The author mentions General Motors to make the point that()
A. vertically integrated conglomerate lacks efficiency
B. U.S. cars are actually no better than Japanese cars
C. General Motors should learn the lesson of Big Media
D. automakers should lower car prices to raise efficiency
A.
Mourning the death of one of its own is perhaps the entertainment industry’s most time-honored traditions. After an agonizing and prolonged decline, the long-suffering Vertically Integrated Media Conglomerate passed away.
B.
It’s an idea that was born when Time Inc. merged with Warner Communications Corp. in , to form Time Warner. It endured as the industry’s prevailing business model for nearly a generation, spawning such clones and mongrel breeds as Viacom, News Corp and GE’s NBC Universal. The vertically integrated media conglomerate was—or was supposed to be—many amazing things, giving a handful of companies unprecedented power over the media—and the chance to earn outsized profits in the process. But its defining characteristic was its sheer size, earning it a fitting nickname. Big Media.
C.
But the theory behind the strategy relied on more than size. Housed under one roof, a single Big Media entity would control the means of producing and distributing media content, from magazine and books to television shows and movies, from cartoons and theme parks to sports franchises and the cable networks that carry the s to recorded music labels and music publishers. In Time Warner’s prototype of the model, it would control everything from the first letter of a Time magazine story or Warner Books novel to the last alphabet of the credits at the end of a Warner Brothers flick or HBO series based on the magazine story or the book division’s fiction. For a time, Time Warner boasted a wide array of media assets.
D.
No more. On April 29, in a filing with the Securities and Exchange Commission, Time Warner CEO Jeff Bewkes officially announced the death of Big Media. Having sliced off Warner Music Group a few years ago and Time Warner Cable this year, Bewkes notified the SEC that he intended to soon spin off AOL—its greatest expansionary effort to achieve media greatness, a move that proved lethal. And now, even the corporate namesake, the magazine company Time Inc., has a funereal atmosphere about it.
E.
The entertainment industry is only the latest in which the idea of vertical integration failed to live up to its promise. Consider the experiences of the auto industry. Henry Ford was a huge believer in the concept. His River Rouge plant, which once built the Model A, had its own electricity plant and its own mill for turning iron ore into steel; the vast majority of the components that went into its cars were made onsite. Over time, however, this soup-to-nuts strategy came to be seen as inefficient, companies could obtain better prices and more flexibility by dealing with a competing band of outside suppliers. Over time, once vertically-integrated companies like Ford and General Motors have spun off their internal supply division to form standalone companies, in an attempt to try to create the flexible, leaner supply chains created by Honda and Toyota.
F.
So what was Big Media’s legacy It’s bad form, of course, to speak ill of the departed, but the model has left mostly a negative mark on the media landscape and corporate America.