Marketplace - American Public Media

America runs on Dunkin's Wi-Fi

Thu, 2014-10-02 13:01

There's been a study done by the mobile market research firm WeFi looking at wireless internet use at coffee shops across the country.

Starbucks, it turns out, has the fastest wireless connections.

But it's customers at Dunkin' Donuts, by a margin of two to one, who use the most data.

Also, on a separate but related note, there's another study out there that says 40 percent of Americans would give up coffee over Wi-Fi.

Seriously?

Quincy Jones on Clark Terry, a godfather of jazz

Thu, 2014-10-02 10:34

It’s unlikely that someone outside the jazz scene would cite Clark Terry if asked to name an influential jazz musician. That’s something legendary music producer Quincy Jones and documentary filmmaker Alan Hicks hope to change.

The two have paired up to make “Keep on Keepin’ On,” a documentary that explains Terry’s role in shaping American jazz music and follows Terry’s work with one of his students.

Both Jones and Hicks agree Terry is one of the best trumpet players ever. He played with Duke Ellington, Ella Fitzgerald, Dizzy Gillespie, Billie Holiday and many more. He was also a member of Johnny Carson’s house band, the NBC Orchestra.

Hicks realized early on that to really illustrate Terry’s greatest legacy, they’d have to show him teaching. 

“When we were doing interviews with all these greats, they would constantly be saying, 'Yeah, he’s one of the greatest trumpet players that ever lived, but he’s also one of the greatest teachers to have ever lived,'” Hicks says.

Terry was known to be generous with his time with developing musicians. His students include Miles Davis, Herbie Hancock and Jones himself.

“I was 12, and I studied with him when I was 13,” Jones says. He remembers skipping school in Seattle to hang out with jazz musicians.

“Seattle was perfect to hang out with guys like Clark, and I begged him to give me a lesson,” he says.

Terry and a student, pianist Justin Kauflin, share a special bond. Kauflin has been blind since he was 11, and Terry went blind more recently after a lifetime of diabetes. In the documentary, the two work through the ups and downs of trying to launch Kauflin’s jazz career.

Jones says that’s harder to do now than back when he started.

“Back then, you couldn’t get away from jazz," Jones says. "It was in the air, the water. Today, they have to resist the pressure of their peers to say, ‘Let’s go see Lil Wayne, Jay Z and Kanye [West].”

The case for buying up car dealerships

Thu, 2014-10-02 09:55

Warren Buffett’s Berkshire Hathaway already owns NetJets and BNSF Railway, and now it's buying the fifth-largest car dealership in the U.S., the Van Tuyl Group. For those of you keeping score at home, that's planes, trains and automobiles.

(That's Buffett’s joke, by the way, delivered Thursday morning on CNBC.)

As a rule, Buffett and Berkshire Hathaway like to invest in things that are easy to understand: candyclothes and bricks, to name just a few.

“Automobile sales is something that I think Warren Buffett feels he can understand, and therefore forecast, and therefore evaluate,” says Meyer Shields, an analyst with Keefe, Bruyette & Woods, which does business with Berkshire Hathaway.

Buffett hasn’t said how much Berkshire paid, but he did say the Van Tuyl Group’s revenue is around $9 billion.

As Dave Sullivan, an analyst with AutoPacific, points out, “$9 billion is a lot of cars.” Since the financial crisis, Sullivan says, car dealers have been consolidating and their business model has changed. As cars have gotten more reliable, drivers are spending less on repairs.

“When you are making your money pretty much all in sales, bigger is better," he says.

The average age of a car is 12 years old, and Sullivan sees that as an indicator that there is pent-up demand. “It’s a pretty exciting time to be getting into the auto industry for Mr. Buffett," he says.

It is also exciting for the auto industry that Buffett is getting involved with. “I think it is a positive signal to investors and consumers, for that matter, that this is a very healthy, growing industry,” says David Kass, who teaches finance at the University of Maryland and closely tracks Berkshire Hathaway.

Buffett says he plans to buy more dealerships, most of which are privately owned. Something else makes the timing good for Buffett: A lot of underperforming dealerships have closed since the recession — dealerships that sold Fords, GMs and Chryslers. That means the ones that are left have gotten more profitable.

