Single entity controls production, distribution, and theatrical release — the classical Hollywood studio system. Eliminates middlemen, concentrates profit margins.
A studio produces its film, distributes it to cinemas itself, and collects the revenue directly – this is the core principle that shaped Hollywood from the 1920s to the 1940s. Major studios like MGM, Warner Bros., and Paramount controlled the entire value chain. They held contracts with actors, directors, and technical staff. They operated their own movie theaters. They dictated which films would run where and when. External dependencies? Minimal. Profit margin? Maximal. This is vertical integration – and it worked until the government intervened.
On set and during editing, you hardly notice this structure directly. But in financing and sales, it shows its power. A vertically integrated studio can handle an expensive project because it spreads the risk of loss across multiple distributors and controls the cinema chains itself. No negotiating with independent distributors, no discussions about film count or running time. The film version you shot as a DoP will be shown exactly as the studio intends. The edit won't be disrupted by distributor demands. This provides planning security and artistic continuity – at least in theory.
In practice, however, this control also led to artistic paternalism. Studios wrote screenplays, cast actors against their will, and forced happy endings because they knew the audience taste of their cinemas. After the Paramount Decree of 1948 – an antitrust decision – studios had to divest their cinema theaters. Classic vertical integration collapsed. Production, distribution, and exhibition then followed separate logics again.
Today, we are experiencing a return to variations of this model. Streaming platforms like Netflix and Amazon produce, distribute, and exhibit their content themselves – technically, this is vertical integration in digital form. They put their own product into their own channel. Traditional studios are trying to do the same by building streaming services. The advantage remains the same: control over output, data sovereignty over audience behavior, no interpersonal negotiations. The disadvantage too: enormous capital requirements and the risk that specialized partners (real distribution professionals) would work more efficiently.