Vertical Integration Case Summary

Paramount Pictures is one of the oldest movie studios in America. Paramount and its divisions are owned by Viacom Inc. Viacom acquired Paramount in 1994, bringing together two entertainment powerhouses. Robert Bakish is the President and CEO of Viacom, while James Gianopulos is a chairman and CEO of Paramount pictures. Viacom’s mission statement is fairly general and is based on being ethical and passionate about their work “…strives to maintain a work environment that upholds the highest standards of business behavior. Our company values individuals who are ethical, work smart and share the dedication and passion that have made Viacom the success it is today and are crucial for continued long-term success. …” (Viacom.com, 2017). Also, the mission statement covers the policies to hold employees accountable for the expected standards, “…Viacom Business Conduct Statement and Supplier Compliance Policy affirm our commitment to these high standards” (Viacom.com, 2017). Paramount itself is based in Los Angles, California; Viacom is based out of New York, New York. Viacom (VIA) is traded on the Nasdaq and as of November 24, 2017 it has a share price of $32.70 (Yahoo! Finance, n.d.).

(2) Cost reduction: Paramount & Viacom both have economies of scale and are doing business in a similar industry.

The censorship conflicts in the 1900s were extremely intriguing and intense. Around the end of the 1920s, individuals possessed immense moral shifts powered by religious groups during the Great Depression, which resulted in decisions that created a new revolution that dealt particularly with the regulation of content of films. Consequently, in 1934, at the same time that the “Golden Age of Hollywood” began, the Hollywood Production code was formally implemented. The film

The Federal Trade Commission (FTC) was created in 1914 primarily as a way for the government to “trust bust” or apply regulations ensuring a free marketplace for U.S. consumers and business enterprises. In this regard, the FTC enforces antitrust viola- tions that could hamper consumer interests, as well as federal consumer protection laws against fraud, deception, and unfair business practices. The commission’s primary enforcement mechanism is the Bureau of Consumer Protection, which is divided into seven divisions: (1) enforcement, (2) advertising practices, (3) financial practices, (4) marketing practices, (5) planning and information, (6) consumer and business educa- tion programs, and (7) privacy and identity protection.21 As the federal

During the early years of Hollywood, films had very few regulations on how they can be made. From 1922 till 1930, people were outraged at Hollywood that they have no rules on how they should make films. In response, religious groups were editing movies for their local communities to make them save for their standards. Eventually the government started to talk about enforcing rules that would censor Hollywood movies for the public. To stop that from happening, Hollywood enforced their own rules called the Motion Picture Production Code or the Hays Code.

Question 1 Paramount is a takeover target because other firms see synergy value associated with combining Paramount’s assets and operations with their own. Specifically, Paramount has several assets that complement other media companies. Value in the media is generated through several different channels. As a media company, Paramount has a presence in most of the entertainment sectors (see Exhibit 2). There seems to be a drive toward consolidation and several industry members are looking to diversify and round out their entertainment business portfolios. During this period Paramount was also experiencing increasing costs and continuous management turnover, which were starting to diminish financial

Nature of the Case: Universal City Studios, the plaintiff, alleged that Sony Corporation of America, the defendant, was guilty of copyright infringement. The preceding was a discretionary appeal from the district court to the United States Supreme Court. They sought money damages, profits, and an injunction against the manufacturing and marketing of Betamax VTR’s.

The Supreme Court ruled against the Hollywood’s monopoly of the film industry of the United States, directing that the production and distribution of movies be separated from movie exhibition practices. The ruling marked the death of studio era and led to numerous changes in film industry decades later. The paramount decision pushed the Twentieth century fox, Big Five studios, MGM, Paramount, RKO and Warner Bros companies to sell some of their theatre chains. The ruling went ahead to outlaw the price discriminatory and purchasing arrangements, fixing of admissions prices, block booking and

As the November Meeting approaches, CFO Doug Scovanner is faced with the problem of choosing which of the five controversial projects available to accept. Our task is to assume this role and evaluate each of the projects based upon two major criteria. The first is determining the firm’s financial motives by quantifying the projected value added to the firm and the risk associated with each project. When determining to accept or reject projects based upon adding value, the most helpful instruments we have are Net Present Value (NPV) and the

The Paramount decision and the Hollywood blacklist were two major milestones that brought dramatic changes to the film industry. The Paramount decision was a ruling made by the Supreme Court in 1948, against the activities of the major studios called the Big 5, which were the main fully integrated film studios between 1920 and 1948. The ruling stated that the major studios practiced bad business tactics that included block-booking and blind buying and that this in fact formed a monopoly of the film industry. The Hollywood black list was a 20th century practice of denying screenwriters, directors, actors, musicians and other U.S. entertainers because of their political associations. This list was created by a group of individuals that believed that certain entertainment professionals persons were affiliated with communists.

The only viable way to make profits was to rely on the novelty of an early run of a new release to attract audiences. The problem with such a reliance was that runs in theaters were regulated by the Clearance and Zoning boards, which were set up as another practice under the Code in an attempt to organize distribution of films in the nation. It arranged theaters in different regions on the marketing pattern of zoning, clearance and run. The country was divided into thirty markets, compartmentalized into zones, and classified by runs that would range from fourteen days to forty-two days or more with a potential of running for more than a year in large markets (Schuchman, & Balio, 1994). This practice gave the Board, which was dominated by the Big 5, the power to control which movie would play when and where. This was specifically important as movies that were already viewed by the potential audience, would not draw in the same patronage as it would in the first run. Consequently whoever got the right to show the movie first would stand to make the most profit. It was very obvious that this would be a potential source of discrimination against independent exhibitors as the Big 5 would favor their own exhibition houses over that of independent exhibitors. With all three practices, it was clear that the intention was to increase profits. Survival of businesses was very precarious as many

In 1954, Alpha Plastics was founded near Manchester. And by the mid 1969’s, the company had developed into a medium-sized company with around 6,000 employees. The company was famous for developing and manufacturing a wide range of laminates and industrial adhesives. Also, it had explored the market in synthetic fibre manufacture by take-over. In 1988, Alpha Plastics involved in merger with the Colmar Chemical Company, which is a slightly larger organisation with 8,500 employees and located near Stockport. Colmar produces a variety of industrial chemicals besides plastic and specialises in the production of synthetic fibres. Alpha Plastics believed that the merger would allow taking advantage of

Spokane Industries has contracted Franklin Electronics for an 18 month product development contract. Franklin Electronics is new to using project management methodologies and have not been exposed to earned value management methodologies. Even though Franklin and Spokane have worked together in the past, they have mainly used fixed price contracts with little to no stipulations. For this project Spokane Industries is requiring Franklin Electronics to use formalized project management methodologies, earned value cost schedules, and schedules for reports and meetings. Since Franklin Electronics had had no experience with earned value management, the cost accounting group was trained in the methodology in order to bid for the

Chapter 7: Merger and Acquisition Strategy ---- House of Tata: Acquiring a Global Footprint (written by Tarun Khanna, Krishna G. Palepu, and Richard J. Bullock)

M&A activity has been on an upward trajectory in the past few years. In 2015, the activity reached a record-breaking $4.3 trillion worldwide. Although activity has since slowed slightly, deal sizes are hanging on – it’s been the seller’s market. So, what are the predictions for 2018?