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Weekly Wrap: General Electric and Stock Market Highs

Fri, 2015-04-10 16:12

Joining Kai to talk about the week's business and economic news are Nela Richardson from Redfin and Sudeep Reddy  from the Wall Street Journal. The big topics this week: General Electric's plans to sell off most of GE Capital, the company's financial division, and the reasons behind some countries' current stock market highs.  

 

How film actors' pay gets calculated

Fri, 2015-04-10 13:41

When Sony Studios was hacked late last year in connection with the film "The Interview," a trove of internal documents was released online. One of the damaging revelations was that the studio was paying some of its actresses less than their male co-stars.

The revelation generated headlines about women's pay. But, it also brought to light the disparities in what actors are paid, and the complex calculations that go into determining those salaries.

"It's a calculus you go through on each film," says Peter Sealey, former head of marketing at Columbia Pictures, who now runs a marketing firm.

Amy Pascal, the former studio chief at Sony Pictures who was fired in the aftermath of the hack, spoke at a women's conference in San Francisco in February, and said one of the fundamental elements of what determines actors' salaries is, simply, negotiation.

"I run a business. People want to work for less money, I'll pay them less money," Pascal said in a public interview with audience. "I don't call them up and go: can I give you some more?"

Some actresses are definitely not working for less money. They are the rarefied few in the $20-million-and-up-club, like Angelina Jolie and Sandra Bullock. They both can command huge salaries and even percentages of movie profits or revenues.

But there are many other actors who do not have such clout. And yet, Pascal's advice was blunt.

"The truth is that what women have to do is not work for less money. They have to walk away. People shouldn't be so grateful for jobs. People should know what they're worth and say no," Pascal said.

But walking away may be less of an option for most actors, because the salary calculations studios do, Sealey says, which change their formulas based on recent trends.

The calculation of an actor's worth in a film "involves a lot of variables," Sealey says, "but principally it is: how much of a draw will that actor or actress be for your target audience?"

The bigger the audience the studio believes an actor can attract to movie theaters — especially during the all-important opening weekend, which can help determine the long-term earnings trajectory of a film - the higher that actor's salary might go.

But that correlation has a number of additional variables that can affect salary. Among them are the film's budget and what role that film plays for a studio's bottom line. If it's a tentpole film, Sealey says, "where it's important to a studio's long-term health... the price of the actor goes up."

A major tentpole, like the James Bond franchise, is supposed to make so much money that it covers the bombs the studio makes and boosts the bottom line. The last Bond film, "Skyfall," made $300 million in the U.S. and $1.1 billion globally. 

Conversely, non-tentpole films might have lower budgets and lower salaries — no matter an actor's star power. But for the big-budget fare, salaries can reach the heights which Daniel Craig reached in "Skyfall:" $17 million. The film itself reportedly cost $200 million to produce. Craig's salary probably also had something to do with the fact that he had been Bond before.

"If you're trying to get somebody to repeat a past success, obviously you wind up paying them more," says Mike Medavoy, a film producer who headed up Orion and TriStar pictures in the '80s and '90s.

Repeating past successes, if done in a particular genre, can help actors establish a brand and help them boost their salaries, Medavoy says.

"Liam Neeson is a perfect example of that," he says. 

Neeson made $1 million for "Taken," but by the second sequel, with a track record of box office success behind him, Neeson raked in $20 million. The film itself made $300 million, most of it overseas.

"At this point, about 65 to 70 percent of the revenue comes out of foreign and not out of the domestic market," Medavoy says. Which means that an actor with strong appeal in foreign markets can demand a higher salary.

Actors' appeal is also calculated with other revenue streams in mind — home video, Internet, TV, etc. Even an actor's social media presence — whether they have a large Twitter following, for example — can help determine their salary, says entertainment lawyer Jonathan Handel.

"That's something that talent reps can use in arguing for a given salary," Handel says, "How that translates into dollars is probably a dark art." 

While actors can do a lot to boost their worth, Handel says there is a countervailing trend among studios. They're making fewer movies, and relying more on special effects and comic-book characters.

"You know if you're casting a Spider-Man movie, it's mostly about Spider-Man and not about the particular actor," Handel says.

Compare that to the 1990s, when movie budgets ballooned and actors' salaries went up along with those budgets. Handel says the decades since have seen a big shift and "the power that actors and their representatives used to have has diminished."

In aggregate, that's meant smaller salaries, except for the biggest of the big name actors, he says.

