Joint Venture

Somewhere between the competitiveness or indifference of autonomy and the border erasure of a merger is a joint venture, a business entity created by two or more parties (generally other businesses) that contribute an economic stake. Joint ventures are more than just agreements between cooperating companies; the venture takes the form of a new business. Often this is because, for instance, one company markets chocolate and the other has a stake in confection-quality peanut butter; while continuing to pursue their own concerns, they create a peanut-butter cup company. Or one company may be experienced in the field of magazine publishing, while the other has developed an improved technology for printing high-quality photographs on thin paper; they could benefit from a joint venture in the form of a photo-intensive magazine.

Though those two examples describe synergistic relationships, there are many reasons a joint venture is desirable, and depending on the industry and the purpose for which it is formed, it may be a corporation, an LLC, a partnership—essentially anything but a sole proprietorship, by its nature. A joint venture may be designed to take advantage of economies of scale. It may be the only way one of the participating companies is willing to share access to certain markets, customers, technologies, processes, or other resources. It spreads out the costs and risks of the venture more than if either company engaged in it on its own—in Hollywood, there have been a small number of movies produced as joint ventures between studios unwilling to take on the full financial risk by themselves, and willing to share the potential rewards. Even when the risk is not perceived to be high, the manner in which a joint venture reduces a company's economic stake relative to pursuing the activity on its own keeps the company more liquid and does not require the interest payments of a loan or other funding.

Recent Examples

Joint ventures may be the quickest way to bring a product or service to market, before other competitors in the industry are able to do so. A joint venture may be an alternative to competition, especially in cases where competition offers no obvious benefits. Hulu is a good example of this, one that demonstrates that the avoidance of competition in no way harmed the consumer or resulted in a product of lesser quality. A Web site that allows viewers to watch ad-supported television shows and movies online—primarily new and classic shows from broadcast television, not the “produced for the Web” shows that had been plentiful elsewhere and in low demand when the site launched—Hulu is a joint venture between NBC Universal and News Corporation (the Australian media conglomerate that owns the Fox television network). In addition to shows from those networks and their cable affiliates (Bravo, the SciFi Channel, USA, FX, et cetera), shows from the Sundance Channel, the Disney Channel, PBS, Comedy Central, and others are available. There is no apparent reason why networks, studios, or viewers would benefit from each network or studio having its own online presence—though in fact NBC continues to show streaming television shows on their own Web site rather than redirecting to Hulu. But the joint venture clearly benefits viewers by aggregating content in one place and providing an experience as uniform as television itself. (Though formed as a joint venture in part to avoid competition between NBC and Fox, Hulu is not immune to competitive impulses, and has pulled content from both Boxee and CBS-owned http://TV.com.)

...