[UPDATED: 8:13AM EDT] General Motors said this morning that its profit fell 86 percent, its worst quarter since came out of bankruptcy in 2009. A series of recalls hurt the auto giant, but excluding these one-time items, profits radically beat expectations.
GM is suffering not just from bad weather during the winter months -- but also from bad PR over its handling of faulty ignition switches going back ten years.
The problem has caused at least 13 deaths, and the belated recall -- in February 2014 -- could cost the company $1.3 billion. GM faces ongoing inquiries into its knowledge and handling of the defect, as well as lawsuits from consumers.
Since emerging from bankruptcy at the end of the recession in June 2009, GM has gone from a message of redemption to an acknowledgment of mistakes.
"We will not shirk from our responsibilities now and in the future," new CEO Mary Barra told a Congressional hearing earlier this month about the ignition-switch recall. "Today's GM will do the right thing."
That appears to include heads moving and rolling. Several top executives, in HR, communications and engineering, are out, says Paul Eisenstein of the Detroit Bureau, an auto-industry news service.
"Since the recall we have been seeing more and more changes in mid- to upper-management," says Eisenstein, and he adds that company executives have signaled to expect more of the same.
Meanwhile, GM plans to staff up two new engineering divisions -- one specifically to deal with safety and quality problems.
"The image of the company as a huge lumbering company where management holds back on innovation and change is an image that the company’s going to have to rid itself of very quickly," says Gary Chaison, a professor of industrial relations at Clark University who studies the auto industry. And he says HR shuffles alone aren’t likely to accomplish that goal.
It’s been almost eight years since "An Inconvenient Truth," Al Gore’s call-to-action on climate change. Now the televison channel Showtime is taking up the challenge with its nine-part docu-series "Years of Living Dangerously." In between these two films, advocates have learned a lot about communicating climate change. No. 1, it’s harder than anybody thought.
After years of dire warnings, a little over half of Americans worry about climate change “only a little,” if at all, according to a Gallup poll.
“At first the attitude was, the truth speaks for itself,” says Dan Kahan, a professor of law and psychology at Yale Law School and a member of the Cultural Cognition Project. “Show them the valid science and the people will understand. That’s clearly wrong.”
Ed Maibach, director of George Mason University’s Center for Climate Change Communication, says there are at least three things “we know that you shouldn’t do,” when communicating the science: don't use language people don’t understand, don't use too many numbers, and don't talk about “plants, penguins and polar bears” instead of people. Maibach says another error is talking about the threat of climate change without giving people solutions.
Elke Webber, a business and psychology professor Columbia University’s Earth Institute, takes that one step further. She believes that instead of “scare campaigns” and “visions of apocalyptic futures,” climate advocates need to present visions of what a world less dependent on fossil fuels would look like.
“Focus on the benefits,” Webber says. “Scare campaigns work extremely well when there’s a simple thing you can do to remove the danger. But if it takes protracted action, over time, nobody wants to feel bad for that length of time. People just tune out.”
The real challenge, however, may be to talk about climate change in ways that don’t push people’s cultural and political buttons. Dan Kahan’s research shows that the way people view climate change is closely tied to their values.
People “aggressively filter” information that doesn’t conform to their worldview.
“And remarkably the more proficient somebody is at making sense of empirical data," he says, "the more pronounced this tendency is going to.”
Robert Lalasz, director of science communications at the Nature Conservancy, is convinced that real progress will come at the local level, where people are already confronting drought and rising seas and looking to community leaders for solutions.
“We need to show people that the people they respect and trust are paying attention to climate science and using it to make decisions about issues they’re dealing with right now and issues in the future,” Lalasz says. Those conversations, however, tend to be about adaptiing to the effects of climate change. The question is whether they can help move the needle on mitigating it, before it's too late.
The iconic New York restaurant Tavern on the Green is reopening Thursday under new ownership after being shut down for years. It has a storied history, but suffered in recent years from a reputation as a tourist trap with dreadful food. The new owners vow to restore it to its old glory and have invested millions in revitalizing the space and the menu.
