Time Warner is an American media corporation which is the merger between Time Inc. and Warner Communications (1990); subsequently purchased by AOL (2001). Today, it is the largest media institution in the world. It had revenues of 43.7 billion USD in 2005. From figure 1, Time Warner is divided into many business segments in which the major businesses are film productions, television divisions, publishing, telecommunications and Internet. The media products include films, TV programmes, newspapers, magazines and movie discs etc.
The development of Time Warner involves mainly 2 kinds of integration - Horizontal integration and vertical integration – which is 2 types of ownership concentration in an industry.
Horizontal integration involves obtaining competitors in the same section of the industry. For example, Business 2.0, a popular monthly newsstand magazine which is originally owned by “Imagine Media”, was sold to Time Inc. of Time Warner in July, 2001. In this case, Time Warner may continue to increase its occupation in the magazine market. When the corporation occupy larger enough of the market, it enhances the promotion of the new release products, e.g. films, and likely to dominate the decision making process of consumers. The importance of horizontal integration is that the company has a better control of the market. Besides, it can achieve a better economic of scale so as to raise its competing power.
Vertical integration involves acquiring every stage of the production process. Hence, the company can ensure a complete control of a product. From the above, it is mentioned that Time Warner has many companies in different stages of the productions. These companies would not work separately. Instead, they are well-coordinated in order to maximize revenues and growth worldwide. In Time Warner, movie studios like Warner Bros, CastleRock Entertainment and New Line Cinema etc. of Time Warner producing many films every year. And Cinamerica, a movie theater of Time Warner, ensure the space and time for distributing the films in America. After the films had been shown in cinemas, Time Warner can put their film on their TV channels such as HBO and CNN. Finally, Time Warner has production companies such as Picturehouse to release VCDs and DVDs of the films. Besides, the TV, newspapers, magazines and books of Time Warner can help to promote the films of Time Warner, such as interviewing the artists, before the release of the films. In fact, vertical integration is very important because the company can control its distribution and dominate its position by limiting the access for other competitors. Therefore, potential profits of the company can be maximized.
With horizontal integration and vertical integration, the media products “can therefore be sold,...