A technology called PhotoDNA -- developed by Microsoft and used by Google along with other online companies -- is being credited with leading to the arrest of a man accused of distributing child pornographic images through Gmail.
Google has argued that they were largely complying with the law in notifying police. According to Stephen Balkam, founder and CEO of the Family Online Safety Institute, the company's actions are consistent with the legal understanding.
“They are to report images of child sexual abuse, and they have done so,” he says.
What makes this particular case different from finding evidence of other criminal activity in an email, according to Balkam, is that Google does not scan for illegal content in such a way as to detect things like planned robberies.
But even with these efforts tackling email attachments, there are other methods of disseminating this material, so action by search engines isn’t the end of the story.
The operating system Android scored a point recently in its ongoing war with Apple. According to the latest data - for the first time ever - the web traffic generated from Android smartphones and tablets was greater than that of Apple’s mobile devices.
The news wasn't entirely a surprise. For some time now, sales of Android smartphones and tablets worldwide have been beating Apple. But Apple’s CEO Tim Cook has waved off any concern by saying Apple dominates when it comes to online traffic. Then he’d ask, where are all those Androids anyway?
"They must be in warehouses, or on store shelves, or maybe in somebody's bottom drawer," Cook would quip.
Cook will have to retire that joke with the news that Android now beats Apple’s mobile devices in web traffic. Tuong Nguyen is an analyst at Gartner and he doesn’t think Apple users will just switch to Android.
"When you talk about the iOS crowd, they tend to be a more self-selecting crowd," he said. "Users who have more income or are more engaged with their technology and devices."
Pai-Ling Yin is the co-founder of the Mobile Innovation Group at Stanford. She says the real turning point will be when greater Android web use turns into more money.
"Just because they’re using it more doesn’t mean you can get them to pay you more," says Yin.
She says Apple users still buy more apps and goods online and so, from a business perspective, can be seen as more valuable.
But, under its new law, the state is prohibited from collecting information about a kid’s Body Mass Index. It also can’t keep a record about whether she’s pregnant, and it can’t gather kids' email addresses.
And that’s just a small part of what the state’s law covers.
"States have taken a huge step forward in the last two years in really strengthening their capacity to safeguard data," said Aimee Guidera, head of the Data Quality Campaign, a non-profit that is tracking student data laws.
But, as technology advances and students do more work on computers, a lot of states want more.
Idaho, for example, rules out certain biometric data; the kind that are collected by analyzing brain waves and heart rate.
New York calls for a parents bill of rights for data privacy and security.
Kentucky has made it illegal for student data to be used to target ads to kids.
So far, more than 20 states have passed laws. And that’s just the beginning.
States with new student-data laws
(click state for details)
New York North Carolina
"Our sense is that we’re going to see a growth in the number of pieces of legislation introduced next year," said Guidera.
A lot of this legislation is being driven by fear, particularly among parents. They worry about what data is being collected and by whom. They want to know how it's being used and whether it is safe.
The rash of new laws and the push by states to pass more is also creating fear among educational technology companies.
"Some of the requirements provide real practical challenges to their ability to serve their customers," said Mark Schneiderman, Senior Director of Education Policy at the Software & Information Industry Association.
In other words, the privacy push is making it harder for companies who want to get their apps into classrooms across the country, he said. It also makes it harder to for them to cash in on the multi-billion dollar market for educational technology.
"We’ve heard it from developers who are now shying away a little bit from the education sector," said Schneiderman.
In tech-centric California, state legislators have been trying to find a way to keep everybody happy.
"We think we’ve found the sweet spot here," said Senate President pro Tem Darrell Steinberg. He's proposed a law that’ll let app developers use student data to improve their products, but not to market to students.
"We’re not trying to stifle this technology," he said. "To the contrary, we want more apps to help more kids."
But, said Steinberg, there are too many weak privacy polices right now, and there's too much free rein for companies collecting data about kids.
Fedor Berezin doesn’t look like a warlord. He seems out of place among the beefy, thuggish rebels of eastern Ukraine, but he's their second-in-command.
“He really does look like the stereotypical sci-fi nerd. He’s this guy in glasses and he’s very soft spoken,” says Russian-born commentater Cathy Young. “Berezin is a sci-fi writer. So we have this really fascinating phenomenon of a sci-fi writer playing real war games.”
What makes Berezin’s presence among the violent, pro-Russian separatists fighting in eastern Ukraine even more extraordinary is that he wrote about the conflict four or five years before it happened. And apart from the plasma guns , the exoskeleton suits and the mechanized monsters, Berezin’s lurid sci-fi version of the war has proved prophetic.
“He wrote about eastern Ukraine becoming a battleground between East and West in a way that is eerily similar to what’s going on today,” says Young, who was the first western-based writer to spot a curious literary trend.
