Task 1


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Task 1

  1. 1. Warner Bros Warner bros is one of the major leading film studios (this makes it an oligopoly), that was independent from 1918- 1967, but as of 1967 became subsidiary to Warner Bros.-Seven Arts for 3 years. After that Kinney National Company became their new parent company for the following 2 years. Then after that Warner Communications became their new parent company from 19721990. Warner bros then came subsidiary to time Warner from 1990-2001 and then AOL Time Warner took over from 2001-2003, from there Time Warner became its parent company again and remained to be their parent company from 2003- present. As well as being a subsidiary company Warner bros are also a conglomerate and parent company, parenting several subsidiary companies, including Warner Bros. Studios, Warner Bros. Pictures, Warner Bros. Interactive Entertainment, Warner Bros. Television, Warner Bros. Animation, Warner Home Video, New Line Cinema, TheWB.com, and DC Entertainment. Warner owns half of The CW Television Network. Warner bros has multiple enterprises making them a conglomerate; they have Warner bros entertainment, Warner bros records and even Warner bros clothing, which have widened the Warner brothers market. Pathe Independent film companies An independent film company is a company that is not subsidiary to any companies although it might be a parent company to other subsidiary companies. Independent films companies differ from the six major film companies in many ways, which are mainly to do with their budget, brand identity and accessibility to useful resources, this gives the major companies a big advantage over independent companies. The main disadvantages of being an independent film company are the lack of budge which makes it harder to have special effects and A-list actors. Independent companies are also less popular, meaning viewers may see them as a less reliable source when it comes to watching their film productions. The main advantages of being an independent company are that they receive all profit, they have less pressure due to the fact that they have a smaller budget and aren’t as popular as the major six. Another advantage is that they have complete control over what they decide to produce, allowing them to have more choices and chances to become more unique. • Using one of your case studies – explain how the ownership of an independent company may work. Global companies
  2. 2. A global company is a company that can be recognised in multiple countries as a corporation which produces and sells goods or services. Examples of film companies that are owned by global companies are What examples are there of film companies owned by Global companies • What are the advantages and disadvantages for a film company of being owned by a Global company. The advantages of a film company being owned by a global company are that they will have higher funding which will increase the size of their budget. Monopolies vs. Oligopolies A monopoly is when single company is the only supplier of a specific product or service. This means they have control of a complete market and have no or very little competition, which allows them to decide the price of the product or service they provide. An oligopoly is when a few companies dominate an industry. An example of a monopoly is sky’s control over pay- TV movie rights in the UK is restricting competition which is leading to higher prices and reduced choice. The commission may decide to restrict the number of Hollywood studies from which sky currently has the rights to be the first to air their new releases. Sky has twice as many pay- TV subscribers as all its rivals combined, this shows how extreme their dominance of the market is. An example of an oligopoly is the major six, which are the six leading film studios. The major six consist of Sony pictures, Warner Bros. Entertainment, The Walt Disney Studios, NBC Universal, Fox Entertainment and Paramount Motion Pictures, which together are the six major film making studios worldwide. Those six studios usually get to produce the more popular films due to the fact that they have a bigger budget than all of their competition. The advantages of being a monopoly are the supernormal profit, which could be used to fund high cost capital investment spending. Another advantage is increased output which will lead to a decrease in average costs of production. The advantages of being an oligopoly are they have a strong hold over the market, which allows them to be able to make huge profits because they have little competition. Another advantage is the companies have the capability to decide the prices of the product or service they remain dominant of; they also make a greater long term profit which is usually maintained. The disadvantages of monopolies are poor level of service, no consumer sovereignty, consumers may be charged high prices for low quality of goods and services and the lack of competition may lead to low quality and out dated goods and services. The disadvantages of oligopolies are the prices set for the consumers may be unrealistically high, it will cause more small companies to fail, due to the lack of competition the dominant companies may not consider improving their product, it will make it harder for smaller companies to become successful, the smaller companies will be left with smaller profits and companies won’t be able to make
  3. 3. independent decisions and will always have to consider the views of other dominant companies. Vertical and horizontal integration Vertical integration is when a company owns companies in multiple stages. This allows them to increase their profit; this also gives them the opportunity to make 100% profits. Horizontal integration is when a company owns multiple companies in one sector, which can allow them to dominate a sector, making other companies have to come to them. Walt Disney Studios is an example of both vertical and horizontal integration. They own companies in multiple sectors making them vertically integrated; they also own multiple companies in one sector in the production cycle. An example of a company that they own in the same sector is Marvel Entertainment. Due to the amount of companies that Walt Disney Studios own in different and the same sector in the production cycle, they are a conglomerate, which gives them an advantage over other companies because they have increased their amount of ventures. Making more companies have to go to them to do certain parts of production and allowing them to make more profit when producing their own movies. Advantages of being vertically integrated is that they can reduce money spent on getting through certain areas of the production cycle and the percentage of profit made increases, especially if the company owns a company in every sector, that would allow them to make 100% profit. Advantages of being horizontally integrated are that they can dominate a sector and force other companies to come to them to progress in the production cycle. Monopoly could also take place which will mean they can dictate the cost of progressing through a specific sector. The disadvantages of being vertically integrated are increased bureaucratic costs, the decreased ability to be able to increase product variety, lack of supplier competition and capacity balancing issues which are having the capacity to provide downstream operations under demand. The disadvantages of being horizontally integrated are the increased possibility of anti-trust prosecution, the poor track record for maintaining innovation and potential collapse of organisation due to sector downturn. Sources http://Tutor2u.net/economics/revision-notes/as-marketfailure-competition-monopoly.html http://en.wikipedia.org/wiki/Major_film_studio http://www.economicshelp.org/microessays/markets/advantages-monopoly/ http://www.buzzle.com/articles/advantages-and-disadvantages-of-oligopoly.html http://www.dineshbakshi.com/igcse-gcse-economics/private-firm-as-producer-andemployer/revision-notes/1306-monopoly