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Lo1 workbook

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BTEC Extended Diploma in Creative Media Production
Unit 7: Understanding the Creative
Media Sector
Learning outcome 1:
Und...
BTEC Extended Diploma in Creative Media Production
Understand the structure and ownership of the creative media sector
Use...
BTEC Extended Diploma in Creative Media Production
understanding of the market places in individual countries.
Independent...
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  1. 1. BTEC Extended Diploma in Creative Media Production Unit 7: Understanding the Creative Media Sector Learning outcome 1: Understand the structure and ownership of the media sector Name: Robbie Hickman
  2. 2. BTEC Extended Diploma in Creative Media Production 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: Private ownership is when a company is owned privately by individuals or private shareholders; their key responsibilities are to make profits and identify new markets so that they can expand them. Other responsibilities can include leading technological innovation and being commercially successful. A good example of private ownership is the Guardian Media Group which owns the Guardian, a U.K. based newspaper. Guardian Media Group (or GMG for short) manages to retain editorial independence i.e. they are not influenced by the authority of others and are free from outside control. Public Service Broadcasting: Public service broadcasting is a form of media in which companies whose content isn’t solely for commercial gains operate. They provide content such as news, arts programming and religious content and can either be state owned (owned by the government) or commercially owned (making money through product placement and selling advertising space). A good example of a public service broadcaster is Channel 4, which is commercially owned. Channel 4 is self-funded and not fully controlled by the government; it broadcasts television programmes and is owned privately rather than being sponsored by the British Government. Multinationals: Multinationals are large media companies that operate in a wide range of countries rather than a single country; however they are generally managed from a single country (usually a home country). Companies of this kind tend to be massive and own subsidiaries based in multiple countries. Companies might desire to become multinationals because they wish to avoid tax or trade barriers or want to be given money by the government. Multinationals tend to bring expertise; the skills of the workforce reflect professional standards, however profits are not always kept within the home country. A good example of a multinational media company is TIME Inc. which owns Time Magazine. It is managed from the U.K. but also operates across Europe, the Middle East and Africa. There is frequent coverage of a wide range of issues affecting these countries by the newspaper. The issues covered tend to involve people, places and issues. TIME Magazine clearly benefits from being multinational because it is present in different countries, therefore a lot more issues can be obtained to discuss within the magazine. There is also a better
  3. 3. BTEC Extended Diploma in Creative Media Production understanding of the market places in individual countries. Independents: Independents are companies that are free from outside control and not subject to the authority of an external organization. They do not depend on another company to assist them; they are self-sufficient i.e. they solely rely on themselves. Companies of this type could be put at a disadvantage because they operate on their own and could therefore struggle at times. Independent companies could be considered as privately owned establishments as they do not tend to be owned by the government; they do not receive feedback from clients either. A good example of an independent media company is Hat Trick Productions; a U.K. based production company that specializes in television programmes, especially comedy programmes. In fact, this company is one of the most successful companies in the nation, primarily because it interacts with numerous award-winning programmes and has worked with professional writers, producers, performers and crew for over 25 years. This proves that the company has had a great deal of experience in regard to television programmes and how they are created. Also, the fact that they are still successful in the present day despite not being subject to any authority/depending on livelihood etc. and working on their own can be considered a positive aspect. Conglomerates: Conglomerates are defined as large organizations that consist of numerous smaller media companies all grouped together. The various media that tends to be covered by conglomerates consists of television, radio, the internet etc. The smaller companies are referred to as subsidiaries or ‘daughter companies’ and can be corporations, companies or limited liability companies, all of which would be controlled by the larger organization. The conglomerate is regarded as ‘the parent company’. An example of a media conglomerate is 20th Century Fox, a film corporation and major movie studio based in the United States. Its responsibility is to provide production facilities and services for film, television etc. and subsidiaries include Blue Sky Studios, Fox Star Studios, Fox Studios Australia and TSG Entertainment. All of these companies are related to the film sector and their parent companies are 20th Century Fox, Star India, News Corporation etc. 20th Century Fox is a good example because it consists of multiple film companies co-operating with each other to distribute movies. For example, TSG Entertainment distributed films from 2015 such as the remake of Fantastic Four and Hitman: Agent 47. These subsidiaries also interact together closely to expand on a media product; this is an example of synergy and the companies may produce TV programmes or comic books based on the films created by 20th Century Fox. Voluntary Organizations: Voluntary (also referred to as ‘not-for-profit’) organizations are a specific type of organization which exist to help a particular cause rather than being established by an Act of Parliament. Charities are good examples of voluntary organizations