By Shea Huffman
In light of Tavern on the Green's return, we decided to look at some of the most well-known, or infamous "tourist trap" restaurants around the country. These restaurants may have originally gained noteriety for good food or intriguing historical origins, but have since become better known for their tourist draw.
Top of the World Restaurant - Stratosphere Hotel, Las Vegas
One could argue Las Vegas itself is one big tourist trap, but to pick one restaurant out of all of them, you have to go with the rotating restaurant atop the Stratosphere Hotel, the Top of the World. Like most touristy places to eat, this one banks mostly on the view it offers customers, but doesn't offer the high quality food to match its high price range (it costs $18 just for admission).
Zehnder's of Frankenmuth - Frankenmuth, Michigan
This all-you-can-eat chicken restaurant is somewhat of a landmark in Michigan, known for its massive 1,500 person seating area, making it one of the largest restaurants in the U.S. Zehnder's staff all wear traditional German-style uniforms to match the general style of the restaurant, though the food is decidedly American.
Fisherman's Warf - San Francisco
This is probably one of the most well known tourist traps in the world, and it would be unfair to single out just one of the restaurants that inhabit it for being unremarkable beyond the fact that they are in Fisherman's Warf.
The Billy Goat Taven - Chicago
"Cheezborger! Cheezborger!" The famous line from the Olympia Restaurant skit in Saturday Night Live was inspired by the Greek immigrant owners of the Billy Goat Taven in Chicago. To this day the restaurant is graced with long lines of patrons waiting to hear the staff recite the words, but the general consensus is that it's just typical diner food.
Times Square - New York
Another famous tourist trap whose restaurants we just couldn't single out. If we had to pick one though, it would probably be Guy's American Kitchen & Bar, the restaurant belonging to celebrity chef Guy Fieri, if only for its brilliantly scathing review in the New York Times.
P.O.V. Rooftop Bar at the W Hotel - Washington, D.C.
This lounge, sitting atop the W Hotel in Washington, D.C., offers patrons a great view of the White House and a number of the city's historic monuments, as well as a chance to rub elbows with a few classy politicos. But that might be all it has to offer, as reviewers contend the drinks are overpriced and the food isn't that good.
The Ivy - Los Angeles
Adorned with flowery cottage-style decor, this nouvelle American restaurant sits not far from the talent agency International Creative Management, which has prompted a number of visits from celebrities and pursuing paparazzi. The chance to spot their favorite movie stars drives many tourists to The Ivy, and they pay for it.
The Varsity - Atlanta
The main branch of this burger chain in Atlanta is the largest fast food drive-in in the world, and has become an iconic fixture in the city's culture. The unofficial catchphrase, "What'll ya have?" has become ingrained in Atlanta's folklore, and the restaurant has even been graced with visits from presidents Jimmy Carter, George H. W. Bush, Bill Clinton and Barack Obama. But pretty much everyone who goes there agrees, the food is just "meh."
To celebrate its 25th year of bringing economics to life, Marketplace® is hitting the road.
On stages across the U.S., "How I Learned to Stop Worrying and Love the Numbers" will provide an irreverent, insightful look at the numbers in our lives. Numbers in headlines, numbers without context. From the Dow to the NASDAQ to weekly unemployment, we're bombarded with newsworthy numbers every day, how do we make sense of what they all really mean?
Join Marketplace host Kai Ryssdal — plus reporters Adriene Hill, Stacey Vanek Smith, Lizzie O'Leary, Rob Schmitz and Paddy Hirsch — as they humanize the numbers. It's an evening of radio, with sound elements, interviews and engaging storytelling.
What Marketplace does best, but in person, on stage, at the Strathmore.
April 24, 2014
To purchase tickets visit: http://www.strathmore.org/eventstickets/calendar/view.asp?id=10819
Limited number of half-price tickets available from Goldstar.
Airbnb has had an up-and-down couple of days. On Friday, investors put an additional $500 million into the company, valuing it at roughly $10 billion. This week, they're in a New York courtroom, defending their model against a subpoena for their list of New York hosts. Hotel regulators argue that the company violates New York law that an apartment cannot be rented for less than 30 days.
