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Bye Bye Blockbuster (Who Knew They Still Existed?)
The last 300 company-owned Blockbuster stores are closing and I, for one, am laughing really hard. And no, it’s not because I forgot to return a 15 year-old video and now my $400 thousand late fee won’t be collected. It’s because in the annals of corporate history, the schmucks who ran Blockbuster were greedy morons who will go down in history as a case study in total strategic cluelessness.
I am not laughing really hard that 2,800 people will be out of work- that’s sad. Though I must say, I find it hard to believe those poor folks thought there was still much of a future in brick and mortar video rental businesses in 2013, A.D. I urge them all right now to avoid sending their resumes to the last Barnes and Noble left in town.
But back to the corporate idiots. First and foremost among them is Viacom which bought Blockbuster for $8.4 billion back in 1994. Dish Network would shell out $320 million a couple of years ago to buy the bankruptcy-riddled company. Let’s put those numbers in relief. $8.4 billion versus $.3 billion. That puts the idiots at Viacom right up there with Rupert Murdoch’s trendy acquisition of My Space for $580 million which he would end up selling six years later for $30 million.
So what were the major mistakes? Oh, not much- other than failing to anticipate the major consumer and technological trends of the 21st century. Like digital streaming. Like the concept of on-demand viewing. In 2000, Reed Hastings, the founder of Netflix, offered to merge with Blockbuster and the video rental store executives basically laughed him out of their offices. In 2002, Blockbuster executives were still unsure of the veracity of this thing called the Internet. A “niche” market, they called it.
Viacom’s idea of remaining competitive against new-fangled competitors like Netflix was to create- and this is really original- a video rental business that would ship directly to consumers! Oops, day late and a dollar short. By the way, showing they now understand the new trends of the past 20 years, Dish network just announced they are also killing off the Blockbuster video-by-mail service, which most people also did not know still existed.
But mostly, Blockbuster sucked because they put really cool, independent, often family-owned video rental stores, out of business. They replaced neat, eclectic movie titles at the indie’s with mass-marketed crap. They also sucked because whatever family fun was to be had hitting the neighborhood Blockbuster on a Friday night, was a huge and expensive pain-in-the-ass by Tuesday morning, when you realized you’d forgotten to return the videos on Monday and now ended up owing pretty much the price of the original rentals in late fees. And then you had to, like, drive an actual car through snow storms and monsoons to return said late videos.
At least the nice Blockbuster employees knew their cinema! Oh, that’s right. Most had no clue about the motion picture industry. Well, as you were checking out paying last week’s late fees and about to incur the following week’s penalties, you could also pick up overpriced bags of popcorn, Twizzlers and Raisinets. That was something.
But we really do have a debt of gratitude to pay to Blockbuster. Turns out, Netflix founder, Hastings, forgot to return his copy of Apollo 13 to Blockbuster way back when and owed some $40. It was his fault but he felt so stupid about it that he purposely avoided telling his wife about the late charge. He started thinking about that and found it insane he was willing to compromise the integrity of his marriage over a video store late fee. That same day he went to the gym and realized he was paying about $30 a month for unlimited use of the workout facilities.
Hey, now there’s an idea, he thought- what if somebody rented videos by mail with unlimited due dates and no late fees?
Netflix now has over $3.5 billion in annual revenues. And though they initially botched their transition from a mostly mail-delivered service to a streaming model, they were obviously savvy and smart to see the digital writing on the wall in the first place, and now with the creation of their own content like the Emmy-nominated “House of Cards,” they show they are creative too.
And that’s the difference between those who at least try to envision the future- and those who don’t.
Stock Market Record! Congrats- You’re Back to Zero!
A lot of happy headlines today as the Dow Jones Industrial Average climbs to heights never before seen. I checked my retirement accounts and I am, indeed, doing nicely. But compared to what?
Compared to 5 and half years ago- we’re now back to where we started. Compared to ten years ago, stocks have averaged only a .6% increase in value. And for giddy investors there’s always this helpful MarketWatch headline: Legendary Hedge-Fund Manager: This Will End Badly.