  4. 4. BTEC Extended Diploma in Creative Media Production as they aim to raise money to help others e.g. those living in poor countries, as well as to raise awareness of issues. Such issues could refer to events that have happened elsewhere around the world e.g. the impact of war on civilians or a disaster that occurred such as an earthquake. Charities are run by individuals known as ‘trustees’, people who give up their own time to run the activities of a charity. Charities raise money through donations made by the public; they accomplish this by fundraising in the form of raffles and sponsored events e.g. 10 mile walks at certain times of the year. Charities also tend to utilize the media to raise funding through the distribution of leaflets and content on TV programmes so as to gain the attention of the public. A good example of a not-for-profit organization is Oxfam; which is an international confederation seeking to end poverty once and for all through the creation of lasting solutions and seeking a generally better future. It accomplishes this by appearing frequently in adverts on TV programmes. Oxfam is a non-profit organization because it is a registered charity based in England and Wales; it does not belong to a government in particular and consists of organizations in many countries. Therefore, Oxfam can also be considered a multinational company. What are some of the challenges faced by independent media companies? Independent Media Companies tend to be free from influence by the government or external organizations. They are usually based around the following media sectors: radio, television, newspapers and the Internet. Although independent media companies are free from outside control, there is a good chance that they may struggle due to the fact that they are on their own; independent. They do not depend on external companies or sources for assistance and therefore can be quite unconventional. For example, a U.S. based indie video games developer formerly known as Westwood Studios struggled to create video games that mirrored professional standards; many of their games appeared rushed and unfinished e.g. Command and Conquer: Tiberian Sun. The company was acquired by Electronic Arts (EA) in 1998 and subsequently closed in the year 2003. Many video games developed by Westwood Studios were subjected to EA. Some of them were even cancelled. The primary reason for this lies with the fact that Westwood Studios only possessed 5-6% of the PC game market, therefore it was very unpopular. Much of the employees for Westwood Studios decided to leave. All of this shows how uncoordinated an independent media company can be if it isn’t receiving external support from other organizations. It could be quite difficult for an independent video games company to develop ideas; this can be proven by the development for the game ‘Command & Conquer’ (1995) in which writers made the decision to ‘build upon the foundation laid by an earlier game’ which was Dune II. Also, the name ‘Command and Conquer’ indicates some lack of sophistication because the title is a mere summary of the gameplay.
  5. 5. BTEC Extended Diploma in Creative Media Production The company was initially known as ‘Westwood Associates’ until it merged with Virgin Interactive in 1992. This means that the two video games companies combined with each other, most likely because one of them was at a disadvantage in terms of skill or because they each desired enhanced revenue and/or lowered financial costs. The fact that these companies merged clearly benefited each one because they will have been able to access a wide range of markets and increase the volume of sales regarding the video games they developed. Both companies could have had poor management with their products; however their performance will have been improved when they became coalesced. This is mainly because the opportunity was provided to remove managers who were lacking in certain abilities from the team(s). What are some of the challenges faced by multinational media companies? Multinational media companies can face a wide range of challenges, mainly due to the fact that there are so large and operate in many different countries. The term ‘multi-national’ refers to the involvement of one or more countries. This means that companies of this type are subject to far more laws and regulations than independent companies; different countries have different regulations regarding the media in general and this can be a potential disadvantage. A large, multinational company might not be permitted to operate in a certain way in one country, however it can in others e.g. its home country. This means that the company would be required to change the manner in which they work to ensure they abide by the laws of each country they are present in. They may be forced to pay taxes for all the countries they operate in and will also need to pay for the transportation of goods. Due to tariffs and duties in other countries, the costs can increase, therefore making it more expensive for multinational companies. Microsoft Corporation is a multi-national technology company based in the U.S. and also the world’s largest software company. It is active in the video games sector, the internet and on mobile devices around the world. Although the company is highly sophisticated, it struggles in certain ways. For example, the Xbox One (the latest Xbox gaming console developed by Microsoft) has many disadvantages, one of which revolves around specific features of the console not working properly in all countries. Upon the launch of the Xbox One, people in the U.S. could access a guide detailing the content of each channel on their TV; this guide was provided by the console itself. However, this feature did not become available in the U.K. until the year following the release of the Xbox One. This shows how a multi-national company can struggle with ensuring the products they release are fully functional, possessing all the features in every country they are released in. Due to the fact that they are so large, there is a significantly greater amount of work for multinational companies to do. What is cross media ownership?
