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Time Warner Cable's CEO could be out $80 million

Thu, 2015-04-23 13:25

A couple of details on the likely demise of the Comcast-Time Warner Cable deal.

Item number one: Comcast isn't going to have to pay the usual breakup fee — the 2 to 5 percent of the sale price that the would-be acquire-er normally pays to the would-be acquire-ee if things go south. It just wasn't in the original paperwork, says Fortune Magazine.

Also, Time Warner Cable CEO Robert Marcus would have gotten an $80 million exit package if the deal had gone through. Or, to look at it another way: more than a million dollars a day for the 45 days from the time Marcus took over to the day the merger was announced.

Sorry about that, Mr. Marcus.

Imagining affordable housing in New York

Thu, 2015-04-23 13:00

New York City Mayor Bill de Blasio plans to build or preserve 200,000 affordable housing units over the next decade. And not a moment too soon. An estimated half of New York renters lack affordable housing, meaning they spend more than a third of their salaries on rent. That may be as many as 1 million people.

In unveiling his OneNYC plan this week, de Blasio said he'll attempt to lift 800,000 New Yorkers out of poverty.

His office called it one of the largest urban poverty initiatives in U.S. history, and affordable housing is likely to be one of the major proposals.

De Blasio has also called for the creation of 160,000 units of market-rate housing over the next decade, an acknowledgement, some say, that all New Yorkers are affected by a housing shortage.

The stakes of the failing Comcast-Time Warner merger

Thu, 2015-04-23 13:00

On Thursday, the long-awaited acquisition of Time Warner Cable by Comcast was reported to be on the rocks

But what's truly at stake for consumers in a $45 billion mega-merger between cable providers? 

Peter Carstensen, emeritus professor of law at the University of Wisconsin, says they're not competing for broadband customers—but they are competing when they buy programming.  A merger could have given them sizable market power, and Senator Al Franken says competing TV networks complained to him in private, fearing reprisals.

But industry analyst Ian Olgeirson at SNL Kagan says the effects on the end consumer of this merger — or any merger with Time Warner that takes place — are likely to be subtle.

Pacific trade and the fear of currency manipulation

Thu, 2015-04-23 13:00

A free-trade deal among the United States and 11 Pacific nations called the Trans Pacific Partnership (TPP) is wending its way through Capitol Hill. Opposition seems to deal has been largely united under the threat of currency manipulation.

Generally speaking, a country with a weaker currency is thought to have an advantage in trade, because their stuff is cheaper. So, currency manipulation is when a central bank buys or sells a lot foreign currency in an attempt to influence the exchange rate. 

In practice however, Carl Weinberg , with the firm High Frequency Economics, says the threat posed by this kind of tinker tends to be over stated.

"Quite frankly, domestic monetary policy usually has more important things to do to help the economy than focusing on trade," Weinberg says.

While some countries such as Japan and South Korea may dabble in this area, Weinberg says the broader impacts of the Pacific trade deal outweigh the risk.

"The trade treaty has values and merits of its own, independent of anything that is happening on the currency side, at any exchange rate," he says.

The Treasury Department already has the ability to take action during cases of currency manipulation, which currency analyst Marc Chandler of Brown, Brothers Harriman says is an authority it rarely uses, even if some members of Congress think it should.

"The U.S. Treasury has not cited another country of currency-market manipulation in over a decade," Chandler says.

Free-trade agreements tend to be controversial, especially leading up to election years, and Chandler points out that if the Pacific deal does go through, together with NAFTA, roughly 40 percent of world GDP would be subject to free trade agreements.

And if it doesn’t? 

"It would look like the U.S. is retreating from the global international leadership space."

China, the country that is most often accused of manipulation isn’t part of this deal, and the yuan has been gradually gaining against the euro and the dollar for some time.

Rhode Island, hard hit by recession, slow to recover

Thu, 2015-04-23 11:09

When she was younger, Carolyn Rafaelian used to work in her dad’s jewelry factory as punishment if she misbehaved. Now, she and her sister run it.

“I love that factory smell,” she says, walking onto the factory floor. To her left are rows of waist-high cabinets, their drawers filled with beads. Some are yellow and orange like candy corns, others pink as grapefruit. To Rafaelian’s right, women sit at long tables, each working on a different task.

Alex and Ani founder and CEO Carolyn Rafaelian surveys vintage beads in the factory. 

Tracey Samuelson/Marketplace

Her dad started this factory in 1966, when Rhode Island was considered a global capital of jewelry manufacturing. During the 1980s, the state produced an estimated 80 percent of costume jewelry made in the U.S.