Why the world is so bullish about the dollar

Thu, 2014-10-02 09:09

The U.S. dollar is at a four-year high, rising 7 percent since July. Other currencies, by contrast, have fallen — woe unto the euro (down 1.9 percent) and the New Zealand dollar (down 5.2 percent) according to Bloomberg Correlation-Weighted Indexes.

“Over the past few months it’s been a very strong story for the dollar,” says Michael Boutros, currency strategist with Daily FX. “We’re at multiyear highs here we haven’t seen since 2010.”

There are three primary causes for the dollar's strength.

1. Recovery

“The U.S. economy is finally getting some traction,” says Win Thin, global head of emerging markets at Brown Brothers Harriman. Thin says people are buying dollars to take advantage of the U.S. recovery.  

2. Yields

The dollar’s also being helped by a side effect of the recovery: changing Fed policy. The Federal Reserve is wrapping up the stimulus program that everyone calls Quantitative Easing (everyone except the Fed itself). That program kept the yield on government bonds and certain other securities low. As the program ends and yields are allowed to grow again, it should offer an opportunity for investors. It is, of course, an opportunity that one can take advantage of only in U.S. dollars, which is why dollars are so popular. 

3. Interest rates

The Federal Reserve is also contemplating raising interest rates. Many suspect it will do so in the first half of 2015. Higher interest rates, again, create an opportunity to make more money and offer a lure to international investors. 

By contrast, yields and rates around the world appear low and appear likely to remain low for some time. “The European Central Bank dragged its feet,” says Thin, in adopting unorthodox measures to stimulate its economy. “It’s belatedly addressing these issues now, and as a result the ECB may not raise rates until 2016 or even 2017.”

Money goes where money can grow, and economic and fiscal conditions make the U.S. the most fertile ground right now. 

The appreciating dollar could offer relief to many developing countries, whose depreciating currencies are now making their exports look more attractive to consumers in the U.S. “Emerging markets have been complaining about stronger currencies — Brazil, Korea, for example."

“In the U.S., a strengthening dollar makes goods produced in the United States more expensive abroad, and foreign goods cheaper in the United States,” says David Stockton, senior fellow at the Peterson Institute for International Economics. Cheaper imports will be welcomed by American consumers, but U.S. exporters will face difficulties.

“At the margin a stronger dollar could hurt exports, but it’s not as big a deal as [in] other economies around the world,” says Thin. “I think we could tolerate a stronger dollar in terms of economic impact much better than a country like, say, Korea or Taiwan could — exports are much more important to their economies.”

Stockton says the impact of more expensive exports and cheaper imports may be to stifle inflation just enough to make the Fed slow down any rate increases, which would in turn slow down the dollar’s rise. It would only slow it, however. All indicators suggest the dollar is in for a steady rise no matter what. 

“Even if there were some crisis,” says Daily FX’s Boutros, and people started abandoning risky assets, “that’s still beneficial to the dollar,” since the safest place even in a crisis? Still the U.S. dollar.

Saudi Arabia is losing its grip on oil

Thu, 2014-10-02 08:51

The U.S. benchmark oil price dipped below a key threshold Thursday: $90 a barrel. Global demand is soft, and on the supply side the world seems awash in petroleum.

That’s put some key supplier countries in a tough position, with some choosing a potential price war. On Wednesday, Saudi Arabia’s national oil company indicated it's still pumping — and selling at a discount to customers.

“They cut those prices across the board,” says HIS Energy analyst Jamie Webster. “And in particular they have cut them very sharply for Asia.”

It reflects a changing world. In the words of a frequently cited 2012 report from Citibank, North America may be a new Middle East.

Citi co-author Seth Kleinman says oil fields in Texas and North Dakota pump so much oil, U.S. imports have fallen by 3 million barrels per day over the past nine years.

“You used to have a big home for OPEC oil on the U.S. gulf coast,” Kleinman says. “The U.S. Gulf Coast is completely jammed. So Asia is really all you’ve got left.”

In the fight for market share, OPEC producers seem to be scrambling with everyone else.

