Founded in 1853 as a French water company, Vivendi has since expanded into other areas of business. Vivendi now owns or holds a majority stake in companies like Activision-Blizzard (videogames), Canal Plus (film), SFR, and Maroc Telecom (telecommunications).
In broadcast television, NBC-Universal owned NBC Sports, which had lucrative deals with the International Olympic Committee for games in 2008, 2010, and 2012.
In networking, NBC-U owns Telemundo, which targets U.S. Spanish speakers.
NBC-U’s cable operations include CNBC, the SyFy Channel (previously the Sci Fi Channel), Oxygen, and MSNBC, which airs “Countdown with Keith Olbermann.”
NBC-U exploited the synergistic possibilities inherent in its structure when it spread coverage of the 2008 Beijing Olympics across CNBC, MSNBC, USA, and Oxygen.
Alec Baldwin, as Jack Donaghy on "30 Rock," touts the GE Trivection Oven.
Sumner Redstone is the owner of National Amusements, which controls both Viacom and CBS.
Viacom finances, produces, and distributes filmed entertainment through operations like Paramount Pictures, Paramount Vantage, and Nickelodeon Films among others.
National Amusements gave CBS old Viacom’s premium pay cable channels, operating under the Showtime, Flix, and The Movie Channel labels.
National Amusements used its control over both CBS and Viacom to reboot the "Star Trek" franchise. The original series, which ran from 1966-1969, was owned by CBS, while the 2009 feature film was produced and distributed by Paramount Pictures.
GE’s third segment focused on consumer and industrial manufacturing and services. This segment produced equipment and systems to manage electrical power as well as types of electrical lights and related equipment for business and residential applications. For consumers, GE marketed five brands of household appliances, some manufactured by GE and others outsourced. These products included refrigerators, gas stoves, and water filtration systems.
GE’s capital and financial services loaned money to companies or governmental entities buying or leasing equipment from GE’s infrastructural operations. In the global market for commercial real estate, GE made equity investments and loaned funds to companies for acquisitions and renovations. GE provided financial services to retailers including private label credit cards and loans. For individual consumers, GE offered credit cards, mortgages, car loans and leases, debt consolidation, personal loans, home equity loans, and savings instruments. Conceivably, an individual could buy a house using a GE mortgage, take out a GE home equity loan to remodel the kitchen, purchase GE appliances using a GE credit card, and, if misfortune struck, have GE consolidate the debt. This sort of one-stop-shopping seems to undergird much of GE’s segments.
Together, these four segments comprise the bulk of GE and cover industries in the energy, transportation, heavy manufacturing, light manufacturing, healthcare, security, and finance sectors. When GE bought Universal Studios from Vivendi in 2006, Vivendi had both a similar structure and parallel interests. [open endnotes in new window]Founded in 1853 as a French water company, Vivendi had diversified in the 1980s, developing extensive operations in the energy and transportation sectors with a special interest in water. The company had moved into waste management, real estate, and construction on a global scale. Between 1983 and 1999, Vivendi acquired operations in theme parks, cable channels and satellites, film production and distribution, advertising, telecommunications, software, wineries, distilleries, soft drinks, and tourism services. Vivendi organized its media holdings as a transindustrial conglomerate, called Vivendi Universal Entertainment (VUE), and embedded that within the significantly larger, trans-sectoral conglomerate that was Vivendi.
The immense structure of that trans-sectoral conglomerate, however, caused problems for Vivendi. Financial institutions and the French government brought pressure to bear on Vivendi, the former seeking greater returns and lower spending, the latter rejecting Vivendi’s attempted rebranding as a global firm. In response, Vivendi began spinning off and selling individual operations, including VUE’s Universal Studios, theme parks, and some other operations to GE for NBC-U in 2006. But the deal was not clean and simple. Vivendi got a 20% interest in NBC-U while GE integrated NBC-U into its trans-sectoral structure. At the time, analysts believed Vivendi would gradually sell its 20% of NBC-U to GE, with GE gaining full ownership in a few years. By November 2009, when GE and Comcast went public about their talks over NBC-U, Vivendi still owned 20% of that operation.
