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In today’s complex and often turbulent economic environment, global firms have sought greater profits by moving labor to less economically developed countries that need jobs but have poor health and safety regulations for workers. The continuous outsourcing of many U.S. jobs and the breakdown of global economic borders accompanied this transformation. Bolstered by the passage of GATT (General Agreement on Tariffs and Trade) in 1947, the signing of NAFTA (North American Free Trade Agreement) in 1994, and the formation of the WTO (World Trade Organization, which succeeded GATT in 1995), global cooperation fostered transnational media corporations and business deals across international terrain.

But in many cases, this global expansion by U.S. companies ran counter to America’s early-twentieth-century vision of itself. Henry Ford, for example, followed his wife’s suggestion to lower prices so workers could afford Ford cars. In many countries today, however, most workers cannot even afford the computers and TV sets they are making primarily for U.S. and European markets.

The Rise of Specialization and Synergy

The new globalism coincided with the rise of specialization. The magazine, radio, and cable industries sought specialized markets both in the United States and overseas, in part to counter television’s mass appeal. By the 1980s, however, even television—confronted with the growing popularity of home video and cable—began niche marketing, targeting affluent eighteen- to thirty-four-year-old viewers, whose buying habits are not as stable or predictable as those of older consumers. Younger and older audiences, abandoned by the networks, were sought by other media outlets and advertisers. Magazines such as J-14 and AARP The Magazine now flourish. Cable channels such as Nickelodeon and the Cartoon Network serve the under-eighteen market, while the Hallmark Channel and Lifetime address female viewers over age fifty; in addition, cable channel BET targets young African Americans, helping define them as a consumer group (see “Case Study: Minority and Female Media Ownership: Why It Matters” on pages 458–459).

Beyond specialization, though, what really distinguishes current media economics is the extension of synergy to international levels. Synergy typically refers to the promotion and sale of different versions of a media product across the various subsidiaries of a media conglomerate (e.g., a Weather Channel segment on NBC’s Today Show, or an NBC News reporter appearing on MSNBC for election coverage—all part of Comcast and its NBC Universal subsidiary). However, it also refers to global companies like Sony buying up popular culture—in this case, movie studios and record labels—to play on its various electronic products. Today, synergy is an important goal for large media corporations and is often the reason given for expensive mergers and acquisitions. But historically, half of all mergers and acquisitions are failures, and synergies are never realized.22 (Consider, for example, the disastrous AOL–Time Warner merger of 2001 or News Corp.’s expensive bad bet on the success of MySpace in 2005.)

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Disney: A Postmodern Media Conglomerate

The Walt Disney Company is one of the most successful companies in leveraging its many properties to create synergies. For example, in 2014, ABC broadcast the prime-time special The Story of Frozen: Making a Disney Animated Classic to promote the Disney movie studio’s enormous hit movie and soundtrack—and to hype ABC’s Once Upon a Time series (which would soon feature a character from Frozen) along with Disney’s next animated film, Big Hero 6. Frozen (as noted in Chapter 7) also taps into a huge array of licensed merchandise and even Frozen-themed vacation trips by Disney’s tour company and cruise line. To fully understand the contemporary story of media economics and synergy, we need only examine the transformation of Disney from a struggling cartoon creator to one of the world’s largest media conglomerates.

The Early Years

After Walt Disney’s first cartoon company, Laugh-O-Gram, went bankrupt in 1922, Disney moved to Hollywood and found his niche. He created Mickey Mouse (originally named Mortimer) for the first sound cartoons in the late 1920s and developed the first feature-length cartoon, Snow White and the Seven Dwarfs, completed in 1937.

For much of the twentieth century, the Disney company set the standard for popular cartoons and children’s culture. The Silly Symphonies series (1929–1939) established the studio’s reputation for high-quality hand-drawn cartoons. Although Disney remained a minor studio, Fantasia and Pinocchio—the two top-grossing films of 1940—each made more than $40 million. Nonetheless, the studio barely broke even because cartoon projects took time—four years for Snow White—and commanded the company’s entire attention.

Around the time of the demise of the cartoon film short in movie theaters, Disney expanded into other areas with its first nature documentary short, Seal Island (1949); its first live-action feature, Treasure Island (1950); and its first feature documentary, The Living Desert (1953).

Disney was also among the first film studios to embrace television, launching a long-running prime-time show in 1954. Then, in 1955, Disneyland opened in Southern California. Eventually, Disney’s theme parks would produce the bulk of the studio’s revenues. (Walt Disney World in Orlando, Florida, began operation in 1971.)

In 1953, Disney started Buena Vista, a distribution company. This was the first step in making the studio into a major player. The company also began exploiting the power of its early cartoon features. Snow White, for example, was successfully rereleased in theaters to new generations of children before eventually going to videocassette and much later to DVD.

