Advertisement
YOU ARE HERE: LAT HomeCollections

VIEWPOINTS : Hollywood Independents Start to Feel the Squeeze

November 22, 1987|WALTER ADAMS and JAMES W. BROCK | WALTER ADAMS is a professor of economics and past president of Michigan State University. JAMES W. BROCK is associate professor of economics at Miami University (Ohio). They are co-authors of "The Bigness Complex," which was published this year. and

The threat of monopoly is once again casting its shadow over the entertainment industry. Major players in the industry--movie studios, theaters and the cable, pay and broadcast television networks--are caught up in a maelstrom of mergers and acquisitions, combining operations at the industry's three pivotal stages: production, distribution and local exhibition.

Consequently, vertically integrated giants have been established with the market power to thwart competition. The big companies can make it difficult both for independent producers to market their work and for independent exhibitors to get these productions. It is the kind of monopoly power that the Supreme Court in 1948 decided to neutralize by ordering the Big Five (Paramount, Loew's, RKO, Warner Bros. and 20th Century-Fox) to divest either their production-distribution operations or their exhibition outlets.

Today, the 1948 defendants are intent on re-establishing their control of the full breadth of the industry. The top studios--which account for more than 80% of film production and distribution--are voraciously gobbling up theater chains. Over the last two years, motion picture studios have acquired 14 theater chains, representing 4,224 screens.

For example, Universal Studios purchased controlling interest in Cineplex-Odeon--one of the largest theater circuits in North America; and Cineplex, in turn, has purchased the RKO Century, Septum and Essaness chains, among others. Other major studios are doing the same. The recent turbulence in the stock market may put a temporary damper on this trend--the recent collapse of the proposed merger of United Artists Communications and United Cable Television is a case in point--but the long-term outlook is unchanged.

The studios also are acquiring local television stations: Fox bought Metromedia--the nation's largest chain of independent stations--as well as WXNE in Boston. Indeed, under the guidance of Rupert Murdoch, Fox is establishing a fourth national TV network. For its part, Universal has purchased TV "superstation" WOR, which reaches 8.4 million subscribers via 1,400 local cable-TV systems. In quick order, movie companies have come to own stations reaching an estimated 30% of the nation's TV homes.

Furthermore, movie companies now dominate the production of programming for broadcast television. Last year, the top studios accounted for 52% of all prime-time programming carried by the networks and 45% of all syndicated television programs.

The story is similar in cable and pay TV. Movie companies operate local cable systems. (Warner is the nation's sixth-largest operator of multiple cable systems nationally.) They also have substantial financial interests in cable programmers such as HBO, USA Network, Nickelodeon and MTV that distribute viewing fare to cable systems. And they have struck agreements to exclusively supply movies and programs to cable programmers and operators.

The movie firms are not alone in their frenzied efforts. Local cable-TV systems are being taken over and merged under centralized national control. According to Michigan State communications professor Barry Litman, the nation's largest cable system operator, Tele-Communications Inc. of Denver, has increased its empire from 1.3 million subscribers in 1981 to more than 7 million today. The combined share of the top two multiple operators doubled between 1982 and 1986. At the present rate of consolidation, the five largest cable operators may control nearly half the business by 1990--up from 29% in 1982.

Meanwhile, cable operators are also getting into program production and distribution. For example, Tele-Communications has acquired a sizable stake in Turner Broadcasting. For its part, Turner--which produces and distributes Cable News Network and other cable programs--has acquired MGM.

Pattern Is Emerging

The TV networks are playing the game too. CBS is a part owner of HBO, while Capital Cities/ABC operates ESPN. In addition, the networks are demanding a relaxation of Federal Communications Commission rules limiting their ability to produce programs for their approximately 600 local affiliates.

Finally, an intricate pattern of cross-media combination is emerging--a pattern that cuts across the entertainment field and binds it tighter. For example, the Columbia Pictures unit of Coca-Cola, CBS and HBO joined in 1982 to launch Tri-Star Pictures, a film production venture. HBO was assigned exclusive rights to exhibit Tri-Star movies on pay TV, while CBS got exclusive rights to broadcast Tri-Star films on network TV. (Now there are even bigger plans for Tri-Star: Coca-Cola announced in September that it would fold its Columbia, Loew's Theaters and Coca-Cola Television interests into Tri-Star, which will be renamed Columbia Pictures Entertainment.)

In sum, we are witnessing the re-linking of production, distribution and exhibition and the concentration of power across the whole spectrum of entertainment among fewer firms.

Advertisement
Los Angeles Times Articles
|
|
|