  6. 6. BTEC Extended Diploma in Creative Media Production Cross Media Ownership is defined as the possession of a wide range of media businesses and sectors by an individual or corporation. These sectors can include film, television, radio, magazines, music and video games. Companies that are quite large e.g. multinational companies are able to expand into a variety of media sectors, therefore offering a wide range of markets in which the media can be distributed into. This can result in a bigger audience and increased profits thus placing the company at an advantage. Large companies are able to pool the resources of their underlying companies to produce media products which are highly professional; in addition to this, companies have more purchasing power. This means that companies can create products at reduced costs. For example, a conglomerate such as News Corporation tends to own more than one type of media company; with each one belonging to a different sector. In 2013, News Corporation was split into two publicly traded companies; with one oriented towards media and the other towards publishing. The major holdings of these companies were News Limited (which published newspapers) and the Fox Entertainment Group (which owns subsidiaries relating to the film and TV media sector). There are hundreds of businesses e.g. media and broadcasting assets that are owned by the Fox Entertainment Group, whereas a specific amount of media assets belong to News Limited. Newspapers and other publishing assets include the New York Times (U.S.), The Times (U.K.), The Sun (U.K.) etc. Film and television companies owned by the Fox Entertainment Group include the Fox Movie Channel, Sky Network Television and Phoenix Television, all of which are cable/pay television satellite TV providers. The fact that these companies are present in different countries e.g. the U.S. and New Zealand proves that News Corporation is a multi-national company as well as a mass media company. What is diversification? Diversification is defined as a sophisticated strategy that revolves around expanding into numerous products, services, locations, customers and markets thus enabling a company to expand and grow into a larger, more diverse organization. As the company expands, a wide range of options are provided for the company in regard to what it can create to attract more customers and becoming increasingly popular as a result. There is a wide range of different strategies to use, all of which could be for different purposes e.g. to license new technologies; distribute a products line manufactured by another firm etc. Another possible purpose could be to take opportunities which would most likely result in greater profitability for a small media company unrelated to the main organization aiming to expand into it. An example of a diverse media company is Forbes Inc. which is one of the most successful publishers of financial news and information. The company started off as a provider for editions of magazines e.g. Flagship Magazine and ForbesLife Magazine, later expanding into businesses and websites. Forbes.com is referred to as the leading business website for Forbes Inc. An advantage of diversification is that a business/company can easily get through tough times through addition of alternate methods and sources of revenue, especially within the event an original market dries up i.e. gradually becomes unproductive and therefore
  7. 7. BTEC Extended Diploma in Creative Media Production useless. Forbes Inc. would have easily been able to weather through tough situations as it expanded into different media sectors. In addition, Forbes Inc. would be able to gain financing advantages, therefore increasing its profits and the resources it could obtain with the opportunity to borrow from other companies it acquires. The customer base for Forbes could be easily expanded with the introduction new products and the targeting of multiple regions, increasing market share etc. This would result in a bigger audience and thus more popularity for the company. There will have been the opportunity to explore industries which aren’t connected to the company in any way, although Forbes will have been required to manage all of these businesses in a simultaneous way. This generally means that the company will have had to put a lot of effort into ensuring each strategy is effective and this can be considered a disadvantage. What is horizontal integration? In media, Horizontal Integration is defined as multiple companies being owned at the exact same level of production by an organization. When the producers of the film merge together, a monopoly is created. However, if there is presence of competition within the industry, an oligopoly will be created. A production company is able to expand into alternate media sectors in regard to a specific level of the production process (pre-production, post-production etc.) in order to ensure the establishment of institutional synergies i.e. different companies based in alternate media sectors working together on a specific product. However, these companies are owned by the main organization and are not external companies. For the parent company, there would be increased profits and greater levels of public influence. A good example of horizontal integration is the production of the 2014 film Transformers: Age of Extinction which was created by Paramount Pictures in association with Hasbro Studios and Di Bonaventura Pictures, the latter of which was established at Paramount Pictures. Paramount Pictures was able to expand itself into these other companies; this proves that all of these companies cooperated with each other to create the films in the Transformers franchise, all working at the same level of the production process (which was production). This proves that horizontal integration was utilized with the Transformers films because the primary production company owned multiple companies in the process of making the films. What is vertical integration? Vertical Integration means that a variety of media companies that operate at different levels of the production process are owned by the organization responsible for producing the film(s). Vertical Integration enables full control over the production process of a film (pre-production, post-production, distribution etc.) and allows for synergies between the owned companies. The benefit for the production company is increased market share i.e. a large section of the market is owned by the company as well as increased profits due to the manner of