Over the past decade there has been a string of Russian and Ukrainian futuristic thrillers harping on a similar theme: noble Russians staunchly resisting the evil encroachment of the West.
Some pro-western Ukrainian politicians have even argued that the Kremlin may be behind this literary outpouring, encouraging a flood of books that make the idea of a war against western Ukraine acceptable.
Sounds far fetched? Oxford University lecturer James Sherr – one of the UK’s leading authorities on Ukraine - says there could be something in this claim.
“This about getting your people and others to adopt a certain narrative. The Russians are past masters at it.” says Sherr. “What people of Putin’s background - security and intelligence – understand is that to achieve your aims in war or peace, you have link all the different dimensions of activity into one narrative.”
Western science fiction buffs are not entirely surprised either, at both the alleged use of sci- fi as a political tool and at the genre’s predictive power. Author and critic Graham Sleight points out that in the past, sci-fi has foreshadowed a number of military innovations and developments.
“In 1903, HG Wells published a story called 'The Land Ironclads', which anticipated the armoured tanks first used in WW1 a decade or more later,” says Sleight. “And one of the founding fathers of American science fiction, Robert Heinlein, wrote a couple of stories in 1940, not only anticipating a world with nuclear weapons but also a nuclear arms race.”
And we would perhaps be wise to note: Berezin has also written a series of novels in which the United States and Russia go to war…. over possession of the Moon.
The Obama Administration wants to strengthen American business investment in Africa. Today, U.S. companies pledged some $14 billion in new business investment. That was in addition to commitments from the U.S. government, the World Bank and other private groups.
The major push in this bid? Power (the electric kind). After all, six of the ten fastest growing economies are in Africa. But Ben Leo, a senior fellow with the Center for Global Development, says 600 million people in Africa lack any electricity. That’s a market opportunity, but it’s also a headwind for economic and business growth.
“That’s why every single African leader has affordable electricity at the top of their political and economic agenda,” he says.
That’s also why the private equity firm Blackstone just announced it has teamed up with African billionaire Aliko Dangote to invest $5 billion in energy infrastructure in Sub-Saharan Africa. The Carlyle Group is also getting involved in energy infrastructure.
Aubrey Hruby, a visiting fellow at The Atlantic Council, says other business obstacles remain. Say you want to open a KFC.
“It doesn’t take a genius to know they want to do business in Nigeria or in Lagos,” a huge city will millions of people, she says. The problem is finding good business data.
“The question is on what block? On what corner? And how do you decide that based on traffic patterns, available disposable income, those kind of metrics?” she asks.
Still, Witney Schneidman, senior international advisor for Africa with Covington & Burling LLP, says U.S. businesses have already invested about $31 billion in Africa. Trade goes both ways, he says.
You can walk into a range of clothing stores in the U.S., like “Lands’ End, Old Navy, and you’ll see shirts that say ‘Made in Lesotho.’ You’ll see pants that say ‘Made in Mauritius.’ You’ll see t-shirts that say ‘Made in Kenya,’” he says.
The evidence? Wal-Mart is doing business in Africa. Procter & Gamble is making diapers there. Even China is looking to Africa for cheaper labor.
GM Financial, the unit of General Motors in charge of auto financing, has received a subpoena in a federal investigation of subprime car loans.
The company disclosed the request in a recent regulatory filing. GM said it’s complying and that it believes the request is focused on the subprime auto-finance industry in general, not GM in particular.
While some of these auto loans can look similar to the subprime mortgages that led to the financial crisis, the scale is different, says Lawrence White, an economics professor at New York University's Stern School of Business.
“The magnitudes are nowhere near in subprime auto what they were in subprime mortgage lending,” he says. “So it’s highly unlikely that there will be any significant macro-economic consequences."
But that doesn’t mean lenders and investors won’t feel some pain if the loans go wrong, White says. The set of borrowers who were impacted most by the mortgage crisis are the ones at risk again, says Chris Kukla, senior vice president at the Center for Responsible Lending.
“It’s also the same practices,” he says. “Loans that were being made at higher interest rates, generally to people who had lower credit scores [with] terms and conditions to them that just made them unaffordable.”
Just like a foreclosure, having a car repossessed can devastate a household.
“Access to an automobile is extraordinarily critical to low-income families and working families," says Stuart Rossman, director of litigation at the National Consumer Law Center. “They are reliant on it for their job, they’re reliant upon it for their education.”
Take away access to a car for enough people, he says, and you could have a serious economic problem on your hands.
