2. Starter Task
Make a list of as many film studios as you can
What is the job of film studios?
How do film studios make their money?

3. Learning Objectives
Complete short history of Hollywood
Identify key terms:
Vertical Integration
Horizontal Integration
Synergy
Case Study Two:
Film studios

4. ‘Golden Age’
Hollywood was established as the film making centre
of the world during the early past of the 20th century
However, Hollywood was not always the centre
of filmmaking excellence
During the first 20 years of the 20th Century
most of the cinemas pioneers operated in
Europe, specifically Germany
In an effort to escape war and
persecution, many filmmakers and Hungarian born
future studio bosses fled to the USA ADOLF ZUKOR –
as political refugees founder of
‘Paramount Pictures’

5. ‘Golden Age’
During the Golden Age Hollywood was dominated and controlled by
the so-called ‘BIG FIVE’
MGM Paramount RKO FOX (later Warner Bros.
20th Century
FOX)
… and THREE
‘minors’

6. Studio System
As these EIGHT studios controlled almost all output from
Hollywood they were able to establish the Business model
and rules for the industry they controlled
Key aspects of the ‘Golden Age’ studio system were:
• Studios were ‘Vertically Integrated’
• Factory like process – they produced
standardised products (reliance on stars and
genre)
• Each aspect of production controlled by the
studio
• Little scope for self expression and artistic flair
• Trouble makers were punished and ‘black listed’

7. Vertical Integration
What is ‘Vertical Integration’?
The process in which several steps in
the production and/or distribution of
a product or service are controlled by
a single company or entity Film Production
The studio will plan, film and
complete post production in studios
they own with equipment, personal
and departments they also own.
Every aspect of the films production
will be carried out by the studio

8. Vertical Integration
What is ‘Vertical Integration’?
The process in which several steps in
the production and/or distribution of
a product or service are controlled by
a single company or entity Film Production
The same studio will create the
‘reel’s’ that are sent to cinemas.
They will produce marketing Distribution
materials (posters etc) and transport
the film to theatres

9. Vertical Integration
What is ‘Vertical Integration’?
The process in which several steps in
the production and/or distribution of
a product or service are controlled by
a single company or entity Film Production
The film will be played (exhibited) in
cinema chains owned by the studio.
The cinemas will only play films
made by the same studio. They are Distribution
also responsible for all premiers /
public screening etc
Vertical Integration gives complete
control and ownership to the Studio Exhibition
that produced the film

10. Vertical Integration
What are the Pro’s and Con’s of ‘Vertical Integration?

11. Decline of the Golden Age
Until 1945 Hollywood enjoyed great success
under the ‘Vertically Integrated’ Studio model
They maintained total control over their
products and collected 100% of the profits
However after WWII Hollywood saw a fall in
profits, less people attending cinemas and
the established studio systems existence
came under threat
Several factors contributed to the sudden
demise of ‘Old’ Hollywood
Can you think of any?

12. Decline of the Golden Age
Post WWII there was a ‘Baby Boom’ – a sudden and
dramatic increase in the number of children being
born
The increase in the number of families led to a shift
in entertainment, with many families opting for
‘home entertainment’
The population also led to the urbanisation of
America
The Paramount Decree
Read the ‘Paramount Decree’ Article

13. Decline of the Golden Age
After WWII America’s Economy exploded and the
invention and sale of consumer electronics increased
dramatically
The most popular of these inventions was the Home
TV Set
1947 – 14,000 Households owned TV sets
1950 – over 4,000,000 (million) TV Sets
owned
Post war Americas were attracted to new Media
Technologies and newer forms of entertainment -
the most popular being Rock ‘N’ Roll

14. Rise of the small screen
4500000 TV Set
4000000 4000000
ownership
3500000
1947 - 1950
3000000
2500000
YEAR
TV SETS OWNED
2000000
1500000
1000000 1000000
500000
172000
0 14000
1947 1948 1949 1950

15. 1950’s Hollywood
As a result of the cultural shift following
WWII, Hollywood found itself facing a series of major
challenged to their dominance of the entertainment
industry:
• Large back catalogue of films
• Falling cinema attendances
• Reduced control over their stars
• Reduced control over the exhibition of films
(Paramount Decree) The studios
• Competition for audiences came to a
• Time and money spent on alternatives to sudden
cinema realisation – If
• Falling profits you can’t beat
them, join them!

16. 1950’s Hollywood
It became clear to the studios that their current ‘Vertically Integrated’
business model was out dated and needed updating
They realised that they must branch out in to emerging
markets such as TV
Paramount Studios branched
out in to TV production and
found huge success with the
Star Trek series

17. Hollywood’s Strategy
Studios also began the following:
Mergers with, or take over of TV companies
TV Movies
Use TV show as a showcase for back catalogue (re-run
old movies generating new profit)
By 1958, 3700 pre-war films had been sold or leased to
TV for over $220,000,000
New approach to cinema – New Technologies offered
‘New Cinematic Experiences’
e.g. Cinemascope, 3D, Technicolor

18. Case Study - Disney

19. Case Study - Disney

20. TV: (30%)

21. Horizontal Integration
What are the Pro’s and Con’s of ‘Horizontal Integration’?

22. Case Study - Disney
By ‘diversifying’ their business film studios like
Disney no longer rely just on cinema for profits
Disney are able to sell their products via multiple
outlets and create several cash flows for the same
products

23. Case Study - Disney
Vertical Integration also allows for:
Ability to share resources and products across many
different formats:
• Films
•TV Shows
• Video Games
• Comics / Novels
• Toys & Merchandise
This is known as SYNGERGY
SYNGERGY: The added value created when joining two separate
firms allows a greater return than from the sum of the individual
parts

24. Case Study
Pick one of the studios from your handout and
research them as a business
Compile a list of the different companies
owned by your corporations
You must them pick ONE film franchise
and research the different revenue
streams the series has created
Create a PowerPoint presentation
detailing how the corporation is
structured and how they create ‘Synergy’
with one of their brands