2. BTEC ExtendedDiplomainCreativeMediaProduction
Understand the structure and ownership of the creative media sector
Use this workbook to help you with this learning outcome. There is some guidance
and further notes which you should read and then remove, replacing it with your own
answers.
Provide a definition of the following different types of ownership and
provide an example of a company which is owned in such a way.
Private ownership is… where a company which is owned by people/ shareholders
(private citizens) rather than the government. This public ownership is funded in part by
the public although they are still independent from the government due to a charter- the
BBC is publicly funded however it still relies on the government to allow it to still collect
the license fee. Private ownership often results in a better product, due to the threat of
losing market share to the competition meaning the company is permanently striving to
create a better product. However private ownership may also have a negative effect on the
quality as companies may think it is more important to simply get their product out there
rather than creating simply an interesting product.
Public service broadcasting is… companies that produce content that isn’t purely for
commercial gain. the kind of content that’s produced may include the news, arts
programming and religious content. public service broadcasters can be commercially
owned meaning they have to make their money through selling advertising space or
providing product placement or state owned where the company is owned by the
government.
Public service media is has the same purpose as public service broadcasting however it
uses digital media and other platforms such as the internet rather than TV and radio
broadcasts, and is a better way to reach the youth audience. The BBC is a state owned
broadcaster as they use a license fee to create media across a variety of platforms such as
TV, radio etc. And are more recently branching out in the digital services such as creating
online programmes such as BBC Radio 1's weekly online broadcast "ICYMI" (In Case
You Missed It).
Channel 4 is commercially owned as they have to self fund through commercial means
such as advertising they do however have to meet a public service remit in order to
continue broadcasting.
Multinationals are… Large companies which are operating in many different countries,
they may be owned by a larger corporation or they may themselves own a number of
smaller businesses and interests. An example of a multinational company is Rockstar
Games, who work within the video games industry and have lots of divisions of their
company in a variety of different companies. There are a number of benefits to being a
multinational company as having a presence in a lot of different countries can allow a
greater understanding of the individual markets, and better tax arrangements to name a
few of the benefits. However there are also problems which can arise when running as a
multinational company such as the change of regulations and laws in different countries,
3. BTEC ExtendedDiplomainCreativeMediaProduction
it can also be hard to keep the company structured and focussed over such a vast range of
locations
Critics also say that multinational companies mean that there is less choice for the
consumer, meaning that too much power over the market is placed into the hands of a
small number of people.
Independents are… any form of media which are free form the governments influence
and/or any corporate interests. The Huffington Post was initially Independent however it
then got bought out in 2011 by AOL meaning it was no longer independent as it now
publishes the interests of AOL in mind. Another example of an independent company is
Blitz Games Studios which formed in 1990 they created games which focused on the use
of others intellectual property on licence such as film characters e.g. Shrek. It however
closed in 2013 after struggling to raise funds to develop new games. This is an issue with
being an independent media producer as you have no external funding to help meaning if
you are no longer able to generate funds you will either have to be bought out or close.
Conglomerates are… a combination of two or more corporations which are involved in
two completely different businesses which fall under the same corporate group. This is
usually a parent company which has a number of subsidiaries, and is often a multi
industry company. The largest media conglomerate is Time Warner created by thee
merging of Time Inc. And Warner Communications Inc.. Time Warner has influences
across a range of media including film TV and publishing and has a vast number of
subsidiaries e.g. New Line Cinema, HBO and DC Comics. Because of this Time Warner
is easily able to create productions completely within its own Incorporation saving
money, such as when the two subsidiaries Warner Bros. Pictures and DC Comics worked
together to create the film The Dark Knight Rises.
Voluntary or not for profit organisations are… organisations which work to affect
social chance, there a many of these organisations and each have their own aims. their
aim may be to make money, this money however will but put straight back into the
business to further their work and help their cause. Employees may be paid to work,
however some may volunteer their time or expertise to help the organisation, a local
example of this is the Accessible Arts and Media in York which helps and supports the
disabled community to produce their own forms of media.
A global example of a voluntary or not for profit organisation is Wikipedia which in
majority is produced by volunteers to create the online encyclopaedia. Anyone is able to
contribute to Wikipedia however there are 100,000- 200,000 staff who do checking,
updating and moderating for the company.
