Introduction
The cultural industries have long been characterised by complex connections between large corporations and a swarm of small and medium enterprises (SMEs).
Critical analysis of these connections has emphasised that control of distribution andfinance has been central to governance and value capture in networks of cultural production. SMEs, connected through a myriad of horizontal relationships in specific locations, remain an essential aspect of cultural production; yet in the last three decades the position of a few large corporations across a range of cultural industries has been reinforced via horizontal and vertical integration, ostensibly at the behest of‘convergence’ and ‘synergy’ in the related fields of media, telecommunications and ICT. Conglomeratefirms have increasingly gained control of access to cultural markets.
Notwithstanding this trend, in the first decade of the 21st century, corporations combining different communication and cultural industries within larger corporate structures have undergone unpredictable and often seemingly contradictory processes of restructuring. Not surprisingly, these developments have often been associated with changes in patterns of distribution andfinance. Accounts of change have most commonly centred on a new phase of media convergence and the destabilising effects of new technical capabilities on the tight corporate control of cultural commodity distribution. Others have emphasised de-convergence and the splintering of cultural industry conglomerates as corporate investors lost patience with low profits, minor revenue increases and depressed stock prices, prompting a shift to new business models. However, such broad accounts do not adequately encapsulate the complex manner in which large companies, such as Google, Apple, Bertelsmann or Comcast-NBC Universal have sought to retain or capture power within the value chains of specific cultural industries. Such peculiarities have often been neglected in the shift
‘back to work’ in the studies of the creative economy. These studies have focused on small and micro businesses and removed cultural workers from the context of different cultural industries and the strategies of larger corporations; indeed, some accounts
of convergence challenge the continuing relevance of the category of industry in the analysis of cultural production.
This chapter provides an overview of the structure and industry dynamics of the cultural industries, from‘global’ corporations to SMEs. First, it provides an empirically up-to-date overview of large conglomerates and charts differences in their size and degree of diversification across different sectors. In doing so, it highlights how diversi-fication involves several forms of control and corporate integration. Building on this, the chapter examines the continuing role of smallfirms in the cultural industries and assesses the possibly changing relationship between thesefirms and large corporations in light of the above-described processes of convergence or de-convergence. In analysing and critiquing such accounts of shifting value chains, the chapter draws upon the distinct cultural industries approach and identifies how specific socioeconomic logics of diverse industries shape the changing aspects of these relationships.
Dynamic corporate structures in the cultural industries
Industrial concentration based on economies of scale and scope has been the standard mode of organisation for the communication and cultural industries. A principal reason is that it provides a means of managing the chronic uncertainty and endemic commercial failure associated with cultural commodities. From the late 1970s corpora-tions in the cultural industries were facilitated in taking full advantage of this fact by shifts in patterns of investment and regulation which were marked by complex transformations of capitalism and often glossed by the terms globalisation and neo-liberalisation (Fitzgerald 2012; Hesmondhalgh 2013). The role of the state, and in particular the United States, has been fundamental in this regard.
As corporations such as Time Warner, Disney and News Corp assembled different operations under their management and control, their competitiveness was argued to be a result of their structure and not simply their size. They sought both to achieve critical mass through the merger and acquisition of businesses in the same field (horizontal integration) and to gain control of the central points of the production, distribution and exchange processes (vertical integration). These strategies sought to reduce external market uncertainties produced by, for instance, several strong com-petitors in the circuit of production, and increase overall rates of return. Increased control and profitability were also pursued via integration across cultural industries (conglomeration). It was argued that this strategy would enablefirms to engage in cost savings, achieve synergies and capture a greater proportion of audience attention and media expenditure. Moreover, the administered systems of financial flow would further significantly reduce market risk via cross-subsidisation and permit greater competition among product line divisions.
The result was that by the late 1990s a small group of vertically integrated con-glomerates played a conspicuously powerful role in international cultural markets:
Time Warner, Walt Disney, News Corporation, Sony and Bertelsmann. By early 2000, this group had been joined by Vivendi-Universal, and Time Warner had rein-forced its leading position through its combination with America Online (AOL). These corporations further strengthened their ostensible ability to control their environment
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through alliances and inter-firm linkages with each other and other large national media players. This ‘march of the behemoths’ narrative was always a simplification:
it presented an‘ideal type’ form of corporate consolidation which in actuality covered corporate entities differentiated by their degrees of diversification and ownership; and it concealed the degree to which the corporate histories continued to involve failure and crisis within particular cultural industry divisions and across entire corporations.