On July 28, 2014, General Motors Financial Company, Inc. (the “Company”) was served with a subpoena by the U.S. Department of Justice directing it to produce certain documents relating to its and its subsidiaries’ and affiliates’ origination and securitization of subprime automobile loan contracts since 2007 in connection with an investigation by the U.S. Department of Justice in contemplation of a civil proceeding for potential violations of Financial Institutions Reform, Recovery, and Enforcement Act of 1989. Among other matters, the subpoena requests information relating to the underwriting criteria used to originate these automobile loan contracts and the representations and warranties relating to those underwriting criteria that were made in connection with the securitization of the automobile loan contracts.
Media company Gannett announced Tuesday it plans to split in two.
Its newspaper and publishing arm – including USA Today – will split off to become one company, retaining the name Gannett. Its broadcast and digital arm, which has yet to be named, will become its own company. That company also, and not coincidentally, just bought up Cars.com.
It’s the latest example of a decade-old scramble to figure out what to do with newspapers.
In some ways, Gannett is spinning off its publishing side, but you could also say it’s ditching it.
“They’re doing it for the simple reason that newspapers are in a downward spiral that’s irreversible,” says Porter Bibb, managing partner at Media Tech Capital Partners.
The idea is that newspapers drag down earnings, stock prices, and even investment from the broadcast and digital side of the company. Those companies could excel, ostensibly without needing to subsidize their ailing brother.
“The latest number showed that while 70 percent of [Gannett’s] revenues were coming from newspapers, already 60 percent of profits were coming from broadcast,” says Ken Doctor, media analyst at Newsonomics.
Even though digital ad spending for newspapers is expected to increase 4.3 percent this year to $3.64 billion, traditional print newspaper ad spending is expected to drop 4 percent to $16.73 billion. That brings the total ad spending down 2.6 percent from last year, according to eMarketer.
The decline of newspapers is intimately tied to why the broadcast and digital side of Gannett will buy Cars.com. Auto advertising used to be the hand that fed newspapers. Now that hand is feeding someone else.
“Print media’s lost billions in ad revenue in the last decade, and a large part of that is from auto dealerships who have shifted spending from print classifieds over to digital,” says Mike Hudson, an analyst with eMarketer.
The broadcast and digital side of Gannett followed the money and it's leaving publishing and newspapers behind in what has become a popular strategy. Time Warner spun out Time Inc. and News Corp split off from 21st Century Fox.
It’s not necessarily leaving print behind to die, just to fend for itself.
“Essentially, the theory goes if you spin off the print piece, the print can have the freedom to focus on the business of print itself,” says Hudson.
There are often crossovers – relationships between TV and print remain. In Gannett’s case, the print company would very likely continue to provide news services to the broadcast side.
But to the extent these spinoffs are independent, they are also vulnerable.
“The companies are left as standalone companies, that means they operate now without a safety net,” Doctor says.
So far the print spinoffs aren’t looking great, either.
“All these publishing companies are still negative on revenue year over year, and for most of them they haven’t grown revenue for seven years really since the recession,” Doctor says. “So we don’t know about the long-term impact of it.”
The broadcast companies appear to be doing better in terms of earnings and stock prices, but that doesn't prove spinning off is a good strategy. Broadcasters have their own battles to fight – think about cable TV and its battles with Aereo and Netflix.
So while the spinoff is a popular move, it’s also a new and unproven one.
Graphic by Shea Huffman/Marketplace
A report today from two bank regulators, the Federal Reserve and the Federal Deposit Insurance Corporation, basically said that "too big to fail" thing.
It was an update on how banks are faring in putting together their living wills, as mandated by the Dodd-Frank law. Basically, it explains how they would handle failure without involving the government.
It's not looking so good. In the words of Thomas Hoenig, the second in command at the FDIC:
"Despite the thousands of pages of material these firms submitted, the plans provide no credible or clear path through bankruptcy that doesn't require unrealistic assumptions and direct or indirect public support."
In other words: Wall Street's totally still going to hose us.
There’s this pretty amazing YouTube video featuring Rafael Dumon at Lake Garda, Italy. Dumon attempts a self-proclaimed world’s first: using a wingsuit to jump off a mountain, gliding onto the lake far below.
“I’m not going to be using my chute, and I will end up skimming on the lake. And instead of bouncing, I will hope to kind of glide in at a trajectory, similar to a plane,” Dumon says.
Believe it or not, he does it, capturing the feat with a GoPro camera:
But what if something had gone wrong? Could GoPro be held liable? After all, the company has its own YouTube channel for users to share extreme videos.
“Well, I would say that they’re certainly at risk for a lawsuit, but not necessarily at risk for losing a lawsuit,” says Jim Underwood, a law professor at Baylor University in Waco, Texas.
He says for GoPro to lose, the plaintiffs would actually need to prove there was something wrong with the camera that caused the accident.
Underwood says another possible lawsuit would be for a plaintiff to blame the risky behavior on the company’s marketing, "and that they failed to provide adequate warnings of those dangers.”
But in the same breath, he says the courts have ruled that when the danger is clear, there’s no need to spell out it.