Much of that business has now moved overseas, but not Rafaelian. Instead of selling to wholesalers, who’d sell to stores, as her father had, Rafaelian launched her own line of jewelry called Alex and Ani, which specializes in thin metal bangles strung with charms. By 2009, the factory was making Alex and Ani products exclusively. In 2013, annual revenue hit $230 million (the company no longer releases revenue data).

“This is what you can’t find in China or anywhere else in the world, archives of stones,” Rafaelian says. “The sizes the shapes, the settings. They don’t even make this stuff anymore.”

The factory, Cinerama, holds drawers and drawers of vintage beads. 

Tracey Samuelson/Marketplace

Rafaelian insists that she can’t make her products in China — that part of their appeal is their story and their Rhode Island origins.

“There’s machines that would do it automatic, but that would probably take away 15 jobs, 20 jobs,” she says. “I like it this way. Everything’s being touched.”

But where she’s thrived, many other companies have folded. Rhode Island’s manufacturing sector, already struggling before the recession, is one reason economists believe the country’s smallest state has been one of the hardest hit by the economic downtown, as well as one of the slowest to return to pre-recession employment levels.

“Rhode Island’s manufacturing sector has essentially been cut in half in the past couple of decades,” says Gina Raimondo, Rhode Island’s governor. “We lost more than 80,000 manufacturing jobs.”

Governor Raimondo is just a couple months into the gig and very, very aware of the big structural problems her state’s economy faces. Like Rafaelian, Raimondo's dad also worked in the jewelry industry.

“My father made his career at the old Bulova watch factory in Providence,” she says. “At one time, Bulova employed over a thousand people. Those jobs are not coming back. My dad’s manufacturing, that is gone and I don’t see that coming back to America, much less Rhode Island.”

The jewelry and textiles and other labor-intensive products that Rhode Island historically made were more vulnerable to competition from China than other states, says Mary Burke, a senior economist with the Federal Reserve Bank of Boston who recently published a paper on Rhode Island's recession and recovery.

She says by 2000, “the manufacturing sector was doing very poorly and in a lot of ways, that was hidden by the housing boom because the housing boom was creating jobs in construction and retail, [as well as] boosting spending in a lot of other things.”

As the housing boom turned into a housing bubble, the national economy suffered. Burke says the impact was magnified in Rhode Island because it had larger housing price increases during the boom years and deeper declines during the bust than other states in the region. 

During the recession, the state began earning the wrong kind of superlatives – its job losses were the worst in the region and it’s still 3.4 percent below its pre-recession peak in 2006. It had highest unemployment rate in the country for parts of 2013 and 2014.

But Burke says state’s economy is gradually recovering.

“It’s not going to happen overnight,” Raimondo says. “The decline has been over decades and it’s going to take time to turn the ship.”

To help make that turn, Raimondo recently proposed wide-ranging jobs plan, including everything from initiatives that seek to streamline the cost of doing business in the state to a new tourism campaign. She also wants manufacturing to play a role in the state’s future, but thinks the state needs to transition into high-tech manufacturing with better-paying jobs, even though she knows Rhode Island residents may not currently have the skills fill those positions. Another feature of her plan? Training programs — both for the jobs the state already has and the ones it hopes to create. 

Checking in with Airbnb CEO Brian Chesky

Thu, 2015-04-23 09:12

Brian Chesky is the 33-year-old co-founder and CEO of Airbnb, a company that he says may very well be “the worst idea that ever worked.” The website allows users to rent rooms, apartments, houses, and even yurts from people they’ve never met, all around the world.

Chesky and his roommate and co-founder, Joe Gebbia, came up with the idea in 2007. The pair couldn’t make rent and needed to come up with an idea fast. Luckily, a design conference was in town, something the two RISD graduates knew a little something about, and all the area hotels had been booked up. Chesky and Gebbia inflated a few air mattresses and rented them out to three people — the first three Airbnb customers.

Photos of the first three Airbnb guests to stay in Brian Chesky and Joe Gebbia’s San Francisco apartment. 

Bridget Bodnar/Marketplace

Since then, the company’s grown rapidly. Chesky explained some of the company’s future plans while giving Kai Ryssdal, a tour of their San Francisco headquarters.

Chesky on whether Airbnb is a tech company, a hospitality company, or a social media company:
“I define the company as whatever the customer or person’s buying. I think our guests are buying hospitality. Now, I don’t think of us as a hospitality company the way these 100 year old companies are. In those ways, we look and feel a lot like a technology company. But I think we are a hospitality company powered by design and technology.”