What are the markets so exuberant about anyway? Unemployment at 8%? Adjusted for inflation, your take-home pay buys 8% less than it did in 2007. Last time we hit record highs on Wall Street your home was worth 26% more than it is today and that’s counting a recent housing rebound. Some 14 million homeowners still have property that’s worth less today than when they bought it. Mark Gongloff has all the stats in this piece in the Huffington Post.
Perhaps the markets are responding enthusiastically to that newfound spirit of compromise on Capitol Hill? Oh- that’s right, we’re still careening from one manufactured budget crisis to the next.
All these reasons for the stock market not to be happy worry me. It’s a nice fantasyland if you’re lucky enough to have a 401k or an IRA- but if you don’t- this little roller coaster ride means nothing except that a bunch of rich people are doing better than you…and even at that- they’re only standing still.
Hate to be the skunk at the garden party, as they say. And I’ll take the rally since the alternative really sucks. But careful out there…irrational exuberance has bitten us in the derriere before.
Supreme Court Throws Health Care Forecasters a Curve Ball
Intertrade had rejection of the individual mandate of the health care law a 70% certainty. Most people had followed CNN’s Jeffrey Toobin’s take on the arguments that seemed to have gone so terribly wrong for the White House back in March. And they were all wrong.
President Obama has Chief Justice John Roberts to thank for saving the Affordable Care Act. Astoundingly, Roberts, who has voted 90% of the time with the other four Republican appointees, joined the court’s four liberal justices.
What many apparently discounted, was the extent that Roberts cares about political appearances. It took some intellectual gymnastics, but, in the end, it seems the Chief Justice wanted, at all costs, to preserve the integrity of the court against perceptions it had become a blatantly political body. Or, in the true meaning of the word “conservative,” he’s the kind of judge who believes it should be very difficult to alter existing law. Or both.
The gymnastics involved was the majority of the court labeling the “fee” that would be imposed on Americans who do not get health insurance a “tax,” a word that was never actually written in the legislation and a characterization which the President vehemently denied. But basically the court’s majority was saying, if the politicians were obviously afraid to call a tax what it really is- as NPR’s Nina Totenberg put it in her analysis of the court’s action, regardless, “If it looks like a tax and acts like tax, it’s a tax.”
And that’s key because there were five justices, including Roberts, who were of the opinion that a universally charged “fee” would have been a violation of the commerce clause of the constitution; they would argue you can’t force people from all 50 different states to pay a fee if they don’t get insurance. But a tax is different. The notion that the Federal government has the right to levy a tax has long been established.
The other part of the gymnastics that seems pretty conflicted is that there’s a law Congress passed that says courts don’t rule on the constitutionality of taxes until they are actually levied and this part of the health care law has not gone into effect yet. In this aspect of the case though, Roberts deferred to Congress’ assertion in the law that it is a fee, they instituted, not a tax. To justify this decision, Roberts had to kind of have it both ways.
So where to now? President Obama gets to explain to the American public what it is that the high court saved today- because his previous communication efforts with the nation in regard to the benefits of the health care law have been widely regarded as abysmal.
And, of course, what many have called his singular accomplishment as President remains intact. Mitt Romney said earlier in the week that rejection of the health care law by the high court would have meant Obama had wasted his first three years in office. That one’s out the window.
But Republicans will likely be all fired up by what they see as a slap in the face by the court. There will be symbolic but ineffective efforts in the House to repeal the law (the Democratic-controlled Senate will never go along). Mitt Romney will make it a mantra in every speech from now until November. Republicans will now be able to use “tax increase” against the President, and overall, it seems the court’s decision will further the stark nature of the choices voters face in November- namely- the role of government in our lives.
Finally, there was a lot of ridiculous speculation and forecasting about how this ruling would go. And you know which one ended up being 100% accurate? There’s a company that makes a business out of analyzing facial expressions. According to their analysis of the way the justices reacted on the bench during the arguments- there were five justices who smiled the most. The four liberals and Chief Justice John Roberts.