I will return to that fact after a discussion of NBC-U’s own structure but two points about control should be noted here. In 2006, both Vivendi and GE were trans-sectoral conglomerates combining vertical and horizontal integration in multiple industries within a sector and duplicated that combination across multiple sectors, including the entertainment-information sector. That meant Vivendi set VUE’s budget and goals, decided where VUE had succeeded or failed, and could dissolve, sell, or break up VUE however Vivendi wished. In brief, Vivendi exercised allocative control over VUE (Murdock, 1982). When Vivendi sold majority ownership in the Universal Studio package to GE, Vivendi secured 20% ownership rights in NBC-U. Although not enough to exert allocative control over NBC-U, 20% ownership was sufficient to potentially block any deal to sell all or part of NBC-U to a third party. Despite having allocative control, GE did not have ultimate control over NBC-U. This complicated NBC-U’s position but did not affect NBC-U’s structure. While NBC-U did not have ultimate control over itself, NBC-U’s structure still mirrored that of Disney, News Corporation, and Time Warner. However, these firms controlled themselves.
Moving from control to structure and NBC-U
The familiar patterns of vertical and horizontal integration appear in NBC-U’s media operations. In broadcast television, NBC-U owned NBC Universal Television Studios, NBC Universal Television Distribution, NBC Entertainment (developed and scheduled series), NBC News, and NBC Sports, which had lucrative deals with the International Olympic Committee for games in 2008, 2010, and 2012. In networking, NBC-U owned both NBC and Telemundo, which targeted U.S. Spanish speakers. Of NBC-U’s twenty-six O&Os, ten affiliated with the NBC network and sixteen with Telemundo. In five markets, NBC-U had duopolies a la News Corporation. NBC-U owned one NBC and one Telemundo station in New York City, Los Angeles, Chicago, San Jose/San Francisco, and Dallas/Fort Worth. As a result, NBC-U vertically integrated television production, distribution, station ownership, and networks, and horizontally integrated in networks and stations.
Prior to GE’s acquisition of Universal in 2003, NBC launched two cable channels: CNBC, specializing in consumer-oriented news, and MSNBC, which was affiliated with NBC News. NBC also owned Mun2TV, which was connected to Telemundo. These moves suggested plans to synergize network operations and cable channels. With the Universal acquisition, NBC gained channels like USA (men) and SciFi (science fiction). The new NBC-U bought and launched new channels as well. The result was an impressive lineup that included Bravo (arts), Oxygen (women), Sleuth (mysteries), and UniHD showcasing Universal Studios’ movies and exploiting its film library. NBC also acquired Universal’s operations in television production and distribution. The acquisition increased NBC’s horizontal integration in network and cable television.
The Universal acquisition also put NBC in the movie business. Film production operations included Universal Pictures, Focus Features (independent-style), and Illumination Entertainment (family-oriented) with distribution done in-house. Universal Home Entertainment produced straight-to-DVD materials and repackaged both films and television series. Overall, NBC-U achieved varying degrees of vertical and horizontal integration in film, networking, and cable.
NBC-U exploited the synergistic possibilities inherent in its organizational structure. For example, sports coverage of the 2008 Beijing Olympics was spread across NBC, CNBC, MSNBC, Oxygen, Telemundo, UniHD, and USA. Universal Studios set the second installment in the Mummy franchise, The Mummy: Tomb of the Dragon Emperor (2008), in China. NBC-U cross-promoted Dragon Emperor and the Beijing Olympics in an extended advertisement intercutting clips from the movie with clips imagining the Beijing Olympics. The ad ran across NBC-U networks, channels, and internet sites.
