Term
| Good example of horizontal integration |
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Definition
| Music Industry- when people start to have control over more premises- the music begins to suck. Independent labels break this system and therefore get stuck in a rut |
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Term
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Definition
ownership or control of multiple units at the same level of same supply chain function- should make money.
Using the same content in broadcasting television as you would in radio broadcasting. Also, newspaper content is used on online newspaper. |
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Term
| Too much horizontal integration? |
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Definition
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Term
| HHI- Herfindahl Hirschman Index |
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Definition
A commonly accepted measure of market concentration.
Square each firm and add them up. |
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Term
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Definition
To measure how competitive a market is.
If it is 10,000= pure monopoly (highest). If it is above 1800 a market is seen to be less competitive and could be a problem. This is used to see how concerned regulators are. Below 1800 is seen as a competitive market. |
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Term
| Evaluating horizontal integration |
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Definition
| Economies of scale- consumers are happy and diversity and innovation is questioned. |
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Term
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Definition
| ownership of multiple units across different supply chains. Ex. Sunglass Hut and Lemonade Stand- ownership at the same time would not be a good idea because there is not a strong relationship between the two. |
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Term
| How is diversification questioned? |
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Definition
| Oil company also owning a cigar company so that they can hand out cigars to employees. |
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Term
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Definition
A combination of two or more corporations engaged in entirely different businesses that fall under one corporate structure (a corporate group), usually involving a parent company and several (or many) subsidiaries.
-the whole that is less with respect to the lines of business. |
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Term
| Evaluating diversification |
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Definition
| Economies of scope, in portfolio companies, synergies, and complementary core competencies. |
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Term
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Definition
| the idea that the value and performance of two companies combined will be greater than the sum of the separate individual parts.- not supported in the film industry- not necessarily a good thing. |
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Term
| Example of Diversification |
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Definition
| Billboard and Broadcast business |
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Term
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Definition
| ownership of multiple units up (backward) and down (forward) the same supply chain. Ex. Lemonade maker buys a super market- that is moving forward. However, it is hard to tell whether it is a good or bad business perspective |
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Term
| Trouble with Vertical integration |
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Definition
| In a dynamic market- if someone comes up with better lemons you are stuck with old not good lemons which makes you behind everyone else. |
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Term
| Vertical integration is a balance between |
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Definition
| efficiency and flexibility |
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Term
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Definition
| the costs other than the money price that are incurred in trading goods or services should be internalized because it is more economical- keep functions in house, internalizing lowers transaction costs, also reduces flexibility |
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Term
| Firm/Hierarchy Organization forms: (internalization of transactions, in-housing) |
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Definition
1. Interior transaction- keeping in house.
2. Transaction Cost- lower cost
3. Flexibility- decrease |
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Term
| Market Organizational Firm: externalization of transactions, outsourcing |
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Definition
1. Exterior transaction- sending transactions out to other sources.
2. Transaction Cost- high transaction cost
3. Flexibility- increases
(works in some markets but not in others- aka a university)
Ex: Having people stand in front of a business that does not contract (Lowes and Home Depot) |
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Term
| Network organizational forms: "virtual integration" |
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Definition
| somewhere in between where you can balance efficiency and flexibility. High risk situations is contracted out- ex: assembly line production and vertical distribution-integration in studios |
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Term
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Definition
Early models of diversification- investor's portfolio- conglomerates a wide variety of diversified holdings. From a movie studio to a copper mind to a cigar company.