It could all push prices down even more. That’s good for American drivers, not so good for American drillers if prices fall from $90 to the mid-$80s, according to several analysts.

“Clearly in the U.S. markets, what you would see is cutting back on investments, specifically on drilling and fracking,” says Quantum Reservoir Impact consultant Nansen Saleri, formerly of the Saudi national oil company.

Saleri notes American oil is comparatively expensive to produce. So if prices fall further, he says, some U.S. drillers would struggle and North American output would likely decline.

The numbers for October 2, 2014

Thu, 2014-10-02 07:25

Amid pressure from the U.S. and a flood of refugees from ISIS-held border towns, Turkey will vote Thursday on whether to join the 40-state coalition against the extremist group. Turkey's president has been critical of the airstrikes playing out over the past week in Syria and Iraq, and hesitant to enter the conflict, citing hostages that were held by ISIS until last month.

But with that consideration gone and a vulnerable border, the Turkish parliament is expected to back a motion that would draw them squarely into the fight, the BBC reported. Just how many military resources the country is willing to commit is unclear.

Here's what we're reading — and some numbers we're watching — Thursday:

$20.6 billion

The value of all subprime auto loans made in the second quarter of this year, which is double the number from the same period in 2010. At the same time, the New York Times reported, banks saw the biggest year-over-year increase in seriously delinquent loans since 2009. Contributing to this subprime auto loan boom are fraudulent used car loans, now subject to a broad state and federal investigation. The Times reviewed several documents indicating dealers lied about an applicant's income or employment status so they would qualify.

$76.3 million

That's how much Bank of America has made since 2000 through its exclusive deal with the Bureau of Prisons to serve 121 institutions and 214,635 inmates nationwide. JPMorgan also has a deal allowing them to distribute debit cards with high fees once prisoners are released. As part of their investigation into banking in the prison system, the Center for Public Integrity found the Treasury Department awarded these contracts without asking banks to bid on them. In turn, B of A has been allowed to subcontract a wide range of services at its discretion.

$275,000

The starting bid for "ElectHillary.com" on the domain name auction site GoDaddy, according to The Hill. Domain name speculation can lead to big payoffs, and some stake out domains long before anyone announces their candidacy. One man told The Hill he's scooped up domains with running mates attached — "ClintonNapolitano.com," "ClintonWarner.com" and even "ClintonBiden.com" — in hopes of selling one back to the campaign at a premium.

Bank of America gets back to normal... with a twist

Thu, 2014-10-02 05:00

Bank of America CEO Brian Moynihan is getting another title: chairman of the board. 

This is Bank of America’s way of saying, "Hey, we’re back to business as usual." It’s unusual for a bank’s CEO to not also be its chairman. 

During the financial crisis, CEOs of the biggest banks were stripped of the chairman title when shareholders didn’t like the way they handled the crisis. 

In 2009, Bank of America shareholders voted to take the chairman role away from then-CEO Ken Lewis. They were punishing him for his decision to acquire Merrill Lynch at the height of the crisis, and then give bank executives huge bonuses. 

But there’s going to be somebody looking over Moynihan’s shoulder. 

Jack Bovender will become the bank’s lead independent director. The bank’s press release announcing Moynihan’s promotion describes Bovender’s role in great detail. He’ll approve information sent to the board, and he will plan the board’s agenda with Moynihan. 

So, it’s back to normal, with a few checks and balances.

 

 

 

 

CEO tries to reset General Motors' brand

Thu, 2014-10-02 02:00

General Motors CEO Mary Barra is trying to change the conversation. This year’s ignition switch recall, and the hearings and lawsuits that followed, have weighed heavily on the automaker. Barra is now focusing on a new strategy, pledging to boost profit margins, cut costs and grow the company. She’s aiming to achieve pretax profit margins of 10 percent in North America by 2016.

GM’s plan includes new factories in China and streamlining global production. It also focuses on what customers want: new, quieter vehicles, broadband and even a hands-free driving option called "Super Cruise."