GE used NBC-U to synergize other GE operations. Examples range from the prosaic—close-ups of GE’s Monogram appliances on the reality series Top Chef—to the postmodern. In 2006, NBC-U premiered 30 Rock, a comedy series airing on NBC about a fictional comedy series airing on NBC. The program attracted considerable attention with its ironic product placements for GE products including jet engines, Trivection ovens, and washing machines as well as for its over-the-top representations of GE executives. Particularly noteworthy was Alec Baldwin’s character Jack Donaghy, Vice President of East Coast Television and Microwave Programming.
NBC-U’s organizational structure closely resembled that of News Corporation, Disney, Time Warner, and National Amusements in the film, network television, and cable television industries. But NBC-U was embedded in GE and GE ultimately controlled NBC-U. In late 2009, the near-collapse of the financial sector and real estate markets strained GE’s financial and real estate operations, resulting in decreased revenues. GE dealt with that problem by repositioning NBC-U through a proposed deal with Comcast, the largest multiple system cable owner with 24 million subscribers (National Cable & Telecommunications Association, 2009).
In November 2009, GE announced that it would buy out Vivendi’s 20% interest in NBC-U for $49.1 billion and that NBC-U would contribute $9.1 billion to that sum by borrowing it from a third party. Clearly, taking on that kind of debt was not in NBC-U’s self-interest but rather GE’s perceived self-interest. NBC-U would be separated from GE and become a joint venture owned by GE (49%) and Comcast (51%). Comcast would pay GE $6.5 billion to gain majority control and contribute its cable channels (E!, Style, Golf, regional sports network) and internet properties ( Fandango, iVillage, Daily Candy, etc.) to NBC-U. Comcast’s cable systems would remain in Comcast. As a result, NBC-U’s vertical integration in cable television would intensify but remain partial.
With 51% ownership of NBC-U, Comcast would have good reason to favor NBC-U’s cable channels. However, because NBC-U would be a joint venture separate from GE and Comcast proper, that would allow Comcast to counter accusations of anti-trust violations with the argument that it and NBC-U were separate companies just like National Amusements, Viacom, and CBS. To some degree that would be true but only if the lines of control were ignored. We turn now to National Amusements, which presents somewhat of an anomaly in its corporate structure and its lines of control.
National amusements, Viacom, and CBS:
National Amusements has been a closely held, family-owned corporation since its founding in 1936 as the Northeast Theaters Company by Michael Redstone (nee Max Rothstein). One of the founder’s sons, Sumner Redstone, rebuilt the firm, extending its horizontal integration in film exhibition and renaming it National Amusements. Currently, Sumner Redstone owned 80% of National Amusements and his daughter, Shari Redstone, owned 20% (Siklos, 2008, James and Eller, 2009). Because National Amusements allowed none of its stock to be traded publicly, it had no reporting obligations with the SEC. Historically, its primary business has been film exhibition.
In 1987, National Amusements acquired the majority of voting stock in Viacom, which continued to be publicly traded and to file SEC reports. These occasionally provided information about Sumner Redstone or National Amusements. Under the Viacom name, Redstone bought operations to increase its horizontal and vertical integration in film, broadcast television, and cable television. Redstone did not integrate Viacom into National Amusements, but coordinated Viacom’s film operations with National Amusements’ theaters to functionally achieve full vertical integration in film. Because National Amusements maintained allocative control over Viacom, National Amusements could dictate policy to Viacom. For example, Viacom had achieved full vertical integration in cable television, which guaranteed a place for its cable channels on its cable systems. In 1995, National Amusements decided to sell those systems, in what was called a “coup for Viacom’s chairman Sumner Redstone” (Bloomberg Business News, 1995), but weakened Viacom by removing that guarantee. Redstone’s self-interest took precedence over Viacom’s self-interests.