For whatever reasons he took the path he did, it would appear it is John Roberts who gets the last laugh.
Warning: Time for Ideas Not Attacks
This cannot be just another mud-slinging Presidential contest. Our economy- the world economy- is looking at a steep drop off a tall cliff if leaders do not step forward and if we keep on with politics-as-usual.
The Washington Post’s Dan Balz has a terrific analysis piece that makes all the right points. He juxtaposes the horrible jobless numbers released Friday with what was a week of campaign hijinks from both sides. The American electorate needs and deserves this election to be a battle of ideas about how to keep the economy from falling into a second recession. Both the President and his Republican opponent need to give us details on their vision for the next four years instead of relying on attack strategies that usually work well in typical election years.
There is nothing typical about where we are today. The continuing debt meltdown in Europe coupled with suddenly slowing economies in China and Brazil have combined to paint a dire situation for the world economy. The challenges are as formidable as anything we’ve seen since the Great Depression of the 1930’s.
This has to be about more than “we’re not doing as badly as everyone else.” Nor do we have the luxury of wasting our precious time discussing television celebrities and birth certificates.
This desperately needs to be a referendum in November on ideas and policy. If the campaign devolves into the usual non-stop partisan warfare that has helped get us into this mess to begin with and skirts around the hard truths we need to address in terms of both economic growth and debt reduction- then our elected President will have neither a philosophical mandate or the public support for the actions he needs to take to protect us from economic calamity.
This is a time for adults not adolescent spit-ball battles and clever pot-shots.
Facebook Fail
I’m no financial expert which, I presume, is why I’m not a wealthy man. But I’m not an idiot either and I’m telling you right now- this Facebook IPO stuff is an unmitigated disaster that is becoming more and more of an embarrassment by the second.
Let’s start out with the basics. Facebook early this week was valued as a $100 billion company. That’s more than Disney, Visa or McDonald’s. As Washington Post financial writer, Dominic Basulto, puts it- at least McDonald’s sells burgers. What’s Facebook got? What does Facebook make? It makes ads that no one pays any attention to. Ask General Motors. They pulled their Facebook ads just a couple of days ahead of the IPO because it was like throwing money into a large black hole.
We’ve been down this road before in the late 1990’s when the Dot.Com bubble burst. Now it’s the social media bubble that’s bursting. Facebook stock was offered initially at $38 a share. It’s trading at $31 this afternoon, but the day is young- there’s plenty more room for it to fall even further. Your average Facebook employee is about $2 million richer this week. But the poor people who got suckered into buying Facebook stock on Monday have already suffered a 20% loss on their investment—an amazing achievement over just two short days.
Some analysts say in order to justify the share price at which Facebook was being offered the company would have to make more than a 40% profit over each of the next three years. That’s a tall order for any company that actually makes things, much less one that is essentially a large data collection service that can’t quite figure out what do with all its data.
I won’t even go into the speculation about the things Facebook must do to make the kind of money it has to pile up to avoid becoming a penny stock. Maybe selling our personal data? Maybe overwhelming its real estate on your computer with ad after ad after ad? Maybe breaking down and finally charging for the service?
And then there’s Facebook’s growth potential. What growth? It has already saturated the world. A half a billion users are already on it. There’s no way to go but down.
I have a friend who counsels adolescents. He tells me the big social media trend among the nation’s youth is getting the hell off Facebook. Presuming the universal adolescent appeal of “coolness,” Facebook is about the least cool thing in the universe. Their grandmothers are on it, for Christ’s sake. And their teachers. And if they can ever find jobs- their damn bosses will be on Facebook asking to friend them so they can check and see if there are any pictures of them projectile vomiting in an alley after an all-night kegger.
But there’s more. Much, much more. Here are some headlines from Marketwatch.com today so we can all revel in the base greediness and irrational exuberance of the great Facebook IPO.