Jeremy Rifkin, author of "The Zero Marginal Cost Society," thinks the way Airbnb operates is a sign of a shift in how business will be done in the future. The conflict comes down to the elimination of marginal costs. That's the term for how much it costs for a business to add an additional good or service. According to Rifkin, Airbnb's marginal costs are almost nothing, and that's problematic for brick-and-mortar businesses.
"Businesses have always wanted to reduce marginal costs. They simply never anticipated a tech revolution so extreme in its productivity that it could reduce marginal costs to near zero, making goods and services nearly free, abundant, and sometimes not prone to market exchange forces."
Rifkin also points out that this struggle between Airbnb and hotel regulators is different than, say, what the music industry went through when users tried to share content for free. In that case, the market had to adjust and learn to coexist with new technologies. Sharing economies, however, may have larger implications with how bussinesses operate. According to Rifkin:
"The capitalist market will stay. It will have a role to play. I don't think it'll be the primary arbiter of economic life in 30 years from now. I think the collaborative commons is here to stay."
College admissions rates across the country hit some all-time lows this year. Stanford University, for instance, took only around five percent of applicants. In response to the crazy numbers game of college admissions, schools are growing their wait lists and using them in some surprising ways.
You may think a wait list is for applicants who aren't quite as good as those admitted outright. But it's not that simple. Chris Munoz, the vice president for enrollment at Rice University, says the differences between candidates accepted and those on the wait list "are so subtle and so nuanced." It is less about who is "better" or "worse," and more about the college making sure it can get the exact student body it wants.
Schools stock wait lists with all kinds of applicants -- A-plus students, athletes, candidates who can pay full tuition. Munoz says wait-listing students is like choosing back-ups for a sports team. You want one for every position."Sometimes you need quarterbacks," he says, "and sometimes you need tight ends. So it's luck."
In the end, the wait list comes down to "yield." This is the percentage of students who will accept the college's acceptance. Schools use wait lists to manage the uncertainty of who will actually say yes when admitted. The yield percentage isn't just important for hitting enrollment targets, it has big financial implications.
Over the years, yield numbers have come to affect a school's ranking and bond rating. Low yields will pull down the rank and make it harder to secure financing. To keep yield high, colleges want as many of the students they initially admit to come.
For the most elite colleges, this is less of a problem. Few applicants are going to turn down an Ivy League college or top liberal arts school. But for other institutions it's not so easy. Some schools try to predict which applicants will actually say yes by factoring in a student's "demonstrated interest." This includes things like campus visits and alumni interviews. Other schools, however, are suspected of playing the numbers game a bit more aggressively.
There are rumors that some colleges actually wait-list applicants who seem too good to be true. Admissions offices realize certain top-notch candidates have a high chance of getting in somewhere higher up the rankings food chain. By putting them on the wait list, the admissions office can see if the applicant gets rejected by other schools and comes back begging to be accepted. This way, colleges can catch some prized applicants without risking their yield numbers. Basically, a school doesn't want to be used as safety and then ditched for a first choice.
Admissions consultant Annie Roskin thinks some of her clients may have been wait-listed in this way.
"The thing is you don't know what a wait list means," she says, "kids don't know." Maybe too many quarterbacks applied that year. Did they show enough demonstrated interest? Perhaps their applications just weren't strong enough. Or, the school wanted to soften the blow of rejection and gave them "courtesy wait lists"—a tactic sometimes used for students related to wealthy donors or who have alumni relatives. Who knows?
Katy Murphy is the president of the National Association for College Admission Counseling. She says the wait list "is purgatory for a kid, basically."
Increased use of the wait lists are part of the vicious admissions cycle. Acceptance rates are falling. That panics kids into applying to more and more schools, which drives acceptance rates further down. All of this lowers yield numbers and encourages colleges to use the wait list. "It's our own admissions march madness vortex," Murphy says.
School rankings fuel all this madness. Murphy says it's part of the increasing commodification of higher education—this idea that college is a product that will predictably deliver things like great jobs and happiness. The rankings establish a brand. They suggest some kind of quantification—the better the number, the higher the return on investment.