Global Expansion

The death of Walt Disney in 1966 triggered a period of decline for the studio. But in 1984, a new management team, led by Michael Eisner, initiated a turnaround. The newly created Touchstone movie division reinvented the live-action cartoon for adults as well as for children in Who Framed Roger Rabbit (1988). A string of hand-drawn animated hits followed, including The Little Mermaid (1989), Beauty and the Beast (1991), The Lion King (1994), Mulan (1998), and Lilo & Stitch (2002). Disney also distributed a string of computer-animated blockbusters from Pixar Animation Studios, including Toy Story (1995), Monsters, Inc. (2001), Finding Nemo (2003), and The Incredibles (2004); it later acquired Pixar outright and released movies including Up (2009), Toy Story 3 (2010), and Brave (2012). Disney’s in-house animation studio eventually got into the computer-animation business and had several major successes with Wreck-It Ralph (2012), Frozen (2013), and Big Hero 6 (2014).

Disney also came to epitomize the synergistic possibilities of media consolidation. It can produce an animated feature for both theatrical release and DVD distribution. With its ABC network (purchased in 1995), it can promote Disney movies and television shows on programs like Good Morning America. A book version can be released through Disney’s publishing arm, Disney Publishing Worldwide, and “the-making-of” versions can appear on cable’s Disney Channel or ABC Family. Characters can become attractions at Disney’s theme parks, which themselves have spawned Hollywood movies, such as the lucrative Pirates of the Caribbean franchise.

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Throughout the 1990s, Disney continued to find new sources of revenue in both entertainment and distribution. Through its purchase of ABC, Disney also became the owner of the cable sports channels ESPN and ESPN2, and later expanded the brand with ESPNEWS, ESPN Classic, and ESPNU channels; ESPN The Magazine; ESPN Radio; and ESPN.go.com. In New York City, Disney renovated several theaters and launched versions of Beauty and the Beast, The Lion King, and Spider-Man as successful Broadway musicals.

Building on the international appeal of its cartoon features, Disney extended its global reach by opening Tokyo Disney Resort in 1983 and Disneyland Paris in 1991. On the home front, a proposed historical park in Virginia—Disney’s America—suffered defeat at the hands of citizens who raised concerns about Disney misinterpreting or romanticizing American history. In 1995, shortly after the company purchased ABC, the news division was criticized for running a flattering profile about Disney on ABC’s evening news program.

Despite criticism, little slowed Disney’s global expansion. Orbit—a Saudi-owned satellite relay station based in Rome—introduced Disney’s twenty-four-hour premium cable channel to twenty-three countries in the Middle East and North Africa in 1997. Disney opened more venues in Asia, with Hong Kong Disneyland Resort in 2005 and Shanghai Disney Resort, which broke ground in 2011. Disney exemplifies the formula for becoming a “great media conglomerate” as defined in the book Global Dreams: “Companies able to use visuals to sell sound, movies to sell books, or software to sell hardware would become the winners in the new global commercial order.”23

Disney Today

Even as Disney grew into the world’s No. 2 media conglomerate by the beginning of the twenty-first century, the cartoon pioneer experienced the multiple shocks of a recession, failed films and Internet ventures, and declining theme park attendance. By 2005, Disney had fallen to No. 5 among movie studios in U.S. box-office sales—down from No. 1 in 2003. In 2006, new CEO Robert Iger merged Disney and Pixar, and made Pixar and Apple Computer founder and CEO Steve Jobs a Disney board member. In 2009, Disney also signed a long-term deal to distribute movies from Steven Spielberg’s DreamWorks Studios. But in 2010, Disney, still reeling from the economic recession, sold its independent film studio Miramax for $660 million to an investor group.

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The Pixar deal showed that Disney was ready to embrace the digital age. In an effort to focus on television, movies, and its online initiatives, Disney sold its twenty-two radio stations and the ABC Radio Network in 2007. Disney also made its movies and TV programs available at Apple’s iTunes store and announced it would become a partner with NBC and Fox in the popular video site Hulu. In 2009, Disney purchased Marvel Entertainment for $4 billion, bringing Iron Man, Spider-Man, and X-Men into the Disney family; in 2012, it purchased Lucasfilm and, with it, the rights to the Star Wars and Indiana Jones movies and characters. This means that Disney now has access to whole casts of “new” characters—not just for TV programs, feature films, and animated movies but also for its multiple theme parks.

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Global Audiences Expand Media Markets

As Disney’s story shows, international expansion has allowed media conglomerates some advantages, including secondary markets in which to earn profits and advance technological innovations. First, as media technologies get cheaper and more portable (think Walkman to iPod), American media proliferate both inside and outside national boundaries. Today, greatly facilitated by the Internet, media products easily reach the eyes and ears of the world. Second, this globalism permits companies that lose money on products at home to profit abroad. Roughly 80 percent of U.S. movies, for instance, do not earn back their costs in U.S. theaters and depend on foreign circulation and video revenue to make up for losses.