Jeremy Acevedo, an analyst at the car-shopping site Edmunds.com, says the strategy is an opportunity for Barra to reinvent the GM brand. “She’s allowed to repaint GM as a new, customer-focused brand, whereas before, it just kind of looked like the old GM that was so interested in driving profits.”

Of course, strong profits are exactly what Barra ultimately wants to achieve. “Our strategic plan,” says Barra,“ is a pathway to earn customers for life and create significant shareholder value in the process.”

 

How the president might tout the economy

Thu, 2014-10-02 02:00

President Barack Obama is set to deliver remarks on the economy on Thursday at Northwestern University in Illinois. While unemployment has fallen to 6.1 percent, many people still feel uneasy about the recovery.

So we asked a couple of economic thinkers: What could the president say to tout the economy?

“In particular, you would want to point to the labor market,” says Dan Greenhaus, chief global strategist at BTIG. He says job gains have been steady for months.

“I think there’s this misconception that we need to see 300 or 400 or 500,000 jobs created every month,” he says. “In the context of where the economy currently is, the numbers we’re getting, which are around 200-and-change-thousand a month, are pretty good.”

Wells Fargo senior economist Mark Vitner says things don’t seem better because of the quality of jobs being added, many of them part-time or in low-wage professions. Take New York City, for example.

“There are more than a quarter million more jobs in New York City today than there were prior to the financial crisis,” Vitner says. “But the total amount of income earned from working in New York City is less today than it was prior to the financial crisis.”

Vitner says the lack of improvement in income growth is the driving factor behind the country’s economic worry.

Why companies really want you to use an app for that

Thu, 2014-10-02 02:00

There's an app for that. So stop using the website.

This is the message companies are trying to drum into users. Mobile is, as we know, convenient and personalized—but there is more to it than that. Apps let companies mine far more of your personal data than websites. That is a major incentive to get you to make the switch from web to mobile.

If you try to use the real estate website Zillow on your phone, you are bound to run into a full-screen ad for one of its many apps.

“Now,” says Jeremy Wacksman, who leads mobile strategy for the company, “Zillow can be present in your pocket when you're touring open houses, when you're driving around the neighborhood, when you're laying in bed at night checking something.”

With all its apps, Zillow can keep you company day and night. Wacksman says two-thirds of Zillow's traffic is now on phones. The company has also partnered with Google Now, an app that gathers information from places like a user's web browser, phone GPS and other Google products. Zillow wants to use that data to show people ads for houses before they even know they want them.

Mobile data opens up all kinds of possibilities for companies. For instance, your contact list can help Instagram connect more user accounts; LinkedIn can learn about your social network from your calendar. And, of course, advertisers will pay a pretty penny for that kind of data.

Every year Appthority releases a report rating the security and privacy of top apps. Company co-founder Domingo Guerra says there is so much more information on mobile than web.

“You have the GPS location, so exact coordinates maybe 24-7,” he says. “And then there is access to cameras, microphones, calendars, address books, even vibration of the device.” That is powerful data he says can be sold or leaked to third parties.

Even if your data is not distributed, Domingo says it is uncertain what companies will do with it all. Many of those companies don't know themselves.

“The more data they collect now,” he says, “the more uses they can find for it later.”

If you do switch from a website to its mobile app counterpart, it may not be obvious what information about yourself you are giving up.

"It's not standardized and it's not regulated," says Susan Grant from the Consumer Federation of America. "So the only way you can tell is by looking at the privacy policy. If it's not clear to you what information is being collected, then don't use that app.” Often, she says, it's not clear.

In any case, some companies do not leave consumers much of a choice. On Facebook, for example, mobile users can only send messages by downloading its new messenger app, which, by the way, has been criticized for gathering all sorts of personal data. 

PODCAST: Nosy apps

Thu, 2014-10-02 02:00

By tomorrow, we'll know the government's official count of people with and without jobs for the month just finished, September. We talk about what we can expect from the Jobs Report for September. Plus, Bank of America's CEO Brian Moynihan is getting another title: chairman of the board. The bank announced the promotion while praising Moynihan for simplifying the company. And now to the campaign to push customers away from websites and into the more circumscribed universe of apps. Among the reasons we are often begged to use the app instead: The app lets companies get far more info about you.

