JUMP CUT
A REVIEW OF CONTEMPORARY MEDIA

copyright 2010, Jump Cut: A Review of Contemporary Media
Jump Cut
, No. 52, summer 2010

Media empires: corporate structures and lines of control

by Eileen R. Meehan

Starting with the Reagan Administration in 1981, the executive and legislative branches of the Federal government rewrote the legal basis for media industries (Bettig and Hall, 2003; Blevins, 2007; McChesney, 1999).[1] [open endnotes in new window] The rewrite changed how media companies could organize themselves (Kunz, 2007; Meehan, 2005; Wasko, 1995). This essay is based on my previous research tracing the holdings and operations of the Walt Disney Company, General Electric, National Amusements, News Corporation, and Time Warner. I selected these five companies because they dominate film, broadcast television, and cable television in the United States. Each had its particular properties and arrangements. Yet, overall, I found two organizational patterns that described how four of the companies were structured (Meehan, forthcoming).

Disney, News Corporation, and Time Warner were organized as transindustrial media conglomerates, that is, as companies whose holdings spanned media industries and were both vertically and horizontally integrated. General Electric (GE) was a trans-sectoral conglomerate whose holdings spanned sectors of the economy. GE’s media holdings, NBC Universal, followed the transindustrial structure but with two differences.

First, NBC Universal (NBC-U) was embedded in the much larger conglomerate GE. Second, GE controlled NBC-U through GE’s ownership of 80% of NBC-U. The remaining 20% was owned by Vivendi SA, which had been a strong trans-sectoral conglomerate in the 1980s and 1990s. As the much weaker entity, Vivendi was believed (falsely) to have been selling its share back to GE in small increments (Caslon Analytics, n.d., Hodgson, 2009). In November 2009, GE and Comcast announced that NBC-U would become a joint venture with Comcast owning 51%, GE owning 49%, and Vivendi being bought out (Comcast, 2009a; Comcast and GE, 2009; Goldman and Pepitone, 2009). If that happens, relationships will shift but NBC-U will still be controlled by entities outside itself.

In contrast to all of these firms, National Amusements owned movie theaters and no other media operations (National Amusements, 2009). However, rather like GE, National Amusements owned the majority of voting stock in two media transindustrial conglomerates, Viacom and CBS. Stock ownership gave National Amusements control over Viacom and CBS. Exercising that control in a manner reminiscent of GE, National Amusements assembled and ran a media empire rivaling that of Disney, News Corporation, and Time Warner. This combination of control and structure made National Amusements an interesting anomaly.

The purpose of this essay is to understand how corporate structures and lines of control have been used by firms in ways that seem both typical and atypical. I begin by examining Disney, News Corporation, and Time Warner in order to illuminate the structural features that make them transindustrial media conglomerates. I then trace GE’s trans-sectoral structure and the transindustrial media conglomerate embedded within it. A brief sketch of Vivendi’s structure as a trans-sectoral conglomerate provides a second example of that corporate form. I address the GE-Comcast proposal in terms of GE’s control over NBC-U. That leads to an examination of National Amusements, Viacom, and CBS in terms of both structure and lines of control. With this overview in mind, we turn first to the most widely used model of media ownership and its exemplars.

The dominant model: the transindustrial media conglomerate

These conglomerates usually organized their holdings in two ways. First, in each media industry, the conglomerates were vertically integrated. In network television, full vertical integration required ownership of a production company, distribution company, owned-and-operated television station (O&O), and network. Conglomerates arranged their holdings so that they had vertical stacks in every medium of interest: film, broadcast television, cable television, recorded music, newspapers, etc. Within each level of these vertical stacks, conglomerates often acquired multiple units performing the same function, thereby becoming horizontally integrated in that function. In network television, full horizontal integration meant owning multiple production companies, distribution companies, O&Os, and networks.

