Marketplace - American Public Media

With oil prices down, small companies feel the squeeze

Wed, 2015-01-14 13:33

We’ve been hearing a lot about crashing oil prices lately. Crude oil is selling for $46 barrel today compared to over $90 a year ago. The price drop is great news for consumers and terrible for oil companies. But not all oil companies -- or oil fields -- are created equal. When oil prices drop, size and location matters.

McAndrew Rudisill knows this. He's the CEO of Emerald Oil, a small, Denver-based oil and gas company that only operates in the Bakken shale of North Dakota. He's got about 50 wells -- minuscule compared to giant oil companies like Continental Resources, with 1000 wells in the Bakken alone and more in places like Colorado and Oklahoma.

Small companies like Emerald are likely to feel the impact of dropping oil prices first, says Niles Hushka, CEO of KLJ, an engineering firm in Bismarck. It is harder for smaller firms to quickly get loans and additional financing. With fewer wells, they also have less money coming in to ride out tough times. Companies in the Bakken need a lot of money to keep drilling. New wells can cost up to $10 million each.

Another factor that makes smaller companies more vulnerable is a lack of geographic diversity. Larger companies, Hushka says, "will have resources that are spread throughout a number of oil plays and therefore they’re much better protected" than small companies who may only have wells in the Bakken.

North Dakota oil companies have to pay much higher transportation costs than companies in Texas or Oklahoma because they are farther from Gulf Coast refineries and must transport much of their oil by train, which is costlier than pipelines. The price per barrel doesn't reflect that cost, so when you hear that oil has dropped to $50 per barrel, oil companies in North Dakota are only getting about $37.

Geography within the Bakken matters, too, says Niles Hushka: "If you're in one of North Dakota’s hot spots, you’ve got a great big smile on your face."

That's because in the heart of the Bakken, like McKenzie or Dunn Counties, it's possible to drill new wells and still break even with prices in the low $30s. In fact, that’s where most of the drilling rigs have moved in recent months. But in the more marginal areas, like Divide County, where operating costs are higher and wells don't produce as much oil, it's harder to justify the cost of drilling a new well.

As a small company, Emerald Oil can't afford to drill a ton of new wells next year. That's because a lot of oil gets produced in a well's first two to six months, so Emerald needs that peak production to come when prices are higher, at least over $85 per barrel.

But they'll still drill a few new wells in order to hang onto their mineral leases In North Dakota, companies have three years to drill a well before their mineral lease expires, assuming their lease is with a private mineral rights owner and not the government.

But other small companies are stopping entirely. Butch Butler is president of a Colorado-based oil company called Resource Drilling that is even smaller than Emerald. Butler jokes that he is the company's landman, geologist, drilling engineer, operations engineer and whatever else needs to be done.

Butler has just one well in North Dakota, and a few months ago, the plan was to drill another two. When prices dropped, Butler put that plan on hold.

Butler's been in the business long enough to have acquired a gallows humor about oil prices. Both times I talked to him in the past two months, he joked that things were bad, but he wasn’t quote “slitting his wrists” yet.

"I’ve been in this business 38 years," he says, "and truly most of that time has been not so good."

He's come to expect dramatic swings and slides, so he doesn't seem too fazed by the recent price drop. It's a good attitude for an oilman to have.

This story was produced by Inside Energy, a public media collaboration focused on America's energy issues.

Obama promotes Internet independence for communities

Wed, 2015-01-14 13:11

President Obama spoke Wednesday in Cedar Falls, Iowa, about his proposal to encourage more municipalities to set up their own high-speed fiber-optic networks. Yet plenty of hurdles remain to creating fast and reliable Internet connections, including infrastructure and regulations.


JPMorgan CEO says 'banks are under assault'

Wed, 2015-01-14 13:11

JPMorgan Chase posted disappointing fourth quarter earnings today, missing analyst expectations. During a call with reporters, CEO Jamie Dimon declared that “banks are under assault," and that it now has five or six regulators coming after it on different issues, compared to one or two previously.

