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Example research essay topic: Vertical Integration Value Chain - 997 words

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... ofitable entertainment business of the 1990 s. As the world fragments, the networks value remains only in order to reach the mass medium; networks are weak in profitability. In 1998 only NBC made money; in 2000, NBC earned $ 375 mill, ABC $ 225 mil, CBS $ 95 mill, Fox $ 48 mill.

Networks are moving toward shows with lower production costs, such as news and reality TV. Consolidation Along the Value Chain The entertainment industry offers up several good examples of vertical integration along the value chain, in many cases where the result did not live up to expectations. When the Disney-ABC merger was announced in 1995, it was at the time the largest ever media merger. Both companies share prices leapt. But since then, the earnings of the combined companies have dropped, executives have defected, and the stock plunged.

There has been slow growth and declines in operating income, net income, and earnings per share. The ROE slipped below 10 %. The culture is seen as insular and arrogant, hierarchical, and slow moving, based on centralized decision-making, which is not appropriate to the needs of rapidly changing entertainment business. Capital Cities (ABC) had been very decentralized. All Disneys businesses, with the exception of theme parks, have been slumping. They are trying to rely on creativity and good products to make a turnaround, but their wholesome brand is viewed as weaknesses to kids who are growing up quicker.

ABC lost money in 1998 because audiences splintering & program costs keep rising (NFL rights). Prime time results were disappointing since the merger; in 1999, ABC trailed NBC and CBS in ratings. The biggest hits on ABC (the Practice, Dharma and Greg, etc. ) are produced by Fox; Disneys Touchstone studio has not produced a hit for ABC or anyone else since 1991. Disney did something interesting in 1999 by merging their production company (Touchstone) into their distribution outlet (ABC). The aim was that Disney would produce and distribute more of its own content; however, the merger created internal revolt, and talent loss. Moreover, it sealed off ABC from other studio and this could result in further decline The merger of AOL and Time Warner is another consolation with uncertainties ahead.

There is crowding at the top with a dual leadership structure -Levin (Time Warner) CEO & Case (AOL) -- chair -Parsons (Time Warner) TV, movie, & music production 35 % revenue -Pittman (AOL) networks, cable, magazines, online 65 % revenue Cross promotion may collide with the need to generate real revenue. This vertical integration cannot get in the way of lucrative deals with other companies (like Aol's $ 21 million agreement with CBS MarketWatch). At the same time, the individual pieces of the merged company are facing challengers. Cnn's ratings are falling (down over 40 % among 25 - 54 year olds). It is viewed as having second-rate programming, production, talent; MSNBC has emerged as s strong competitor, as has Fox News. CNBC and CNNfn also provide strong competition to each other.

Again, in the entertainment industry, there is a need for corporate culture to be speedy and collaborative; however, Time Warner has a history of being slow moving and conflicted in decision making, although it has had past successes that may make it difficult to change. For example Time Warner paid cash bonuses based on performance of individual units, while Aol's compensation was based on stock reports. Time Warner reported quarterly, while AOL reports weekly. In combining the two companies, the challenge will be to institutionalize decisiveness & innovative ness Conclusions -The Value Chain in the Entertainment Industry -Makes sense to think about acquisition of distribution -In theory, many potential advantages including risk reduction (regardless of where profits move in a position to gain) -Does not make sense to lock-in distribution, but rather to use distribution as bargaining tool (ends dependence, provides credible threat to go elsewhere) -Acquisition of distribution provides closeness to customer (cross-selling) and possibility of developing new products, differentiating existing products, and catering to individual customer needs -Catering to individual needs can yield higher profit margins than selling undifferentiated commodity -But synergy with acquisition of distribution may be hard to achieve -Have to look for complementary assets that work with ones own company -Have option of creating (i. e.

building own) distribution, rather than acquiring existing company -Bigger long term investment, but dont face challenge of revitalizing what acquire or clash of competing cultures -Creating gains from combined companies not easy to accomplish 'Slayer' It Ain't So The WB's ''Buffy'' is still negotiating its future. EW reports on the chilling effects the outcome may have on network TV by Lynette Rice Hundreds of ad buyers are crammed into a New York City ballroom, as they are every year, to hear what the WB has in store for fall. The room is plastered with posters of the networks personalities: Alyssa Milano, David Boreanaz, Jessica Biel, and -- wait a minute -- where's Sarah Michelle Gellar, the WB's No. 1 star? She's across town, in another ballroom, at a presentation by Fox, ''Buffy the Vampire Slayer's new crypt. That could be the scenario come May, when the networks unveil their fall schedule to advertisers. And it's a possibility that's set off a battle as bloody as any the Slayer has waged.

The WB and ''Buffs producers, Twentieth Century Fox, are fighting over the drama's future, and many in the business consider the possible and precedent setting outcome -- that the studio would yank its show from the WB, which launched it five years ago, and put it on its affiliate network, Fox (both are owned by Rupert Murdoch's News Corp. ) -- to be nothing short of industry shaking. ''It's the worst thing that could happen, ''s ays Marty Adelstein, a partner in the talent agency Endeavor. ''Fox [the studio] has a lot of shows on other networks and they do a lot of shows for their own network. They " re good a...


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Research essay sample on Vertical Integration Value Chain

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