-Portfolio companies are used to avoid a change in the success of a company (ex: The lemonade stand does worse in the winter because people want hot chocolate instead). |
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Term
| Studio Network Conglomerates |
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Definition
| Conglomerates are made up of a company that has many different arms in different areas. Ex: starbucks- coffee, music, sweets. They had multiple branches for the business cycles and these went out and were broken up and sold off individually. |
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Term
| Conglomerates and parent companies |
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Definition
| it is found that a single unit can thrive independently, sometimes companies do better when not part of a big conglomerate. |
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Term
| Studio Specialty Divisions |
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Definition
| These are divisions of a parent company like Paramount pictures that focus on producing, buying, and distributing certain types of movies. Paramount Vantage focuses more on "art house" type movies. This allows the parent company to target audiences that they normally would not draw in. |
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Term
| Film- DIY Finance and Distribution |
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Definition
| You borrow a lot of money from Aunt Hazel to shoot the movie, then show it to your film collective, send DVD-Rs to other film collectives, put it on Vimeo! |
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Term
| Film- straight acquisition |
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Definition
| You finance the film without any distribution commitments, and sell distribution rights to a more or less finished product (whether to a major or indie distributor). It’s not unusual for distributors to assert some creative control (“the last act didn’t play well in test screenings, and we want some reshoots”), but otherwise you’re in financial and creative control. |
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Term
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Definition
| You finance the film by selling nontheatrical distribution rights (home video, foreign territories). A distributor is getting into your game before you’ve finished the product, but typically not getting in so far as to allow the kind of financial and creative control in (C) and (D)—buying rights to distribute Belgium doesn’t buy the right to ask for script revision. (Note that pre-sales aren’t necessarily mutually exclusive with other distribution deals; a studio might ask for worldwide, cross-media rights, but if you’ve already sold Belgium or pay-cable, that’s not a deal breaker.) |
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Term
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Definition
| A major or indie distributor agrees to finance and distribute your film, but the financing is payable on delivery; you take the agreement and your completion insurance to the bank for a loan to pay production costs. Unless Aunt Hazel wants to loan you money to top you off, the distributor has a lot of financial control, and not insignificant creative control. |
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Term
| Film- Production- finance/distribution deal |
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Definition
| Before you start shooting, you get your check from the (major or indie) distributor, who buys significant financial and creative control along with distribution rights. Production finance might come in stages: a little bit of money for development, and then more for actual production once the project gets a green light. These deals might get made differently depending on your relationship with the studio: are you (D1) independent, (D3) studio-owned, or (D2) with some studio affiliation in between? If you’re independent and looking for studio finance, you’re doing more shopping around than you would with a studio first-look deal. |
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Term
| Music- DIY Finance and Distribution |
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Definition
| Borrow a little money from Aunt Hazel to record the bands you signed in a cheap studio (or your basement), then give away the CDs (or CD-Rs) at their shows, sell them through the mail or on the Web, consign them at local music stores (or maybe stores further away), send them to TV music supervisors. |
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Term
| Music- Distribution-only deals |
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Definition
| ou’ve recorded your bands, but you want further reach, so you sign a distribution deal with an indie or major distributor, who takes a significant cut for wholesaling. In a lot of ways, these deals are similar to straight acquisition deals in film, with an apparent creative and financial separation between producers and distributors. But especially if you’re distributing through a major (Alternative Distribution Alliance!), there might be glimmers of more developed relationships: revenue from the distribution deal allows you to sign bigger bands, and to record them at fancier studios; your distributor offers some business suggestions; your distributor threatens to drop you if your catalog under performs. |
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Term
| Music- Production and distribution deals |
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Definition
| You’re an at least nominally independent label, and a division of a major conglomerate wants to take a bigger hand in your catalog, and pursues a closer affiliation. There’s a wide range of these affiliations; typically they involve the major taking on responsibilities for pressing and distribution and also promotion (that’s where the biggest economies of scale are), but the major might also take an ownership stake in your label, or poach a big band from your label as part of the deal. Whatever the affiliation, as we’ll see in sharper focus in a few weeks, at this point you’re in bed together, and giving up significant creative and financial control (unless you’re just a financial and creative genius making lots and lots of money for your major). |
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Term
| Music- D3- label owned by a major |
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Definition
| ou don’t need to worry about deal making, but you’re giving up about as much creative and financial control as there is to give (though genius gets you some breathing room). |
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Term
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Definition
| primarily refers to reductions in average cost (cost per unit) associated with increasing the scale of production for a single product type. |
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Term
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Definition
| refers to lowering average cost for a firm in producing two or more products. |
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