What are some of the challenges faced by independent media companies?
There are a couple of issues which may occur in independent media companies, this is
mostly due to the fact that they get no external funding meaning that they have to fund all
of their own future products/ ventures. If they are unable to supply their own funds they
may have to be bought out by a larger company or close.
An example of this is Blitz Games Studios (formed in 1990) who created games focused
on the use of others intellectual property on licence such as film characters e.g. Shrek. It
was closed in 2013 after struggling to raise funds to develop new games.
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As previously mentioned the company doesn't always have to close if it struggling to
raise funds if the company is able to find someone to buy them out, such as when The
Huffington Post was no longer able to fund itself and was bought out by AOL in 2011
this however meant that The Huffington Post was no longer an independent company as it
was now influenced by AOL. Meaning that The Huffington Post have less control/ say
about what they are able to produce as they must also reflect AOL's views.
What are some of the challenges faced by multinational media companies?
There are problems which can arise when running as a multinational company such as the
change of regulations and laws in different countries,
it can also be hard to keep the company structured and focussed over such a vast range of
locations
Critics also say that multinational companies mean that there is less choice for the
consumer, meaning that too much power over the market is placed into the hands of a
small number of people.
An example of a multinational company who has struggled as a result of these challenges
which it has faced is Virgin well know for its multinational diversification, as a result of
these challenges some of its smaller companies such as Virgin records have gone into
administration as they are no longer able to compete within the market as less close
attention has been paid to them.
What is cross media ownership?
Cross-media ownership is where a single organisation owns more than one type of media
company e.g. a TV station and a newspaper, this has the simple advantage of creating a
bigger audience for the brand and therefore creating more revenue. An example of a cross
media ownership is the Bauer Media Group who own "Kerrang!" A British based
music magazine. In addition to their original magazine they later expanded and created a
digital radio station and "Kerrang! TV", as well as sharing ownership of a number of
music television channels with Channel 4
What is diversification?
Diversification is where a major media company spreads into ownership of other related
and/or unrelated products. For example the company Virgin initially started as a music
distributor, it then expanded by creating a record label, radio empire, mobile phone
provider, book publishing, cosmetics, soft drinks, personal finance and an airline to
simply name a few of their products and services.
Diversification has advantages as it is an effective path to fast growth of a business, it
allows you to sell a greater variety of products to brand loyal customers as well as
allowing you to establish new markets creating greater opportunity for greater revenue
production there is however an element of risk as companies must carefully select the
market they wish to go into otherwise they may find themselves making a loss if the
market turns out to not be particularly profitable.
What is horizontal integration?
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Horizontal integration is where a single organisation owns more than one company at the
same level of production the companies may not produce the same type of media however
they are in comparison at the same level of production for example Time warner owns
DC Comics, Warner Bros. Pictures, Warner Bros. Records and Warner Bros. Games. All
of these companies create different forms of media and they all work on the same level of
production. This can be a benefit for Time Warner as they are able to have institutional
synergies, which saves them money.
What is vertical integration?
Vertical integration is where a single organisation owns a number of companies on
different levels of production such as production, distribution and exhibition for example
Time Warner owns Warner Bros. Pictures (production), Warner Home Video
(distribution) and Warner Bros. Cinemas (exhibition). Vertical integration can also save
Time Warner money as it creates synergies between the companies at the different levels
of production.
What are some of the advantages of these different ways of structuring a
company?
Horizontal integration
There are a number of benefits to horizontal integration for the company
involved, firstly it increases the companies market share and may even make
the company the dominant owner of the market, this therefore gives the
company a greater public influence as they are more able to create trends.
Another benefit is that the conglomerates profits will increase, this is simply
because they own more companies in different areas creating revenue for
them this is also due to institutional synergies saving money for the
conglomerate as they will not have to pay as much as they would if they had
to hire an outside company to produce a product.
There are however a number of disadvantages relating to horizontal
integration, which effect the audience of the product. Firstly there becomes a
reduced competition in the market as smaller companies are unable to
compete with the conglomerates companies this therefore means there is a
reduced amount of choice for the audience due to the creation of monopolies
and oligopolies this also reduces the media plurality as there are less
companies producing media and therefore less of a diverse range of views
are being represented.
