Monday 4 March 2013

Unit 8 Understanding the TV and Film Industries Task 1

 

BTEC LEVEL 3 CREATIVE MEDIA PRODUCTION

UNIT 8: UNDERSTANDING THE TELEVISION AND FILM
 
 INDUSTRIES

LO1: KNOW ABOUT OWNERSHIP AND FUNDING IN THE
 
TELEVISION AND FILM INDUSTRIES

By: Sophie Samengo-Turner

Teacher: Ms Ahmadian

 

My brief as a production researcher is to investigate and analyse the different types of ownership and funding within the film and television industries. This will provide the basis for a concise report which summarises and explains the funding options available. I will be exploring three case studies in my report; Disney which is a conglomerate company; Simon Cowell who has a large industry around him all by private ownership and the BBC which provides public service broadcasting.


The TV and film industries are structured in a variety of ways. It could be a conglomerate which is a large corporation with ownership in different media interests, owning smaller companies known as subsidiaries. For example Disney is a conglomerate and it owns the Discovery Channel, which is a subsidiary. It could be an independent company, which has no hierarchy and can be owned by a single person or a group of people. Another possibility is public or private ownership. This will be further explored in the main body of the report.

 
As with any industry the film and television industry relies on the ability to generate a source of income for its operations. This can be through a multitude of ownership and funding options. Ownership refers to who owns companies or groups of companies in the media industries. The ownership can be in many forms, for example, it could be publicly or privately owned. If the company is created for the public, created to educate and entertain then it is known as a public service. An example of this is the BBC. Funding can also take many forms such as sponsorship or independent funding. Without funding there is no end product or even a beginning product. The crucial point in all production is the availability of cash, from whatever source, to pay for the production and to ultimately make a profit for the producer so that he/she can go on to make further productions.
 

The first case study I will look at is the BBC. BBC stands for British Broadcasting Corporation. The BBC is a Public Service Broadcaster (PSB) and was created to educate the public. Given that the BBC was created for the public and not for profit reasons, it is funded by public taxes. To have a television in your house you need to pay a Licence Fee each year which funds PSB programmes. The purposes of the BBC are the same as any other PSB:

‘Informing our understanding of the world

Stimulating knowledge and learning

Reflecting UK cultural identity

Representing diversity and Alternative viewpoints’ (Stafford, Branston. 2010, page 273). However, in recent years the BBC has generated a significant amount of money from selling its shows abroad and creating merchandise such as Doctor Who figurines. This money is being used alongside the money generated by the license fee. The BBC shows the News which is constantly updated to inform the public of any changes or new information in the world around them. BBC also has educational programmes running during the day such as Daily Politics, educating its audience on politics in the world today. They also show The Weakest Link which educates people in general knowledge, as well, as keeping the audience entertained. It is important to have a programme like this in my opinion to give a non-bias view of what is happening in our society and our world because it gives us a more open mind.
Another very important source of funding for both large and small companies is tax credits. This is a where a government gives a production cash back (by way of not charging tax) to productions that are shot using, for instance, UK facilities and crew. Tim Bevan of Working Title, once one of the largest independent companies in the UK (now owned by Universal Studios), said he shot Les Miserables (2012), a film set in France about the French, herein the UK because of tax credits, ‘on all of these movies the tax credit is integral to getting them made, even bigger movies (Les Miserables) like this the difference between the net budget and the gross (total) budget is absolutely the tax credit in the UK’ (Screen International).
There are two different methods by which a film can be created, these are horizontal and vertical integration. An example of how vertical integration works is Disney. When Disney comes up with a film idea they have a research team to look into the different aspects of how the film should be created, where it should be filmed, how much the film is going to cost as well as many other considerations. Once the pre-production stage is complete they then move onto the production stage. Disney already owns the equipment needed to make the film or create the animation as well as the rights to the story, music, relevant cast and crew needed. After filming on location is complete they move to the post-production stage Disney has an editing facility to edit the film and a manufacturing team to package the final product. If the film is going straight onto television they already have their own programmes to air it on. Throughout this whole process, the film idea has not left the Disney Company, from the moment it became an idea to the moment the audience got to see it.
Horizontal integration, on the other hand, is when the product is produced by more than one company the company. For example, if two companies work together to create a film the product is shared between them. If we look at the example, Titanic (1997), it was funded by 20th Century Fox. Because of the expense of creating the film was going over the original budget they needed to generate more money to continue. To gain more money, Paramount Pictures, another Hollywood production company, invested in the film and helped fund it to completion. In the end, the budget was ‘$200,000,000 (estimated)’ (IMDb). The outcome of horizontal integration means that more profit is paid out to other investors. In this example, money is paid out to both 20th Century Fox and Paramount Pictures. Whereas, in vertical integration all the money is kept within the company meaning they have a larger profit. The difference between the two approaches is the risk and reward. Many films fail to produce a profit for their companies. If a project is kept in-house then the company gains 100% of the profits but they also get 100% of the loss. If a company joined with other companies to create a product then there is a lesser profit percentage but there is also a lesser risk. This way is also beneficial because if you are putting less cash into a project you can spread your money about and fund more projects gaining a higher chance of producing profit.
To explain what a media conglomerate is I shall look at my case study on Disney. Disney is a multinational corporation with different Disneyland Resorts, various television programmes and they are largely famous for the films they have created. They are also very well known for their trademark characters such as Mickey Mouse. As you can see, Disney sells to many different media interests and is known worldwide with resorts in Paris, Florida and Tokyo. Disney also owns many smaller companies such as Touchstone Television, Marvel Studios,Pixar, The Discovery Channel and now Lucasfilm. Although, each of these companies has their own name and logo they are owned by Disney meaning that Disney profits from them all earning money. Also, each of the subsidiaries that Disney owns does something different; they have a different consumer base. For example, LucasFilm created Star Wars which is sci-fi whereas the Discovery Channel is informative and is aimed at specific interest groups such as military enthusiasts.
 