  8. 8. BTEC Extended Diploma in Creative Media Production ownership which encompasses each step of the production process. A good example of vertical integration is the 2012 James Bond film Skyfall, as well as other instalments in the James Bond franchise. Eon Productions produced many of the James Bond films; however Pinewood Studios (which Eon Productions operates from) was also involved with post-production in the United Kingdom. The rights to the films are owned by MGM Home Entertainment and the distribution for the latest films (Skyfall, Spectre, Casino Royale and Quantum of Solace) was controlled by Columbia Pictures). This shows that the James Bond films are examples of vertical integration because different companies are involved at alternate levels of the production process. What are some of the advantages of these different ways of structuring a company? Horizontal Integration has many advantages for the media company desiring to expand in this way. First of all, the parent company/conglomerate will be able to achieve greater profits and costs regarding production will be reduced, therefore making it less expensive for a company to use horizontal integration compared to vertical integration. The latter method of structuring a company can result in balancing problems in terms of finance and therefore resentment from fellow companies. This could place horizontal integration at an advantage over vertical integration. Vertical Integration can allow a company to differentiate itself from competitors thus allowing it to gain an advantage over other media businesses. It would be generally easier for a company using vertical integration to produce high quality products due to the presence of a quality control system. Vertical Integration can also result in decreased flexibility for a company. There is a chance that other companies can establish strong positions within the market and make it more difficult for a company to reach a customer base; this can be considered a disadvantage because it makes things far more difficult for a company using vertical integration and also limits their options. There would also be reduced choices for the audience. The worst disadvantage a company using horizontal integration can face is a severe reduction in the value of certain media firms; this is because the synergies provided by the company fail to materialize. A good example of how horizontal integration can have a negative impact on media companies is the ownership of media outlets by News Corporation. News Corporation was split into two publicly traded companies; one of which was 20th Century Fox. 20th Century Fox owns multiple companies relating to the production of films and TV programmes. The reason for this split was because there were a variety of concerns from fellow shareholders in response to a series of scandals. The decision was made with the hopes that ‘greater long-term shareholder value’ could be unlocked thus proving that the former corporation wasn’t satisfied with how they were influencing their customers. This also indicates reduced choices for the audience at the time. Use the following table to show how the Disney Company is structured.
  9. 9. BTEC Extended Diploma in Creative Media Production Production Walt Disney Pictures Walt Disney Studios Walt Disney Animation Studios Distributio n Walt Disney Studios Motion Pictures Disney Media Distribution Touchstone Pictures Screening Disney Theatrical Productions Disney Theatrical Group Disney Live Family Entertainment What different ways can ownership be shared out? Media ownership can be shared out in a variety of ways. First of all, shareholders would be able to own a specific company and profit if the company is succeeding, however they are not responsible for the debts or obligations for that company. Shareholders tend to benefit when their chosen company does well; in this case, their share price would increase. Shareholders can inspect the records belonging to a company and also have a right to receive a portion of any dividends that are declared by a company i.e. a sum of money that is annually paid out by a company to its shareholders. Companies are also able to own parts of other organizations. OFCOM (Office of Communications) clearly states that citizens and companies are allowed access to a variety of sources for news, information, opinion etc. However, these rules apply to everyone so people should be provided with a specific section of a media company. Within the U.K. more people can invest within a company if companies are introducing long-term incentives i.e. providing motivation and encouragement to others. This could attract fellow companies. Also, the executives of companies share the risks of their firms and tend to be less short- term on their own horizons. This means that companies are able to anticipate anything that may go wrong in a short period of time. What is a merger? Why would companies merge together? A merger is a general term used to refer to the combination of two or more media companies on roughly equal terms to form a new, larger organization. The most common purpose would be to provide the shareholders of one company security within the acquiring company. In other words, two companies come together to create a single, usually larger one. Mergers tend to be affected by the exchange of the pre-merger shares for the shares of the new firm, and the former owners of each firm continue as owners of the newly created company. Companies would merge together for a range of benefits. For example, merging can benefit companies because it enables the resources of two firms to be pooled at the advantage of the newly created entity. Another purpose might be to establish a new business with an entirely different name. For example, two Japanese role- playing video game developers known as Squaresoft and Enix, both of which