Murphy says the reduction of schools to numbers drives ambitious applicants to pursue a small group of elite colleges, not because they are the best fits, but because they are the most effectively branded. She says, "I think everybody would be better off if they didn't believe that there were only thirty colleges that were good colleges."
If that doesn't change, expect more kids to be stuck in admissions limbo on the wait list.
It's an impressive list of high quality television: The Sopranos, Six Feet Under, The Wire, Big Love, Deadwood, Eastbound & Down, Family Tree, Enlightened, Treme, early seasons of Boardwalk Empire and True Blood, plus mini-series like Band of Brothers, John Adams.
These are all of the HBO shows that will be made available next month to Amazon Prime customers.
To some, it will feel like a necessary perk, what with Amazon Prime membership costing more than it used to. To others, it's a farewell to productivity, because let's face it, this is a lot of television to watch. Just how long will it take you to get through all of this content?
Assuming you take no potty breaks, don't sleep, and eat in front of your laptop or television, it will take this long:
Thanks to the website tiii.me, which allows you to calculate how much of your life you've spent watching tv based on what shows you've seen, it will take a grand total of 21 days, 23 hours, and 30 minutes to blaze your way through all of the HBO content.
If you're an Amazon Prime member, maybe don't plan on doing much for the month of May.
Valeant, a pharmaceutical company, is trying to look good. It’s made an offer for Allergan, the company that produces Botox. Over the past couple of years, Valeant has bought up other pharma companies including Solta, Obaji and Medicis, makers of skin-smothing-lasers, creams and fillers. Valeant isn't looking to make more by increasing R&D, but you don’t have to wrinkle up your forehead to figure out why it wants to buy the company that produces Botox.
“They are clearly going to have a monopoly in the marketplace," says Dr. Jack Berdy, CEO of SmoothMed, a service that provides botox treatments in Manhattan. Berdy notes Valeant already bought the company that makes Dysport – a Botox competitor.
“I can’t imagine the company Valeant, who would look for economics in a takeover, maintaining both products in the marketplace," he said. "One of them would probably disappear.”
Along with a lot of jobs -- for some people, Valeant's offer is going to create stress (and wrinkles). Seamus Fernandez, an analyst with Leerink Partners, agrees. “That’s a fair conclusion,” he says.
Fernandez says the international market for cosmetic dermatology is worth billions every year. And with the potential for consolidating workforces, Valeant is trying to be efficient.
“Most doctors are pretty busy, they would much prefer to just talk to one person who could go through and update them on what’s new on all the products they use, rather than having to have a bunch of different sales people come in from each company,” says David Krempa, an equity analyst with Morningstar.
Fernandez says, unlike the wrinkles it fixes, the market for cosmetic dermatology is growing – at about 12 percent a year.
About one James Edward Franco:
An actor, yes. But also: A poet! A novelist! A filmmaker! And an artist.
Not so fast, says Roberta Smith, co-chief art critic for The New York Times. Some of Franco's photographs are on display at a gallery in New York, and Smith isn't impressed.
Franco "remains embarrassingly clueless when it comes to art," she writes in her review. "The deep content here, beneath the entitled narcissism, is a confused desperation that seems to drive Mr. Franco's pursuit of visual art."
She continues: "It's hard not to feel some sympathy for him, while also wishing that someone or something would make him stop."
More than 1,000 IRS workers who failed to pay their taxes still received performance bonuses.
In all, 28,000 tax workers with substantiated conduct issues collected $2.8 million in bonuses for 2011 and 2012.
Andrew Biggs with the American Enterprise Institute generally favors performance bonuses for federal employees. But, Biggs says, “it is difficult to have employees working for the IRS who didn’t in fact pay their own taxes. That undermines the credibility of the agency as a whole.”
The IRS is considering a policy change.
But in order to make conduct issues affect performance bonuses, the IRS must negotiate a new agreement with the National Treasury Employees Union.
The New York Police Department got a big lesson in social media this week. It created a Twitter hashtag – #myNYPD – to get people to tweet pictures of happy New Yorkers standing with smiling officers. But this being both New York, and social media, the NYPD didn’t get quite what it expected.