“In fact, that’s why these videos are so popular - because the danger is so obvious and sometimes shocking,” Underwood says.
Even though it may be difficult for GoPro to lose one of these lawsuits, the company wants would-be investors to know they could be sued.
On page 34 of GoPro’s IPO filing with the Securitites and Exchange Commission under a section entitled “risk,” the company writes:
“Consumers use our cameras and accessories to self-capture their participation in a wide variety of physical activities, including extreme sports, which in many cases carry the risk of significant injury. We may be subject to claims if consumers are injured while using our products.”
GoPro may have reason to be concerned. The workout app Strava, which lets cyclists and runners compete virtually, has been criticized -- and even sued -- for encouraging dangerous biking in busy cities.
“Trial lawyers will never miss an opportunity to try to open a new avenue for litigation. Certainly the world of apps is one of those," says Bob Hartwig, president of the Insurance Information Institute.
He says unless laws start to change, the way litigation works in this country -- lawyers are actually encouraged to file a lawsuit against everything and everyone involved in an accident. Even a GoPro camera.
Should the public know how much money Wal-Mart, or that convenience store down the street, takes in through the federal food stamp program? Or does that amount to a retail trade secret? Those are the questions at the heart of a request for public comment announced Monday by the U.S. Department of Agriculture, which runs the food stamp program.
Here’s the background: Last year we spent $76 billion tax payer dollars on the food stamp program (officially known as the Supplemental Nutrition Assistance Program or SNAP). That money goes to about 47 million low-income Americans, who use it to buy food at more than 250,000 retail stores across the country.
But, as I have reported here before, exactly which stores and which companies benefit most from those food stamp dollars is something the federal government has never disclosed. Officials have long argued they are required by law to keep the information secret, in order to protect retailers.
A few years ago the Argus Leader, a newspaper in South Dakota, sued the USDA, arguing the public has a right to see this data. The issue is still tied up in court. Last spring, when I interviewed Agriculture Under Secretary Kevin Concannon about the issue in March, he told me that in his opinion, greater transparency would be a good thing.
“I think personally it’s in the interest of the American public,” he said. “These are public benefits that are moving through the economy.”
Yet when I asked him if he would push his agency to disclose the information he said he needed to “talk to the lawyers.”
Judging from the USDA’s announcement Monday, the lawyers have been consulted.
In the press release announcing the agency’s request for public input, Concannon said: “Our goal is to provide more transparency so that people can have access to basic information about the amount of SNAP benefits that individual grocery stores and retailers are redeeming. We hope that this public comment period will be informative as to how we can do that in the most thoughtful and appropriate way possible."
The USDA will take public comment until Sept. 8. As for what kind of comments might come in over the next month, we have some clues already.
When I asked Wal-Mart spokesman David Tovar last spring about how much revenue his company took in from food stamps, he told me it was proprietary information.
“We don’t provide our market-share data on any categories like that,” he said, pointing out that knowing how much a particular Wal-Mart in a particular location makes in food stamps could be helpful to competitors. “I think any information that a retailer shares about how they’re serving customers and how they’re going to market would be interesting to lots of other retailers.”
It’s worth pointing out that aside from being the nation’s largest retailer, Wal-Mart likely takes in the most food stamp dollars, an estimated 18 percent last year, according to leaked comments from a company vice president at a private dinner last fall, which Walmart later confirmed. That sum would amount to $13 billion, or about 4 percent of Wal-Mart’s total U.S. sales.
Wal-Mart is also one of several retailers that have a significant number of employees who make little enough that they rely on food stamps to get by. In Ohio, up to 15 percent of Wal-Mart’s workforce uses SNAP, based on our analysis of state food stamp enrollment data.
Outside the retail community, there are voices advocating for making the data public, arguing that it could help citizens and policy makers better understand which stores profit the most from food stamps, what kinds of foods they promote and sell, and what their business practices are.
“It could be used to improve SNAP and make it more accessible to poor families,” writes Stacy Cloyd, the Senior Domestic Policy Analyst at Bread for the World Institute, an anti-hunger organization. Knowing which stores attract the most SNAP customers would “allow hunger advocates to learn from successful businesses and share best practices. It would also help them identify the highest-volume vendors so that they can offer the stores information and recommendations on how they can supply a variety of nutritious foods,” she writes.
As Jonathan Ellis, the South Dakota journalist who sued the USDA to make food stamp data public, points out: “Typically, if a business participates in a government program, you can get a copy of their contract and find out how much they’re being paid.”
That’s how it works when the government pays a construction company to build a bridge, or a defense contractor to build a fighter plane.
But that’s not how it works when the government reimburses retail companies that participate in the federal food stamp program, at least for now.