As the Federal government erased rules that once separated media industries, and which limited or discouraged complete vertical and horizontal integration within each industry, companies enthusiastically began merging, acquiring, and integrating media operations. Under the new rules, a single company could operate in as many media industries as it liked. Within each industry, the firm could vertically and horizontally integrate its holdings. Companies once centered in a particular media industry restructured themselves as conglomerates whose holdings spanned multiple media industries—as transindustrial media conglomerates within the entertainment-information sector of the economy.

This form of corporate organization was used by the Walt Disney Company, News Corporation, and Time Warner. Each firm’s holdings varied. But all three owned operations in film, network television, and cable television that were vertically and horizontally integrated. All three were major players in the US and global markets for movies and television. I will quickly sketch their holdings in film, network television, and cable television beginning with News Corporation, currently the largest of the three conglomerates and owned by Rupert Murdoch.[2] News Corporation had operations in the United States, South America, Europe, Asia, Australia, and New Zealand. I focus only on the U.S. operations.

In film, News Corporation owned the Twentieth Century Fox Film Corporation, Fox 2000 Pictures, Fox Searchlight Pictures, and Blue Sky Studios (animation). Film distribution was generally through Twentieth Century Fox Film Corporation. News Corporation did not own movie theaters. The company synergized its films, using Twentieth Century Fox Home Entertainment to repackage them as videos and DVDs, Fox Music to deal with soundtracks, and Twentieth Century Fox Licensing and Merchandising to promote them and earn secondary revenues. In film, then, News Corporation was vertically integrated in production and distribution, horizontally integrated in its ownership of four studios, and synergized through connections to other operations.

In television, News Corporation was vertically and horizontally integrated. The company owned three operations producing and distributing television programming: Twentieth Century Fox Television, Fox Television Studios, and Twentieth Television. Besides licensing some of its programming and films to other networks or cable channels, News Corporation ran its television programming on its Fox network and MyNetwork, which had both O&Os and affiliated stations. The Fox network owned seventeen O&Os, MyNetwork owned ten.

The new rules not only allowed News Corporation to own twenty-seven stations and two networks but also to own two stations in each of nine markets: New York, Los Angeles, Chicago, Dallas, Houston, Phoenix, Minneapolis, Orlando and Washington, D.C. These so-called duopolies were affiliated with either the Fox network or MyNetwork. Thus, News Corporation achieved complete vertical integration in broadcast television in its ownership of television production, distribution, O&Os, and networks. News Corporation achieved horizontal integration in its ownership of multiple O&Os and networks. These achievements were intensified, first, by News Corporation’s duopolies—eighteen stations in nine markets—and then by each duopoly being split between the Fox network and MyNetwork.

For cable operations, News Corporation used its production and distribution arms to repackage films, recirculate broadcast programming, and generate cable programming. The company was horizontally integrated in the ownership of cable channels: FOX Business Network, Fox College Sports channel, Fox Movie Channel, FOX News Channel, Fox Reality Channel (reruns of reality television series), Fox Regional Sports Networks, Fox Soccer Channel, FSN (for Fox Sports Network), FX channel (reruns and original series), SPEED (auto racing), and FUEL TV (extreme sports). News Corporation participated in one joint venture in the U.S., owning 67% of the National Geographic Channel.[3]

By integrating its production and distribution operations in film and network television with its cable channels, News Corporation achieved vertical and horizontal integration as well as synergy. Supporting these operations and building more synergy were News Corporation’s Fox Music, Twentieth Century Fox Home Entertainment, and Twentieth Century Fox Licensing and Merchandising.

The general pattern of vertical and horizontal integration across News Corporation’s holdings in film, network television, and cable television was repeated in the organization of both the Walt Disney Company and Time Warner, although with variations. [4] Like News Corporation, Disney and Time Warner had operations in film production and distribution. Disney and Time Warner made films under different studio brands, among them Disney’s Miramax and Hollywood Pictures as well as Time Warner’s Fine Line and Warner Bros. Pictures. However, the firms also manifested some interesting differences. In film, only Time Warner had achieved full vertical integration through Warner Bros. International Cinema, which owned or had interests in ninety multiplex theaters in Italy, Japan, and the United States.