  10. 10. BTEC Extended Diploma in Creative Media Production produced video games and anime, merged in 2003. This resulted in the creation of a new video game developer, publisher and distribution company called SquareEnix which became an international expansion. This example shows how the merging together of two companies can have a positive end result. It clearly shows how the two game developers (which were of a similar size and stature) combined with each other to form a company which would have greater influence over the public worldwide rather than in a sole country. The bigger company created would also go on to be more effective in the creation of well-known video games such as Deux Ex: Human Revolution and Final Fantasy XV. What is a takeover? Why do companies take each other over? A ‘takeover’ is defined as an acquiring company making a bid of some kind with a target company; for example, purchasing and/or exchanging stock with the purpose of gaining control of a corporation. A takeover is very similar to an acquisition; it is a corporate action in which a media company purchases the ownership stakes of the target company, gaining control of the target firm as a result. However, a takeover can be considered negative because the target company may not wish to be purchased, thus that company is bought against its own will. Companies most likely take over each other because they might be seeking to increase their own market share or achieve economies of scale; these would allow the company to reduce its costs and increase its profits at the same time. Usually, niche companies or small companies with viable products (and insufficient financing) are targeted because they are considered the best companies to take over. For example, video game developer Origin Systems was acquired by Electronic Arts and later disbanded in the year 2004. Electronic Arts is a major video games developer, publisher and distributor as opposed to Origin Systems which wasn’t a major company. This will have enabled EA to gain control of Origin Systems; the latter company eventually ceased operations in 2004 because it was quite unsuccessful previously. The game Ultima X: Odyssey was developed by Origin Systems. However, it was unsuccessful and therefore never released. What is cross media regulation? Cross Media Regulation is a set of rules put in place to control who can own what across a wide range of media sectors e.g. film and TV. The rules state that all media products must be owned by specific producers; these producers are permitted with legal ownership of the media texts they produce. They are also legally responsible for dealing with audience complaints and taking legal action; they profit from the distribution of media texts within their own companies. However, certain restrictions are in place regarding the merging together of companies, the flow of information and the protection of media recipients. It is vital that control of the media ensures that not too much power is placed in the
  11. 11. BTEC Extended Diploma in Creative Media Production hands of media companies or individuals. For example, it has been noted that companies can become ‘too powerful’ by Parliament and this would be a concern because they can have too much influence over the public, as well as the media across all sectors. It has been stated that political parties do not have the right to broadcast as well. Before News Corporation was disbanded in the year 2013, there was a great deal of public concern over Rupert Murdoch (founder of News Corporation) gaining too much control over the media and therefore the country’s politics. This necessitates the purpose of regulation within the media because it can be a serious issue if too much power is placed within the hands of a company. Should we have restrictions on the amount of media outlets people can own? In my opinion, it is a good idea that specific rules and regulations apply for ownership of media outlets. First of all, the rules are important for ensuring companies which aren’t influenced by the government do not have too much power because if this happened, there would be far too much influence over the media sectors as well as the public and this could result in other companies struggling to survive. The possible reason for this would be because other companies can be limited in regard to who they can provide news, feature stories etc. to, especially if there is too much influence over the media in general. In other words, it can be difficult for a small media company to persuade the audience if a corporation with too much influence over the public is allowed to exist. For example, News Corporation raised concerns within the public; there was increasing worry over the fact that the corporation would have too much influence over the public as well as politics. Placing too much power in the hands of an individual or company can result in a huge amount of control over multiple media sectors which isn’t a good thing because it might result in a huge amount of competition. If a company has a great deal of market share within the television and newspaper sector, they shouldn’t be allowed to run a radio station as well because it would be deemed as being dominant over more than one media sector. There is also a likely chance that the media could be imbalanced i.e. certain media sectors do not have a suitable relationship compared to other corresponding ones. 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?
  12. 12. BTEC Extended Diploma in Creative Media Production Activision Blizzard, Inc. is a major video games publishing company headquartered in the United States. The company is well-known for publishing multi-million dollar gaming franchises e.g. Call of Duty and Warcraft. It is one of the world’s largest gaming companies in regard to revenue and was formed in 2008 following the merging together of two video game publishers: Activision Publishing Inc. and Blizzard Entertainment, Inc. Activision Blizzard makes money in a variety of ways. As a video games publisher, the company receives income through direct distribution of games aimed at a range of consoles, devices etc. Although it doesn’t publish video games under its central name, it has released instalments of major gaming franchises, especially those belonging to the shooter genre for many consecutive years i.e. successive years. For example, instalments of the Call of Duty series such as Modern Warfare 3 and Black Ops have grossed around $100 million in the U.S. This would, without a doubt, lead to the press crediting Activision Blizzard and therefore resulting in increased popularity for the company. In 2011, Activision premiered with the Skylanders franchise which was nominated ‘Game of the Year’. This shows how successful Activision Blizzard is when it comes to making money through the direct distribution of media products. The company also benefits through the publishing of adverts for the video games it releases, and it accomplishes this through advertising on