GE to sell most of its lending business

Fri, 2015-04-10 13:00

General Electric announced today that it’s getting out of the lending business, selling off most of its financial arm, GE Capital, over the next couple of years. First up is a big chunk of its real estate business, which it’s offloading to Blackstone. That leaves GE, the industrial company – a producer of jet engines and other things that go "vrroom."

Historically, GE’s lending business was a very small portion of the company, says Tom O’Boyle, author of “At Any Cost: Jack Welch, General Electric, and the Pursuit of Profit.” That changed when Jack Welch took the helm in the early ‘80s.

“Jack Welch saw bonanza in finance,” says Jeff Madrick, a senior fellow at the Century Foundation and the author of “Age of Greed: The Triumph of Finance and the Decline of America, 1970 to the Present.

 

He says the company realized it could make lots of money in finance with far fewer employees than manufacturing, eventually becoming "a full-fledged mortgage lender and a sub-prime mortgage lender.” Now, Madrick says GE’s getting out of a business it never fully understood. Moreover, the financial industry is more competitive now with lower profits.

It’s not that finance is dying, says Jim Wilcox, a professor at U.C. Berkeley’s Haas School of Business.

“Instead, I would say the bubble’s popped,” he says. “The damage was done, but now we’re going to have a financial sector that’s going to be sturdier, and it’s going to be sturdier because it’ll be the serious devoted firms that remain.” He adds that the remaining firms are also more heavily regulated. 

Designing watch apps that won't drive you nuts

Fri, 2015-04-10 13:00

Today is the day you can officially pre-order yourself an Apple Watch.

If you are weighing the decision to buy one, you might be asking yourself what, exactly is this thing going to do. It will no doubt be a new home for apps, very tiny apps . These apps will deliver notifications via a very small screen screen and by vibrating your wrist. The potential hazards of badly designed wach aps could drive a person mad. So how exactly do you go about making products for the new era of smart watches?

 

Your dollar goes a long way at the Masters

Fri, 2015-04-10 12:53

Twenty-one-year-old American Jordan Spieth is tearing it up at the Masters. He set a 36 hole record today: 14 under par 130 for the first two days.

Augusta National, the home of the Masters, certainly has its issues. But gouging spectators at the concession stands isn't one of them. 

A CBS sports producer took $100 out with him the other day to see how many golf fans he could buy lunch for at the tournament. He was able to feed 17.

Pimento cheese sandwiches — whatever they are — and soda are available for $1.50 each.

Quick update to this story: Dozens of people wrote in to explain what pimento cheese is, and how allegedly good it is.

Okay, now that I know what pimento cheese actually is...um...I'll pass.

— Kai Ryssdal (@kairyssdal) April 10, 2015

Philadelphia 76ers: worst or best NBA strategy?

Fri, 2015-04-10 12:42

The Philadelphia 76ers are one of the marquee franchises of the National Basketball Association. They've won three championships, and some of basketball's greats have worn the uniform: Allen Iverson, Charles Barkley and Wilt Chamberlain. 

 

But this season they're just terrible. They won just 18 games, while losing 61. Home attendance hovers around 14,000, the worst in the league. 

 

While every team has rebuilding years, not every front office trades out its veteran players for younger prospects and higher draft picks, banking on an uncertain future.

 

As Philly native Michael Sokolove put it in the New York Times Magazine, this year's Sixers are "the least capable assemblage of basketball players ever." 

 

That's by design, he says. While the players work hard for every shot and loose ball, the front office is cycling through the roster as quickly as possible. It's a gamble designed to — eventually — propel the Sixers directly from the lowest ranks to a championship team, rather than steadily building from middling to good. So, are they tanking on purpose?

 

"It depends on what you consider tank mode," Sokolove said. "The players surely are not tanking. They're trying very hard. Management is certainly tanking. There's not a move that they have made, last year or this year, that has had the intent of giving them a better chance to win the next game."

 

Sokolove went on the road with the Sixers and found an earnest and loveable group of players, led by a cynical front office. He had quite a few off-the-record conversations with the Wall Street-trained, MBA wielding stats wizards. But, they wouldn't speak about their strategy outright. 

 

"I think we can intuit the philosophy is, 'We've got a better plan. The rest of y'all out there trying to win right now, and trying to win gradually... look at us,'" Sokolove said. "We've got a plan that's going to work, just wait and see."

 

Management's pursuit of a calculating strategy for making big leaps is a bit reminiscent of Oakland A's coach Billy Beane, as profiled in Michael Lewis's book, "Moneyball." But that's not exactly right, Sokolove said. 

 

"If you remember Moneyball, you know, Billy Beane is pacing and going crazy. He's living and dying with each game's result. He's trying to win, and he's trying to win soon." 