There was a point not all that long ago when schools taught the metric system because it was "just a matter of time" until the United States ditched pounds, miles and inches.
Well, this adaptation has yet to happen, and who knows if it ever will?
"One thing that shocked me was that the first measure that was completely decimalized was the U.S dollar," says John Bemelmans Marciano, author of "Whatever Happened to the Metric System?". "And we largely have Thomas Jefferson to thank for that."
President Jefferson suggested the use of a decimal currency in 1782.
"It took about 100 years for decimals to catch on for everyday transactions," says Bemelmans Marciano.
Hear the full conversation in the audio player above.
In the early 2000s, Intel was named the most valuable manufacturing company in the world.
Michael Malone, author of the book, "The Intel Trinity: How Robert Noyce, Gordon Moore and Andy Grove Built the World’s Most Important Company", told us "at one point, Intel was one of the best known brand names in the world, which is insane if you think about it... this is a company wasn’t selling to consumers, it was selling chips to go onto motherboards, to go into somebody else’s personal computer, to be sold at Costco."
Intel has since been overshadowed by newer tech companies. Malone says techology has become so pervasive, the microprocessors fueling daily lives are taken for granted.
"For most of the 21st Century, it’s been all about Facebook, Twitter, LinkedIn and apps. And we forget, because we are so used to them now, that all that stuff rests upon hardware," says Malone. "Without the hardware, devices, chips, and especially the microprocessors it all grinds to a halt."
On Tuesday, Missouri voters are headed to the ballot booth to decide on whether to increase the state’s sales tax. The additional revenue would be used to fund the maintenance and construction of roads and bridges.
The state of disrepair of the nation’s transportation infrastructure has been a known problem for quite a while now. What isn't known is who's going to pay to fix it.
Phil Oliff, who researches infrastructure issues for the Pew Charitable Trust, says traditionally, “states get a lot of money that they spend on highway and transit infrastructure from the federal government.” Most of that money comes from the Federal Highway Trust Fund, but the fund is running out of money, and Congress has been doling out funding in short-term increments. That's bad news for states, who need more certainty about their financial situation when they commit to long term projects. Many states are taking it upon themseves to raise the money independently.
That could mean tolls on roads and bridges. It could mean borrowing from the bond market. In Missouri, lawmakers are proposing a three-quarter-of-a-cent increase in the sales tax.
Tom Shrout, of the advocacy group Missourians for Better Transportation, says says the tax is unfair to locals.
“Big trucks passing through Missouri, they would be asked to pay nothing while a senior citizen who doesn’t use the roads much will be asked to pay more,” he points out.
As Missourians head to the polls, the Associated Press says nearly a quarter of the states have already instituted similar taxes, fees or fines to pay for infrastructure projects.
Last week was a pretty crummy stretch for stocks, and today doesn't look much better. So how is the stock market really doing? Plus, does the public have the right to know how much a retailer takes in through the federal food stamp program, or is it a trade secret? More on that debate. Also, Missouri voters are headed to the polls today to decide whether to increase sales tax. Money raised would be used to fund roads and bridges. We tell you why your state might be next.
If you’ve ever called a customer service line, you’ve likely talked to someone in India, the Philippines, or Mexico. Now, some U.S. companies are bringing their call centers home and changing the way they do business.
Have you ever been stuck in a phone tree so long you just lost it and started ranting on Twitter?
“In a call center, somebody’s calling to talk to you. In social media, somebody is talking about you,” says Paul Stockford, research director at the National Association of Call Centers.
Stockford says the industry has been growing in the U.S. since 2008, and more than half of contact centers here now have social media programs.
Kymberlaine Banks is a social media program manager with Telvista, which runs contact centers in Mexico, but also in Texas and Virginia. Her "small but mighty" stateside social media crew monitors the web for complaints.
“They’re reaching out to people who are saying, ‘You suck, you failed, you whatever,’" she says. "It is not a happy thing.”
She says social media representatives need more writing and problem-solving skills than people who answer phones. It’s a different skill set because they also respond to positive comments.
“If someone says, ‘I love you,’ we say, ‘We love you, too,’” Banks says.
General Motors brought back a number of customer service jobs from Argentina last year.
Just don't call them "call center" jobs. Now, the catch phrase is "customer engagement."
Terri Still has lived in Camden, New Jersey since she was in second grade. But these days, as she walks around her neighborhood, she tries not to look around her to avoid seeing the blight that surrounds her.
“It’s depressing seeing it all constantly,” she says. “You try not to think about it.”
Across the street, Christopher Toepfer pokes around inside an abandoned warehouse. There are stacks of broken palettes and scattered food wrappers, evidence of squatters. The building used to house a porta-potty company, but it’s been vacant for several decades.
“We call [these] ‘abando-miniums’ in the vacant building business,” he says.