How small financial setbacks can derail college plans

Wed, 2014-10-01 15:58

A year ago Jan Escobar was working part-time as a bank teller and going to school full-time at Montgomery College in Rockville, Maryland. Then his boss started asking him to work more. Escobar needed the cash and didn’t want to jeopardize the job.

“When you’re in a tight situation with your money, it’s harder to say no to extra hours,” he says.

Escobar, the son of working-class immigrants from El Salvador, thought he could manage the workload. It turned out he couldn’t.

“The way I planned it out, everything had to fall perfectly into place, and that’s really not likely at all,” he says. “It didn’t work out.”

Escobar ended up dropping a class—after the deadline—and wound up owing the school almost $500 for credits he never got. He couldn’t re-enroll until he’d saved enough to pay off the debt. The whole thing set him back a year.

“What you can see is that a few hundred dollars, a thousand dollars, can really derail a student’s success,” says Mike Wasserman, Massachusetts executive director for Bottom Line, a group that helps low-income students get in to college and then make it to graduation.

Situations like these are one reason low-income students are much more likely to drop out of college than wealthier students. One study from the Pell Institute for the Study of Opportunity in Higher Education found that only 11 percent of low-income, first-generation students (those whose parents didn’t finish college) had earned a bachelor’s degree in six years, compared to 55 percent of more advantaged students.

Colleges will often be flexible about things like an add/drop deadline when an emergency comes up, Wasserman says, but students may still have to give back their financial aid.

“Often families are using a student’s financial aid to keep the family going,” he says.

So even when the school doesn’t charge for dropped classes, students may have to return their financial aid, Wasserman says. If the money’s already been spent on rent and food, students have to find a way to pay it back.

Other times students just lose track of what they owe. A couple of overdue library books and an unexpected charge at the campus health center can add up.

Angel White had to take some time off from Western Illinois University to work at Wal-Mart so she could pay off a few hundred dollars she owed the school. After she returned, a financial aid snafu left her owing $1,300 she couldn’t pay.

When she tried to transfer to a less expensive community college, White says Western Illinois wouldn’t release her transcript. That meant she couldn’t transfer even the credits she’d paid for. She had to take several classes over again.

“The whole experience set me back a lot, seeing as though right now I’d be a senior in college instead of a sophomore,” she says. “It’s a very discouraging process.”

When you don’t have parents who can bail you out or help navigate the system, small mistakes and emergencies can carry a high price, says Nancy Leopold, executive director of CollegeTracks, which works with low- and moderate-income students in Montgomery County, Maryland.

“In many ways what they really lack is the slack that their more affluent counterparts have, that sort of room to maneuver when the unexpected happens,” she says.

Many believe colleges aren’t doing enough to help those students manage the almost inevitable financial challenges.

“Many colleges now have opened the doors wider to admitting low-income students because they are interested in a more diverse student population, but they haven’t addressed the problems of keeping those students in school,” says Marvin Hoffman, who helps advise disadvantaged students from Chicago in a program called AIM High.

More colleges are turning their focus to retention. Some schools offer emergency loans or grants. Others have stepped up their advising to help students avoid pitfalls in the first place.

Jan Escobar went back to Montgomery College with the help of a mentoring program called Future Link. His mentor made him a deal: Future Link would pay half the debt as long as Escobar got more involved with the group.

“We’re in touch like twice a week,” Escobar says. “They’re always checking up on me to see if I’m doing my work.”

So far he is, he says. He found a job with more flexible hours, working as a host at a restaurant. He’s hoping to finish his associate’s degree in business administration next year and then transfer to a four-year college.

That's no moon... it's all the money 'Star Wars' made

Wed, 2014-10-01 14:49

In his day job, Chris Taylor is deputy editor of the news site Mashable. But recently he’s been able to combine his love of journalism and “Star Wars” to pen the ultimate behind-the-scenes biography about the storied franchise.

How Star Wars Conquered the Universe” sets the record straight on rumors, and offers a few spoilers from the upcoming “Star Wars: Episode VII," due to hit theaters in December 2015. Here are the three big “Star Wars” facts Kai discovered when he sat down with Taylor:

The first movie came dangerously close to being scrapped.