Another example of a conglomerate is NewsCorp. NewsCorp is owned by Rupert Murdoch and the company owns BSKYB, 20th Century Fox, Fox Network, The Times and The Sun. Evidently, the interests are ranging from film and TV through to newspapers. These companies owned by the head office corporations are known as subsidiaries. A simple way to describe how this hierarchy works is by the diagram on the next page.
 
This diagram shows the different media interests of NewsCorp, as well as, showing the hierarchy of the media conglomerate and the lower status of the subsidiaries. The reason company is a conglomerate and not just an ordinary company is because it owns subsidiaries and the corporations interest is not only in one section of the media industry but in several, for example they own newspaper companies and production companies. Often, conglomerate corporations are small companies run by a few people and the company owns larger companies as their subsidiaries.
 
A subsidiary is a company that is owned by the conglomerate. These can be large organisations in their own right but the majority of the shares are owned by a conglomerate. In the case of Disney, one of the subsidiaries is Marvel Studios. Marvel Studios was bought by Disney and although the company generates its own income and comes up with their own ideas, ultimately they are owned by Disney. Their profits are given to Disney. The profit taken by the conglomerate varies between each conglomerates contract with its subsidiaries. If the company was not owned by a conglomerate then it is not known as a subsidiary, it would be an independent company.
There are few successful independent companies in the media world, with so many larger competitors. The main reason for this is the extreme amount of money and risk needed to make films and TV productions. The bigger the company the more cash it can generate and the more risks it can take. Normally successful independent companies are bought up by conglomerates and then become subsidiaries. Independent companies are run by themselves and not by a larger institution. An example of a once independent company is So Television which was owned by Graham Norton and Graham Stewart’s Production Company. This company produced The Graham Norton Show and was set up in ‘September 2000 to make high quality entertainment television’ (So Television). By being brought up by ITV it meant that So Television had more money to fund and also publicize making it better known.
Another independent company is a film and television company, Scenario Films Ltd. They ‘are an award-winning team with a long track record of television and film creation’ (Scenario Films). They have made films such as Desire (2009) and Brass (1983). Although they have gained nominations and awards for their films they are not very well known. This is probably because their films are low budget since they do not have a large conglomerate company funding them.
By comparing both companies (So Television and Scenario Films Ltd), So Television is better known. This is because one was brought up by a large conglomerate and was given more funding and the other only has a budget that is generated within the company or that is gained from sponsors and investors. Also, Graham Norton is a celebrity, because of this more people know him and will watch his show. Scenario Films does not have a similar person on their team.
The case study I will use to explain private companies overlaps with my research on conglomerates and on synergy. The case study in question is my study on Simon Cowell. Simon Cowell owns the company Simco Ltd. Simco Ltd created SYCO entertainment as a trading name, ‘currently under the banner of Syco Entertainment are; Syco Music, Syco Television and Syco Film’ (Simon Cowell Online). This research shows that Syco has many different media interests with many subsidiaries. Syco TV owns Britain’s Got Talent and The X Factor. Syco Music also owns West Life, Susan Boyle, Cher Lloyd and One Direction. Since Syco Entertainment is the conglomerate and Syco is owned by Simco Ltd, Simon Cowell’s company, Simco Ltd is the conglomerate corporation. The highest power in the company is Simon Cowell meaning there is no conglomerate above him; he is the conglomerate so he does not need to give his earnings to a hierarchy. Syco is a privately owned company, which has a joint venture with another large media conglomerate Sony. A joint venture is a method where two large companies create a contract to work on a project and split the profits and the cost, this joining is called synergy. ‘Sony Music Entertainment announced a new long term global venture focusing on the production of music, television, film and digital content’ (Simon Cowell Online). With this merging, both companies will work together to gain a larger profit and each will gain recognition when one company does something that influences their contract.
A private company does not work for the government. While profits from the BBC would go to the government, profits from a private company like Syco go to the company.
 