Not only did it backfire – now the hashtag has spread on Twitter to other police departments like Los Angeles and Chicago.
Twitter users sent in scores of pictures of New Yorkers who appear to be abused, beaten, even run over by officers. Some of the photos may be old or misleading, but the NYPD fell into a trap that has sunk many a social media campaign before it.
“Part of me is kind of incredulous. Didn’t they expect they would get this kind of backlash?” says Ann Handley, head of content at MarketingProfs, and co-author of Content Rules. “You can’t get people to talk about how great you are on Twitter.”
The NYPD could have learned something from McDonald’s' experience two years ago. It wanted people to send in nice comments with the hashtag “#McDstories.” They got something else entirely, says Howard Fencl, Vice President at the crisis communications firm Hennes Paynter Communications. “Trolls came out of the woodwork with ‘my brother found fake fingernail in his french fries, #McDstories,” he says. "People are sick of spin.”
Some companies have more success jumping into what everyone is already talking about on Twitter. After Colorado legalized marijuana, Ben & Jerry’s tweeted a picture of empty ice cream shelves, which went down well with Twitter users.
But if you’re big and important, the public might just be itching to knock you down a peg.
“The Police Department. McDonald's. You talk about taking it to the man, not every organization is ‘The Man’,” says Jay Baer, founder of the social media consultancy, Convince & Convert.
Baer says social media doesn’t create hate; it just uncovers it.
How much would your boss have to pay you to get you to quit your job?
Amazon’s Jeff Bezos offered the company’s full-time warehouse employees $2,000 to $5,000, depending on tenure, to quit. In a letter to shareholders, Bezos explained:
“The goal is to encourage folks to take a moment and think about what they really want. In the long run, an employee staying somewhere they don’t want to be isn’t healthy for the employee or the company.”
This deal is especially healthy for the company’s bottom line says Nancy Koehn, historian at the Harvard Business School. She says Bezos is taking a line from the Zappos playbook.
“It is as much a financial and strategic issue as it is an image or PR issue,” Koehn says.
She notes how difficult it can be to get rid of an employee that doesn’t fit in well with the company. If handled poorly, a lawsuit would be much more expensive than $5,000.
But don’t expect all employers to offer the same deal. Koehn thinks it’s unlikely to become a new trend in working America.
Rick Warren, author of the best-seller "The Purpose-Driven Life," is expanding his Saddleback Church from the Los Angeles suburbs to 12 global cities. Last weekend, a campus in Los Angeles joined Buenos Aires, Hong Kong, Manila and Berlin. Moscow, Tokyo, and Accra are among those coming soon.
Scott Thumma, an expert on mega-churches from the Hartford Seminary, isn't surprised: He says the megachurch is a global phenomenon. Of the world's top 20 megachurches, only one is in the U.S.
"If you just look at it in the United States, you see it as a suburban reality," he says. "It's kind of recreating a kind of small-town connectedness with people who have like values and interests," he says. Around the world, he says, that's "what we're all longing for, in the anonnymous urban setting."
Seoul is the world leader in mega-churches. Its Yoido Full Gospel Church boasts almost a half-million churchgoers per week. And it's not the only one.Top 20 Megachurches, Worldwide Rank Attendance Church Name City Country 1. 480,000 Yoido Full Gospel Church Seoul Korea 2. 75,000 Deeper Christian Life Ministry Lagos Nigeria 3. 75,000 Mision Cristiana Elim Internacional (Elim Central Church) San Salvador El Salvador 4. 70,000 New Life Church Mumbai India 5. 65,000 Onnuri (All Nations) Community Church Seoul Korea 6. 60,000 Pyungkang Cheil Presbyterian Church Seoul Korea 7. 55,000 Victory Metro Manila Manila Philippines 8. 50,000 Living Faith Church (Winner's Chapel) - main campus Lagos Nigeria 9. 50,000 Apostolic Church Lagos (Ketu) Nigeria 10. 50,000 Yeshu Darbar (Royal Court of Jesus) Allahabad India 11. 50,000 Nambu Full Gospel Church Anyang Korea 12. 50,000 Bethany Church of God Surabaya Indonesia 13. 50,000 Igreja de Paz Santarém Brazil 14. 45,000 Evangelical Cathedral of Santiago (formerly Church of Jotabeche) Santiago Chile 15. 43,500 Lakewood Church Houston U.S.A. 16. 42,000 Comunidad Cristiana Agua Viva (Living Water Christian Community) Lima Peru 17. 40,000 Redeemed Christian Church of God Lagos Nigeria 18. 35,000 United Family International Church Harare Zimbabwe 19. 35,000 Kwanglim (Burning Bush) Methodist Church Seoul Korea 20. 35,000 Word of Hope Church Quezon City Philippines
A lot of mega-churches now have multiple locations.