Vertical Integration
There are some advantages for companies which have vertical integration, it
allows them to have complete control over their product through the
production, distribution and exhibition process meaning that it is easier for
them to ensure that the product is being made and displayed exactly how they
want it to be. Another benefit is that the conglomerates profits will increase
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simply because they will own more companies which are able to produce
revenue for them this however will also be due to the fact that greater
synergies will be formed between the owned companies meaning that money
will be saved as the conglomerate will not have to pay extra to hire an outside
company to take part in the production process.
On the other hand vertical integration may cause a conglomerate to have too
much economic and political influence which is a disadvantage to others as it
may mean smaller companies may be unable to compete and therefore have
to close meaning that there is less choice for the public and therefore less of a
variety of views are represented.
Use the following table to show how the Disney Company is structured.
Production Pixar Walt Disney
studios
Marvel studios
Distribution Disney media
distribution
Walt Disney
studios home
entertainment
Marvel
Television
Screening Hollywood
pictures
Walt Disney
motion pictures/
cinema
Marvel
Entertainment
What different ways can ownership be shared out?
Companies can be shared out between a number of share holders, if someone owns over
49% of the companies shares then they become the companies primary owner. Some
companies may own parts of other companies for example EA owns 20% of shares of
Ubisoft (one of their competitors), therefore if Ubisoft as a company starts doing well the
price of EA's shares will increase and they will start doing well as a company.
limited ownership rules apply in order to control how much of the media one company
can control, this done in order to allow for the representation of a diverse range of views.
What is a merger? Why would companies merge together?
A merger is when two organisations decide that it is within their best interests to merge,
this may be in order to cut costs and increase profits, they may also be able to provide
their expertise to the other company or receive the others expertise. Production and
distribution companies often merge together such as Walt Disney and Marvel.
What is a takeover? Why do companies take each other over?
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A takeover is where a large company purchases a smaller company. In order to take over
a company the larger company must purchase at least 51% of the smaller company, this
not only means that they would now own the smaller company but the larger company
must now take on any financial or political issues the smaller company may have been
facing. An example of a takeover is then Asda purchased over 50% of Netto a small UK
bases super market, meaning that they are now in control of the company, although they
have had to take on some of the issues which came with the smaller company
What is cross media regulation?
Cross media regulation was created in order to control who can own what over a range of
media. The 20/20 rule is used in order to regulate this. It states that if your company owns
over 20% of the market in your area of the media then you are not allowed to own parts
of different areas of the media, however if you own 20% or less in you're area of the
media then you are allowed to own up to 20% in as many other areas of the media, these
rules have been changed throughout the years with the last amendment in 2009.
The purpose of this rule is to ensure that the consumers have a variety of choice within
the products.
Should we have restrictions on the amount of media outlets people can
own?
Yes, I believe that we should have restrictions on how much of the media people can
own, the restrictions, mean that there are able to be a greater number of institutions in the
media, therefore meaning thaere is a greater choise for the consumer, and a greater variety
of veiws and oppinions are able to be portrayed, the fact that there are more opinions
being shown to the public also means that one company/ person is unable to influence the
viewers ideas, meaning that the pubic are able to gain more points of view and gain their
own opinions. The ability to have more media outlets due to restrictions on ownership
also means that there is increased competition for the companies. This is a benefit as the
competition will push companies to produce better products than each other meaning that
there will be a better quality of media for people to view
On the other hand restrictions could be negative, particularly for larger companies as they
are unable to expand to their full potential and therefore dominate the market, this is a
negative for these companies as they wont be able to make as much profit as if there
where no restrictions.
However if there where no restrictions and larger companies where allowed to dominate
the market, smaller companies wouldn’t be able to survive, causing closure and
ultimately less variety of choice for the audiences.
You should select an organisation to work with to help you answer the following
questions. It can be in any media sector. Researching your company in detail will help
you produce stronger answers.
What income streams does your chosen company have?
8. BTEC ExtendedDiplomainCreativeMediaProduction
The company which I have decided to look at is Sky plc. they have a variety of different
income streams.
The income streams belonging to sky are: Sky broadband Ltd the operating company for
Sky's broadband and telephone services. Aura Sports Ltd and Aura Play Ltd which are
media sales agencies which sell advertising for a number of websites in either the major
sports or music and entertainment sectors. Sky Ireland, Sky Italia Srl and Sky
Deutschland AG the operating companies for sky pay-television in the named countries
outside of the UK. British Interactive Broadcasting Holdings Ltd, the interactive
television services, this used to be in alliance with BSkyB, BT Group, HSBC and
Panasonic.