Marcus Stanley, policy director of Americans for Financial Reform, says Dimon has it backward – regulators and Congress are under assault from the financial lobby due to ongoing efforts to repeal various elements of the Dodd-Frank financial reforms passed in 2010.

Who’s right?

Both sides, says John Coffee, a Columbia Law School professor. In 2014, many regulators took a stricter attitude toward banks, including state-level overseers. And while the financial crisis made it clear we need better bank oversight, Aaron Klein of the Bipartisan Policy Center says he thinks that consolidating regulators would save money for both banks and taxpayers. 

JPMorgan's Jamie Dimon says banks 'under assault'

Wed, 2015-01-14 13:11

JPMorgan Chase posted disappointing fourth quarter earnings today, missing analyst expectations. During a call with reporters, CEO Jamie Dimon declared that “banks are under assault," that it now has five or six regulators coming after it on every different issue, compared to the old days it dealt with one or two. Marcus Stanley, the policy director of Americans for Financial Reform, thinks Dimon has it backwards, that it’s regulators and U.S. Congress who are under assault from the financial lobby, due to its ongoing efforts to repeal various elements of the Dodd-Frank financial reforms passed in 2010.

So who’s right?

Actually, both sides, says John Coffee, a professor at Columbia Law School. In 2014, many regulators took a stricter attitude toward the banks, including state-level overseers. And while the financial crisis made it clear we need better bank oversight, Aaron Klein with the Bipartisan Policy Center, thinks consolidate regulators would save money for both banks and taxpayers. 

The Razzies: Lampooning Hollywood for 35 years

Wed, 2015-01-14 12:12

Sylvester Stallone has been nominated for 30 Golden Raspberry Awards and won four. He's not a fan. Neither is Michael Caine, who called the awards "the pustule on the butt of Hollywood” when he was nominated in 1980 for both "Dressed to Kill" and "The Island."

This celebrity aggravation wouldn’t be possible without John Wilson.

Wilson started the awards, which honor the worst of the worst in film each year, 35 years ago in his Los Angeles living room. The nominees and winners are now reported on throughout the world.

In his interview with Kai, Wilson shares the origin story of the awards and talks about the time Sandra Bullock showed up to accept her Razzie in person (Halle Berry did too). 

Here are two tidbits that didn’t make the radio broadcast. First, we asked Wilson if the Razzies have ever been used to promote a film:

It’s interesting. The ultimate Razzie movie is probably "Showgirls," the one that Paul Verhoeven did. I loved the quote, "It’s the only movie about Las Vegas that’s actually more tasteless than Las Vegas." [Wilson lives in Las Vegas] He showed up at the ceremony and accepted his award, but MGM, when they saw the reaction to it they tried to rerelease it and turn it into another "Rocky Horror Picture Show" and make it an interactive bad movie where you would come dressed as one of the dancing [strippers] and yell. It didn’t work, but yeah, I actually have in my storage a poster that says "Winner of an unprecedented seven Razzie Awards."

 We also asked Wilson if he views the Academy Awards differently after the Razzies have been the anti-Oscars for 35 years:

I’m way more cynical. I grew up with two parents who were Depression-era kids who loved movies and they passed that on to me. I actually as a child used to stay up and watch the Oscars in Chicago when I was very young, and I do love the Oscars. But they've gotten to the point where they’re so huge and so self-involved and so smug and so …  all of the things that an award that means something probably shouldn't be. And we’re still down here with our peashooter going: [Wilson blows a raspberry.]