Bridget Bodnar/Marketplace

On who Airbnb’s competition is, and isn’t:

“We are primarily a new form of travel. As we’ve grown, hotels have grown. Hotels have record occupancy rates. And a lot of people, when we launched, thought we couldn’t coexist. But we are fundamentally a different way to travel. People stay in Airbnbs almost twice as long so it’s almost like a whole new behavior.”

On making mainstream partnerships:

“We’re definitely leaning more mainstream … now we’re one of the official housing providers for the Rio Olympics next year.”

On criticisms about Airbnb’s effect on rent prices:

“I’m totally sympathetic to the complaints. Ultimately, we want to enrich the cities we’re in. When we launch, these other externalities happen. That being said, I fundamentally believe Airbnb is a really good thing for the city of San Francisco, New York, many other cities.”

The Airbnb offices consist of a mix of open work spaces and private conference rooms designed to look like real-life Airbnb rentals. 

Bridget Bodnar/Marketplace

On how long he plans to stay at Airbnb:

Chesky names two people he admires – Walt Disney and Steve Jobs. “I think really great entrepreneurs, they do one thing and that one thing is so significant that that’s how they’re remembered and that’s what they do for a very long period of time.”

 Airbnb uses one wall in their office as a timeline for major events in the company. 

Bridget Bodnar/Marketplace

Earlier this month, Chesky was named one of TIME's 100 Most Influential People. His profile was written by Jonathan Ive, senior vice president of design at Apple.

Pine Beetle timber boom could soon bust

Thu, 2015-04-23 08:51

When you hear the word “boom” in the West, you usually think of the energy industry, but in the last 15 years, a timber boom has taken over.

Thanks to the mountain pine beetle, a tiny ravenous bug that’s now chomped its way through over 40 million acres of forest in the U.S., forest managers have turned to the timber industry to clean up all that dead wood, leading to a surge in jobs and enterprise. 

But now, the bugs have almost eaten up all the host trees. And that raises the question, what’s next for the industry?

Hank Lucido looks just like a lumberjack out of a fairy tale with the big burly beard, the stocking cap and the boisterous laugh. Today, the company he manages, West Range Reclamations, is harvesting beetle-killed ponderosa pines on the Colorado-Wyoming border. He gives a holler and a log loader’s giant metal claw starts grabbing up several logs at a time and stacking them on a logging truck to ship for processing — even smaller branches and rotting logs.

“With a lot of our byproduct, we grind it up and we make the colored bark mulch. Then there are other places, such as dairies and horse barns that like to have wood shavings. We sell that product too,” Lucido says.

Lucido's company also supplies wood for products never before manufactured in the region, like pellets for heating stoves and biofuel for the energy grid. Timber industry jobs in Wyoming have increased by 25 percent in the last 10 years, but Lucido says all this work could soon come to an end. That’s because the quality of the wood available to the industry is deteriorating, fast. The pine beetle has killed all its best host trees and what’s left is rotting from the inside out.

Standing next to a pile of wood, Lucido jabs his finger into the pulpy center of one log.

“Some of this, when it gets this red rot to it, if you were to grind that, it would turn to dust. When you go to grab it and it crumbles, it’s not worth anything to us.”    

And it’s not worth anything to other businesses that depend on the lumber from pines, either, like Rich Arbour’s. He manufactures rustic furniture and sells it in his store, Mountain Woods in Laramie, Wyoming. He used to sell lots of dining tables and bunk beds made from blue stain, a unique-looking wood made from beetle-killed trees.

But now?

“We only have one, and it’s a particularly nice piece, and that’s this entertainment center here.”

He points at the streaks of reds and blues on the cabinet’s door.

“The beetles have infected the wood,” Arbour says, “the tree is trying to preserve itself, and it’s emitting enzymes. And the enzymes are what makes that color in the wood. It makes for pretty woods.”

He says when the pine beetle was a big deal in the news, people couldn’t get enough of blue stain furniture. But with the epidemic on the decline, he says, “The interest in it has waned, in a big way.”

It will likely continue to wane as the forest turns green again. And timber manager Mark Westfahl says the U.S. Forest Service will likely manage that next generation of young trees with a tight fist until they’re mature enough to harvest.

“How long will we be offering traditional timber sales?” Westfahl asks. “That’s kind of to be seen. It really depends on how long the trees continue to stand.”

Westfahl is the guy issuing the Forest Service contracts to loggers like Hank Lucido, but with fewer and fewer trees left, Westfahl says they’ll have to start weighing the health of the timber industry against the health of the forest.

Logger Lucido says that means the timber industry is running out of time to harvest what’s left.