Several major production companies dropped “Star Wars” because they believed it would be a huge flop. The movie studios—and George Lucas himself—believed it was going to be a children’s movie; the average children’s movie at that time grossed about $12 million. 

It's near-impossible to find someone who has never heard of "Star Wars."

Taylor traveled to Window Rock, Arizona, for a "Star Wars" screening — it was the first movie to be translated into the Navajo language. One tribe elder told Taylor he’d never heard of "Star Wars," but remembered seeing "wild birds in space” on television once. After talking to the man some more, Taylor realized he had actually caught a glimpse of the movie's X-Wing fighters. So the search continues.

The franchise has made about $42 billion (so far).

Taylor estimates "Star Wars" merchandise has raked in $32 billion so far. Ticket sales? A measly $4 billion, and another $6 billion on home video. But there's far more money to be made. Since buying Lucasfilm for more than $4 billion in 2012, Disney has announced at least five more films and a new TV series.

Nuclear warheads aren't going anywhere because... asteroids

Wed, 2014-10-01 14:05

From the Wall Street Journal, this item, in which the phrase "planetary defense" features prominently:

The U.S. has apparently fallen behind on its timeline for getting rid of old nuclear weapons. One reason we're hanging onto them, according to the GAO: Disposition is pending, and "senior-level government evaluation of their use in planetary defense against earthbound asteroids."

I feel much better now.

You?

Intel CEO Brian Krzanich on 'silicon leadership'

Wed, 2014-10-01 12:42

Intel has been around for a long time: 

 

Intel's chips are still inside PCs, the guts of tablets, wearables, and increasingly, smart cars and refrigerators. They're not the shiny Gorilla glass or sleek brushed aluminum on the outside, but rather, the stuff that makes our stuff run. 

 

When you talk to Intel CEO Brian Krzanich, head of a tech company that's older than Larry Page, his tone is less flashy pitchman with a slide deck and more the engineer's precise graphs. Not least because Intel feels a kind of looming responsibility toward Moore's Law—the notion that chip capacity will double every 18 months—coined by Intel co-founder Gordon Moore. Krzanich mentions Moore's Law at least three times during our interview. It's on his mind. A lot. 

 

He also uses the phrase "silicon leadership" to describe Intel's role in the industry. We asked him what it means, and he said: "When you're the first guy to put out the piece of silicon that's half as expensive, or twice as powerful, you bring a capability to the market that nobody else does, or can." 

 

In addition to measuring out the nanometers and nodes that allow chips to continue to shrink in size and cost, Intel has given itself the challenge of removing conflict minerals from its supply chain by 2016. Smart phones, chips, and other gadgets rely on metals like tungsten and gold, which are often mined in countries with persistent civil conflicts, like the Democratic Republic of the Congo.

 

Before becoming CEO last May, Krzanich ran the supply chain for Intel, when the company removed conflict minerals from its microprocessors.  

 

"Back then we'd didn't even know how to do it, what the process was, or whether it could be done. We've done that," he said. 

 

When it comes to removing conflict minerals from every other product, Krzanich insists it will get done by 2016. 

 

"We have now a fairly long list of everything that needs to become conflict-free. We're simply mapping its supply chain, knowing where each metal comes from, and yes, we'll get there. But it'll be close."

 

When asked to describe Intel in five words or fewer, Krzanich said, "We make everything connected and smart."

Smaller cable companies are in a tight corner

Wed, 2014-10-01 12:02

Viacom, the giant media company that produces channels including Comedy Central, Nickelodeon and MTV, has been dropped from the TV menu of one of the nation’s smaller cable companies.

Suddenlink Communications, based in St. Louis, says Viacom’s stations cost too much, and that it can’t pass that cost on to its cable customers.

Industry watchers say this is evidence of a growing trend. Smaller cable providers are opting out of expensive carriage deals with major content providers and risking the ire of customers deprived of popular channels. Some small cable companies are getting out of the TV business altogether and offering only broadband internet and phone services.