"You get to a point where it becomes a franchise model," says Thumma. "It's easier and more cost-effective to plant several campuses around town."
Like McDonald’s, the experience is the same wherever you go, including a variety of more-intimate worship settings in a single campus, with the pastor beaming in his sermon via closed-circuit.
Warren has an advantage for someone growing a church: worldwide fame. His book has been translated into 85 languages.
Here's a map of mega-churches in North America, based on a database Thumma has compiled.
Back in the day, Milwaukee was known as the Beer Capital of the World. But if there were ever a beer that truly represents the city, local Susie Seidelman says Pabst Blue Ribbon is it.
"Pabst is from Milwaukee, and so much of the brands authenticity, its draw, its appeal, its marketing has to do with Milwaukee," she says. "It’s right on the can, it’s all over the website, all over the promotional material. We really made this beer what it is."
Seidelman is part of a Facebook group called “Milwaukee Should Own Pabst Blue Ribbon”. It has more than 4,000 members.
Pabst might have been born in Milwaukee, but for the last four years it’s been headquartered in Los Angeles. It’s owned by investor C. Dean Metropolis. He’s the guy responsible for bringing Twinkies back.
The Pabst brand is worth a lot of money—anywhere from $500 million to $1 billion. Seidelman says coming up with that kind of cash would take a lot of people willing to part with their money.
“We would have the brewery be community owned by the city of Milwaukee, we would put the call out to hundreds of thousands if not millions of investors asking for small support in the form of purchased share.”
Local business owners like Jim Haertel are rallying around the movement. He has a special interest in Pabst.
“We have their former corporate offices. We have Captain Pabst’s old office, even his roll top desk, which we would gladly save for the president.”
Haertel says he had to fight to save many of the old industrial brick buildings at Pabst headquarters. He even opened a bar in one. He says he has space to accommodate the new Pabst if it comes back to Milwaukee.
“Pabst is certainly the first of the great Milwaukee brewers, Schlitz would share some of that fame. The two of them really duked it out over the years,” Haertel says.
But now Pabst owns Schlitzand Blatz and brands like Colt 45. And the company does all this without even brewing its own beer; it pays MillerCoors to do that. But Pabst does have one thing going for it.
“Pabst is still the largest American owned brewery," says Jim Kupferschmidt, who owns the Milwaukee Beer Museum.
He says that’s because MillerCoors and Anheuser Busch are both now owned by foreign beer makers. He says there’s a good reason beer companies are buying out competitors: “You want as much shelf space on the liquor store and in the tavern as you can possibly get.”
As for Milwaukee’s push to bring Pabst back, Susie Seidelman says she knows it’s a bit of a pipedream. But she says it’s not about the beer. In fact, she doesn’t even drink Pabst: “I’m more of a Miller High Life person myself.”
Seidelman says Pabst never should have left. She says this is about righting a wrong.
From the Marketplace Datebook, here's a look at what's coming up April 24:
Did you buy a dishwasher in March? The Commerce Department reports on orders for appliances and other durable goods.
It's Take Our Daughters and Sons to Work Day. Not a parent? Maybe it's Get Away From Your Coworkers' Kids and Take a Really Long Lunch Day.
If you're in Iceland you probably have time off to celebrate the first day of summer on Thursday. It's a public holiday.
Actress Shirley MacLaine turns 80.
And the focus is on traveling far. Really far. A three-day Humans to Mars Summit wraps at George Washington University.