But outside, the warehouse is getting a facelift. A small crew is painting the exterior dove grey, covering up years of graffiti. They're employed by Toepfer’s nonprofit, The Neighborhood Foundation, and the warehouse is one of about 40 buildings the Foundation has boarded up and painted in Camden this summer. Across the country, they’ve done about 1,500 similar projects, focusing primarily on residential buildings in 21 different cities.
Local officials who have to deal with large tracts of vacant and abandoned buildings often resort to one of two options: fix 'em up or tear 'em down.
Toepfer represents middle ground. His foundation paints the boarded-up buildings to look as though they have real, working windows and doors. Occasionally the painters even draw plants or pets in the window.
“Sometimes, we even do facades of trees, like silhouettes of trees, to cover graffiti,” he says.
Once an urban area falls into decline, there is a spiral effect. Abandonded houses fall into disrepair and are often used by vagrants or criminals. That depresses the value of occupied homes and makes the neighborhood less desirable. Property values decline, the remaining residents sell up or move out, and landlords find it difficult to rent the housing stock. Those houses fall into disrepair, and the downcycle continues.
The idea is that a makeover, even one that’s just skin deep, can stop this spiral and stabilize a neighborhood. The Neighborhood Foundation charges $500 to paint and secure a house or $2,500 for a larger commercial building. It's a lot cheaper than a renovation, or even a demolition, which could cost $10,000 or $15,000.
It's not just that a paint job can have a beneficial economic effect; it can raise peoples' spirits, too.
“I think when they fix things up, it gives people more encouragement,” says Terri Still, the Camden resident. “It makes them want to take pride in where they live.”
Beautification does work, agrees Susan Wachter, a professor of real estate and finance at the University of Pennsylvania’s Wharton School. “Small investments can have large returns."
It’s a strategy realtors and developers have long used.
“In the 'burbs, when you’re selling a property that hasn’t been lived in for a while, the first thing the realtor will say is 'mow the lawn',” says Wachter, adding that simple fix can boost property values as much as 20 percent.
Of course, securing and painting a property isn’t a permanent solution — it’s a Band-Aid, literally plastering over the wounds of a city.
But hopefully, that Band-Aid gives it the chance to heal.
The suburb of San Leandro sits just east of Oakland, California, within striking distance of San Francisco and Silicon Valley. Underneath the city lies a loop of ultrafast fiber optic cable known as Lit San Leandro. Data speeds through these cables about 2,000 times faster than a typical internet hookup.
The cable exists because of one guy: Pat Kennedy.
Kennedy runs OSIsoft, a company based in San Leandro. A few years ago, he was looking to expand, but he wanted the kind of infrastructure he saw in towns like Palo Alto. So he put down $3 million of his own money to make it happen in his backyard.
“The reason I did it is that I’ve actually been a 40-year resident of San Leandro," Kennedy says.
It became clear to him that industrial cities like his were never going to be top picks for things like broadband or fiber. "We’re really going to suffer as a result,” Kennedy says.
Can broadband speed up the economic of industrial towns?
San Leandro was already struggling. It used to be a manufacturing town, but those jobs dried up in the '70s and '80s.
At one time, there were more than 20,000 manufacturing jobs in San Leandro. In 2013, fewer than 7,000 of those remained. Industrial-zoned land, much of it now used for storage, makes up nearly a quarter of the city. A 2013 report calls these areas “neither memorable nor particularly pleasant to get around.”
On the other hand, a presentation by City Manager Chris Zapata calls broadband “a laser cheetah with explosive power accelerating economic growth.”
Deborah Acosta, San Leandro’s new Chief Innovation Officer, frames the issue differently: “How do we re-energize this industrial space to actually become alive again?” Her job is to convince businesses that San Leandro is the place to be.
That starts with the bright red streaks running through her hair. They put people on notice, Acosta says.
“When they see my red hair, they’re going, ‘Holy smokes! Something’s different here, I think I need to pay attention,’” she says.
Investment in fiber and infrastructure — now at more than $13 million — wouldn’t have happened if Pat Kennedy hadn’t put down that initial money, Acosta says.
Analyst Craig Settles says private investment, like Kennedy's, is one way for cities to get broadband.
“The idea of going to local businesses and saying ‘can you contribute to the network?’ is one of the more viable options, in my book,” Settles says. Local businesspeople have helped get broadband off the ground in places far away from tech centers, like Emporia, Kansas; Fredericton, New Brunswick; Keene, New York.
In San Leandro, Pat Kennedy’s investment has paid off with buzzing and whirring on the second floor of the West Gate shopping mall. The sound comes from 3-D printers, manufactured by Type A Machines.
Based in San Francisco, Type A moved its manufacturing operations to San Leandro earlier this year. They’re currently based above a Sports Authority at the mall, a massive building that was once a Dodge auto plant. If all goes well this year, Type A’s workforce here could more than double, to about 50.
