertainment -the most popular being Rock ‘N’ Roll
Rise of the small screen4500000 TV Set4000000 4000000 ownership3500000 1947 - 195030000002500000 YEAR TV SETS OWNED200000015000001000000 1000000500000 172000 0 14000 1947 1948 1949 1950
1950’s HollywoodAs a result of the cultural shift followingWWII, Hollywood found itself facing a series of majorchallenged to their dominance of the entertainmentindustry:• Large back catalogue of films• Falling cinema attendances• Reduced control over their stars• Reduced control over the exhibition of films (Paramount Decree) The studios• Competition for audiences came to a • Time and money spent on alternatives to sudden cinema realisation – If• Falling profits you can’t beat them, join them!
1950’s HollywoodIt became clear to the studios that their current ‘Vertically Integrated’business model was out dated and needed updatingThey realised that they must branch out in to emergingmarkets such as TV Paramount Studios branched out in to TV production and found huge success with the Star Trek series
Hollywood’s StrategyStudios also began the following:Mergers with, or take over of TV companiesTV MoviesUse TV show as a showcase for back catalogue (re-runold movies generating new profit)By 1958, 3700 pre-war films had been sold or leased toTV for over $220,000,000New approach to cinema – New Technologies offered‘New Cinematic Experiences’e.g. Cinemascope, 3D, Technicolor
Horizontal IntegrationWhat are the Pro’s and Con’s of ‘Horizontal Integration’?
Case Study - DisneyBy ‘diversifying’ their business film studios likeDisney no longer rely just on cinema for profitsDisney are able to sell their products via multipleoutlets and create several cash flows for the sameproducts
Case Study - DisneyVertical Integration also allows for:Ability to share resources and products across manydifferent formats:• Films•TV Shows• Video Games• Comics / Novels• Toys & MerchandiseThis is known as SYNGERGY SYNGERGY: The added value created when joining two separate firms allows a greater return than from the sum of the individual parts
Case StudyPick one of the studios from your handout andresearch them as a businessCompile a list of the different companiesowned by your corporationsYou must them pick ONE film franchiseand research the different revenuestreams the series has createdCreate a PowerPoint presentationdetailing how the corporation isstructured and how they create ‘Synergy’with one of their brands