In 2000, National Amusements acquired a majority stake in CBS, which was organized as a transindustrial media conglomerate with holdings in broadcast and cable television, among other media ventures. National Amusements integrated CBS into Viacom, creating a significantly larger transindustrial conglomerate with National Amusements maintaining allocative control. The resulting firm, called Viacom, mirrored the structures of News Corporation, Disney, and Time Warner but lacked ultimate control over itself. This was dramatically demonstrated in 2005 when Redstone split Viacom into two entities, each publicly traded. As 10ks for the separated Viacom and CBS noted, Redstone personally controlled them through National Amusements and could make decisions that were not in their best interests (Viacom, 2006; CBS, 2006). For example, the 10ks state that CBS and Viacom agreed to continue coordinating their operations, to act on Redstone’s suggestions regarding business opportunities with each other, and not to expand into each other’s areas of operations. With Redstone maintaining allocative control over both firms and direct control over National Amusements, Redstone could coordinate the operations of all three to replicate the integrated operations typical of a single transindustrial media conglomerate. To illustrate this, I will trace that tri-corporate structure starting with holdings in film.
On its 2009 website, National Amusements identified movie exhibition as its main business with theaters located across the globe (National Amusements, 2009). These theaters, organized into chains, provided exhibition outlets for films made by Viacom’s film production and distribution units. Viacom described itself as financing, producing, and distributing “filmed entertainment” (Viacom, 2009) through six operations: Paramount Pictures, Paramount Vantage (independent-style films), Paramount Classics, MTV Films, Nickelodeon Films, and Paramount Home Entertainment. While Viacom had ingested and then rid itself of the once-independent studio DreamWorks (live action operations, 2006-2008), Viacom retained distribution rights and ancillary rights for some co-productions made with DreamWorks. Viacom repackaged its own films through Paramount Home Entertainment, thereby integrating film production, distribution, and repackaging.
By adding National Amusements’ theater chains to Viacom’s film and home entertainment operations, National Amusements controlled sufficient properties in film production, distribution, exhibition, and repackaging to be fully vertically integrated. Horizontal integration was achieved through National Amusements’ ownership of multiple theater chains and its control of Viacom’s multiple operations in film production. Taken together, National Amusements’ own operations combined with its control of Viacom allowed National Amusements to act like a vertically and horizontally integrated film conglomerate.
Prior to Redstone’s separation of CBS from Viacom, the old Viacom had been vertically and horizontally integrated in network and cable television. In network television, old Viacom owned operations in television production and distribution, had a library of old television series, numerous owned-and-operated stations, the CBS network, and the co-owned CW network. Similarly, in cable television, old Viacom had holdings in production, distribution, basic cable channels, and pay cable channels. In the split, Redstone gave new Viacom most of the old Viacom basic cable channels including BET (African Americans), CMT (country music), Comedy Central (18-34 year olds), MTV (rap, rock, reality shows), Nickelodeon (children), Nick at Night (nostalgia and contemporary irony), Spike (men 18-34), VH1 (older rock, reality shows), and TV Land (nostalgia).
Redstone gave operations in television production, networking, and premium pay channels to CBS. In broadcast television, those operations included old Viacom’s Paramount Television production unit, the CBS television network, thirty O&Os with twenty one affiliated to CBS and the rest to CW, half of the CW network, the CBS College Sports cable channel, the Paramount and CBS television libraries, and 90% of the Smithsonian Channel. National Amusements also gave CBS the old Viacom’s premium pay cable channels, operating under the Showtime, Flix, and The Movie Channel labels.
This way of splitting network and cable operations encouraged interdependence between new Viacom and CBS. For example, Viacom had films that CBS needed for its premium pay channels while the new CBS had television programs that Viacom could rerun on basic cable channels. While CBS rented space in Viacom’s production facilities, Viacom repackaged CBS’ television series onto DVDs. Most interestingly, Viacom and CBS were also connected by the Star Trek franchises. In 2009, Viacom rebooted the Star Trek film franchise using characters from the original television series (Star Trek, 1966-1969). While Viacom owned the copyrights for the Star Trek films, CBS owned the copyrights for the five Star Trek television series, including the characters of the original Star Trek series. Because National Amusements controlled both firms, it could ignore the potential copyright problems and synergize CBS’s intellectual property using Viacom’s film holdings.