Since San Leandro first installed broadband a couple of years ago, the initiative has created about 90 jobs. But Acosta and Kennedy think they’re on to something. They’re doubling down, and point to half a million square feet of office space going up, with those ultrafast connections.
Comcast is expanding its "Internet Essentials" program, which lets low-income Americans apply to receive broadband internet for ten dollars a month. The move to draw attention to the program has been part of a campaign to convince regulators to approve its merger with Time Warner Cable. Comcast says, if approved, the merger would extend Internet Essentials to millions more low-income people.
Comcast is also announcing is that they're changing their eligibility requirements so that former customers who still owe payments on their bills will be able to use the program.
“If your bill to Comcast is more than a year old, you will be able to apply for Internet Essentials,” says Brian Fung, technology reporter for the Washington Post.
While Comcast has touted the 1.4 million Americans currently enrolled in the program, critics counter that up to 2.6 million households would be eligible for the program, were it not for the current enrollment criteria -- A household is eligible for Internet Essentials if it has a child eligible for free or reduced school lunches.
What the program does make clear, according to Fung, is that there is now an understanding that internet access, especially for poorer families with children, is essential.
Why do cinemas charge so much for popcorn? Wouldn't they make more money if they lowered the price because, presumably, many more people would purchase it for $4 instead of $7?
- Basil Utter, Maryland
This is a question with some easy answers and some surprisingly complicated ones.
First the easy — and incomplete — answer...
Because they can.
This is what we all intuitively assume, that theaters are shooting fish in a barrel by charging high prices to a captive audience.
“They’re basically in a monopoly selling position,” says Russell Winer, chair of the marketing department at NYU’s Stern School of Business. “Since they don’t allow you, theoretically, to bring food into theaters, they can pretty much charge what they feel the market will bear.”
Indeed, they do.
In theory, they will charge a price for popcorn where the spread between what it costs them to make another box of popcorn, and what consumers will pay for that box of popcorn is at its highest level.
Movie theater owners aren’t residing in some dark turret behind the screens, stroking a cat and reveling in the injustice they are inflicting upon hapless moviegoers. Ask movie theater owners, and they’ll tell you they charge so much for concessions. . .
Because they must.
Jack Oberleitner, a 55-year veteran of movie theaters, is now a consultant. He quotes a friend whose family has been in the business since 1908, with a line he says summarizes the situation of theater owners: “We left the movie business and we’re now in the popcorn business."
Movie theaters don’t make much money from movies. Movie studios do.
“The film industry will charge movie theaters upwards of 70 percent of the box office revenue,” Oberleitner says. Revenue sharing schemes change over the years – sometimes studios take a peak percentage from the first few weeks and then adjust downward, sometimes they take a peak percentage from the best few weeks regardless of when they occur – but the outcome is the same: Studios take far and away the biggest chunk of ticket proceeds.
On top of that, he says, studios place a lot of conditions on playing their movies.
“So they’ll say if you have 14 screens, for instance, we want the latest film from our company to show on three of those screens for the first three weeks. If you’re not getting people into those screens, well, sorry about your luck.”
Being forced to fill screens with movies nobody’s watching can be a revenue suck, but if the theater says no, the studio can turn around and say, "Fine that’s the last MGM or Warner Brothers or Disney movie you ever screen."
At the same time, costs like rent, air conditioning and heating for large spaces are significant. And every few years there’s some new amenity or technology no theater can do without: surround sound, stadium seating, digital and 3D projection systems. Each requires hefty investment that brings down profit margins.
Theaters could raise ticket prices, but with 70 percent of any increase going to studios, it isn't particularly appealing. Plus, price competition between theaters is fierce.
The one thing that does not have to be shared with studios: concessions.
While concessions account for only about 20 percent of gross revenues, they represent some 40 percent of theaters’ profits. Even with $10 tubs of popcorn, and profit margins on concessions of 85 percent, profit margins for a whole theater average around 4.3 percent for the industry, according to IbisWorld.
“I would say the '70s is when it first started to change,” says Oberleitner. “The quarter cup of popcorn increased to 50 cents, 75 cents and then $1. This all happened pretty rapidly through the course of the '70s, and by the time we hit the '80s it was in full gear completely.”
Which do you prefer: expensive concessions, or expensive movie tickets?
Some consumers are paying a lot for concessions, but on the other hand, this means that all consumers are paying less for movie tickets than they otherwise might. If you factor in inflation, admission prices are actually about the same as they were 40 years ago. Those $10 buckets of popcorn are subsidizing everyone’s tickets.
But any good movie has a twist, and in this case it falls under the second part of our question: If they lowered the price of the popcorn wouldn’t they increase sales and profits?
The immediate answer is no.