 

Whereas the Sixers don't seem to care about short-term wins. 

 

"If there's such a thing as sports ethics," Sokolove said, " I think you're supposed to go out there and try to win, and they're clearly not in that mode."

 

Returning to the players, Sokolove found that winning was the goal, even if not a likely reality. 

 

"I absolutely love the players because no more than 2 or 3 of them have an assured NBA career," Sokolove said."So these guys are desperate... If they have a bad shooting night, they're in the gym that night, past midnight, practicing their shots. So you want to root for these guys."

Florida takes steps to limit standardized testing

Fri, 2015-04-10 11:07

The movement to curb standardized testing in schools scored a small victory this week. The Florida legislature passed a bill limiting the number of hours students can spend on state and district testing to 45 per school year. 

Even some advocates of standardized testing welcomed the legislation. Two years ago, the Foundation for Excellence in Education looked into how many standardized tests students were taking in Florida. The group was founded by former Florida governor Jeb Bush, who expanded the use of testing in the state.

“Some school districts were requiring as few as eight tests on top of what the state required, and some districts were requiring up to 200 additional tests,” says Patricia Levesque, CEO of the foundation. “There is such a thing as too many tests.”

If signed into law by Governor Rick Scott, the bill would also eliminate an 11th grade English test, and schools would no longer have to give final exams in every subject not covered by state tests. 

That’s progress, says Bob Schaeffer, who often speaks for the growing test resistance movement as public education director of the group FairTest. But, not enough.

“The vast amount of time devoted to testing in public schools is not administering the exams themselves, but the huge amounts of time spent by teachers and students getting ready for the tests,” he says.

Homeboy Industries helps former gang member start over

Fri, 2015-04-10 11:04

Javier Chavez was only eight years old when he began getting into trouble. By the time he was 11, he was involved in a gang in Los Angeles.

He's been arrested multiple times, on charges ranging from selling drugs to weapon possession.

Chavez's longest stint in prison was for four years. He's 33 now, and says he's getting a second chance at life.

Chavez works as a mentor, navigator, and recovery group facilitator at Homeboy Industries. Homeboy provides job training positions and free social services for formerly gang-involved, and previously incarcerated, men and women.

How hard is it to start over? Listen to the full story in the audio player above.

What happens when two bank accounts get married

Fri, 2015-04-10 11:02

It's officially wedding season. It's a romantic time of year, but it can be a pricey one too, whether you're dressing up and shelling out for a hotel and a gift, hosting a bridal shower or bachelor party, or planning (and paying for) the wedding itself. 

"I do" also means ka-ching — for venues, flower ships, bakers, caterers, the list goes on and on and on. 

Money isn't the most romantic topic of conversations, and some couples may want to put off the financial talk until after the honeymoon. But is that the best bet? Probably not, according to Louis Barajas. He's a certified financial planner who works with many couples as they approach marriage. Barajas stresses the importance of transparency — from financial history, debt and credit scores to goals for a financial future. He says it's important to have these conversations early and often, to keep things open.

That's exactly what Rob Luchow and Jessie Rosen did before they got married almost a year ago. For Rob and Jessie, talking money before tying the knot was a natural part of the process; they already lived together and had been splitting their expenses pretty evenly, but as Jessie changed career paths to become a full time writer, Rob took on more of the financial burden.

The couple decided to meet with a financial planner shortly before they got married to help ease the process. Keeping the business talk separate from the emotional part of their relationship (and mediated by an objective third party) was a relief for Rob and Jessie. 

A year into marriage, they've settled into a rhythm with their finances, keeping their money active in savings and investments, and working together to work out their priorities in the short term and the long term.

That's meant sacrificing a little bit now to invest in the future — Luchow and Rosen put off their elaborate honeymoon and a potential move to a new apartment in order to save. That means they can maintain their current standard of living without a strain and also save up for their future house. And according to their financial planner, stasis at the beginning of a marriage can be good, at least when it comes to spending. 

Hear Jessie and Rob's full story, and more advice from Louis Barajas, in the audio player above.

Putting a price tag on looking pretty

Fri, 2015-04-10 11:01

Plastic surgery is nothing new, but the trend has been on the rise again in the last few years. According to the American Academy of Facial Plastic and Reconstructive Surgery, 13 percent of facial plastic surgeons surveyed saw an increase in requests for celebrity look-a-like procedures in 2014.

 Nearly 16 million people went under the knife last year alone, up 3 percent from the year before.

 To ask for a Rob Lowe-nose of his own, guest host David Lazarus (left) paid a visit to Dr. Lloyd Kreiger, a plastic surgeon on Rodeo Drive in Beverly Hills.