Facebook Stock Dubbed “Falling Knife”
How Facebook Threatens the U.S. Economy
Here’s an absolute brilliant analysis of all of this by Martketwatch.com’s David Wiedner:
It’s as if Mark Zuckerberg is having the ultimate nerd’s revenge: He’s humiliating all of us and taking our money in the process…
There were few regular people who made fortunes on Facebook. Its private placement and exclusive club made certain that Zuckerberg and his backers decided who would get rich and when….
At the end of a Facebook session, we feel an anticlimax. We hope for contact and more often than not get silence. We exploit our own privacy to our friends, advertisers, strangers. We rarely, if ever, make that connection that’s worth the investment of putting so much of ourselves out there…
In the end, it’s clear Facebook’s was the rare initial public offering in the markets that catered to that same kind of person, an exclusive sort of investor: the sucker.
In 2010, the movie “The Social Network,” told the story of the Harvard nerd who hit it big with his Facebook concept. There’s a sequel ahead that’s sure to be a hit with all those people Mark Zuckerberg has taken for a ride for all these years. And it will be called “The Fall of Mark Zuckerberg: Avenging the Revenge of the Nerds.”
Tax and Cut Armageddon
Forget the threat of the end of the Mayan calendar later this year- American political and governmental dysfunction is a more realistic doomsday scenario.
This article in the Washington Post lays it all out. As soon as the withering, vicious, nasty and exhausting national campaigns end this November- our government will have to figure out how to deal with the expiration of the Bush tax cuts on all Americans-middle class and rich alike. That’s also the time the temporary payroll tax cut expires.
Meantime, because of their inability to compromise on a deficit reduction package that was supposedly the solution to the debt ceiling fiasco of last year- a bunch of automatic budget cuts are scheduled to hit the Pentagon and the poor.
In a normal world where politicians put country ahead of party and ideology- the solutions would be easy. There would be compromise on the Bush tax cuts, extending them for middle class folks so as not to burden their finances in a still stubbornly recession-like economy. There would be consideration of allowing them to expire for the top earners. The increased revenue could then be used, in part, to help pay for the continuation of payroll tax relief that mostly middle income Americans have now come to depend on over the past couple of years and that add to the average consumer’s spending ability.
Normal politicians would then split the difference on cuts in Pentagon spending and entitlement programs. All in all, you would have actually engaged in a little budget discipline while still managing to keep some of the tax cut incentives necessary to incent spending and grow the economy.
But, of course, we do not have normal politicians in Washington right now. We have a system that is broken with massive ideological rifts preventing any semblance of compromise or rational governance.
And it’s too bad because there are positive signs out there for the American economy. Home builder sentiment is at its most positive point since the start of the recession. A new USA Today/Gallup poll finds 58% now optimistic about an economy recovery.
But the people who invest and spend on America look at governmental gridlock and see nothing but uncertainty ahead. Small businesses are going into their shells and slowing their pace of hiring. Defense contractors are freaking out and they’re slowing their hiring too. And God help you if you’re not one of the well-off in this society- because the concept of a safety net will be tattered beyond recognition as the government cuts Medicaid, food stamps, college loans- you name it.
If the President would like to get himself re-elected, you’d think he would address this tax and cut Armageddon that’s looming in November, because the very prospect of it could strangle our current anemic recovery and fatally injure his electoral chances. And if Republicans want to be taken seriously and not viewed as a party taken over by uncompromising ideological rigidity, you’d think they’d take seriously that their electoral success looks just as threatened as the President’s.
Some worry about Europe and whether countries like Greece and Italy will default. Some fear that date in December when the Mayan calendar supposedly ends. I laugh at those measly threats. Our biggest fear should be the American politician. If only they could offer leadership as well as they play politics.
Is Boycotting Rush Anti-Free Speech or the Exercise of it?
There are free speech proponents who, regardless of the foulness of the speech involved, feel very, very queasy about economic boycotts intended to silence people.
But regardless of how one feels in the specific case of Rush Limbaugh’s remarks about Georgetown University student, Sarah Fluke last week, central to the issue of the efficacy of economic boycotts is the concept of money and the free market.
