Tag Archives: Vertical integration

Regulating Ownership of Network Programming: The Rise of Major Media Conglomerates

Category: Ownership & Control

Issue: Regulating Ownership of Network Programming

Originally, the FCC’s fin-syn system was implemented in 1970, which was the FCC’s financial interest and syndication rules for the regulation of ownership and control of television programming.  These fin-syn regulations were enacted to limit the “ability of the 3 major TV networks (ABC, CBS, NBC) to acquire financial interests or syndication rights in the television programming” as well as “to limit network control over television programming and thereby encourage the development of a diversity of programs through diverse sources of program services. (FCC 1995)” (Croteau & Hoynes 87).

However, in 1993 the U.S. district court ruled in favor of relaxing the fin-syn regulations so that the networks were not subject to these regulations because the competition between cable stations and the materialization of new networks prevented the large media conglomerates from monopolizing production and syndication (Croteau & Hoynes 87).  The U.S. district courts ruled this way because of the new changes in technology that started happening in the early to mid 1990’s.

Now, networks can acquire financial interests in and syndication rights to all network programming. This encouraged vertical integration; networks turned to studios that they owned or their corporate partners owned to produce more of their programming.  The large media conglomerates argued that “monopolistic control is no longer possible because we live in a diverse world with many options” (Croteau & Hoynes 88).  However, this is not the case.

By relaxing the old fin-syn regulations, major media conglomerates that owned many media outlets flourished, especially those that owned their own studios.  Independent and smaller media producers were constrained and even harmed by the relaxation of the old fin-syn regulations.  This is because major media conglomerates, like ABC, NBC, Fox, and CW were able to produce 90% of the series on major networks as well as being able to have financial interests in half of all of the prime-time programming. (Croteau & Hoynes 88).

The main debate between structure and agency in this case is that the “structure that protects the media industry’s copyright claims also constrained it’s ability to produce and resell its products” (Croteau & Hoynes 88). While “the agency of the media industry is seen in its ability to promote changes that favored the major networks” (Croteau & Hoynes 88).  Basically this debate between structure and agency in this case is that the same regulatory structure that protected the media industry copyright laws made it harder for those media industries to produce and sell its products while the actions of the media industry started to create regulations to favor the larger media conglomerates.

The regulation in question is the FCC’s fin-syn regulation, which was uplifted in 1993, which ruled that networks were not subject to this regulation anymore because of the new advancements in technology.  If the regulation was written in favor of the ‘other side,’ which in this case would be independent and smaller media producers, then more small and independent networks would still have the ability to make independent TV and cable stations.  The smaller networks would then have a equal chance against the large conglomerates networks that take up a lot of the prime-time programming slots because it does not cost as much for them. This is because the major media conglomerate vertically integrated with their studios, that either they owned or that their corporate partners owned, to produce more of their programming.

A suggestion I have for altering the regulation to improve them would be to go back to something similar to the FCC’s fin-syn system because the FCC’s fin-syn system initially imposed constraints on networks (mainly large media networks) so they could not monopolize or oligopolize network programming.  My recommendation is to impose a regulation that does not allow network companies, large or small, to acquire all financial interests and syndication rights to all network programming.  This would make the large media conglomerates not be able to use their own or their partners’ studios to produce more of their programming, which would require the large media conglomerates to pay another studio to produce their programming.  I think that this would not necessarily equal the playing field of network programming between small and large networks because the major media conglomerates already have a lot of money, so they are probably still able to take up a lot of the networking and prime-time slots, while the small and independent media producers were harmed from the inaction of the fin-syn regulations, and probably can not afford to show their programming in prime-time slots.  However it would give the small or independent media producers a higher chance of being able to get their programming on television, and therefore steadily making more money so that they can compete for TV time slots.

Source Cited:

Croteau, D. & Hoynes, W. (2014). Media/Society: Industries, Images, and Audiences. Thousand Oaks, California. SAGE Publications.

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Bertelsmann SE & Co. KGaA

Bertelsmann is a multinational media conglomerate.  Bertelsmann operates in 50 countries, and its headquarters are in Germany.  Its principle divisions include Penguin Random House, RTL Group, Gruner + Jahr, Arvato, Be Printers, and BMG.

Penguin Random House  is the world’s largest general interest trade book publishing company.

RTL Group is Europe’s biggest broadcaster of radio and television, which is also the parent to the FremantleMedia movie and TV production enterprise, the largest of its kind outside Hollywood.

Gruner + Jahr is one of the biggest magazine publishing houses in Europe.

Arvato is an international media and communications service provider.

Be Printers is an international group of companies offering printing solutions and communications services.

BMG is an international music company focused on the management of music publishing and recording rights.  BMG is the fourth-largest music publisher in the world, based on revenue.

Bertelsmann is a media conglomerate that employs Vertical Integration, which is evident considering its holdings primarily deal with the media, including book publishing, broadcasting tv and radio stations, magazine publishing, a media and communications provider, and a printing solutions firm.  BMG could be considered a horizontal integration, because it has to do with music and not the media industry.  Bertelsmann’s strategy is all about creativity and creating an environment that fosters innovation.  According to their CEO, Thomas Rabe, “Creativity is the foundation of all our businesses, the centerpiece of our value creation. We will therefore continue to invest in and expand our creative businesses.” Another part of their strategy is to aspire to be part of the digitization of media outlets, including watching tv on tablets, using e-readers, and reading magazines through their apps.  They way people consume news has drastically evolved over the past decade, making this point a priority for Bertelsmann.  Bertelsmann plans to continue growing and expanding their reach and influence.  Purchasing BMG Rights Management was a step in that direction.  In just four and a half years, BMG is  the world’s fourth-largest music publisher, with the rights to more than a million songs.  Bertelsmann plans to grow into the education industry, the booming e-commerce business, and integrated financial services, as well as the IT and high-tech sector. Bertelsmann also plans to expand geographically, to South America, India and China.

Although Bertelsmann is a multinational company, I haven’t heard of any of the media outlets.  However, Bertelsmann is more of a European company.  They have similar European television shows that are also showed in the US, such as The Price is Right and Idol.  Bertelsmann is in the top 10 for World’s Largest Media Conglomerates, but I had never heard of them before, which is surprising. However, this probably has to due with the fact that it’s a European company.

For more info on the specific tv and radio stations, magazines and newspapers, check out http://www.cjr.org/resources/?c=bertelsmann

http://en.wikipedia.org/wiki/Bertelsmann

http://en.wikipedia.org/wiki/BMG_Rights_Management

http://www.bertelsmann.com/strategy/growth-regions/