TV programmes, on magazine covers e.g. EDGE Magazine with the means of raising awareness of a video game. This would ensure that a wide range of people can be intrigued and there would be a good chance that they would desire to purchase the game, thus providing the company with even more money. Merchandising is another way Activision could make money; it could do this by promoting the sales of the video games it releases such as Call of Duty. For example, video games retailers such as GAME could raise awareness of games through the presence of large cut-outs in windows or posters on the walls. This is an effective way for Activision to promote its products because a lot of people walking past could see the cut-outs, posters etc. and decide whether or not they want to buy them. What is product diversity? How diverse is your company’s product range? Product diversification is the process of expanding business opportunities; this is generally accomplished by producing a variety of different products which could appeal to a wide range of different audiences. Diversification can be achieved by altering or making improvements to a product, as well as conducting market research and attempting to enter additional markets. Due to the immense size of a company such as Activision Blizzard, the variety of media products is very likely to be much larger than that of a smaller company. Activision Blizzard has many subsidiaries e.g. Beenox and FreeStyle Games, all of which develop video games of different genres e.g. shooter and superhero games. Another of its subsidiaries, Activision has a very diverse product range, mainly because it releases an instalment of the Call of Duty series at the same time every year since 2005. Blizzard Entertainment releases video games such as World of Warcraft, Diablo
  13. 13. BTEC Extended Diploma in Creative Media Production and Starcraft. This shows that Activision Blizzard has an extremely diverse product range, especially because it is a conglomerate i.e. owns lots of subsidiaries that all work on video games. Each subsidiary of the larger company is a video games developer. The games released can attract different audiences due to being quite distinct from each other. For example, Call of Duty (published by Activision) is a military first-person shooter franchise, whereas Diablo (developed by Blizzard Entertainment) is a role-playing ‘hack and slash’ style video game. What advantages does this give your company in the market place? Because Activision Blizzard produces a wide range of extremely diverse media products, therefore it is well-known in relation to the video games sector and is also successful when it comes to promoting the games developed by its subsidiaries. The company will clearly have a lot of success within the market; the video games they publish are likely to appeal to multiple audiences due to the fact that they belong to different genres e.g. shooter and role-playing games. This ensures that Activision Blizzard and its subsidiaries are highly popular if multiple categories of audience find that specific titles of video game developed by Activision appeal to them. A good example of how product diversity benefits Activision Blizzard is when a trade fair for video games known as ‘Gamescom’ is held annually in Germany. At this event, the company gets the opportunity to show off the qualities of its latest games to a large group of people. These games would cater for the interests of this group of people, all of whom will have a different taste for video games whether it be shooters, MMORPGs, strategy etc. Why is the profitability of a product range so important to a company? The profitability of product range is important for a company, especially a video games company. Product profitability is defined as the amount of money that is being made by a specific product or service. For example, the 2015 Sci-Fi movie ‘Chappie’ was successful because it grossed $102 million worldwide upon its release, despite the fact that it took $49 million to make the film. If the box office of a film is lower than that of the amount of money it took to make the film i.e. the budget, the film will be considered a failure. Columbia Pictures, which distributed the film, will have benefited from the fact that Chappie was a success because repeated success of new releases ensures that the company maintains its status as one of the leading film studios. This applies to the film sector. The video games Activision Blizzard publishes tend to vary in regard to innovation and quality. A good example of this is the three year rotation that is provided by Activision (a subsidiary of Activision Blizzard) for the Call of Duty series; Sledgehammer Games developed a title in 2014, Treyarch developed another in 2015 and Infinity Ward will be developing the next instalment for 2016. Depending on how good the games are, the amount of sales (and therefore profits) will vary greatly. The higher the profitability of a product, the better. Activision Blizzard will be able to maintain its status as a major games developer and publisher if the video games it releases appeal to a wide range of individuals and are commercially successful. However, some games might not be considered a success and therefore would be regarded as ‘failures’. This would
  14. 14. BTEC Extended Diploma in Creative Media Production have a negative impact on the company, especially if a lot of time and effort has been put into a video game to make it seem as professional as possible. The 2013 video game Call of Duty: Ghosts was a success as it grossed $1 billion on its first release day (in regard to the sales it made); thus benefiting Activision Blizzard in terms of the revenue for its games. What advantages or disadvantages are there in making big budget, mainstream products? There are many advantages for producing big budget, mainstream products. First of all, they are very likely to gain the attention of a large audience due to the fact that they are established and there is a strong sense of acceptability of the work as well as the company that created it. This means that the audience will consider the work to be professional if it seems more significant compared to products that are niche i.e. those that take the form of media campaigns which appeal to a small audience. Mainstream products are known for being distributed globally and having high budgets as well as production values. Activision Blizzard is responsible for publishing