“If we don’t get into this wood in the next five years, it’s going be blown over or burned up. And once it falls onto the ground, it’s done,” says Lucido.

But he says, when the pine beetle boom is over, he trusts the timber industry will still have a role to play, managing a healthier forest less prone to such epidemics in the future.

Tidal's wave is breaking

Thu, 2015-04-23 08:15
$1.7 billion

That's the budget for a planned NFL stadium, approved by the city of Carson, California Tuesday. Similar plans went through in Inglewood earlier this year. There are a few franchises weighing a move to Los Angeles after about 20 years with no NFL presence in the city. While a team could make a killing on luxe suites and skyboxes, moving to LA is a big expense, and teams in smaller markets like Green Bay enjoy devoted fans and healthy profits.

$56 million

That's what Jay Z paid for Aspiro and its streaming music service Tidal. Despite the massive star-power behind it and a promise to pay artists more than rival services, Tidal seems to be failing after about a month, the Guardian reported, dropping off the top-700 App Store chart. Meanwhile, Spotify and Pandora are still going strong.

September 10, 1963

The date Marvel Comics published Avengers #1, and the world first met the super-team. Before "Avengers: Age of Ultron" hits theaters next week, the Wall Street Journal has analyzed 50 years of Avengers comic book covers, showing how color palettes, technique and printing technology have evolved. 

$1.5 trillion

That's the estimated buying power of Latinos in the U.S., and big brands are taking notice. Target has begun reaching out to millennial Latinos with a new campaign called "#SinTraduccion," focused on words and ideas that don't always translate.

8 million

That's how many taxpayers were disconnected from the IRS phone lines this season, up from 360,000 last year, the Washington Post reported. Agency officials say budget cuts and additional expenses from enforcing the health care bill were to blame. According to a report by House Republicans, the IRS spent $134 million less on customer service this year, all told.

PODCAST: A huge quarterly loss for Brazilian oil company

Thu, 2015-04-23 03:00

Gas is cheap, but what about the cost of putting a roof over your head? We look at the trend towards skyrocketing rent. Plus, Petrobras, the government-run oil company in Brazil today posted the worse quarterly loss in its history. We'll talk to the BBC's South America business correspondent Daniel Gallas from Sao Paolo, Brazil, to find out why. And by one estimate, the buying power of U.S. Latinos is three times what it was in the year 2000: that's $1.5 trillion. Big retailers are trying to keep pace. Target says Hispanic millennials are now their core demographic. And now, they've got an ad campaign to go with the shift.

 

In a sharing economy, labor laws fall short

Thu, 2015-04-23 02:01

When it comes to the future of the growing “sharing economy,” things are far from clear. Two California juries are set to decide cases that could have wide-ranging implications on the industry that has grown up around Uber, Lyft, and other car-hire services.

Plaintiffs allege that the companies treat drivers as independent contractors even though they should be considered full employees, which would require Uber to provide sick days, health insurance and other benefits. Judge Vince Chhabria, who is presiding over the Lyft case, wrote that the jurors “will be handed a square peg and asked to choose between two round holes.”

Chhabria wrote that because he believes the labor laws, which employ legal tests to determine whether a worker is a contractor or an employee, are outdated.

For some workers, it’s clear.

Drew Bathe drives for Uber in Richmond, Virginia. He’s an EMT, and he’s usually in his car. “Uber was just a perfect opportunity to continue to use my car,” Bathe says. He says he can “sign on when I want and sign off when I want.”

He usually drives around during periods of high demand, in what's known as “surge pricing.” Bathe says he can make about $40 an hour. But other workers use Uber, Lyft, TaskRabbit and Mechanical Turk much more frequently, and they more closely resemble full time workers.

Wilma Liebman, former chair of the National Labor Relations Board, says that’s because “we now have work opportunities that no one would have thought of a few years ago.”

“Back when the labor laws were enacted,” Liebman says, “what we generally saw were large, vertically integrated corporations that did all aspects of the work.” Think Standard Oil and U.S. Steel.

Applying the employee/contractor test back then would yield clear results. The person who paints your house is an independent contractor. They have control over the tools, the means to do the job, how the complete the job. Employees are subject to employer-imposed restriction dress, appearance, tools and so on.

In recent years, some corporations have been accused of deliberately miscategorizing their workers as independent contractors in order to avoid the costs of hiring an employee, such as social security and payroll taxes, as well as health benefits. Fedex is appealing a Kansas supreme court ruling that said its drivers are actually employees.

Robert Reich, who was Labor Secretary during the Clinton Administration, says it’s a trend that's been going on for years.