Popular HBO shows like "The Wire" and "Big Love" will be available on Amazon Prime Instant Video soon. It’s the first time HBO has made its shows available to an online-only subscription streaming service.
While HBO shows like "The Sopranos" and "The Wire" have been highly coveted by streaming video companies, HBO has been reluctant to license them. In part, that’s because HBO didn’t want to cannibalize it’s cable TV business, said Paul Sweeney, an analyst with Bloomberg Industries.
“The reason they’re licensing their streaming content now is simply a realization that more and more consumers particularly younger consumers are online,” Sweeney said. “I think HBO said, ‘Listen we need to be part of that business.’”
The network isn’t giving Amazon new episodes of shows like"Game of Thrones." And not all titles -- like "Sex in the City" -- will be available on Amazon Prime. Regardless, this is a big win for Amazon in its competition with Netflix, said Brad Adgate, an analyst at Horizon Media.
“This gives Amazon a real shot in the arm and I think Internet streaming video is going to be the next product category war,” Adgate said. He adds the deal get more people to adopt of Internet TV.
The Hollywood talent agency William Morris Endeavor announced a big merger last December with the sports marketing firm IMG Worldwide.
IMG represents NFL stars, NBA players, World Cup skiiers and baseball players with multi-million dollar contracts.
"They've had to go out and raise $2.5 billion to finance this deal," says Sharon Waxman, the founder and editor-in-chief of entertainment site The Wrap, who has seen some new details about the merger. "This very ambitious acquisition of theirs of IMG -- which is the largest sports talent and events agency in the world -- is very much the minnow swallowing the whale."
Also revealed in the paperwork behind the deal? After the financing of this merger, WME will have some considerable debt racked up. They'll have to diversify their operations and find new revenue streams to grow their company. Waxman says agencies are putting a larger emphasis on events, signing athletes, and representing corporations.
And to drive even more cash flow into the company to help fund the debt, Waxman says WME may decide to go public -- which would be a big break from tradition.
"That would be very interesting to watch. Who wants to buy those shares, who wants to own a piece of a Hollywood talent agency. That's not been something that's been available to the investor public out there before."
You've probably heard about inflation, when prices rise for the goods and services you buy. But how much do you know about its evil cousin, deflation.
Deflation is when the average level of prices start to fall throughout the economy.
In order to explain, we will use Econodog, a small white Coton de Tulear, courtesy of Precious Pets in Manhattan, to play the role of the economy as we walk through the city.Precious Pets NYC
Econodog the Coton de Tulear helps us understand deflation
Like the economy, Econodog is responsible for pulling us along.
As we begin our walk, Econodog is giddy with joy. He is enthralled by cigarette butts and pigeons, and starts pulling very hard. In fact, Econodog is pulling so hard that he becomes inflationary. Inflation, of course, is when prices are rising. It happens when money is moving too fast and the economy is becoming hyperactive and flush with cash. People borrow, buy, and push up prices.
For Econodog, we pull back on the leash. For the economy in real life, the Federal Reserve does the same thing. It has a leash for money. That leash is called interest rates. The Federal Reserve will raise those rates if the economy pulls too hard. If borrowing becomes more expensive, people will think twice about throwing their money around, and they stop driving up prices.
As our walk progresses, a malaise befalls Econodog. Perhaps our walk has persisted for too long, or perhaps the rejection by the birds was too much to bear. Either way, at the corner of 51st and 2nd Ave, Econodog has become deflationary. He has stopped. He will not pull us anywhere.
WRONG. HE’S NOT CUTE. DEFLATION IS NOT CUTE.*
While you might think that things getting cheaper in an economy is good, deflation is secretly vicious**.
When prices fall, it’s usually when an economy is weak. Unemployment is persistent, so you find workers willing to work for lower wages. If you're a business, that's small comfort because the weak economy also means people aren't buying your stuff. So you offer price cuts to get people to buy. So prices start to fall.
And here are Econodog’s hidden fangs: "When prices start to fall, people realize prices are falling. Then they realize it's better to spend money tomorrow, when things are cheaper, than spend money today," explains economist Justin Wolfers. So people start to spend less. Which contributes to weak demand that caused the deflation to begin with. "It's self perpetuating; deflation leads to lower growth leads to deflation leads to lower growth. It’s a deflationary spiral."