He sat for a consultation in Dr. Krieger's exam room, exploring the big picture trend but also seeing what can be done to improve his own looks.

 

Scoring a home run with a spring renovation

Fri, 2015-04-10 11:00

With warmer weather and flowers in bloom, it's time for a fresh start — for your home?

Yes, it's remodeling season, and spending on everything from new kitchens to complete domicile makeovers is on the upswing, as shown by a recent surge in mortgage refinancing.

A brand new bathroom or even just a fresh coat of paint can be costly, but can also be a smart investment whether you're staying put or looking to sell.

What happens when your dream home needs a little sprucing up? Tom Silva, general contractor with "This Old House," passes on some words of wisdom. Plus, Shawn Kravitch, a public interest lawyer in Los Angeles, tells us how he went about his own DIY remodel in East Hollywood. 

To hear their stories, tune in using the player above.

Your Wallet: Fast money

Fri, 2015-04-10 09:00

What's the fastest money you've ever made? 100 bucks in under a minute? More?

Tell us your story of making fast cash. Write to us, or tweet us — we're at @MarketplaceWKND.

PODCAST: GE's new direction

Fri, 2015-04-10 03:00

Airing on Friday, April 10, 2015: General Electric likes to be known for its power plants, it's cat scanners, it's fridges, but less so for its massive real estate holdings. There's news just now that GE is going to refocus on its roots in manufacturing. Plus, LinkedIn, the social networking tool, is purchasing Lynda.com, an online business skills training company. The price tag? $1.5 billion. We look at why LinkedIn would want to spend that kind of money. And in a lot of cities in Mexico, it's not that easy to get safe drinking water - and a lot of folks reach for a soda pop instead. The Mexican government is trying to change that. 

 

In Mexico, things go better with...water

Fri, 2015-04-10 02:00

If you’re looking for lunch in the northern Mexico border town of Nuevo Laredo, you might walk into a spot called La Parilla. When I walked in there, I noticed almost every table has 4 or 5 empty soda bottles on it. This isn’t a big restaurant – less than 20 tables. My waiter tells me that he sells about 100 sodas every day.

“It’s because people just enjoy the flavor,” he says.

And his customers aren’t alone. The Mexican population drinks more soda than anywhere else in the world. The numbers work out to more than 160 liters of the sugary stuff a year. That’s about half a liter per person every day.

Jose Luis Quinones drives a cab in Monterrey. He says when he leaves for work in the morning he grabs something quick.
“And what’s the cheapest thing I can buy?” he asks. “A can of soda and some crackers. It’s cheaper to buy a can of soda than a bottle of water.”

Why is that the case? It could be that poor Mexicans don’t have the purchasing power to create a viable market for water. That’s certainly the case in a lot of the rural parts of the country where more than 10 percent of people don’t have access to potable water. But for some reason, they can always grab a soda. Tom Bollyky, Senior Fellow at the Council on Foreign Relations, says the reason behind that is a combination of things.

“It’s something that costs the same price as water," he says. "And it’s more accessible in schools in Mexico. And it’s sweet. That combination is literally deadly.”

It leads to obesity. Mexico now has the highest obesity rate in the world. And the Mexican government is trying to do something about it. Last year, the government passed a soda tax. It also started running ads urging children to drink water instead of soda. But Bollyky says the way they’re using the money – earmarking it for raising access to drinking water in elementary schools – is just as important.

It will still take a while to see how well the tax and ads work. But early numbers look pretty good. According to Bollyky, while still high, soda consumption in Mexico is down 7 percent.

In Panama, President Obama seeks economic growth

Fri, 2015-04-10 02:00

President Barack Obama is in Panama for the Summit of the Americas, a gathering of American heads of state. This year the leaders will be joined for the first time by Raul Castro, Cuba's leader. For years, Cuba was excluded from the summit, which created tension between Latin American leaders and the U.S. 

Disagreement over the U.S. embargo of Cuba wasn't the only gripe Latin American leaders had with U.S. policy in the region. "American presidents have a hard time paying attention to Latin America," says Moises Naim, a fellow at the Carnegie Endowment.

But the Obama Administration seeks to slow the tide of illegal immigrants, so Naim says "the top priority for the United States ... is to have strong economies that produce jobs."

That's a shift from years of sending money to the region's militaries to pay for the War on Drugs. 

"The United States has moved beyond a single policy toward Latin America," said Bruce Bagley, a professor of political science at the University of Miami. But focusing on poverty alleviation in places like Honduras, which has high violence and a high level of emigration, isn't easy, because "one of the major constraints is the absence of capital and expertise," he said.