In network television, Disney and Time Warner produced programming, using various brand names. Time Warner was a prolific producer with many series airing on networks owned by other companies. Both companies had distribution arms: Disney’s Buena Vista Television and Time Warner’s Warner Bros. Television. Each firm achieved vertical integration in television production and distribution as well as horizontal integration in production.

However, their profiles in terms of stations and networks differed. Disney owned one major network (ABC) and ten O&Os. Time Warner and National Amusement’s CBS co-owned a minor network, CW. Time Warner had no O&Os. Thus, Disney was fully vertically integrated in production, distribution, and networking as well as horizontally integrated in production and O&Os. In contrast, Time Warner’s co-ownership of a minor network weakened its vertical integration and the firm achieved horizontal integration only in television production. The particular ways in which Disney, Time Warner, and News Corporation achieved vertical and horizontal integration in network television varied but the overall pattern of such integration remained across the three firms.

A consideration of Disney’s and Time Warner’s cable holdings may suggest some reasons for their differences in ownership of stations and networks. Both Disney and Time Warner owned multiple cable channels but the ownership patterns differed. Time Warner owned the premier pay channels HBO and Cinemax. Disney had none. Time Warner’s basic cable channels included six acquired from Ted Turner (Cartoon Network, TBS, TNT, Turner Classic Movies, and the news channels CNN and HLN) as well as truTV (previously the co-owned Court TV) and Boomerang (old cartoons). In contrast, Disney’s basic channels included both wholly owned operations (like The Disney Channel, Toon Disney, ABC Family, and SOAPnet) as well as joint ventures (A&E, Biography, the ESPN channels, Lifetime, Lifetime Movie Network, and History).[5]

Where Disney owned no cable systems, Time Warner had long owned the second largest group of cable systems, which was spun off as Time Warner Cable in 2009. Although legally separate, Time Warner Cable’s name suggested that it was still committed to carrying Time Warner channels on Time Warner Cable’s systems. In cable television, then, the overall pattern observed in News Corporation of horizontal integration through ownership of multiple channels and multiple production units as well as vertical integration through ownership of production, distribution, and channels recurred. Again, all three firms have divisions that supported corporate synergy ranging from Disney’s book publishing to Time Warner’s comic books, but always with a division dedicated to music, home entertainment, and licensing and merchandising.

These brief sketches of News Corporation, Time Warner, and the Walt Disney Company show a repeated tendency for each firm to vertically integrate production and distribution in film and television programming. Each company owned multiple production units making films or television programs, thereby horizontally integrating holdings in production. In broadcast television, News Corporation and Disney capped off, so to speak, their vertical integration through the ownership of stations and networks, although each firm took a different approach.

Time Warner provided an interesting contrast. Its ownership of movie theaters made it fully vertically integrated in film. In cable, Time Warner’s apparent connections to Time Warner Cable suggested a continuing relationship that aped full vertical integration in cable. Lacking O&Os and a major network, Time Warner seemed weaker than Disney or News Corporation in broadcast television. Regardless of the individual firm’s strengths or weaknesses, however, the pattern of vertical and horizontal integration across media industries held for all three companies. With this pattern in mind, we turn now to the trans-sectoral conglomerate as exemplified by General Electric and its organization of NBC-Universal as a transindustrial conglomerate embedded in a trans-sectoral conglomerate.

Trans-sectoral conglomeration and an embedded transindustrial media conglomerate

GE was typically rated among the top five corporations in the world and has functioned historically as an invention factory. GE operated in the following sectors of the global economy: energy, transportation, heavy manufacturing, consumer manufacturing, healthcare, security, finance, and entertainment-information (GE 2009). GE’s 10k identified six areas of operation: energy infrastructure, aviation, technology infrastructure, consumer and industrial manufacturing, capital and finance, and NBC Universal (NBC-U). I will merge aviation into technology infrastructure, where GE discusses its other transportation operations, and briefly describe each of GE’s four non-media segments, sketch Vivendi’s holdings, and then profile GE’s NBC Universal (NBC-U).