This year’s Razzie Award nominations:

Worst Picture

  • "Kirk Cameron's Saving Christmas"
  • "Left Behind"
  • "The Legend of Hercules"
  • "Teenage Mutant Ninja Turtles"
  • "Transformers: Age of Extinction"

Worst Actor

  • Nicolas Cage, "Left Behind"
  • Kirk Cameron, "Kirk Cameron's Saving Christmas"
  • Kellan Lutz, "The Legend of Hercules"
  • Seth MacFarlane, "A Million Ways to Die in the West"
  • Adam Sandler, "Blended"

Worst Actress

  • Drew Barrymore, "Blended"
  • Cameron Diaz, "The Other Woman," "Sex Tape"
  • Melissa McCarthy, "Tammy"
  • Charlize Theron, "A Million Ways to Die in the West"
  • Gaia Weiss, "The Legend of Hercules"

Worst Supporting Actress

  • Cameron Diaz, "Annie"
  • Megan Fox, "Teenage Mutant Ninja Turtles"
  • Nicola Peltz, "Transformers: Age of Extinction"
  • Brigitte Ridenour, "Kirk Cameron's Saving Christmas"
  • Susan Sarandon, "Tammy"

Razzie Redeemer Award

  • Ben Affleck
  • Jennifer Aniston
  • Mike Myers
  • Keanu Reeves
  • Kristen Stewart

Worst Supporting Actor

  • Mel Gibson, "The Expendables 3"
  • Kelsey Grammer, "The Expendables 3," "Legends of Oz," "Think Like a Man Too," "Transformers: Age of Extinction"
  • Shaquille O'Neal, "Blended"
  • Arnold Schwarzenegger, "The Expendables 3"
  • Kiefer Sutherland, "Pompeii"

Worst Director

  • Michael Bay, "Transformers: Age of Extinction"
  • Darren Doane, "Kirk Cameron's Saving Christmas"
  • Renny Harlin, "The Legend of Hercules"
  • Jonathan Liebesman, "Teenage Mutant Ninja Turtles"
  • Seth MacFarlane, "A Million Ways To Die in the West"

Worst Screen Combo

  • Kirk Cameron and his ego, "Saving Christmas"
  • Seth MacFarlane and Charlize Theron, "A Million Ways to Die in the West"
  • Any two robots, actors (or robotic actors), "Transformers"
  • Cameron Diaz and Jason Segel, "Sex Tape"
  • Kellan Lutz and either his abs, pecs or glutes, "Legend of Hercules"

Worst Screenplay

  • "Kirk Cameron's Saving Christmas"
  • "Left Behind"
  • "Sex Tape"
  • "Teenage Mutant Ninja Turtles"
  • "Transformers: Age of Extinction"

Worst Remake, Rip-off or Sequel

  • "Annie"
  • "Atlas Shrugged: Who Is John Galt?"
  • "The Legend of Hercules"
  • "Teenage Mutant Ninja Turtles"

As consumer prices fall, we may be buying more with less

Wed, 2015-01-14 11:11

Shoppers disappointed economists last month. Retail sales fell 0.9 percent, while experts expected an increase. But those Commerce Department numbers might not tell the whole story. Consumer prices have been falling, so we might be buying more things for less money. 

Shazam CEO: Introducing visual 'Shazaming'

Wed, 2015-01-14 11:05

Before Apple came up with the App Store, Shazam was doing what it still to this day does best: helping people identify the music they are listening to. But, back in 2002, that didn't exactly work on flip phones the way it does on an iPhone or Android these days.

"Shazam was mobile before mobile was cool"

"We like to say 'Shazam was mobile before mobile was cool,'" says Rich Riley, Shazam CEO. "When it was originally launched, you would basically record a sound clip, text that to Shazam systems and it would return with the name of the song and you would pay like a dollar for that text."

Four years later came the iPhone.

"It took about 10 years to do the first one-billion Shazams and now we do a billion Shazams every 45 days or something like that," says Riley.

Top Shazam'd Songs of All Time: 15 million+

However, Shazam is not just about music anymore. Users can also Shazam television shows, movies and advertisements. The company also recently received $40 million from Mexico's Telecom mogul Carlos Slim for continued expansion.

"Most people now have this incredibly powerful device in their pocket. It’s only getting faster, it’s only getting more powerful and it’s the way they are going to want to connect to things around them," says Riley.

The company will soon announce "visual shazaming." Users will be able to Shazam things like print ads, quick response codes and packages.

"Say if it’s a DVD, for example, you can push Shazam and watch the full trailer," says Riley.

Shazam in five words or less

"Connect people to the world," says Riley.

