structure of media organisation (vertical/horizontal integration)

Vertical integration

It is when the production company has the ownership of the means of production, distribution and exhibition of the film by the same company, because of this they receive all of the profit. Is when a production company owns all of the sectors which includes production exhibition and distribution.

Benefits

• A secure source of raw material or distribution channels.
• Protection of and control over valuable assets.
• Access to new business opportunities.
• Simplified procurement and administrative procedures.

Drawbacks

• Costs and expenses associated with increased overhead and capital expenditures .
• Loss of flexibility resulting from large investments.
• Problems associated with unbalanced capacities along the value chain.
• Additional administrative costs associated with managing a more complex set of activities.

 

 

Horizontal integration

This is where Production Company expands into other areas of one industry. This means that the company can develop in a particular area of production or they can buy out another company that deals with these areas.

Benefits

• Economics of scale: selling more of the same product in different parts of the world
• Economics of scope: sharing resources common to different products “ synergies”
• Increased market power
• Reduction in cost

Drawbacks

• Costs
• Increased work load
• Increased responsibilities
• Anti-trust issues
• Creating a monopoly

 

 

Media cooperatives are a form of cooperative that report on news based on the geographic location of their membership, or the general interests of the membership.