gaming franchises that are well-known, thus they are also responsible for ensuring that the games created by their subsidiaries reach the audience. Specific franchises e.g. Call of Duty are already well-known, therefore an innate sense of validation for the company is present within the consumers i.e. the consumers personally consider any future titles developed by the company to be acceptable even before their release. The disadvantage of producing a mainstream media product would be a sense of universal appeal within the audience. For example, people could falsely assume that there is something within a video game for everyone if it is well-known; this isn’t always necessarily true. The games released by Activision Blizzard tend to be shooting games suitable for adults and/or teenagers. To be profitable, companies are expected to sell a lot of copies for video games. This means that a lot of requirements are put in place for the company, thus companies will need to put a lot of effort into ensuring their games reflect professional standards. What are some of the objectives of your chosen company? http://www.activisionblizzard.com/about-us The main website for Activision Blizzard highlights some of the company’s objectives; being the ‘world’s largest interactive gaming company’ as quoted in the ‘About Us’ section, Activision Blizzard has a responsibility to serve the best interests of the public in regard to the video games sector, technological innovation and entertainment as best as it possibly can. The public should be able to identify Activision Blizzard in a positive light; the company is composed of two operating units as well as talented video game developers including Sledgehammer Games, Treyarch and Infinity Ward, all three of which produce the main instalments of the Call of Duty franchise. The company has been able to create and publish six video games which have each been considered ‘the biggest game of the year’ and this reflects upon the quote provided by Activision Blizzard: “We strive to do a just a few things, but do them exceptionally well. Instead of
  15. 15. BTEC Extended Diploma in Creative Media Production making a lot of bets across the table and leaving a lot to chance, we scrutinize our opportunities with a tremendous amount of rigor so that everything we choose to do has the potential to be a breakthrough entertainment experience.” This quote shows just how determined Activision Blizzard is to maintain its status as a leading video games developer and publisher, and possibly the most influential one on the globe. What are the advantages/disadvantages of taking part in a media franchise? A media franchise is defined as a collection of media products belonging to multiple media sectors. These media products tend to be derivatives of an original work and are therefore strongly related to that original product. The Call of Duty series itself can be considered a good example of a media franchise. Due to the fact that it is so large, the franchise expands into other forms of media including merchandise e.g. T-Shirts, books, comics and live-action YouTube videos for each title just prior to its release. All of this would benefit Activision Blizzard because it ensures the video games it publishes can reach an even larger amount of people through alternate products e.g. books which could appeal to a wide range of other people. Therefore, the COD franchise would become even more popular. Another advantage would be increased options for the company and audience due to video game instalments existing in more than one media sector, as well as a stronger sense of immensity for the COD series if it exists in other sectors as well as video games. This could be considered a positive impression for Activision Blizzard. A potential disadvantage for taking part in media franchises is that the alternate media products, which are derivatives of the original work, can be considered as negative or lacking in sophistication and originality. Many people could assume that these existing works are merely imitations of another company’s work rather than their own. For this reason, these other works can be disapproved of due to a lack of implied creativity in spite of the fact that the main purpose is to promote an upcoming or existing title even further. This is quite prominent in the Marvel Universe e.g. lots of merchandise such as toys and T-Shirts to promote specific characters like Iron Man or the Hulk. What, if any, products does your company license? Activision Blizzard is a video games publisher, therefore it won’t license merchandise such as toys. The reason why the company wouldn’t do this is because the games it publishes are generally aimed at teenagers and adults. The content with their games e.g. violence and profanity would be clearly unsuitable for children and pre-teens who are more likely to be the planned, main target audience for merchandise such as toys, comics etc. However, certain forms of merchandise that aren’t made directly by Activision Blizzard exist. These include T-Shirts displaying the titles of video games published by the company, as well as video game posters, keyrings, schoolbags, video game controllers and mugs. The possible reason why Activision Blizzard might do this would be to raise awareness for their video games; if games such as Call of Duty are present on different forms of merchandise, a huge amount of people will see it and thus the
  16. 16. BTEC Extended Diploma in Creative Media Production franchise will become more popular. Another reason why the company might feature their video games on merchandise could be to identify the popularity of their games or to highlight who their primary audience is. This would be an effective method to obtain information regarding who their games appeal to. Who is in competition with your company? How successful is your company in comparison? Competition can be found in almost every media sector; it mainly involves two or more media companies/organizations that are attempting to establish a strong sense of superiority over each other or striving to gain something in particular e.g. greater audience appreciation and increased attention. Competition is very common in the video games sector because companies will attempt to make as much money as possible through the creation of video games. Companies will also put a huge amount of effort into their video games to ensure they look as professional and intriguing as possible. Activision