Rich Riley's Bad Day at Work Playlist

"Blank Space" by Taylor Swift is the song currently stuck in Riley's head the most, he says, because his kids are obsessed with it.

Latest Charlie Hebdo will barely be distributed in US

Wed, 2015-01-14 11:00

The first issue of Charlie Hebdo published after last week's attacks hit newsstands in France today. The 3 million copies essentially sold out within hours.

Would-be readers in the U.S. will likely  have a tougher time finding a copy. They also might want to brush up on their French.

The magazine's distributor in the U.S. and Canada says just 300 untranslated copies will be sold here.

They'll arrive Friday morning on an Air France flight, CNN says.

Charlie Hebdo’s challenge to old media

Wed, 2015-01-14 10:20

It’s yet another sign of the growing distance between old and new media.

Many of the established stalwarts — including The New York Times, NBC News, CNN and NPR — declined to publish an image of the cover of the latest issue of Charlie Hebdo,  the one featuring a  caricature of the prophet Mohammed holding a sign reading ‘Je Suis Charlie’ under the words ‘All is Forgiven.’ The cover, of course, is a response to the terrorist attack against the satirical magazine one week ago that killed 12 people, including its editor and five of its top cartoonists.

Most digital news outlets, meanwhile, rushed the image onto the Internet yesterday, after the magazine released it a day ahead of publication. The Daily Beast, Huffington Post, and were among the sites prominently displaying it.

“We didn't even consider not publishing the new cover,” says Max Fisher, director of content at the news site Vox. “These cartoons have major news value as they are an important part of this story, so we feel it's part of our jobs to provide them to readers.”

Marketplace editors determined that the cover was of significant enough news value to warrant publication on

Pascal Le Segretain/Getty Images

The split isn’t absolute:  The Washington Post and The Wall Street Journal used the cover, for instance. But many old-media editors argued that the decision not to publish came down to a matter of taste.

“Many Muslims consider publishing images of their prophet innately offensive and because we do not normally publish images or other material deliberately intended to offend religious sensibilities, we have refrained from publishing these images of Mohammed,” a spokeswoman for The New York Times told Marketplace.

That decision was controversial within the Times itself.

“The new cover image of Charlie Hebdo is an important part of a story that has gripped the world’s attention over the past week,” wrote Margaret Sullivan, the newspaper’s Public Editor in a piece published online Wednesday morning. “The cartoon itself, while it may disturb the sensibilities of a small percentage of Times readers, is neither shocking nor gratuitously offensive. And it has, undoubtedly, significant news value.”

What’s behind the split?

“There’s no question that there is evidence of a digital divide between legacy news brands and digital first news in publishing the cartoons,” says John Avlon, editor-in-chief of The Daily Beast. “I think the primary reason is due to the more bureaucratic, culturally cautious nature of older news brands versus the more aggressive and, in this case, principled stand that the younger generation of news brands felt free to pursue.”

What do the experts think?  “Personally, I think that this new Charlie Hebdo cover easily passes the test for a newsworthy image,” says Bruce Shapiro, executive director of the Dart Center for Journalism and Trauma at Columbia University. “Come on:  How Charlie Hebdo grapples with the murders of its editors and artists is of a matter of unquestionable political importance and cultural significance. It is also the truest test of satire--finding an image that is potent, compassionate and relevant in the face of unspeakable horror. This cover is news, pure and simple.”

After an initial print run of three million copies, partly funded by Google, Charlie Hebdo has gone back to press. The magazine is being distributed in 25 countries and translated into 16 languages, including Arabic. Charlie Hebdo’s normal print run is some 60,000 copies. 

Quiz: Passing on a pledge of allegiance

Wed, 2015-01-14 06:03

President Obama endorsed student data-privacy pledge and proposed data protections during a speech at the Federal Trade Commission.

