This post will detail how four companies became stitched together under one banner over the course of seven decades. And beyond even that I will try and shed a light on why horizontal expansion has its limits and that only through vertical expansion can a corporate media compete and thrive in the 21st century. Today's Lesson: Fox! Or more accurately...
let's start back in 1904 when Hungarian-American William Fox bought a significant minority share in a Brooklyn movie theater. As early investments in booming industries are wont to do, his investment paid back handsomely and within four years he had singular ownership across more than a dozen movie theaters in New York City. Realizing that while attempting to own ALL THEATERS EVERYWHERE (in New York) as a horizontal integration plan was a profitable goal, it was a goal with a low ceiling and no long term stability. He needed to expand in a way that cut costs.
As the industry stood at the time, a myriad of wealthy studios who could afford Thomas Edison's patents had a de facto monopoly on film creation and distribution. But Fox figured if he could round up a few small studios who may have or may not have been entirely above-the-board, he could distribute their films to his theaters. For Fox and the indies, it was a win-win: the indies found a distributor willing to take their gray-market films and since no one paid Edison's patents, with the ticket prices the same, Fox got the films for cheap and saved a chunk.
As a side note, Edison and his fellow studio heads tried to seize Fox's indie studio friends' equipment only to have Fox retaliate and sue Edison et al. under antitrust laws and win.
But theatrical ownership and film distribution still was not enough vertical integration in Fox's mind. He could save even more money owning and operating his own film studio and skip licensing films in the first place. Free is better than cheap! Fox bought an indie studio from his network of distributors, French-owned Éclair Studios operating out of New Jersey. Even then he knew that New Jersey wasn't the best locale for either shooting film or making studio business deals. So in 1915 Fox moved the company out to Los Angeles and renamed it drumroll Fox Films.
The next 14 years had more astounding success for Fox. His company grew in wealth and stature that in 1927 he made an attempt to buy the corporate parent of Loew's Theaters and Major Film Studio MGM. MGM executives fought it in court until 1929 when the stock market crash left Fox penniless. He was forced to give up the acquisition of MGM, turn over Fox Films to a new president, and after lingering on with nothing but good credit for another five years, his studio old studio was sold to...
20th Century Films!
20th Century Films had only existed two years prior to their purchase of Fox Films. They were a collection of other Major Studios' outcasts, entrepreneurs, and Bank of America investors. They had strong financial backing combined with financial and critical acclaim; all they lacked was name-brand legitimacy. After a failed attempt to acquire United Artists, they instead went in on Fox Films to create...
20th Century-Fox!
Things were smooth sailing for 20th Century-Fox for the next 20 years until they faced two major challenges: a court ordered separation of their Studio and Theater businesses but more urgently: the rise of Television.
All the Major Film Studio were stuck competing with Television, a once-fad now seemingly here forever. 20th Century-Fox fought back by evaluating what Television could not provide to the consumer and wholly investing in those novel, unproven, and risky tactics. They wanted to be more provocative than television, they wanted to be more epic then television, and they wanted to be more cutting edge than television. Some of these tactics worked, for example, their CinemaScope technique won the Widescreen format battle and was rapidly adopted by all Major Film Studios. Some of these tactics, infamously the film Cleopatra's epic production costs, almost drove the studio to bankruptcy. That set off a chain of panicked, reactionary management that kneecapped the studio's ability to profit and grow for the next 15 years.
A series of high profile successes (The Sound of Music, Fantastic Voyage, Planet of the Apes, and The Towering Inferno) was essentially the only thing holding Fox together. But the success of a little film called Star Wars, a film that single handly changed an entire genre of filmmaking and GOSH YOU'RE READING THIS BLOG I THINK Y'ALL KNOW WHAT STAR WARS did for Hollywood... anyways, Star Wars brought attention in the sense of HERE IS A FINANCIALLY STRUGGLING STUDIO who happens to own the Intellectual Property Rights to the MOST SUCCESSFUL FRANCHISE in the history of franchises. In 1981, two investors bought the studio outright for $700 million.
Buy Low Amirite?
The next five years were absolutely insane.
But let's put a pin in that for today and very briefly talk about a Television manufacturing company and an Australian Newspaper.
In 1931 a New Jersey company named DuMont Labs began manufacturing televisions replacement parts. Again, like any erupting industry, early investments paid off well. Only a decade later, a humble Television repair company founded its first Owned & Operated television network. Along with rivals NBC, CBS, and ABC, the DuMont Television Network rode the early wave of television growth and acceptance.
But unlike NBC, CBS, and ABC, the DuMont network did not have a robust Radio Industry company arm to back it up. Without that corporate and financial leverage, DuMont and their O&O stations often found themselves at odds with the telephone-line-owning signal bandwidth company (AT&T) or their Studio Investors (Paramount Pictures) and their lack of name-brand recognition was unable to draw A level Hollywood talent. Their biggest and final blow came in 1948 when the FCC froze new television station applications. When the dust settled in 1952 and the FCC expanded the channel range (from the original 2 to 13) all the way up to channel 83, DuMont found their stations relegated to the higher numbers, which at the time required specialty TVs.
By 1956 the company had folded, creating the first and only failed Broadcast Network company in the United States. With a failed sale to ABC, many of their O&O stations divested and became independent. Two re-conglomerated as Metropolitan Broadcasting Company in 1958 and were later rebranded as Metromedia in 1961.
Back in 1923 (FINAL TIME I'M DOING THIS I SWEARS) a fellow named James Edward Davidson bought two rural newspapers in southern Australia. He incorporated them under the name News Limited. In 1949 newspaper investor / owner Keith Murdoch purchased a minority stake and by his death in 1952 he owned News Limited outright. His son, Rupert, took control of News Limited and conglomerated the rest of his father Keith's newspaper ownership under the News Limited Brand.
Rupert spent the next 30 years buying up Australian newspapers, as well as newspapers across Asia & Europe, as well as a handful in the United States. In the very late 1970s, he formed News Corp. as a holding company to better organize his assets in preparation to expand greatly into the United States. Rupert Murdoch had billions of dollars, control of a great deal of print media, and - by extension of those two facts - friendly associates in the private and public sectors.
And here was a Major Film Studio, 20th Century-Fox, and an aspirational
Major Television Broadcast Network, Metromedia, both looking for a buyer. If a single company controlled both, why, it would be the first Film Studio-Broadcast Network merger! Think of the money to be made...
Stay tuned for
- OK we know what's coming next. FOX, FOX, MOUSE!
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