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1. Vertical integration in studio system The term "vertical integration" refers to the structure of a marketplace, which is integrated (rather than segregated) at a variety of crucial levels. In the case of the motion picture industry, the studio system established a market in which the studios owned production facilities, distribution outlets, and theaters. In other words, the studios controlled every level of the marketplace from the top down, from production to exhibition. "Vertical integration" began in the 1910s and inspired the postwar consolidation of the studio system as national distribution companies, such as Paramount merged with production companies, such as Famous Players and Lasky and subsequently began purchasing theater chains. All of the major studios in Hollywood (Paramount, MGM, Warner Bros., etc) owned theater chains; the minors, Universal, Columbia, and United artists, did not. The minors, distributed their pictures, by special arrangement, to theaters owned by the majors. The...

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