BBC does not have any adverts; once a programme starts it runs all the way through to the credits with no interruptions. After the programme there is about one minute of promos telling the audience of future programmes for the channel. This is because BBC is not a profit based programme. For media conglomerates such as ITV or Channel Four there is an interruption every 12 minutes, lasting approximately 4 minutes, and covering a range of adverts. Adverts provide a large source of funding for these companies. These companies are paid to allow these adverts to run during break sessions in their shows to help fill up half an hour/hourly slots. For example, if someone is watching The Big Bang Theory on E4 and then the Head and Shoulders new shampoo advert comes on, E4 gains money from them. Head and Shoulders created the advert and paid for it to be shown. The money was given to E4 to put it during their ad breaks. This is known as commercial ownership.
A new scheme has come into play called “Now TV”. “NOW TV” was set up by Sky to allow people to access Sky on the internet whether or not they were a Sky customer. It is ‘a new pay-as-you-go internet television service’ (digital spy). This means is that you can pay to watch something on Sky, e.g. Casino Royale 2006, on Sky Movies 007 without being a Sky customer or being a Sky Movies subscriber. This makes Sky more profit, for example, from people just paying to watch the sports channels or to give their kids the Cartoon Network channel during a car journey on an ipad or anything connected to the internet.
There is a lot of competition in the television and film industries. A major part of the competition is to hold onto subscribers and viewers as the subscribers pay fees and the viewer numbers of each channel determine how much can be charged to the advertiser. For example, someone who owns a Virgin Media box is subscribed to the Virgin Media channels, they pay to see those channels. ‘Subscription income does certainly offer some security, especially if packages are sold to viewers for a set period of time (e.g. a minimum one year contract)’ (Stafford, Branston, 2010, p 278) because it means that for that period of subscription there is no chance that they will lose customers and money from subscriptions since they are on contract to pay for the year. Also some companies like BSKYB ‘earns it revenue primarily via individual subscriptions’ (Stafford, Branston, 2010, p 279) so without subscriptions BSKYB would likely fail from insufficient funding. This is similar to many subscription products such as NetFlix which does monthly subscriptions to allow the customer to stream unlimited programmes or films.
Product placement is another source of funding in the film and television industries. If someone is watching a film and the talent on screen is at their ‘home’ getting breakfast and they pull out a cereal box, e.g. Frosties, then the audience can see that the character likes Frosties and might want to buy some. That is product placement, the company that makes Frosties cereal, Kellogg’s, paid the film companies to place their product in the scene.
Sometimes the product is inconspicuous and other times the product placement is obvious. These companies would pay for their logo to be shown in a programme or film giving the programme or film a larger budget and needing to spend less money on props. Sometimes product placement is used to show something about a person. The James Bond films all show Bond with a range of gadgets. Most of the time Bond is shown with the latest phone, a shiny, professional looking watch and drinking specific vodka before or after going to or from his clean, brand new car. By including all these things in a Bond film, it makes the audience want to own them to be more like everyone’s favorite spy. People believe that these products will make them look more high class and professional, and some believe that these products could possibly even make them look cooler!
In conclusion, it can be seen that there are many different forms of ownership and funding. Some programs are owned by the public, PSB or Public Service Broadcasting, other programs are owned by private/independent companies or corporations. Film companies can also be owned privately/independently as well. If these corporations own other companies and have interests in other media interests then they are known as media conglomerates. The companies owned are called subsidiaries. Films can be created by either vertical or horizontal integration. There are few independent companies because they either fail and go bankrupt or become successful and are normally brought up by large conglomerates. Television companies can gain funding by commercial ownership, license fees, subscription, pay per view, sponsorship and product placements. Film companies can gain funding by development funds, shareholders, distribution companies, sales of films and merchandising. In my opinion I think that the media industry is going to be run by the powerful media conglomerates with the majority of independent companies being crushed by the larger competition or being bought up by these conglomerates which will make it harder for new, smaller creative companies to start up. There is also scope for other funding options which remain to be seen.
Bibliography
Stafford, R, Branston, G (2010). The Media Students Book, Routledge
So Television: http://www.sotelevision.co.uk/ (27/11/12)
Scenario Films: http://www.scenariofilms.com/  (28/11/12)
Simon Cowell Online: http://www.simoncowellonline.com/#/syco/4560890384  (28/11/12)
Screen International Magazine, December 14 2012 issue.


 

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