“As I looked on a case-by-case basis, it was clear to me that some employers were doing it purely to save money and they were doing it as a way of circumventing all of these labor laws,” Reich says.

But what’s going on with sharing economy companies is a bit different, according to Elizabeth Kennedy, a professor of law at Loyola University Maryland.

She agrees with the statement by Judge Edward M. Chen, who is presiding over the Uber case, that it “strains credulity” for Uber to argue it is a tech company and not a car company. But, Kennedy says, it’s important to remember that apps like Uber started out small.

“How do we find this middle ground that recognizes the economic reality of the worker performing the service and also recognizes these businesses can scale up and reach a point where that relationship perhaps changes over time,” she says.

But there might be another way. Back in 2005, Kennedy wrote about how other countries had dealt with this pool of workers who fall between clear-cut employees and independent contractors: a third way, called “dependent contractor.”

 

In a sharing economy, labor laws fall short

Thu, 2015-04-23 02:01

When it comes to the future of the growing “sharing economy,” things are far from clear. Two California juries are set to decide cases that could have wide-ranging implications on the industry that has grown up around Uber, Lyft, and other car-hire services.

Plaintiffs allege that the companies treat drivers as independent contractors even though they should be considered full employees, which would require Uber to provide sick days, health insurance and other benefits. Judge Vince Chhabria, who is presiding over the Lyft case, wrote that the jurors “will be handed a square peg and asked to choose between two round holes.”

Chhabria wrote that because he believes the labor laws, which employ legal tests to determine whether a worker is a contractor or an employee, are outdated.

For some workers, it’s clear.

Drew Bathe drives for Uber in Richmond, Virginia. He’s an EMT, and he’s usually in his car. “Uber was just a perfect opportunity to continue to use my car,” Bathe says. He says he can “sign on when I want and sign off when I want.”

He usually drives around during periods of high demand, in what's known as “surge pricing.” Bathe says he can make about $40 an hour. But other workers use Uber, Lyft, TaskRabbit and Mechanical Turk much more frequently, and they more closely resemble full time workers.

Wilma Liebman, former chair of the National Labor Relations Board, says that’s because “we now have work opportunities that no one would have thought of a few years ago.”

“Back when the labor laws were enacted,” Liebman says, “what we generally saw were large, vertically integrated corporations that did all aspects of the work.” Think Standard Oil and U.S. Steel.

Applying the employee/contractor test back then would yield clear results. The person who paints your house is an independent contractor. They have control over the tools, the means to do the job, how the complete the job. Employees are subject to employer-imposed restriction dress, appearance, tools and so on.

In recent years, some corporations have been accused of deliberately miscategorizing their workers as independent contractors in order to avoid the costs of hiring an employee, such as social security and payroll taxes, as well as health benefits. Fedex is appealing a Kansas supreme court ruling that said its drivers are actually employees.

Robert Reich, who was Labor Secretary during the Clinton Administration, says it’s a trend that's been going on for years.

“As I looked on a case-by-case basis, it was clear to me that some employers were doing it purely to save money and they were doing it as a way of circumventing all of these labor laws,” Reich says.

But what’s going on with sharing economy companies is a bit different, according to Elizabeth Kennedy, a professor of law at Loyola University Maryland.

She agrees with the statement by Judge Edward M. Chen, who is presiding over the Uber case, that it “strains credulity” for Uber to argue it is a tech company and not a car company. But, Kennedy says, it’s important to remember that apps like Uber started out small.

“How do we find this middle ground that recognizes the economic reality of the worker performing the service and also recognizes these businesses can scale up and reach a point where that relationship perhaps changes over time,” she says.

But there might be another way. Back in 2005, Kennedy wrote about how other countries had dealt with this pool of workers who fall between clear-cut employees and independent contractors: a third way, called “dependent contractor.”

 

Coke and Pepsi face headwinds

Thu, 2015-04-23 02:00

Despite the fact that consumers are consuming sodas less frequently after lots of headlines about sugary drinks and the obesity epidemic, Coca-Cola managed to post better-than-expected earnings on Wednesday. 

But the celebration may be short-lived if Coke and its main rival Pepsi focus heavily on promoting their namesake soda brands. 

Consumer analyst Nik Modi of RBC Capital Markets says soda sales have been declining industry-wide, and among the reasons why is "the mom veto."

"Mothers are not buying these products for their kids, like the prior generation," says Modi, adding that consumers are not only paying more attention to the number of calories in the products they consume, but also to the number of ingredients and kinds of ingredients. 