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PODCAST: A bittersweet future for chocolate

Wed, 2015-01-14 03:00

We knew lower oil prices would depress the government's calculation of retail sales for last month. But taking out oil prices along with food and cars, retail sales still fell four tenths of a percent and that is a nasty surprise. More on that. Plus, college sports' governing body has its annual convention starting today in D.C. The White House has asked NCAA officials to come in and talk about a range of subjects including academic achievement by student athletes. Now that the college football championship game has come and gone, it could be time for a sharp shift to matters of policy. And with Valentine's day a week away, we take a look at the factors behind what could be a shortage of chocolate.

Not all taxes are created equal

Wed, 2015-01-14 02:00

A new study published on Wednesday finds that local taxes are hitting low-wage earners much harder than wealthy individuals.

According to the Institute on Taxation and Economic Policy, the poorest 20 percent of Americans pay an average of 10.9 percent of their income in state and local taxes, while the top one percent pay 5.4 percent. 

Meg Wiehe is the institute’s state tax policy director. This is not only bad policy, she says it’s bad for state budgets.

"That's because the more income that goes to the wealthy, and the lower a state's tax on the wealthy, the slower the states revenue could grow over time," says Wiehe.

The Institute on Taxation and Economic Policy

The report also found that so-called “low tax” states, like Washington, Kansas, Texas and Florida, actually place the highest burden on the poor.

The reason behind this imbalance, claims Wiehe, is due to the fact states and cities rely heavily on sales and property tax, and specific excise taxes on things like gas, cigarettes and alcohol.

ITEP claims that this creates a “regressive” tax structure, which is a bad idea from a policy perspective because it means the less you make the more you pay.

But not everyone thinks all regressive taxes amount to bad policy.

“The purpose of it is as a user fee for local public schools and local public services like police. So state and local tax systems are not supposed to be progressive,” says Economist Chris Edwards with the Cato Institute.

Edwards says the Federal income tax system does tax wealthier people at higher rates, which is the appropriate place for these kinds of graduated rate structures. He also claims the report ignores the benefits of low taxes on competitiveness and job creation, all of which benefit the poor and middle class.

Just in time for Valentine's, a shortage of chocolate

Wed, 2015-01-14 02:00

Valentine's Day is a month away, but stores have been hawking hearts and stuffed animals since the day after Christmas. But lest you forget, here's a friendly reminder that the holiday is actually about showing your appreciation for the one you love ... by giving them chocolate. 

But is our increasing demand for chocolate, paired with a shortage of resources to grow it, endangering the sweet treat? Mark Schatzker thinks so. He's a contributing writer for Bloomberg Pursuits magazine, and author behind "Chocolate: can science save the world's most endangered treat?"

Click the media player above to hear more.

After big game, NCAA grapples with student-athlete pay

Wed, 2015-01-14 02:00

The NCAA—college-sports’ governing body—has its big annual convention in Washington, D.C., this week. Now that Ohio State has won the first-ever national college-football championship against the University of Oregon, and the new post-season playoffs have proven to be a ratings hit on ESPN, the NCAA will be talking about ways to let some schools increase financial support for scholarship athletes.

The NCAA is facing increasing pressure from a college-player union, and antitrust lawsuits, to loosen the rules that limit direct compensation to student-athletes, and guarantee instead that a big share of revenue from top-earning sports teams flows to university athletic departments and the million-dollar-plus coaches they employ.

Click the media player above to hear more.

The NCAA—college-sports’ governing body—has its big annual convention in D.C. this week.  Now that the college-football championship between Oregon and Ohio is over, and ESPN’s enormous ratings are in one of the things the NCAA will be talking about is whether to increase benefits to college athletes. The NCAA IS facing increasing pressure from a college-player union at Northwestern,  and antitrust lawsuits to increase financial benefits to players in the most lucrative sports.   

Wall Street's earnings report parade

Wed, 2015-01-14 02:00

The volatile energy sector is causing some headwinds for banks right now, which lead some to wonder if it would rain on the earnings reports due from major banks this week for the fourth quarter of last year.

For the big banks, there’s no storm yet, but there are clouds on the horizon. 

Here’s the problem for the JP Morgans of the world: they made loans to oil producers, and their suppliers. 