Sky UK Ltd was the original Sky Television plc when the company first started out, this
now operates as a holding company for Sky plc's UK operations.
Sky also provide a number of other services such as: The Cloud, a Wi-Fi provider
acquired by BskyB. Amstrad, the British electronics company also acquired by BskyB.
Acetrax an on demand movie rental service. Sports Internet Group Ltd a sport online
betting service. Sky Subscriber Services Ltd, the operating company for the sky pay
television service.
Sky also have Sky In-Home services ltd, who provide instillation for Sky's products such
as satellite dishes an set top boxes.
Overall Sky's income streams in majority from the distribution network, and focus
primarily in television.
As well as selling products/services from an individual income stream sky also offer
bundles where two or more of their products are sold together at a discounted price a
common example of this is Sky's subscription TV service ad their broadband service
being sold together.
What is product diversity? How diverse is your company’s product range?
Sky's products aren't particularly diverse as the majority of them come from the
distribution network sector. Their products focus primarily in television, as this is where
the company started and they have chosen to keep building their company within this
area. As well as Sky's subscription TV services and products/ services related to this they
also, provide broadband services, which produces some diversity within their products
however they are still not particularly diverse as this is a fairly similar service to the
subscription TV.
What advantages does this give your company in the market place?
Less diversity in Sky's income streams, is an advantage for them as it allow them to make
a greater amount of money from one area of their business, as they provide customers
with possible add ons to their product/ service. This may be provided in the form of
bundles.
The fact that Sky's products are all from the same area, mean that branding can become
stronger for the company, as people are more likely to associate the brand with that type
of product and therefore look for similar products form the same brand as they have built
a well known, trustworthy name for themselves in this area.
The lesser amount of diversity also mean that the company can gain a greater
understanding of their market and the customers spending habits. Whereas if they had a
diverse range of products for example like virgin, then they would have to have
understanding of all of the markets of which they are within, meaning that they wouldn’t
be able to have such a deep understanding of the markets which their products are in,
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making them less able to create a better product that competitors who have a greater
understanding of the market and customers.
Why is the profitability of a product range so important to a company?
The profitability of a product is important as a company needs to make the money back
which they have invested into the product, otherwise they will make a loss in revenue
which will cause problems further down the line for the company, either in terms of
continuing to run the company or being able to produce other products in the future.
However for a large company the profitability of a product may be less important, if they
are able to make a large profit from another product in order to cover both its own costs
and the costs of the other product.
An example of a product within sky which is less popular is Amstrad, as this service is
less popular it may have some of its costs covered by a more popular service such as
Sky's subscription TV service. Amstrad may be less successful as, there are less
additional services surrounding it meaning that it looks less appealing than another
companies service. The subscription TV service is most likely more popular as there are a
number of additional services which are available for access for the customers making it a
more desirable product for them to buy.
What advantages or disadvantages are there in making big budget,
mainstream products?
Sky make a number of big budget mainstream products/ services such as their
subscription TV service and their broadband service.
An example of another company which makes big budget products is Time Warner who
make films with both a big budget or a smaller budget. An advantage of having a big
budget product is that they will be able to afford more advertising meaning that there is a
greater chance of people hearing about the product and coming to see it or use it.
Therefore increasing the profits for the company which has produced the product.
However in the other hand there is a disadvantage of big budget products, which is that
there is a greater chance of making a loss if the sales of the product flops as there is a
greater amount of money which will need to be covered from the production and
advertising of the product. This is a great risk for a company as a large amount of money
may be lost if the big budget product fails, which may be detrimental to the company and
their progression in the business.
What are some of the objectives of your chosen company?
Sky's objective is: "We create sustainable value by pursuing broad growth
opportunities across our markets, achieving competitive advantage through
our core strengths and the way we do business." This objective is evident
throughout Sky's product range as this shows that they have chosen to grow
within the markets which they are already in, this therefore explains why
there isn't a great deal of diversity within Sky's products, however this still
benefits them as it allows them to achieve a "competitive advantage" against
their competitors as they have a greater understanding of the markets which
they are in meaning they are therefore more able to produce a greater qulity
10. BTEC ExtendedDiplomainCreativeMediaProduction
of product.