Blizzard appears to be in competition with Electronic Arts (EA) which develops and publishes the Battlefield franchise, FIFA games and also Star Wars: Battlefront in 2015. These gaming franchises have been described as ‘quite unlike any other’ and would appeal to teenagers and adults because this specific group of people play video games, especially shooters, a lot. Games of this type would not be suitable for children or pre-teens due to the presence of blood/gore and profanity. Activision Blizzard publishes similar video games to Electronic Arts; for example, the COD franchise and Battlefield share many similarities as they are both shooters and the even the war-driven narratives within their campaigns are very alike. Both of these games would appeal to males because this group tends to prefer themes of action and violence compared to females, however the age groups each game applies to differs slightly. Most of the Call of Duty titles are rated ‘18’, therefore the main audience is adults whereas Battlefield games tend to be rated ‘15’. This means that Battlefield could have a bigger audience. Activision Blizzard and Electronic Arts are both major video games developers; they each have a great deal of influence within the market and perform equally well. Some of Activision’s games maintain a top position over popular games developed by EA; for example, the sales of Call of Duty: Black Ops 3 were almost able to surpass the expectations of the rapidly growing gaming industry. As of 2014, Activision Blizzard has gained $4.41 billion in terms of revenue worldwide. This indicates that Activision Blizzard is hugely successful when it comes to developing video games. However, EA has gained $4.515 billion in revenue as of 2015 indicating that this company is slightly more successful compared to Activision Blizzard due to the wide range of video games franchises it releases. This also proves that EA is the video games company that is leading the market place, primarily because of higher revenue compared to Activision Blizzard.
  17. 17. BTEC Extended Diploma in Creative Media Production Who are your customers? Activision Blizzard has a wide range of customers and consumers; it belongs to a specific media sector: video games, therefore it won’t be aiming to provide other businesses or companies with equipment or news stories so that company can develop the overall product. Activision Blizzard creates and publishes the video games itself; thus they are responsible for distributing the products to the audience. This proves that the customers for Activision Blizzard are no other than the general public. Although customers are defined in a wide range of ways i.e. they could also be members of other companies seeking to obtain the resources from another organization, video game companies aim only to provide the public with their own media products. Therefore, the customers are buying the end product and this is vital for ensuring the company receives income for the games it creates. If the company didn’t receive income, it wouldn’t be successful at all. The customers tend to be fans of video games who desire to purchase an upcoming title; these titles tend to be aimed at consoles e.g. Xbox. This means that people who prefer mobile games and intend to buy one will not be satisfied because Activision does not create games in this manner. There is also likely to be a huge number of customers present, especially upon the launch of a new game which is highly anticipated. This is often seen during the launch event of a new Call of Duty game; in this case, the customers are likely to be Call of Duty fans. The primary audience for video games of this type would consist of male adults and teenagers (this group prefers to play action-based games as opposed to females). The age group is likely to be 15-21 year olds due to a greater interest in gaming compared to people who are much older. The customers might also fall into the ‘middle class’ category due to being the most contested out of the three social categories (upper, middle and working). Those who are middle class are neither rich nor poor are also more likely to go into business. Which global media trends are affecting your company right now? Online Only Content: This media trend is having an impact on Activision Blizzard. Although video games developed by the company feature a wide range of online functions in multiplayer, they are commonly downloaded (sometimes illegally) through a variety of places e.g. Steam which delivers multiple video games to the desktop of a computer. These games can be updated automatically and allow access to official gaming content e.g. multiplayer or DLCs for free. This can be referred to as illegal downloading of video games and it can impact video games companies in negative ways. For example, Activision Blizzard was hit hard in 2011 as ‘a gaming population two-thirds the size of New York City’ illegally downloaded 2010’s Call of Duty: Black Ops for free. The impact on the company would be loss of revenue; at least 5.2 million copies of the game were downloaded for free and this will have resulted in the company making less money as people were getting the game for free. There is a chance that something like this could result in the cost of video games increasing in an effort to ‘combat poor sales’. This would be a disadvantage to the customers as well as the company itself; there would no doubt be an
  18. 18. BTEC Extended Diploma in Creative Media Production increased lack of appreciation for Activision Blizzard by the audience if the costs of games increased too much. However, illegal downloads could have a positive impact on Activision Blizzard; the company might produce new technology which could lead to innovation. This could entice customers to unique gaming experiences which can’t be obtained at home. Social Media Presence: Activision Blizzard has a significant presence within social networking sites e.g. Facebook and Twitter. In addition to YouTube (where the company can provide advertisements), the company will be able to attract a wide range of people who use social media. Because millions of people use Facebook and Twitter, advertising on these sites would result in more people finding out about a new release e.g. through trailers on the News Feed in Facebook. Therefore, Activision Blizzard would benefit as the audience for the game(s) they publish expands even further.

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