He says one way Coca-Cola has combated this trend is by selling smaller cans of its sodas. "If you give a child an 8-ounce can of coke, that's much more tolerable than a 12-ounce can or a 20-ounce can," says Modi.

Coke has also raised prices and cut costs by doing things like laying off 1,800 employees. But industry consultant Tom Pirko is pessimistic about the future for both Coca-Cola and Pepsi, because the majority of sales for both companies come from foreign countries.

"Brazil, the rest of Latin America, Europe, Russia: the economies are in trouble and this is all directly affecting Coca-Cola," says Pirko, adding that both Coke and Pepsi should focus more on promoting and selling their non-soda brands.

Coca-Cola recently even got into the milk business.

Target takes aim at new 'core' customer: young Latinos

Thu, 2015-04-23 02:00

“There will always be a part of you that simply doesn’t translate.” That’s the slogan Target is using in a social media campaign with the hashtag #SinTraduccion, or “untranslateable.”

The campaign is aimed at Hispanic millennials, a demographic Target now counts as its core customer group. By one estimate, the buying power of U.S. Latinos overall is three times what it was in the year 2000: $1.5 trillion and counting.

Target spokesperson Luz Varela says the #SinTraduccion campaign hinges on words like 'arrullo,' which is often translated as ‘lullaby.’ That’s one meaning, Varela says, “But it’s also used to describe the entire setting and ambience of putting your baby to sleep.

Varela says Target’s goal here is to deepen the brand’s connection with people like Linda Hernandez, a 29-year-old mother of two at shopping at the Target in Yakima, Washington.

I’ve been here every day for the past two weeks,” Hernandez says. She even shows me a picture of her shopping cart posted on Instagram, featuring a pile of her favorite stationery, pens, and pencils.

According to marketing researcher Isabel Valdes, Hernandez is in retailers’ sweet spot.

“Latino millennial is the segment to target: if you’re not there, you’re losing,” she says. “That’s where the growth opportunity is—the new family formations, the new people buying cars.”

SinTraduccion is Target’s first campaign designed solely with Latino shoppers in mind. It uses Spanish songs that touch themes like childcare and family meals.

Roberto Siewczynski says that makes perfect sense. Even young Latinos who prefer English, “think of Spanish as the language of the heart,” he says.

Siewczynski manages Hispanic marketing for the firm Catapultvista.

“You have a very large company here that is not only telling Hispanics, ‘Hey, we’ve got great stuff for you to do,’ but it’s telling them, ‘It’s great to be Hispanic,’” he says.

Siewczynski says a second language is like a second path into a consumer’s mind. Will Target get there? Keep an eye out for the hashtag #SinTraduccion.

 

Rents are rising, and fast

Thu, 2015-04-23 02:00

The average rent in San Francisco is more than $3000 a month. In New York, you’re paying $2,355.  

According to the real estate tracking firm Zillow, rents are up 3.7 percent, nationwide.

“More and more Americans are renting now than they did before the great recession,” says Zillow senior economist Skylar Olsen.  

Olsen says there just isn’t enough rental housing to go around.  She says the renters are former home owners who were foreclosed upon, or newly employed millennials.

“They’re able to you know, imagine a world where they move out from their parents' basements," she says. "And when they do that they turn to the rental market.”

They can’t afford to buy a house because, even though they have a job, wages are still stagnant.

“Brad Pitt’s making millions of dollars but the average person in Keokuk, Iowa is not making a lot of money in terms of wage growth,” says Anthony Sanders, distinguished professor of finance at George Mason University.

And Sanders says, even if they do have a nest egg, they’re too nervous to buy in the wake of the housing crisis. 

Slimmer cable bundles rattle media companies

Wed, 2015-04-22 13:00

Verizon has launched a new pay TV service, with a stripped-down “basic” package and a choice of “channel packs” featuring genres like kids’ programming, news, or sports. The pitch to consumers is, essentially: "How'd you like to build your own TV bundle, with just the programming you want?"

Content companies like ESPN, Fox and NBC-Universal have made an offer of their own to Verizon, which amounts to: “How’d you like a fat lip?” They say Verizon’s plans violate their contracts.  

Content producers typically insist that their channels get included with basic bundles, says Derek Baine, research director at SNL Kagan, which watches the media industries. He says they have two very good reasons: one is ad revenue. "The bigger the number of subscribers you have, the more attractive you are to advertisers," Baine says. "They want access to the whole country."

The other is the licensing fees, which get passed onto consumers in the price of the bundle. Even customers who never watch ESPN —  and never see any ads — pay for the channel. Verizon says it’s offering consumers a way out of that.

