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.
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.
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.
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.
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.
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.