Business Studies

Select 1 of the economic concentrations (clusters) below:

• Seattle-Tacoma-Olympia, WA aerospace / defense industry
• Central California winemaking industry
• Hollywood movie industry
• Silicon Valley Technology hub
• Texas / Louisiana Gulf Coast crude oil and natural gas production and refining
• Pre-1994 vs Post-1994 US auto and light truck production and the reasons for the change in economic concentration

Write a 700- to 1,050-word paper evaluating economists’ assessments of the role the 4 factors of production played in determining how the economic concentration you selected has evolved. Complete the following in your paper:
• Analyze how the economic concentration in the area you chose was influenced by competition and pricing.
• Analyze how the economic concentration in the area you chose influenced the supply chain.
• Analyze which of the 4 factors of production were the most and least important in determining the economic concentration of the area you chose.
• Predict changes you anticipate for the area of economic concentration you chose. Support your predictions.

Consider the resources provided and other academically appropriate sources. The use of charts and tables to illustrate data is highly encouraged.

Cite at least 2 academically credible sources.

Format your assignment according to APA guidelines.

Submit your assignment.

ANSWER

The economic concentration of the Hollywood Movie Industry has been subject to various studies. For more than 90 years, an oligopoly of Hollywood Studios that comprises Paramount, Universal, Fox, United Artists, Columbia, Walt Disney, Warner Brothers and R.K.O collectively referred to as ‘the Majors, have exalted dominance the film industry (Silver 2007). An intriguing event that draws a lot of attention from researchers is that most if these Major Studios has at one point or the other come close to bankruptcy, during the Great Depression and the late 1960s and not even then did a competitor take them out of dominance. This research essay attempts to establish how the economic concentration of the Hollywood movie industry was influenced by competition, how it influenced the supply chain and the factors of production that were most and least important in determining this concentration.

Before the Major Hollywood Studios back in 1909, nine huge film companies combined to form the Motion Picture Patents Company (MPPC) to monopolise. However, the concentration at that time did not survive and eventually got quashed suggesting that concentration in the industry is not an easy task. However, Hollywood Majors have been able to maintain concentration for more than nine decades. Box office statistics show that very few films have been able to penetrate the market and gain commercial success without being part of the Majors (Vogel 2020). These films produced independently lack filming finance and distribution deals that are strongly held by the Majors making the market an already unfair completion ground for anyone else.

Researchers have since discovered that market concentration of Hollywood majors lies in the “exclusive ownership of channels of distribution” (Vogel 2020). Similarly, independent films also find themselves lacking in big-budget production finance (Vogel 2020). These factors accompanied by the fact that the Majors invest heavily on advertising expenditure makes the filming industry an already saturated market making it relatively impossible for other films from independent firms to ever get noticed (Vogel 2020).

In determining the economic concentration of the film industry, capital and innovation were the factors that came too much into play. Research indicated that Hollywood strategizes in exploiting of new technologies in the form of technicolour, talking pictures, widescreen processes and Pay TV (Silver 2007). Such required huge capital investments towards a state of the art technologies making all other companies obsolete. Similarly, to wane off the competition the biggest companies came together to form an Oligopoly to ensure that they were not competing against each other through vertical integration in the 1920s (Silver 2007).

Future prediction further suggests that the Hollywood Majors will continue dominance for a long period because of the hands-on approach that makes them immune to geopolitical change, technological innovation, globalisation and de-regulation that for years have made other companies rise and fall. Similarly, the Majors have erected high barriers forbidding any new entrants in the market due to ownership of industry resources of copyrights and patents and “an overwhelming market force” (Silver 2007). Vertical integration and large economies of scale are also factors that will further enable this economic concentration of the film industry. However, unlike many cases where concentration prompts the production of substandard goods and services due to lacking competition, the Hollywood movies industry has stayed true to their consumers worldwide ensuring high-quality production throughout.

References

Silver, J. (2007). Hollywood’s dominance of the movie industry: how did it arise and how has it been maintained?. Retrieved 17 July 2020, from https://core.ac.uk/reader/10885386

Vogel, H. L. (2020). Entertainment industry economics: A guide for financial analysis. Cambridge University Press.