As the 10ks for both companies indicate, this coordination was formalized by contracts to cooperate, an agreement not to duplicate each other’s operations, and Redstone’s decisions regarding future projects. The upshot is worth noting: Redstone had reorganized his media empire by splitting old Viacom into two companies, but National Amusements’ control over both maintained the empire’s functionality.
On the basis of the media operations owned by National Amusements, that firm should have had no place among the top transindustrial media conglomerates, i.e., News Corporation, Disney, or Time Warner. If Viacom and CBS were independent conglomerates, then their holdings were oddly restricted, making them significantly weaker than News Corporation, Disney, or Time Warner. However, National Amusements control over Viacom and CBS allowed National Amusements to coordinate the operations of these entities and together they functioned as a fully developed transindustrial media conglomerate. That gave National Amusements parity with News Corporation, Disney, and Time Warner.
Structure and control
When the Reagan Administration and Congress started rewriting the economic basis for the entertainment-information sector of the economy, the stated purpose was to inject competition into media industries. The rewrite generated new rules regarding how corporations could structure themselves, undertake joint ventures, build alliances, and control other firms. One result was “merger mania” (Bettig and Hall, 2003) that produced behemoths like GE and Vivendi as well as media giants like Disney, News Corporation, and Time Warner. A second outcome was exemplified by National Amusements: the ‘behind the scenes’ controller of old Viacom, new Viacom, and CBS.
Much of the scholarship on the first result traced the particular holdings of a company or group of companies within a media industry. Working from that approach, I built two categories that allow us to understand each company’s particular holdings in terms of a general structure. While Disney, News Corporation, and Time Warner had different combinations of holdings in film, broadcast television, and cable television, those holdings all followed the same pattern: vertical and horizontal integration in each of the media industries where a company operated.
The contrast between those firms and both National Amusements and GE was dramatic. National Amusements owned theater chains but no other media operations. GE operated across multiple sectors of the economy and structured NBC-U like a transindustrial media conglomerate. GE’s structure echoed that of Vivendi, the company from which GE had purchased 80% of the voting stock in NBC-U. Both GE and old Vivendi had been similarly structured as trans-sectoral conglomerates.
GE’s majority ownership of NBC-U allowed GE to sacrifice NBC-U in order to prop up GE’s operations in the financial sector. With minority ownership, Vivendi could block the proposed deal between GE and Comcast. GE’s payoff to Vivendi included funds from NBC-U, which was forced to borrow money. That illustrated the significance of control acquired either through majority or minority stock ownership. Lines of control, then, in tandem with structural categories prepared us to deal with the apparent anomaly of National Amusements.
In the case of National Amusements, that firm owned little but controlled much in film, broadcast television, and cable television through its majority ownership of voting stock in the old Viacom originally and then in the new Viacom and CBS. That majority position gave National Amusements the power to force old Viacom to act against its self-interests by submitting to the loss of its broadcast television operations and premium cable channels to the new CBS. Then, having created apparently independent companies, National Amusements could force these companies to continue functioning as if they were a single firm. Lines of control allowed National Amusements to mandate that CBS and Viacom operate as if they were mere divisions of National Amusements. This made National Amusements an equal to Disney, News Corporation, and Time Warner while allowing National Amusements to use Viacom and CBS as brand names, deflecting attention from National Amusements per se as a major player.
Overall, then, this research suggests two conclusions. First, observation of individual structures of media-owning corporations can generate categories by which groups of corporations can be usefully classified according to their structure. Second, tracing lines of control can illuminate how a majority stockholder (whether corporate like GE or individual like Sumner Redstone) wields power over apparently autonomous entities (respectively, NBC-U and both Viacom and CBS). These conclusions are far from earth-shaking. However, gaining clarity on these points can only enrich our research and perhaps begin correcting the discourses in which every entity connected to the media—from ABC to Disney, from Fox to News Corporation, from CBS to Viacom, etc.—is treated as if it was a free standing company that charted its own course, made its own decisions, and sealed its own fate.