These realities became more evident during the first decade of the 21st century and the aftermath of the dot.com bubble, as the Vivendi-Universal and AOL-Time Warner conglomeration deals collapsed under the weight of debt and engendered massive corporate write-downs. During this period, the changing influence of two pro-cesses, conspicuous since the 1980s, affected the cultural industries’ organisational structure: convergence andfinancialisation. The communication industries’ development always had an influence on cultural industries; yet in the 21st century, communication industry actors (telecommunicationfirms, Internet service providers, software manu-facturers and Web companies) have noticeably expanded their operations as, in parti-cular, the articulation between cultural content and the digital devices they control has become more economically viable. The strategies of new types of actors, Google, Amazon and Apple, have had a destabilising effect, especially on distribution networks.
Financialisation has been associated with constant restructuring of a corporation’s
‘portfolio’ of business units to maximise profit rates and share price performance.
Although this initially drove corporate consolidation, the sentiment of the investors, lenders and analysts has shifted away from vertically integrated conglomerates (although bondholders more than shareholders remain attracted to the fixed assets associated with vertical integration). By the middle of the 2000s the crisis induced pro-cess of de-conglomeration, epitomised by AOL-Time Warner and Vivendi-Universal, had achieved a more considered form, epitomised by Sumner Redstone’s 2005 decision to split Viacom-CBS in two. The global financial crisis (GFC) (2007–9) does not appear to have altered the course of reorganisation in the cultural industries:
‘Media valuations are [now] back to pre-crisis levels and as News Corp, Time Warner and Bertelsmann attest, portfolio shuffling is fashionable again in media’ (Edgecliffe-Johnson 2013). In 2013 some of the largest conglomerates (see Tables 4.1 and 4.2) initiated or completed wide-ranging restructuring processes involving de-merger and de-conglomeration (including Time Warner, Vivendi and News Corp).
Analysing forms of control and corporate integration:
Models and chains
The cultural industries tradition of analysis provides a useful framework to examine the uneven and combined development within such corporate forms, where competition drives organisational transformation and the stratification of capitals. A characteristic quality of this tradition is an emphasis‘on the unique and specific attributes of the media economy and the persistent barriers that impede the wholesale commodification of culture’ (Winseck 2011: 29–30). The barriers to commodification and industrialisa-tion reflect the reliance on creative labour and the high initial costs of producindustrialisa-tion relative to reproduction and distribution; the constant need for superficially ‘new’
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Table4.1Internationalmediaconglomeratescompared,2006–13(US$billion) CompanyRevenuesNetincomeMarketcapitalisation Year2012201020082006201220102008200620132012201020082006 1.Comcast62.5737.9434.2524.966.203.632.5472.5389.0867.6146.556.9057.59 2.WaltDisney42.2838.0637.8433.7475.683.964.4273.374113.7286.6955.958.3755.16 3.TimeWarner28.7326.8946.9843.693.022.58-13.406.55253.9032.9533.349.6075.9 4.Viacom/CBS27.9822.828.5725.683.561.58-10.423.25329.51/ 27.9523.0/ 19.8218.02/ 8.924.9/ 14.9330.13/ 19.02 5.NewsCorp.25.0532.7832.9925.321.182.545.3872.31449.3936.1835.2458.656.65 6.Bertelsmann21.8021.7523.2326.230.640.640.1982.813N/A 7.Sony22.27 (28.17%)22.51 (29.1%)21.4 (24.15%)14.52 (22.8%)-5.56-0.437-0.2030.31518.0326.7326.2544.4845.46 8.NBCUniversalN/A16.90 (11.25%)17.06 (9.35%)16.24 (10.7%)N/A2.2613.132.92N/A166.5365.5359.7 9.Vivendi13.325 (45.96%)12.49 (43.25%)15.719 (44.5%)12.365 (46.8%)0.222.9383.6235.31125.4323.6528.2243.7340.01 Sources:OrbisDatabase;CompanyReports FiguresinbracketsforSony,NBCUniversalandVivendiarethepercentageofrevenuederivedfrommediaoperations.
CorporationIndustry sectors Name Headquarters No of employees TV broadcasting
Radio broadcasting
Cable channels Film or TV production
Press Books Music Video games
Cable or satellite system
Web content or social networking E-commerce
e WarnerNew York, USA38,000* DisneyBurbank, USA144,000 mcast Philadelphia, USA107,000 s CorpNew York, USA24,000 Fox New York, USA25,600 SonyTokyo, Japan170,200 mannGutersloh, Germany102,983 mNew York, USA11,200 CBSNew York, USA25,580 Paris, France58,500 * Time Warner’s presence in the area of the press will end in 2014 = significant operations
Majorareasofoperationofinternationalmediaconglomerates,2013
symbolic goods; and the high level of uncertainty of valorisation based upon sym-bolic goods whose use-value,first, is established in part through cultural ‘distinction’
and, second, is not destroyed through consumption (Miège 1989; Garnham 1990;
Hesmondhalgh 2013). The organisational responses such issues engender mean that there are specific limits to which cultural industries can be treated like any other sector.