Suddenlink serves approximately 1.2 million customers in North Carolina, Arizona, Texas, Louisiana and other Southern states. Company spokesman Pete Abel says Viacom was demanding nearly 50 percent more in carriage fees in their renewal contract this fall. Abel says Suddenlink came back with a counterproposal: The company would "un-bundle" Viacom’s channels “which our customers could then pick, choose and pay for, at their discretion."

"So far, neither Viacom nor any of the companies we have made that suggestion to have agreed to do that,” Abel says.

Viacom sent a written statement to Marketplace:

“After five months of negotiations, Suddenlink abruptly stopped negotiating with Viacom one week ago.”

Viacom says it accepted Suddenlink’s final contract proposal for one year, but Suddenlink walked away from that offer.

Whoever is to blame for the blackout of Viacom channels on Suddenlink, the phenomenon of small cable companies changing or dropping programming represents a paradigm shift in the industry, says entertainment equity analyst Tuna Amobi at S&P Capital IQ.

“We’ve always said that something has to give, given the escalation in programming costs, which is translating into cable bills outpacing inflation by orders of magnitude,” Amobi said.

Amobi predicts more consumers will "cut the cord" in the future.

Last year, the pay-TV industry lost customers for the first time ever, shedding 167,000 subscribers, according to research by MoffettNathanson cited in the Wall Street Journal. Media analysts say this trend is partly driven by the big media companies themselves—whether content providers like Viacom, or cable service providers like Comcast—which insist on bundling big packages of preselected channels to consumers, and then increasing bills to cover the cost.

“Across the entire U.S., the advent of over-the-top services like Hulu, Netflix and Amazon is where the paradigm shift of cord-cutting is occurring,” said Amobi. “This trend is going to continue and ultimately exert even more pressure, in terms of consumers dropping the high-priced cable bundles in favor of cheaper alternatives.”

Why there is no Ebola vaccine

Wed, 2014-10-01 12:01

The first diagnosed case of Ebola in the United States reveals a truth people in developing countries know all too well: There is little incentive for drug manufacturers to develop vaccines and drugs for diseases that affect the poor.

The simple reality is that drug manufacturers want to make money. To that end, Columbia economist Frank Lichtenberg says companies want to know two things: the number of potential customers and their ability to pay.

“If there are a million consumers and each of them would be willing to pay $1,000 for a drug, that translates into a billion-dollar potential market,” he says.

That is in no way the Ebola market.

“The total number of cases of Ebola in the world between 1976 and 2013 were less than 2,000,” says Dr. Sue Desmond-Hellmann, the CEO of the Bill and Melinda Gates Foundation, which last month committed $50 million to address Ebola.

What the Ebola outbreak reminds us all is that millions of lives are potentially at risk and there are few incentives for private industry to treat or prevent diseases like Ebola and malaria. That has left funding vaccines and medicines to philanthropies, federal governments and entities like the World Health Organization.

Desmond-Hellmann says the spread of Ebola forces people to ask whether that system is adequate.

“This epidemic is showing us how important it is for the world to have at the ready a response for such an epidemic,” she says.

The U.S. government has invested millions on Ebola over several decades, but it could take years—and quite a bit more money—to develop effective therapies.

So how do you get more money into research and development for these diseases and other public health concerns? USC health economist Joel Hay shares one idea that's being kicked around: “If you just had a tax on every pharmaceutical product sold, that money could be used for some more of these socially desirable goals,” he says.

The thing to remember is that this is a tricky market to regulate. And it’s trickier still for our government, which has a duty to keep people safe, but must find the right incentives to keep the drug industry in the game.

Reddit raises $50 million and wants to share with users

Wed, 2014-10-01 12:00

Reddit is a digital bulletin board of sorts, the self-proclaimed “front page of the internet,” where gazillions of users post, share and read about almost any topic area, or "subreddit," that you can conceive of and many that you honestly couldn't (or perhaps shouldn't).

“The content is 95 percent of the time relevant and interesting, which is really cool,” says user Colin Grussing, of his favorite subreddits, which mostly include entrepreneurship. “I don’t know if there’s any other site on the Internet that does that so well.”