That absence of capital is one reason why cabinet member and U.S. Small Business Administrator Maria Contreras-Sweet was in Panama to announce a new partnership between the SBA and ConnectAmericas, a social network for Latin American entrepreneurs. "That's how we help their youth change their future and change their lives," Contreras-Sweet says. 

LinkedIn wants to teach you stuff

Fri, 2015-04-10 02:00

LinkedIn, the professional networking site, is purchasing Lynda.com, the online video training company, in a deal worth $1.5 billion in cash and stock. The acquisition is expected to close in the second quarter of 2015, LinkedIn said in a press release.

"The combination of LinkedIn and lynda.com is the kind of fit that benefits everyone," LinkedIn CEO Jeff Weiner wrote in a company blog post. "LinkedIn has the members, the jobs... and... can be accessed by roughly 350 million people to share professionally relevant knowledge. lynda.com's service has the premium library of skills-based courses."

The acquisition makes sense in terms of LinkedIn's goals "to build out kind of an entire ecosystem around training, job recruitment, job hiring, talent development," says Analyst Mark Mahaney of RBC Capital Markets.

But it also has pitfalls for LinkedIn, says Colin Gillis of BGC Partners. "You're paying $1.5 billion for a business that is a subscription business and may come into pressure from free sites like YouTube."

Silicon Tally: Defending your digital life

Fri, 2015-04-10 02:00

It's time for Silicon Tally! How well have you kept up with the week in tech news?

This week, we're joined by Jason Scott, the curator of the Internet Arcade.

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Do wings give you wings?

Fri, 2015-04-10 01:00
$ 1.5 billion

That's how much LinkedIn paid for Lynda.com, an online video training company. The huge price tag may be worth it for LinkedIn. As part of LinkedIn's broad strategic ambition, the acquisition build out an ecosystem around training, recruitment, hiring, and talent development. 

100 million

That's how many chicken wings sports bar chain Buffalo Wild Wings sold during this year's NCAA basketball tournament, Bloomberg reported. The Minneapolis-based company has been on an extraordinary rise, riding the fast-casual wave and adapting to volatile wing prices and crowds that come and go with sports seasons.

650

That's how many men and women under 25 working at the IRS. The total staff? 87,000. The IRS is trying to convince more millennials it's cool to work for the tax agency, according to Bloomberg. Four years from now, about 40 percent of its workforce will be eligible to retire. The recruiting page for student and recent grads reads, "You’ll be part of a tax collection process that funds our nation’s most vital programs—from securing the nation and protecting social services, to maintaining parklands and forests, building libraries, opening museums, enhancing schools and much, much more.” 

April 24

The hotly anticipated release of the Apple Watch. But Business Insider notes Apple is changing the way it approaches launch day, letting people try on the smart watch by appointment and encouraging them to order online. Part of this shift is practical — with so many watch combinations and price points, it could be tough to keep everything in stock — but it's also about image. Apple's new retail chief came over from Burberry, and the Watch is being sold in part as a luxury item. Long lines and tents outside of the store isn't exactly classy.

87 days

That's how long oil flowed into the Gulf of Mexico after the Deepwater Horizon oil rig exploded in 2010, spilling nearly 5 million gallons. Five years later, the Gulf's reputation for great seafood is starting to recover, but there isn't as much to sell as there used to be.

160 liters

That's how much soda the Mexican population consumes every year — or about half a liter per person per day. Mexico drinks more of this sugary stuff than anywhere else in the world. And in areas without easy access to fresh water, people more often turn to soda to quench their thirst. This trend has lead to obesity, but the Mexican government is trying to tackle it with a soda tax. 

LinkedIn purchasing Lynda.com for $1.5 billion

Thu, 2015-04-09 15:34

Kind of a biggie in the social media professional networking space: LinkedIn said this morning it's going to spend $1.5 billion to buy Lynda.com,  a company that specializes in online professional training videos and tutorials.

The bet LinkedIn is making, of course, is that people will go to LinkedIn for something other than just random clicking around looking for a new job.

Which is what you guys do too, right?

LinkedIn purchasing Lynda.com for $1.5 billion

Thu, 2015-04-09 15:34

Kind of a biggie in the social media professional networking space: LinkedIn said this morning it's going to spend $1.5 billion to buy Lynda.com,  a company that specializes in online professional training videos and tutorials.

The bet LinkedIn is making, of course, is that people will go to LinkedIn for something other than just random clicking around looking for a new job.

Which is what you guys do too, right?

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