Popcorn is a tool to get you to pay more.
Simply put, it’s quite possible for the profit from a few moviegoers who pay an obscene amount for popcorn to be worth more than dozens of people who pay a reasonable price. You can also think about it this way: A monopolist has a sweet spot between price, demand, and cost that lets it maximize profits. There is nothing in economics that requires that sweet spot to be reasonable for most people. And, in fact, it is pretty much always higher than a situation where there is competition.
But high-priced popcorn also is a valuable tool.
“Movie theaters use this to price discriminate across moviegoers,” says Ricard Gil, associate professor of economics at Johns Hopkins’ Carey School of Business. He says popcorn lets theaters charge different consumers different prices for going to the movies, which helps maximize profits.
“Different movie viewers have different willingness to pay for the experience of watching a movie. When you’re on a date, you know you’re gonna spend some money.”
From a theater’s perspective, it would be fantastic if the theater could find out who would pay a lot to see a movie and charge them extra. But theaters can’t stop everyone in line and look at their tax returns. So, instead, they offer something only the spenders will buy: Really overpriced popcorn.
Voilà: Some people get charged extra for going to the movies.
This is, incidentally, the same principle by which lot of other products operate. Video game manufacturers, for example, will sell a console at cost or even at a loss, but then charge a high mark-up on video games. Some people will only buy one or two video games, and others will buy a ton. By setting a low barrier for getting a console, and then charging a ton for games, the firm can extract profit from all different kinds of people.
Coupons operate the same way. Some people are willing to pay full price because the idea of saving, organizing and coordinating coupons is too much of a bother. So the store captures them at the highest price. Others won’t pay those prices, but they are willing to save and look for coupons, so the store is able to capture them too.
Some people are complete coupon fanatics, who won’t pay a penny more than they have to, will spend hours accumulating discounts, and the store can get them in the door as well.
Economic jargon at your local theater: Mixed bundling.
Not only does the selling of high-priced concessions allow a theater to locate which consumers can pay more for a movie experience, it also allows theaters to zero in on those consumers and figure out who is willing to pay more for certain types and combinations of snacks, says Daniel Vincent, professor of economics at the University of Maryland in College Park.
They do this through what’s called “mixed bundling” in economic jargon. Bundling is where you combine one product with another – like the popcorn-soda combo. Mixed bundling is where you offer combos like that, but also let people buy products – popcorn and soda – individually.
Here’s how it works: The theater charges the highest price it possibly can for soda and popcorn individually. But it offers a slight discount on the combo.
Some people really just want a Coke and nothing else, and they’ll be willing to pay that price. Maybe they’re really wealthy, or maybe they’re allergic to popcorn. Vice versa, there are some people who love popcorn but would rather get free water than soda. The theater captures them no problem.
However, there are some other high value consumers who are willing to pay a lot, but not that much. “The guy who is on the fence, he sees the current monopoly price for Coke and he’s willing to buy that. He sees the monopoly price for popcorn and says, 'Ehhh, I’m not willing to buy that for that price.'”
By offering the combo at a slight discount, the theater captures that guy and all the people who are on the fence. They’re still paying an arm and a leg for popcorn and soda, but not quite as much as the people the theater captured who are willing to pay even crazier prices for an individual item.
“Selling combos has as its ultimate goal the role of forcing the population to separate into different groups of people,” says Vincent, so they can be charged different prices.
Maybe there’s just something about popcorn?
Gil has an additional thought about pricing and popcorn. It has to do with the popcorn itself: It’s super salty and buttery. Which means, you can’t really buy just popcorn. You’d die of thirst. So if you want popcorn, you kind of have to commit to a soda, too. Maybe possibly to something sweet, as well.
So all of a sudden, a consumer isn’t choosing between buying no snacks and maybe just one little thing. They’re choosing between buying no snacks, and buying an armful of concessions.
If the choice is go big or go home, there are suddenly two types of consumers.
“The consumers that want to go all out, and the consumers that are very price sensitive,” says Gil.
Perhaps, he supposes, it helps that most people see a movie either before dinner or after dinner, so they’re either very hungry or not hungry at all.
Either way, once a theater has found a price where it can get all or most of the all-out consumers buying popcorn and soda and candy, if it lowers that price... it won’t get many new takers. There just won’t be that many more all-out people left. To get everyone else, they’d have to hit rock bottom prices – which just aren’t worth it.
“Theaters realize this and price accordingly,” Gil says.
Why ask why
There are a quite a few reasons consumers pay so much for concessions at the movies. So if you find yourself staring at the board of concession prices and shaking your head, just remember that basically, this is how theaters make their money.
You could also just remember to sneak your snacks in next time.
Special thanks to 'Voice of Hollywood' Ben Patrick Johnson for doing the voice-over in the audio version of this story.