In seeking to analyse the complexity of the diverse and segmented structure of the cultural industries, Bouquillion, Miège and Mœglin (2013: 76–82) argue that two con-cepts are particularly valuable: models and value chains (filières). Looking at models first, within the cultural industries tradition they have been used to provide ideal type frameworks to capture the different socioeconomic logics that shape the prevailing institutional forms assumed by the commodification and industrialisation. These forms reflect different ‘content’ types, a mode of organising the production, selection and delivery of content andfinancing modes associated with direct commodification based upon intellectual property rights and indirect commodification via advertising or state subsidy systems. Two dominant models (publishing and flow) and three intermediate models (the club, the metered economy and information brokerage) are commonly identified (for a further elaboration see Fitzgerald 2012: 72–92). In the publishing model (e.g. books, music, DVDs) an editor/producer uses a catalogue of cultural artefacts as a means of mediating between various creative/artistic submis-sions, industrial production and the uncertainty of market demand. Here thefinal consumer contributes directly to thefinancing of the content they consume (a book through Amazon or a music track on iTunes) by purchasing a copy that they can own (the purchasing of a cinema ticket is still a notable exception). Theflow model (e.g.
broadcasting) responds to uncertainty by producing‘a constant flow of products as a packaged service and where speed and range of distribution is critical’ (Garnham 2000: 53). Consumers neither possess nor directly pay for this continuous program-ming; rather, a third party, usually advertisers, provides funding indirectly. Table 4.3 summarises these models.
These models, and the logics on which they are based, serve to distinguish indus-trial concentration trends under ‘general market’ conditions from trends towards scale and scope economies that are specific to the cultural industries. As Table 4.3 makes clear, the market and industry structure of theflow model – in which uncertainty is partially offset via demand for a steady flow of programmes/content – has historically differed from the publishing model – where control of diverse contributions to a catalogue permits a relatively small number of commercially successful commodities to underwrite a larger‘publishing’ enterprise. Nonetheless, it is unusual for any cultural industry, whether new over-the-top Internet television or‘mature’ areas of book pub-lishing, to reflect an unadulterated version of these models. To help determine the processes of change in operation and organisational structure we need to analyse, at a more concrete level, the segments of the value chain that connectfinance, design, production, distribution and consumption in specific industries.
These value chains can be traced within both large conglomerates and the intra-industry sequences between firms of different sizes in production and distribution that have long characterised the cultural industries. Thus, while independent pro-duction companies became prevalent in Hollywood in the 1950s, apparently giving
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rise to vertically disintegrated, post-Fordist/flexibly specialised production, analysis of the industry’s global value chains revealed how Hollywood studios had effectively created de facto vertical integration or ‘virtual integration’ with these small firms through complex licensing, financing and distribution contracts (Christopherson 1996). Thefilm industry thus took on aspects of industrial organisation that had long characterised the book and music industries. In the 1980s arrangements involving interdependent networks between small and large companies became prevalent across new areas of the cultural industries, most significantly in European broad-casting: the value chain elongated to comprise independent production companies and a multitude of small ancillary and technical supportfirms (Hesmondhalgh 2013:
211–12). Such changes were in line with wider transformations of the ‘organised capitalism’ of large corporations that gave rise to ‘subsidiary and subcontractor modes of inter-corporate relations’ (Wayne 2003), a process associated with the drive to increase ‘shareholder value’ through the reorganisation of international divisions in labour and commodity markets.
The handful of international media conglomerates, discussed earlier, have developed on this basis: the industry structures of the cultural industries have been characterised by large national and transnational corporations (TNCs) which link (regionally embedded) networks of SMEs to national and international markets. International media conglomerates have attempted to combine‘global’ reach with a responsiveness to local markets by granting affiliates enlarged autonomy and increasing their speciali-sation and connectedness with local inter-firm networks. As ‘runaway’ production in audio-visual industries attests, this also permits the competitive search for a balance between skill sets and costs. The outcome is global production networks (GPNs) that Table 4.3 Distinction betweenflow and publishing model
Model characteristics Flow Publishing
1. Sectors Broadcast TV and radio Books, music andfilm 2. Dominant payment 7. Market structure Tight oligopoly, vertical
integration
Oligopolistic core surrounded by smallfirms
Source: Winseck 2011: 32 (adapted from Lacroix and Tremblay (1997: 56–65)).