Reddit has just announced that it raised $50 million from a series of investors, including top tech venture capitalists and stars like Jared Leto and Snoop Dogg.

The company will use the money to:

"... hire more staff for product development, expand our community management team, build out better moderation and community tools, work more closely with third party developers to expand our mobile offerings (try our new AMA app), improve our self-serve ad product, build out redditgifts marketplace, pay for our growing technical infrastructure, and all the many other things it takes to support a huge and growing global internet community.”

“I grew up with a computer, and many of my friends were people I met online,” says Sam Altman, the president of Y Combinator and the lead investor in this round of funding. “I think one of the most fundamental societal transitions in the last 20 years is this idea that people connect to some of the closest people in their lives and have some of these important parts of their personalities get developed in online communities.”

But he also thinks Reddit’s passionate, highly engaged users will make the site a good long-term investment.

Like other large community sites, he says Reddit could make money in three ways.

“One, obviously, is with ads,” he explains. “Two is with charging users for premium features, and three is some version of commerce. That’s more in the experimentation phase, but where you let people basically spend money on the site and take part of that transaction.”

Altman and his fellow investors want to give 10 percent of their shares back to the community, because users have helped build the site, and, as he says, people treat a car they own better than a rental.

It’s a relatively simple idea, but one that’s very difficult to execute legally, says Lance Kimmel, a securities lawyer.

“I think Reddit really has their work cut out for themselves,” he says. “This stuff is really, really complicated.”

The Securities and Exchange Commission has shut down other companies' attempts to do something similar, says Kimmel.

In announcing the idea, Reddit admitted that it has been interested in a similar move in the past, but hasn't found the right legal avenue.

Its CEO recently floated the idea of giving users a cryptocurrency backed by shares, though Kimmel is skeptical about the legality of that approach as well. 

Who are the small cable providers that are getting out of TV?

Wed, 2014-10-01 11:45

Cable subscribers aren't the only ones cutting cords. Increasingly, smaller broadband providers have been getting out of the TV business altogether, the Wall Street Journal reported Tuesday, or scaling back their offerings. The latest is Suddenlink, a smaller cable provider that just dropped Viacom's suite of channels, including MTV, VH1 and CMT.

A representative for small cable companies told the Journal that change in the cable TV market is going to "come from the bottom." Are small broadband providers key to upending the cable business model? Here's what you need to know:

Who are these companies?

Just about all metropolitan areas in the U.S. are claimed by just a few large broadband providers like Comcast, Cox and Time Warner, but about 14 percent of pay TV subscribers are served by a cable company with a million or fewer customers.

These companies — like USA Communications, a co-op in Shellsburg, Iowa — typically serve rural or small-town customers. Many eschew eye-catching new subscriber discounts used by larger companies in favor of straightforward price lists by community. These subscriber bases are small, sometimes only a few thousand customers. 

About 915 smaller cable companies are represented by the National Cable Television Cooperative, which told the Journal that companies serving a total of 53,000 subscribers have gone out of business or dropped their TV offerings in favor of broadband. One provider in Missouri said only a fifth of its customers pay for TV anymore.

How do networks fit into this?

TV networks charge "carriage fees" to cable providers for the right to run their channels. Providers pay a fee per subscriber, often for a bundle of channels. Historically, cable companies have complained about rising fees and being made to carry channels their customers don't want.

The fees themselves are closely guarded secrets, but some estimates put them as high as $6 per subscriber for ESPN. The rising costs and ballooning bundles can put a strain on smaller providers, like Cedar Falls Utilities, who spoke out against the carriage system earlier this year.

Between high costs and low subscriber interest, it's easy to see why some smaller providers might be eyeing a broadband-only business model.

How are small providers making up for the lost programming?

These small companies are making up for programming by pushing à la carte streaming services. Earlier this year, Netflix inked deals with three small cable companies to put their services directly into set-top boxes, for example. One company, RTC Telephone in Georgia, promotes Roku's set-top box as a $5 add-on to its broadband service.

More rural cable companies, like BTC Broadband in Oklahoma, are also providing high-speed fiber internet, which could push customers away from pay TV and toward reliable broadband.

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