The content companies say Verizon can’t do it without violating their contracts, and Laura Martin, managing director at Needham Equity Research, believes them. She thinks Verizon is bound to lose any legal fight.

However, the company may have other goals in mind. "One goal Verizon could have is to tell consumers that it’s not them that’s requiring these bundles, it’s these companies that are suing them," Martin says.

In other words, playing to the crowd. Or maybe, she says, Verizon is working the refs — signalling to regulators that the contracts, which require bundling, deserve scrutiny. 

Congress pushes for cybersecurity overhaul

Wed, 2015-04-22 13:00

After a series of spectacular cyber attacks on companies like Sony, Anthem and Target, Congress is pushing forward a bill to increase data sharing about security and hacks between private companies and the federal government.

The proposals address concerns from the business community that sharing data with the government could open them up to litigation from consumers; the companies that share data would be granted immunity.

The bills also address privacy concerns by requiring companies and government to try to scrub personally identifying information from the data. But that doesn't mean all the right information will be scrubbed.

"What we have seen in the surveillance context is the procedures don't actually protect privacy," says Mark Jaycox, legislative analyst with the Electronic Frontier Foundation

Matt Blaze, professor of computer science at the University of Pennsylvania, says the focus on data sharing was "baffling" and it would be better to encourage better security practices. "These systems are very weak to begin with," he says. 

And the version passed by the House Intelligence Committee would hand that shared data over to the NSA and parts of the Department of Defense, according to Gregory Nojeim, senior counsel at the Center for Democracy & Technology.  

That, Nojeim says, could discourage data sharing because some big tech companies have promised not to fork over users' data writ large to the government. 

That same House Intelligence Committee version also permits data obtained to be used in criminal prosecutions, according to Nojeim. If both the Intelligence Committee and a competing version from the Homeland Security Committee pass, it will be up to House leadership to decide which elements make it into the final version. 

How the humble glass bottle lost its appeal

Wed, 2015-04-22 13:00

It's Earth Day, but before we talk about recycling glass, Carl Zimring, author of the book, "Cash for Your Trash," suggests we start here: "The first question to ask is, 'how much glass is being produced to be disposed of as a product?'"

Way back when, glass wasn't so much recycled as it was reused, like with bottled milk.

"So that when you were done with the bottle, you would give it back to the dairy, which would wash it and then fill it with more milk," he says. Zimring says in the late 50s, beverage distributors started using bottles that were designed to be used once. Glass bottles were heavy, expensive, and expensive to transport. And they broke. So, Coke in plastic bottles and beer in cans took over.

"And that was absolutely deliberate to change the responsibility from the producer to the consumer," he says.

Zimring says manufacturers from that point on had no incentive to care about what happened to glass once it left their distributors. Some states enacted deposit laws, but he says the beverage industry lobbied hard against more. There hasn't been new bottle deposit legislation in more than 30 years.

Passing the buck — or in this case, the bottle — is just how manufacturers like it, according to Michael Munger, who teaches political science and economics at Duke.

"As soon as they make something, the packaging as well as the product belongs to someone else," Munger says.

Even with recycling, that someone else often turns out to be the landfill.

Soon Amazon will deliver to the trunk of your car

Wed, 2015-04-22 13:00

I know this makes it two Amazon finals in a row, but you gotta hear this.

The Financial Times is reporting that Amazon's going to pilot a program next month that will have packages delivered directly to the trunk of your car. The catch is that your car has to be an Audi and you have to live in Munich, Germany and you have to be an Amazon Prime member.

Amazon says a delivery person from DHL, a German delivery company, will get one-time keyless access to your trunk.

In the long term, they'll make the service available to Prime members everywhere.

Why NFL teams should think twice about coming to LA

Wed, 2015-04-22 12:20

The city of Carson, California approved plans Tuesday night for a $1.7 billion NFL stadium to be shared by the Raiders and Chargers, the second NFL facility green-lit in as many months in Southern California.  In February, Inglewood approved a $1.8 billion stadium for the St. Louis Rams to be built near Los Angeles International Airport.

Almost four million people live in Los Angeles, compared to 1.3 million in San Diego, or 318,416 in St. Louis — but in the NFL, bigger is not necessarily better.

Just ask the Green Bay Packers. Forbes ranks the Packers as the 13th most valuable NFL franchise out of 32 teams, even though they play in the tiniest market.

“It’s actually surprisingly profitable to host an NFL team in small cities,” says Victor Matheson, a sports economist at College of the Holy Cross. "Most of the revenue streams that an NFL team gets are shared equally among all teams in the league, which means a team operating in Los Angeles or New York City gets exactly the same share of the TV rights and merchandising as a team in Jacksonville or St. Louis.”