The Supreme Court has made it pretty clear that money is a vehicle for the expression of protected 1st amendment rights. In the matter of Citizens United, the high court upheld the rights of corporations and labor unions to spend unlimited amounts of money on political campaigns.
The underlying philosophical foundation would also support the concept of economic boycotts because they too involve the use of money as a means of political expression. Not the spending of it, but the strategic denial of it.
And it is, perhaps, ironic in the case of the Rush controversy, that presuming that many on the political right are extreme free market proponents, the use of the economic leverage of the boycott, really is use of the free market; manipulating it as an expression of free speech.
So whether you’re boycotting Bill Maher’s advertisers for an ill-advised and, some would argue, grotesque tweet about Tim Tebow a couple of months ago, or angry with Rush Limbaugh for his vitriolic rhetorical attack on a young female college student, looks to me like the law is- more than ever- firmly behind you if you decide to stop buying products from companies whose perceived values are incompatible with your own.
To the anti-boycott/free speech advocates- if there really is a marketplace for ideas in this country- a place where people pay through their purchases and their listening or viewing habits, to make it possible for some to shout their views from an electronic pulpit- no one is ever losing their right of expression.
The only thing affected by the power of money- is the size of the pulpit. How people choose to spend their time and money and show their attraction or revulsion to the product, determines whether that pulpit is amplified through a 50,000-watt radio or television tower, or relegated to 45 people reading the daily rants of a lonely website.
Either way, though, it’s still free expression. Nobody said you have the absolute right to get rich off of it.
Assorted Thoughts: Gas Prices, College Snobs, Cruise Ships
Gas Prices
Yeah, they’re high and going higher. It’s been an inescapable trend over the last several years. Gas prices are low when the economy is reeling. They are high when economic conditions improve. Both sides always try to bash the party holding the White House about costly gas prices and both come up with solutions or blame that are just plain silly.
Really want to have an effect on gas prices? Convince one billion Chinese to stop buying cars and filling them with gas.
Collegiate Snobbery
Rick Santorum has been getting a lot of flack from Democrats and Republicans alike for saying this:
President Obama once said he wants everybody in America to go to college. What a snob. There are good, decent men and women who go out and work hard every day and put their skills to test that aren’t taught by some liberal college professor trying to indoctrinate them. I understand why he wants you to go to college. He wants to remake you in his image.
Foolish or crazy as a fox? It may yet resonate with conservative blue-collar voters in Michigan. And I’ll bet a lot of anti-Obama voters didn’t even hear the college part as much as they heard the “Obama is a snob” part, which some suggest is the GOP version of class warfare. It may well work- in a primary. The overall problem with this strategy, of course, is that there’s polling that finds 93% of Americans think it’s a pretty good idea to send your kids to college.
Looking Forward to that Cruise Ship Vacation
First there was the Costa Concordia incident, in which an Italian sea captain trying to show off, came too close to shore, grounded his ship and killed more than 30 passengers and then literally tried to catch a cab and run off into the good night.
Now you have its sister ship, the Costa Allegra, adrift in the Indian Ocean. And as if it’s not bad enough that a generator fire knocked out the engines, the radio communications and then the air conditioning, it was adrift in “Pirate Infested Waters.” I’m not afraid to admit I hate infestations of any kind, but particularly pirate infestations.
In between the two incidents, there were several outbreaks on a number of cruise ships of the Norwalk Virus.
So….if you don’t get killed by a show-off captain, manage to avoid spending three days with a raging fever and massive intestinal distress, and escape marauding pirates in the Indian Ocean- it should be a wonderful vacation experience for all!
My memories of a cruise ship vacation were primarily the tiny, little cabins and the huge bill at the end. In between, you eat like a depraved Roman Emperor, consuming indescribably large amounts of food in a celebration of decadent gluttony accented with pretty little ice sculptures gently melting on a buffet table of death.
US Economy on the Rebound? Implications for the Presidential Race
History has shown us that it is not a wise thing to bet against America. It’s a pretty resilient country. And though millions are still without work, the housing crisis continues and Europe may yet be unable to contain its debt crisis, Friday’s unemployment report has significantly surpassed most economist’s expectations and offers more than a glimmer of hope that a recovery is actually taking hold.