GE’s operations in energy infrastructure included providing the equipment, services, and systems necessary to produce energy from oil, gas, coal, steam, wind, nuclear reactions, and the sun. A second series of operations focused on water with GE producing technologies, products, and processes required to treat water so that it could be potable (including desalination), used in industrial applications (like mining), and reclaimed.

In its annual financial statement to the Securities Exchange Commission (10k filing), GE identified transportation, “enterprise solutions,” (GE, 2008, p. 5) and healthcare as comprising its operations in technology infrastructure. Transportation dealt with specialized engines for land-based vehicles, products, systems, management services, and other services needed in railroads, other transit systems, and in the oil and gas, mining, and marine industries. Aviation operations focused on specialized engines, sensors, systems products, and services used in commercial and military aviation.[7] Maintenance, repair, and rebuilding engines were themes in both aviation and transportation.

Under enterprise solutions, GE addressed issues in security including automation, computing, identification, non-intrusive testing, monitoring, sensing, communication, and prevention of unauthorized intrusion, fire, or power failure. Some synergy between enterprise solutions and healthcare seemed apparent given the use of non-intrusive imaging technologies, patient monitoring systems, information systems, filtration systems, cellular technologies, equipment maintenance and services, etc. Filtration systems seemed relevant to GE’s expertise in water treatment.

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.[8] 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,[9] 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),[10] 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: lines of control

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.[11] 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).[12] 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)[13] 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.[14] 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.[15] 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.

Notes

1. Thanks to Benjamin Birkinbine for research assistance and for creating and captioning the visual narrative for this essay. [return to text]

2. All information on News Corporation is taken from its 10K filed in 2009.

3. The remainder was owned by the National Geographic Society.

4. Information on Disney was taken from its 10k filed in 2009 (Disney, 2009b) and Disney Facts. Information on Time Warner originated in its 10k filed in 2009.

5. The original ESPN channel was owned by Disney (80%) and Hearst Corporation (20%) as were the two Lifetime channels (50-50%). History and Biography were split between GE, Hearst, and Disney (37.5 % each). A&E, Biography, History, Lifetime, and the Lifetime Movie Network were subsumed under A&E Television Networks in August 2009 (Disney, 2009a and b).

6. All percentages are rounded off and so will not add up to 100%. All information has been taken from GE’s 10k filed in 2009.

7. GE broke out its aviation operations separately from transportation operations, possibly because of the military focus of some aviation operations. Because aviation would seem to qualify as transportation, I include GE’s aviation operations in this category.

8. Information on Vivendi was taken from 6k filed regarding Vivendi’s media purchases from Matsushita in 2006, Vivendi’s 2006 and 2009 Annual Reports, and from Caslon Analytics “Vivendi Universal Group.” As a French company, Vivendi filed no 10k reports.

9. MSNBC was briefly co-owned with software giant Microsoft.

10. Bravo was repositioned as a reality series channel, with many series focused on strife at work: The Restaurant (chef vs. backer), Blow Out (hair stylists), Work Out (personal trainers) and Flipping Out (housing speculators).

11. In television history, CBS was Viacom’s metaphoric parent. When the FCC ruled in 1971 that the networks had to get out of series’ production and syndication, CBS spun off its production unit and television library, creating the independent firm Viacom.

12. The language in the 2008 10ks for CBS and Viacom on this was almost identical, cf., Viacom, page 28-30 and CBS p. 31-32 on Redstone’s use of National Amusements to control and limit the activities of CBS and Viacom.

13. Information on Viacom before the split was drawn from Viacom’s 2005 10k and, after the split, from the company’s 2009 10k. Information on CBS was drawn from its 2006 and 2009 10ks.

14. The Smithsonian Institution owned the remaining 10%.

15. The film was Star Trek (2009), directed by J.J. Abrams. The five television series were Star Trek (1966-1969); Star Trek: The Next Generation (1987-1994); Star Trek: Deep Space Nine (1993-1999); Star Trek: Voyager (1995-2001); and Star Trek: Enterprise (2001-2005).

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