In addition, satellite transmission has made North American and European TV available at the global level. Cable services such as CNN and MTV quickly took their national acts to the international stage, and by the twenty-first century, CNN and MTV were available in more than two hundred countries. Today, of course, the streaming of music, TV shows, and movies on the Internet through services like Spotify and Netflix (and through illegal file-sharing) has expanded the global flow of popular culture even further. (See “Media Literacy and the Critical Process: Cultural Imperialism and Movies” on page 461 for more on the dominance of the American movie industry.)

The Internet and Convergence Change the Game

For much of their history, media companies have been part of usually discrete or separate industries—that is, the newspaper business stood apart from book publishing, which was different from radio, which was different from the film industry. But the Internet and convergence have changed that—not only by offering a portal to view or read older media forms but also by requiring virtually all older media companies to establish an online presence. Today, newspapers, magazines, book publishers, music companies, radio and TV stations, and film studios all have Web sites that offer online versions of their product or Web services that enhance their original media form.

The Rise of the New Digital Media Conglomerates

The digital turn marks a shift in the media environment, from the legacy media powerhouses like Time Warner and Disney to the new digital media conglomerates. Five companies—Amazon, Apple, Facebook, Google, and Microsoft—reign in digital media, as detailed in Figure 13.3.

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Each of the five leading companies has become powerful for different reasons. Amazon’s entrée is that it has grown into the largest e-commerce site in the world. In recent years, Amazon has begun shifting from delivering physical products (e.g., bound books) to distributing digital products (e-books and downloadable music, movies, television shows, and more) on its digital devices (Kindle, Fire TV, and Fire Phone). Apple’s strength has been creating the technology and the infrastructure to bring any media content to users’ fingertips. When many traditional media companies didn’t have the means to distribute online content easily, Apple developed the shiny devices (the iPod, iPhone, and iPad) and easy-to-use systems (the iTunes store) to do it, immediately transforming the media industries. Today, Apple has a hand in every media industry, as it offers the premiere platforms of the digital turn.

Facebook’s strength has been its ability to become central to communication and social media. As Facebook’s number of users surpassed one billion worldwide in 2012, the company still struggled to fully leverage those users (and the massive amounts of data they share about themselves) into advertising sales, particularly as its users moved to accessing Facebook via mobile phones. Unlike the other four digital companies, Facebook lacks hardware devices to access the Internet and digital media, although it began to remedy that problem with the purchase of the Oculus Rift virtual reality gaming headset for $2 billion in 2014. Google, which draws its huge numbers of users through its search function, has much more successfully translated those users (and the information provided by their search terms) into an advertising business worth more than $59 billion a year. Google is also moving into the same digital media distribution business that Apple and Amazon offer, via its Android phone operating system, Nexus 7 tablet, Chromebook, and Chromecast. Microsoft, one of the wealthiest digital companies in the world, is making the transition from being the top software company (a business that is slowly in decline) to competing in the digital media world with its Bing search engine and devices like its successful Xbox game console, Surface tablet, and Windows phone. Microsoft also owns Yammer, a business social network, and holds a small ownership share in Facebook.

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Given how technologically adept these five digital corporations have proven to be, they still need to provide compelling narratives to attract people (to repeat a point from the beginning of the chapter). All five companies are weak in this regard, as they rely on other companies’ media narratives (e.g., the sounds, images, words, and pictures) or the stories that their own users provide (as in Facebook posts or YouTube videos). Amazon is leading the other companies in content development, though, with its own publishing divisions (to compete with publishing companies) and its own original television series and online channels like Twitch (to compete with Netflix, Hulu, and YouTube). It’s likely that the other digital companies will eventually do the same. The history of mass communication suggests that it is the content—the narratives—that endures, while the devices and distribution systems do not.

The Digital Age Favors Small, Flexible Start-Up Companies

All the leading digital companies of today were once small start-ups that emerged at important junctures of the digital age. The earliest, Microsoft and Apple, were established in the mid-1970s with the rise of the personal computer. Amazon began in 1995 with the popularization of the Web and the beginnings of e-commerce. Google was established in 1998, as search engines became the best way of navigating the Web. And Facebook, beginning in 2004, proved to be the best social media site to emerge in the 2000s. For each success story, though, hundreds of other firms failed or flamed out quickly (e.g., MySpace).

Today, the juncture in the digital era is the growing importance of social media and mobile devices. Like in the earlier periods, the strategy for start-up companies is to find a niche market, connect with consumers, and get big fast, swallowing up or overwhelming competitors. Instagram, YouTube, Twitter, and Zynga are recent examples of this. The successful start-ups then take one of two paths—either be acquired by a larger company (e.g., Google buying YouTube, Facebook buying Instagram) or go it alone and try to get even bigger (e.g., Twitter). Either way, success might not last long, especially in an age when people’s interests can move on very quickly. Witness Zynga, which had the top social media game when FarmVille debuted in 2009, but started to fizzle out a few years later without another hit game.

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