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‘combine concentrated dispersion of the value chain across firm and national boundaries, with a parallel process of integration of hierarchical layers of network participants’ (Ernst and Kim 2002: 1418). Because the development of cultural com-modities, though comparatively expensive, can usually be undertaken on a relatively small scale, multi-divisional conglomerates within such GPNs canfinance and distribute production‘in-house’ through their own semi-autonomous divisions or finance and distribute productions that have been subcontracted to smaller companies. By con-trolling distribution on a national and international scale, a small number of these largefirms are thus able to collect a significant portion of the income of a sector as a whole. While this may underpin the production of the most expensive yet lucrative content (blockbuster content and ubiquitous marketing campaigns), the majority of the costs and risks of production are borne by a myriad of relatively smaller, and more
‘flexible’/expendable, firms. In exchange for greater access to markets, these small firms support the economies of scale on which the large firm’s distribution systems are built. Moreover, at the cost of bearing the risk of innovative, or different and untested, products for uncertain cultural markets, small companies can maintain the cachet of cultural‘independence’ in the marketplace and hence attract talented employees who want greater ‘creative autonomy’ from commercial pressures. This is ‘especially [important] in those cultural industries and genres where there is a mistrust of cor-porate bureaucracies, such as rock or indiefilm making or certain kinds of games’
(Hesmondhalgh 2013: 212).
Since the 1990s a range of approaches has emerged to examine how complex and dynamic economic networks, made up of inter-firm and intra-firm linkages (Dicken 2011), have changed the relationships:
between management over immediate production processes (operational control over labour power/physical means of production) and the ability to set overall policy and strategy (allocative control); and
between the ability to control the flow of resources in and across firms (economic ownership, i.e. investment, profit distribution and share issue) and various forms of legal title to property (legal ownership, e.g. stock ownership) (Murdock 1982: 118–19).
As the corporate economy has developed, there has been a tendency for dissociation between economic and legal ownership and a functional differentiation between operational and allocative control and these processes have only become more complicated with the shift to forms of ‘subsidiary and subcontractor capitalism’.
However, in analysing organisational forms between hierarchies and markets, some analyses have both underplayed the extent to which legal ownership constrains inter-firm ‘project’ relationships and the extent to which forms of hierarchical control and power inequality shape the organisation of value chains/networks in supposedly collaborative value networks in which value is co-created and revenues are shared amongst all participants (Arsenault 2011).
Here Gereffi, Humphrey and Sturgeon (2005) have offered a highly influential and heuristically useful model of types of network coordination mechanisms and the changing relationship between leadfirms and suppliers from a high degree of explicit coordination and power asymmetry (hierarchy and captive coordination), a
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moderate degree (relational coordination), to a low degree (modular and market coordination). These ideal types of governance arise from transaction cost analysis and economic sociology: governance patterns are influenced by the capabilities of the suppliers; the complexity of the transactions; and the ability to codify complex information. All affect the ability to lock suppliers into unfavourable contractual relationships. However, Parker, Cox and Thompson (2014) argue that further essential factors affecting governance arrangements and power asymmetries are market con-centration and limited competition in key segments of the chain(s), which give rise to
‘bottlenecks’. Such arguments have long been central to the analysis of the cultural industries’ tradition of political economic analysis: significant assets – ownership of distribution systems and copyrighted cultural catalogues (Garnham 2000: 52)– allow large capitals to establish‘virtual integration’ or ‘captive value chains’. Nonetheless, it has been argued that a confluence of technological, cultural and economic change has altered these arrangements and produced more relational or modular coordination patterns. This in turn has had an impact upon the place of small and medium sizefirms within lengthening and increasingly complex value chains of the new‘creative economy’.
Indeed, Rainnie, Herod and McGrath-Champ (2013) argue that it should not be assumed that small firms are always dominated in global production networks and draw on Rainnie’s work to categorise the role of small firms in the strategies of large firms and the state (as either dependent, dominated, isolated or innovative).
A new phase of media convergence: Arm’s length economic coordination
The established value chain patterns in the cultural industries have been argued to be disrupted by a new stage of media convergence. As noted, central here is the destabilising effects on the oligopolistic control of cultural commodity distribution. In turn, it is argued that this is leading to the radical reshaping of the global communications landscape (Jin 2013) and the expansion of the entrepreneurial role of smallfirms and creative individuals in an enlarged cultural market. While digital technologies and the Internet figure prominently in such accounts, these formulations emphasise the multifaceted nature of convergence so as to escape the (warranted) charge of tech-nological determinism. That the term ‘convergence’ is used in many different ways also importantly reflects that it has been renewed and reshaped for over 30 years
The established value chain patterns in the cultural industries have been argued to be disrupted by a new stage of media convergence. As noted, central here is the destabilising effects on the oligopolistic control of cultural commodity distribution. In turn, it is argued that this is leading to the radical reshaping of the global communications landscape (Jin 2013) and the expansion of the entrepreneurial role of smallfirms and creative individuals in an enlarged cultural market. While digital technologies and the Internet figure prominently in such accounts, these formulations emphasise the multifaceted nature of convergence so as to escape the (warranted) charge of tech-nological determinism. That the term ‘convergence’ is used in many different ways also importantly reflects that it has been renewed and reshaped for over 30 years