Tickets are split 60-40 between the home and away team, and all the revenues from jerseys and hats are pooled.

The NFL brings in enormous television rights fees of upwards of $6 billion a year, but all teams get the same cut: an estimated $187.7 million a year. By contrast, the Los Angeles Lakers and Los Angeles Dodgers are the first and second most valuable franchises in their respective leagues, according to Forbes. That's due, in part, to their lucrative local cable contracts: $122 million a year for the Lakers and $210 million for the Dodgers.

“In other sports, you go to a major market and you can get untold cable riches from having a local cable deal,” says Neil deMause, who edits the sports business site Field of Schemes. “That’s just not an issue in the NFL.”

What is a big issue is public financing, which smaller markets tend to be more generous with. Politicians in San Diego and Oakland are scrambling to come up with plans to keep the Chargers and Raiders in town, and Missouri Governor Jay Nixon has proposed extending state and local bonds to provide hundreds of millions in financing to keep the St. Louis Rams from returning to Los Angeles.

“If Missouri comes up and says 'Hey, we’ll kick in half the cost,' that’s going to be awfully tempting,” deMause says.

Los Angeles is not offering public financing, which helps explain why an NFL team hasn’t played here for two decades.

Moving west

In the case of Rams owner Stan Kroenke, moving West could get very expensive. The financing details are murky, but deMause says it’s hard to imagine a scenario where Kroenke would be spending much less than a billion out of pocket — and that’s not even including a relocation fee the NFL charges, which could tack on another billion.

"I’m not saying that Kroenke is absolutely bluffing, but I think it’s safe to assume that when any owner in the NFL says, 'I’m going to move to L.A., and I don’t care if I have to spend my own money,' it’s safer to assume bluff until proven otherwise,” deMause says.

So why would any NFL owner want to come to LA then? For one, there's nice weather, but more important is the ability to sell premium seats and luxury boxes. They're exempt from revenue sharing and have become an important tool to finance stadiums. There, L.A does have a big advantage, says Scott Spencer, President of the Suite Experience Group, a luxury box reseller.

“While the Rams and St. Louis have done a good job selling their suites, you’re going to see it go to a whole new level if they move to Los Angeles,” says Spencer. “Individuals – especially in Hollywood – they want to be in the 'in spots.' They want to be seen on the floor at Staples Center and so they’re going to be in suites in an NFL venue. In St. Louis, it’s frankly a different mindset, and businesses there just don’t have the funds to spend on luxury suites.”

Scott says that means the Rams could double the price of each luxury box if they were in LA, and have twice as many boxes. A nice stadium is important for keeping suites full, but the most important thing? Just win, baby.

IBM banks on Watson for progress and profit

Wed, 2015-04-22 11:27

IBM reported profits this week; they still made a pile of money, but it was the 12th straight quarter — that is, three straight years — of falling revenue.

Though known for hardware, IBM wants to be a major player in cloud computing, specifically in what the company calls cognitive computing. Their plan relies on the Jeopardy-winning super computer, Watson.

Marketplace's Ben Johnson visited the IBM Watson building in Manhattan this week. And while you can't see Watson — it's an amalgam of interconnected mega-servers and fans whirring away — its technology could hold great promise.

When Johnson went to visit Watson's human collaborators, he found them in a futuristic glass building in Manhattan, no buttons in the elevators. 

The goal of cognitive computing is simple on the surface: a computer that can hold a conversation. 

It's "the step before you get to artificial intelligence," Johnson says. "Google Now, Apple's Siri, Microsoft Cortana are all part of this idea."

What's not simple for a computer, is the vast amount of data that flows between two humans in even the simplest conversation. However, improving this process could speed up a lot of slow conversations that still take place person-to-person, or the data that we fill out in forms that later has to be entered into computers. 

Sound technical? Let's take this into a frustrating real-world location, the doctor's office. 

"Medical information doubles every three years. And in 2020, it will be doubling every 73 days. Your doctor's not going to be able to keep pace with that volume of information," said Steve Gold, Vice President of IBM's Watson group. "But Watson has a voracious appetite. It reads and understands all this information in context and become this assistant."

Instead of filling out reams of forms at every doctor visit, and waiting on that giant piece of paper in the back office, you could be talking to Watson until the doctor comes in. 

"Then, there's a three-way conversation [with] you, and the doctor, and the computer," Johnson said. "It actually could be really good for helping the doctor understand the full context of the patient, getting a good prognosis and a good way to a cure."

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