The job gains were impressive and across all sectors of the American economy. There have now been five consecutive monthly drops in the national jobless rate and the 8.3% figure represents a three-year low in the unemployment number. Wall Street seems impressed and the Dow Jones is now flirting with the 13,000 mark.
The political implications are huge. It’s estimated that if the current monthly gains of over 200,000 new jobs continues until election day, the jobless rate in November may well come in at just under 8%. It’s a significant number. No incumbent President has ever been re-elected with a jobless rate over 8%.
For Republicans seeking the presidential nomination and centering their campaigns on a cratering American economy, there are still enough weak points and looming threats to the nation’s finances to make a case but there’s also a political danger. It is not an advantageous position to appear to be rooting for the continuing demise of the American economy. It is not a “morning in America” message and it threatens to make President Obama the optimist and Republicans the party of gloom-and-doom.
There is an obvious pivot that can be made to other issues and they are also important ones to be settled in a campaign. The debate over the size of government. The arguments of over-regulation versus government protection of consumers and the environment, for example. There’s the continuing danger of massive budget deficits.
But there’s a ritual that occurs on the morning of the first Friday of every month. The current leader of the Republican party, House Speaker John Boehner, releases a public statement on the latest jobless report. For five straight months now, he’s had to say, in essence, we’re glad things are looking up but the situation is still dire. How long that message continues to resonate if the string of positive economic news continues, could well end up determining who gets to live in the White House for the next four years.
Not Class Warfare- It’s Class Cluelessness
(Cartoon by RJ Matson, St. Louis Post-Dispatch)
Even the lawmakers who say they “get it” don’t really “get it.” For them it’s an abstraction. They think they know what those poor middle-class people care about.
They are advised by their aides and consultants that the failure to extend something like the payroll tax cut would hurt the finances of the regular people. But they don’t really know because, by any standard- our lawmakers are very wealthy people who live in a world far different than most of their constituents.
Here are the figures. There are 535 members of Congress; 100 Senators and 435 members of the House. Between them, there are 261 millionaires. Last year, the Center for Responsive Politics found that the median wealth of a House member was $765,000. The median wealth of a U.S. Senator was $2.38 million. And during the worst of the Great Recession, lawmaker’s median wealth increased 16% between 2008 and 2009.
For a $50,000 a year income, repealing the payroll tax cut costs that worker $160 monthly or $40 a week.
So what‘s $40 to somebody worth a million or ten million or a hundred million? Not even couch change. It’s nothing.
– Half a tank of gas for an SUV? They wouldn’t know. They don’t drive cars, they have drivers.
– A little extra money to buy prescription drugs? They wouldn’t know. Congress has the best health care coverage in America. They’ve never had to use an HMO and they certainly don’t have to worry about paying out of pocket for medications.
-Eight roasted chickens at Costco? They wouldn’t know. Forty bucks barely covers the tip for a couple of steak dinners and several cocktails at Morton’s.
-Nine gallons of milk/ Ten 20-ounce loaves of bread? Actually, they do know these figures because they get briefed on them by aides so they won’t get embarrassed if some wise-ass reporter asks them.
– Half the price of a one-way ticket on Amtrak’s Northeast Regional for the holiday visit to grandma’s in New Jersey? They wouldn’t know. They take the Acela. 1st Class.
– A really cheap pair of shoes? They wouldn’t know. A pair of Ferragamo men’s shoes goes for about $600. The low end of Manolo Blahnik’s for women go for about $700.
Don’t get me wrong. I wouldn’t mind being rich myself. But when they fight for us regular people, it’s usually because doing so helps ensure they remain on the pathway to power and wealth. After all, it’s the little people who elect them. I’m not saying they don’t care. It’s just that when they consider the tough times most people are going through, they have to imagine that world. They certainly don’t inhabit it.
Some would accuse me of waging class warfare. I would respond that it’s not war when one side has all the weapons. But it is class cluelessness.
Garcia Media Life 
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