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Comm 345, Week 1 Notes

by: Andrea Lloyd

Comm 345, Week 1 Notes 345

Marketplace > Texas A&M University > COMM > 345 > Comm 345 Week 1 Notes
Andrea Lloyd
Texas A&M
GPA 3.2
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About this Document

Introduction to the Course and Economics of the Media Industry
Media Industries
Joshua Heuman
Class Notes
Economics, Communications, Media, industries




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This 6 page Class Notes was uploaded by Andrea Lloyd on Monday September 5, 2016. The Class Notes belongs to 345 at Texas A&M University taught by Joshua Heuman in Fall 2016. Since its upload, it has received 3 views. For similar materials see Media Industries in COMM at Texas A&M University.


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Date Created: 09/05/16
0. Media stories—on screen, on the couch, and off screen I. Course requirements. A. Attendance. B. Reading. C. Labs D. Exams. E. Research project. F. Homework assignment. G. Extracurricular activities. II. Course policies. Notes ● Read extended syllabus pp 1­2; Read group homework assignments Homework Do not duplicate work from another class Think of Topics for final paper 1. Dealmaking Dossier? HMWK 3 is mine ____________________________________________________________________________ Industrial organization, within and across supply chains I. The Supply chain: Bio of product, from raw materials to consumer; Set of rels among roles  and functions *Production / distribution / exhibition­rental­retail II. Industry structure. A. Horizontal integration (ownership of multiple units at same level of same supply  chain). 1. Measuring horizontal integration (ownership concentration).*The Herfindahl­ Hirschman Index (HHI): sum of squares of top­50 firm shares >/< 1800. 2. Evaluating horizontal integration ($: Economies of scale! / : Diversity/Inno?) B. Diversification (ownership of multiple units across different supply chains).*Evaluating  diversification: Economies of scope, in portfolio cos, synergies, and complementary core  competencies. Notes ● Abstract world questions without real world examples ● Every product has a biography of how it got to us (process and ingredients in  order to be made) ○ Lemonade: raw materials, location, distribution, delivery, etc from  scanning systems to growing lemons.  ○ Supply Chain: what roles, functions, and process do we need in  order to reach the consumer and a final product ■ Production ■ Distribution: power player, Hollywood Studios,  ● Selecting and financing movies,  middle man, coordinator ■ Exhibition: movie theaters ■ Rental: blockbuster or amazon ■ Retail:  ○ Firm participation in a supply chain ● Horizontal Integration: owner and controlling multiple units at the same level  and supply, it should be making money for you unless you cannot coordinate and  manage branches ○ Not branching out. Same supply chain. Just multiple units.  ○ Pretty safe plan and bets, more you own the more you sell ○ Synergistic effect, better locations, greater presence allows better  recognition, changing or cutting out the middle man, more advertising and trust in a brand, spillovers in advertising ○ Buy more, more leverage with suppliers, keep costs down ○ Benefits of centralization: one accountant and one lawyer  involved with all hotdog stations, streamline and cut out functions ○ Economies and efficiencies of scale allow you to make more  money whether spillovers, leverage buying power, centralization ○ Critics of horizontal integration say too much concentration raises  concerns about a lack of diversity and innovation in the marketplace ○ Closer to monopoly, incentives for new products decreases ○ Cycles of Symbol Production Research: Major distributors  reach for more stocks and grabs until there are opening for new markets and  indies take advantages of these holes in the market. Major distributors imagine  their audiences more narrowly and leave openings for indies to come up and  support a new need. EX. Music industry as they focus on a tired stale music  style, there are rises of new types of music as the doors open. ■ Rise and Fall of Rock and Roll ■ Film industry’s Action Blockbuster, but left tastes  out of the market (sequels, franchises, series, reboots, familiar)  ■ Tarantino's  Reservoir Dogs and Pulp Fiction (new  and indie, breath of expression, odd stories) ■ Cycles of market structure: too much horizontal  integration, interruption of indies, indies integrated into new market,  market focuses into horizontal integration ■ Example, Christopher Nolan ○ Measuring the integration: competitive market? Oligopoly,  monopoly? Herfindahl­Herschman Index (HHI). ■ Line up the top 50 firms listing market shares,  square market shares expressed as percentages, add them together,  ● Highest is 10,000, pure monopoly  ● 3400 is a good oligopoly size ● 1000 is competitive market ■ HHI < 1800 green light ■ 2500ish> HHI > 1800 yellow light (scrutinize future  mergers, aware) ■ HHI > 2500ish > 1800 orange/red light (Dept of  Justice puts precompetitive conditions on mergers, or denies approval to  mergers; protect consumers) ■ Share of revenue, unit sales, national and regional  market, exact and inexact substitution ● Diversification: Owning and controlling multiple units of different supply chains. ○ Easier to get wrong (sport drinks and hair gels) ○ Concrete specific complementaries (hot dogs and hot dog buns &  soft drink and sports drinks & movie studios and theme parks) ■ Distribution is a huge part, economies of scope,  able to be more profit ■ This makes it a good plan for diversification  ■ “My brand is a fun brand, people have fun with my  brand” ■ Will investors buy the arguments I am making ■ Show how parts go together to make a more  complete product ○ Cross promotion ○ Relatively new ____________________________________________________________________________ Industrial organization, within and across supply chains, Day 2 Evaluating diversification: Economies of scope, in portfolio cos, synergies, and  complementary core competencies. C. Vertical integration: Ownership of multiple units up (backward) and down (forward) the same  supply chain *Vertical integration and transaction costs 1. Firm/hierarchy org forms (internalization of xactions; in­housing): ­ext xaction; ­xaction cost, ­flexibility 2. Market org forms (externalization of xactions; subcontracting/outsourcing): +ext  xaction; +xaction cost; +flexibility 3. Network org forms (“virtual integration”) *Ex: From studio to post­studio Hollywood a. Assembly­line production and vertical integration in studio­system era Hollywood. b. Project­based production and vertical dis­integration in post­studio­system Hollywood. Notes Cycle of symbol production Indie crossword puzzlers are shaking up a square world  AMC theaters switch to reserved seating in manhattan  Diversification  Portfolio company eg Gulf and Western Corporate raiders by buying large companies, re assemble into smaller companies, and sell the  smaller companies AND MAKE MONEY Conglomeration doesnt work when customers doesn't see the value of the diversification Business scholars that companies under huge conglomerates are under performing,  conglomerate insulated from the immediate market Media industries are slower to conglomerate (70s, 80s, 90s)  Synergy ­­ diversification Own every aspect of the media property. Ex. Mickey Mouse everything is under disney AOL­Time­Warner Merger: Ultimate synergy pipelines to deliver content and content Minor problems: AOL user is not a new­hip consumer and cannot deliver the promises of this merger, Dot­com crash tech is not worth as much as it was prior Synergy is a dirty word Loss of BILLIONS of dollars  Focus on core products than branching out  Media industries have to train consumers for new methods of technology Music and coffee and treats for selling coffee Starbucks, free download of music  Jukebox Starbucks used to have a music label  ● Vertical Integration ○ Forward (buying more units)  or backward (buying a producer)   integration ○ Balance between efficiency (constant source of  materials) and  flexibility ( not locked into a resource) ■ Stable market or Turbulent Market ? ○ V.I. lowers transaction cost ■ Transaction cost: cost to drive to the store,  regulate, the in betweens (search, bargain, regulation) Hidden not  monetary cost ○ Firm/hiearchy ­­ machine for running transactions within the  organization “in house”. Reduce transactions and increase efficency ○ subcontracting/outsourcing ­­ more external transaction but also  more flexibility ■ E­bay one night stand type intergration  ○ Network forms, virtual integration, balance between flexibility and  efficiency  ■ “First look” deal,  Transformation of the hollywood studio system 1920s ho&ve integration oligopy Forces to sell the theaters, and becomes competitive game (1950s) Focus on sharing other people’s films, but not own films Actors and agents are free to choose their movies  Used to be an assembly line, now we are a project based system to be more flexible


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