And unfortunately, we can’t use the leash like we could when Econodog was being INflationary. When Econodog is deflationary, he is being unruly in the opposite direction. He isn’t moving too fast and pulling too hard, he's just sitting there. Sluggish. Like a furry lump. Very frustrating: if we want Econodog to pull us along, he needs to move. But pulling on the leash won’t help. Neither shaking the leash nor throwing it will work. The dog won’t move.
That's deflation. Money is moving slowly, prices are falling, not rising. You can relax the leash as much as you want. In the case of the Federal Reserve, that means you can give as much slack as you can on interest rates, taking them down to near zero. But sometimes things are bad enough that this doesn't make the economy move. There's an expression for this – "you can't push with a string," or in this case, a leash.
YOU MUST PLAY MIND GAMES WITH IT
So there we are, on the corner of 2nd and 51st, Econodog has come to a halt. Trainer Bernadette Ambrosioni has an idea. We are near Econodog's home, so we look towards home and tell Econodog that we are going home.
Wanna go home? Wanna go home? Let’s go home!
"Shifting expectations can be a great way of solving deflation," says Wolfers. Seriously!
Yes, when it comes to the real economy, you have to fix the underlying problem of a slow growth, but you also have to change people’s minds.
The reason is that if people expect deflation, they cause deflation. Remember, if people expect things to be cheaper in the future, they put off purchases. As a result people start to spend less, which further causes deflation. Spend less, economy shrinks, prices fall, spend less. That's the vicious cycle.
So, you change people’s expectations. You tell them you're printing money, you tell them you're going to create inflation, lower interest rates, and stimulate the economy. In fact, this is exactly what Japan is in the middle of doing.
How does this actually work? Wolfers says think of it from a business owner's perspective. "If you can convince shopkeepers that you want to bring inflation back to the economy, then they'll expect competitors will raise their prices tomorrow, therefore there's no reason for me to cut my prices today."
And, ideally, people would start spending today instead of waiting for tomorrow.
Japan dealt with deflation for more than a decade and is only now fully exiting that trap. Europe is straddling on the edge, and the U.S. is just one percentage point above deflation territory. Many economists are predicting we'll pull up just in time, but for now, the possibility is nipping at our heels.
** In real life this dog is adorable and we love him and he is not vicious.
Apple is expected to report mostly flat revenues from a year ago, when it releases earnings after the bell Wednesday. It wasn’t so long ago, of course, that Apple’s stock was a rocket ship, seeing the kind of exponential growth you find in tiny startups. Another tech company used to be like that: Microsoft.
David Einhorn, a pretty big name among activist investors, made headlines yesterday with his “bubble basket” and for saying that there’s now a consensus that there’s a tech bubble.
Hollywood is no longer the go-to place for shooting feature films and TV shows. Just eight percent of big budget Hollywood films were made in LA in 2013, down from 65 percent in 1997. And from 2005 to 2013, California's share of one-hour TV series dropped from 64 percent to 28 percent.
David Einhorn, a pretty big name among activist investors, made headlines yesterday with his “bubble basket” and for saying that there’s now a consensus that there’s a tech bubble.
Activists investors buy a large chunk of stock in a company with the goal of pressuring management to make changes. At the Active-Passive Investor Summit in New York, Einhorn said his “bubble basket” is a group of stocks he’s shorting, or betting that the price will go down. While he didn’t name companies, we can assume there are tech stocks in that basket. Einhorn is betting that some stocks might fall by as much as 90 percent.
Activists investors also raised bigger issues. Jeff Ubben, a notable west coast hedge fund investor, called into question executive compensation at the tech companies. He singled out Google’s Eric Schmidt and his $100 million pay package in 2011, which Ubben thought was outsized. Ubben noted that same year, JP Morgan Chase’s Jamie Dimon was “hauled over the coals” for getting paid $20 million.
The tech companies haven’t responded to the criticism but upshot from the summit was that tech companies need to be put under more scrutiny.