If oil prices stay low, “The effect will come in two waves,” says Charles Peabody, a banking analyst and partner at Portales Partners. “The first wave will be a slowdown in loan growth.”

Then, if oil prices don’t rise over the next year, Peabody says, there’ll be a wave of loan defaults.

But here’s the thing: the low oil prices will help the consumer banking business. Consumers will have extra cash on hand, while gas prices are low.

“They may be able to spend more, or just have the money to pay back their loan,” says Brian Klock, a bank analyst and managing director at Keefe, Bruyette & Woods.

And Klock says we may very well see a bulge in big bank earnings from consumer spending, before the losses from the oil patch kick in. 




An unexpected drop ends a strong year for JPMorgan

Wed, 2015-01-14 01:30
7 percent

That's how much JPMorgan Chase's profit dropped in the fourth quarter, as reported on Wednesday. The decrease was unexpected, but they still finish 2014 with a reported $21.8 billion, the highest ever annual profit for the company.


That's how low the price of Brent Crude got Tuesday. Goldman Sachs predicted the freefall will finally stop at $42 a barrel, but Quartz says it's possible we might hit the $32 low point of December 2008.

$300 million

That's how much online craft and vintage market Etsy is looking to raise in its upcoming IPO. That's a lot of hand quilted tea cozies. It could be the largest IPO for a New York tech company since 1999. 


The average tuition and fees students at two-year colleges for the 2014-2015 academic year, or about a fifth of those students total budget, when transportation, supplies, housing and other costs are considered. According to the Washington Post's Wonkblog, those additional costs will create a much higher barrier to entry for students than President Barack Obama's free community college plan suggests.

5,700 rupees

That's how much Samsung's smartphone, the  Z1 handset, goes on sale for in India on Wednesday. As the BBC reports, the phone is a notable departure from Android, as this is the first phone that uses Samsung's own operating system called Tizen.

16 billion

The total page views Buzzfeed got in 2014. Let that sink in for a second

The economics of Woody Allen and Amazon

Tue, 2015-01-13 14:50

The Tuesday announcement was a showstopper: Woody Allen will produce his first television series. His distribution partner: Amazon Studios.

It came on the heels of a big weekend for Amazon, which won its first two Golden Globe awards for the series "Transparent."

Here's how the 79-year-old Allen characterized the deal in a written statement: "I have no ideas, and I'm not sure where to begin."

Nevertheless, in its latest move to challenge the streaming dominance of Netflix, Amazon has ordered a full season of whatever show Allen comes up with.

This rivalry could be good for Hollywood.

"The dynamics have changed rapidly in the last several years," says Steve Ennen, president of entertainment research firm Centris. "And that means the consumer has a greater ability to find ... quality content of their choosing through digital distribution. And it's starting to show in the numbers."

Here are a couple of those numbers:


That's how many new or returning original series Netflix will release this year.

$100 million

That's how much Amazon spent on original content in just one quarter of 2014.

"That's part of the mission of these types of companies. Investment in good original content has a lot of value for them," Ennen says.

Andrew Wallenstein, co-editor-in-chief at Variety, says the investment has been paying off.

"It was just three or four years ago where the notion of getting the kind of quality entertainment you get from broadcast or cable on the Internet was really almost laughable," Wallenstein says.

Still, the vast majority of content being watched on streaming services remains shows from traditional TV, even as those traditional channels see their audiences abandon them for streaming services. Wallenstein says those dynamics could mean networks may reconsider their willingness to sell older content to Netflix.

"They're making money from Netflix, good money, by licensing their shows. But if it hurts their own network ratings, you may see a dramatic pull-back at some point," Wallenstein says.

That's further incentive for streaming sites to make their own content. Netflix already has two critically praised shows: "House of Cards" and "Orange Is the New Black." But it made less of an impact with the $90 million "Marco Polo" that debuted at the end of 2014 with much fanfare but few positive reviews.

Meanwhile, Amazon has been getting critics' attention with "Transparent."