What are the advantages/disadvantages of taking part in a media
franchise?
Media franchising is where a smaller company buys the rights to use the branding from a
larger company's product in order to sell merchandise. For example Disney owns the
rights to marvels avengers and a small toy production company may pay a certain amount
of money in order to use this branding and characters for their toys.
There are advantages to this for both companies. The smaller company are able to use a
well know brand for their products, which they may be able o price cheaper than Disney's
products meaning that people are more likely to buy their products. Another advantage is
that customers are more likely to buy a product which is related to a well known brand as
they recognise the brand making it more desirable over a lesser known product. A
negative for the smaller company is that, the cost of the rights to use a brand can be very
expensive, therefore the company will be taking a greater risk as more money will be
spent, meaning that they will need to sell a greater number of products to break even.
The advantages for the larger company are that, they may not need to spend money to
produce merchandise for their product, meaning that they are less likely to make a loss.
Another benefit is that they are able to make a profit from the other company's selling of
the product with their brand meaning they are bale to produce a greater amount of
revenue without any additional costs.
What, if any, products does your company license?
I have discovered that Sky don’t licence anything as all of their products involve the
customer coming directly to them, this benefits the company as it allows them to
internally make a greater amount of profit, due to the nature of Sky's products licencing
isn't really possible.
However other TV channels such as ESPN or BT sport, pay Sky to have a space for their
channel within Sky's service. This is another way for sky to make profit from the fact that
other companies want exposure through Sky's TV service.
Who is in competition with your company? How successful is your
company in comparison?
BT is an example of a competitor for Sky they produce a number of similar products to
sky. In particular the subscription TV service and their Broadband, which both companies
also sell as a bundle. These two companies are very close competitors due to the fact that
their products are so similar. As both companies produce almost identical products they
both have the same audience, meaning that they are constantly competing in order to
create a more desirable product and win over customers. The two companies compete
with each other by trying to offer better prices particularly through bundles. And also
offering different TV channels which the other doesn't to try and entice, the audience to
use their product as they offer something slightly different.
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from looking at and analysing research I have found that currently BT are dominating the
market over Sky (and their competitors), this is mostly due to the fact that their
broadband is desirable and is a well known company for this service, however as the TV
subscription stands sky seems to provide a more popular service as the company mostly
focuses on this service, this is evident as they appear to have a greater understanding of
the market meaning that they are able to create a more appealing product.
As evident from looking at the facts and figures both Sky and BT are very close
competitors as each company dominates in a different area of the product range which
they both produce. I feel that customers will make their choice on which to buy simply
due to personal preference, of which bundle or selection of channels suits them best.
Who are your customers?
Sky doesn’t have a specific Target Audience as the majority of people watch TV, and use
Sky's other services. However Sky's service is additional to the cost of the Freeview TV
service meaning that it is unlikely that people in the lower socio-demographic groups
would be able to afford some of the services. The vast range within the audience is
reflected within Sky's products at they provide diversity and choice for the consumer, for
example through their variety of TV channels and programmes (Kids, Entertainment,
Documentaries, Sport etc.).
As well as the general public being sky's customer, so are other companies and even their
competitors as they are able to purchase a space in Sky's subscription TV service for their
channel allowing them to gain exposure, this is beneficial for Sky as it provides them
with a greater variety of channels allowing them better resources to compete within the
market as they can offer their audience a better variety of channels
Which global media trends are affecting your company right now?
12. BTEC ExtendedDiplomainCreativeMediaProduction
The current trend with online subscription services such as Netflix, has meant that the
original TV services are going out of fashion, as a result of this Sky has had to react
accordingly, and have now included on demand services, such as Sky Movies or Sky
Box Sets, allowing people to watch a greater variety of programmes whenever they want
similar to Netflix, if sky hadn't of done this then they may of started to make losses as
their product was no longer desirable for their audience. As an extra service sky now also
provides a record and live pause button available with Sky+ this is another way which sky
is competing with current trends, like iPlayer which is currently popular as the current
generation is busier and therefore may miss a programme and want to use iPlayer to
watch it another time rather than the on sky when It is premiered. The pause and record
button provides a similar service to iPlayer and therefore allows sky to compete with this
current trend.