"Amazon is starting to come up with content that rivals Netflix," says Wedbush Securities analyst Michael Pachter, who keeps close watch on the streaming world.  Competition for high-quality shows could set off a bidding war in Hollywood, he says. With more stars in the mix, writers, directors and actors could be seeing bigger paydays.

"Amazon very much wants to cut into the Netflix market share. And Amazon has a much bigger checkbook," Pachter says.

That ultimately could mean that everyone in the entertainment game could be paying more for content, Pachter says.

Stay tuned. Or stay streaming, that is.

Do workplace wellness programs work?

Tue, 2015-01-13 11:57

Among the nation’s largest employers, wellness programs are expected to double this year according to Towers Watson.  These programs often use financial incentives and penalties to encourage workers to get healthy.  

Many healthcare observers say there is little evidence this $6 billion worker wellness industry does much to improve health or save money.

So why then are employers flocking to something with little reliable data?

“We suspect that companies are making money on them, otherwise they wouldn’t make plans to increase the program,” says Jill Horwitz, a law professor at UCLA.

Horwitz says the challenge is to identify those employees who would benefit from help addressing their health problems.

In the meantime several lawsuits are challenging the legality of wellness programs as financial penalties against workers are climbing.

Aetna raises its minimum wage ... who's next?

Tue, 2015-01-13 11:52

Aetna’s raising its minimum base pay to $16 an hour and improving its health benefits starting in April 2015. It's a massive raise for some workers, generally in customer service and billing positions. 

But is this a sign that wages are preparing to rise for low income workers across the economy? Not necessarily.

Aetna, as a healthcare company, sees a future in which it is increasingly consumer facing. And yet, the turnover rate industry wide for customer service employees is around 30 percent.  The company is investing to improve morale, reduce that turnover rate and attract high quality employees.  

Bidding for blood, the Priceline way

Tue, 2015-01-13 11:20

For hospitals, blood is a core commodity. 


“It’s not like if you run out of milk you’re fine, we’ll go without milk,” says Chris Godfrey. “If you run out of blood, there are lives at risk, so the stakes are very high.”


Most hospitals rely on regional blood centers, which is why Godfrey started Bloodbuy. It’s like Priceline, but for blood products – a cloud-based platform connecting supply with demand in a multibillion-dollar industry.


Blood complexities


Managing a blood supply is more complex than managing hospital products like morphine or pain pills. Two main factors make blood a tricky business:


  1. Blood products can expire quickly: While red blood cells have a shelf life of 42 days, platelets last only five days before they need to be tossed.
  2. Blood supply varies greatly by region: Blood donations in Des Moines, Iowa, might be high, while in Houston there may be shortages.


“You have blood centers on the supply side and hospitals on the demand side,” Godfrey says. “So we act as a technology backbone that sits in between them and connects everybody.”


Where blood buyers and sellers unite


Like Priceline, Bloodbuy uses a series of algorithms that match a hospital’s needs with what’s available for the best deal. And the suppliers, not the shoppers, pay a fee to list what’s available. So far, there are users in six states.


Mike Dossey of John Peter Smith Hospital in Fort Worth, doesn’t use Bloodbuy, but says he can see how the service could save blood, and money, by making availability and prices more transparent across the country.


“Because it’s such a rare commodity, and you’re asking people to donate their precious blood, you don’t want to waste any of it,” he says. “We spend just under 4 million dollars a year on blood products.”


Today, a hospital pays from $170 to $300 for a pint of blood.


In a pilot program, Bloodbuy’s technology saved Texas Medical Center in Houston more than 20 percent on blood expenditures.


Dossey with John Peter Smith Hospital says there are risks to using the Priceline model.


“It might also affect your buying power with your current vendors if you’re using less of their products and going somewhere else,” he says.


Maintaining a good relationship with the blood bank in town is crucial, Dossey says, when there’s unexpected trauma.


“You could have a 10-car pileup out on the interstate and need those products swiftly,” he says. “And having that relationship with our vendors is also key to getting those products here when you need them.”


Both Dossey and Godfrey say they hope easier access to prices and inventory for hospitals will help even out supply and demand so blood can, yes,  circulate better.