Cable Companies Cut the Cord & Unleash TV Everywhere

May 6, 2014 by Jackson Bentele Leave a Comment

The cable television industry’s costs are increasing while its user base is simultaneously vanishing. “2013 marked the first year in which the paid TV industry actually shrank,” reports USA Today. More and more people are looking to a cable-less future, flagshipped by a trend dubbed “cord-cutting”, while the current generation of millennials will probably exist as something more along the line of “cord-nevers”. However, multichannel video programming distributors (MVPDs), including cable television/pay-TV operators like Comcast, satellite operators like DirecTV, and telco companies like Verizon, all rely on the current model and won’t give it up without a fight…a fight finally unified under the banner of: ‘TV Everywhere’.

America easily made the transition from a broadcast- to a cable-nation. An endless array of channels featuring a smorgasbord of programming perfectly suited our appetite for consumption, while also fixing some of the technological issues found with (free) antenna-based broadcasts. In 1996, the Telecommunications Act created the cable industry as we know it by “relaxing regulation on media cross-ownership…to foster competition…[and allow] telephone companies to offer TV service and cable operators to deliver phone service.” This also opened the door to FCC-approved mergers between the big boys of the media industry, resulting in the monopolistic fact that all content creators are controlled by a few major companies: Comcast/GE, Walt Disney, Viacom, CBS, News Corp. [that recently spit out other giant 21st Century Fox], and Time Warner Inc. Several of these companies own local TV stations in key media markets. Comcast is also the largest cable provider in the country, even more so if their attempted acquisition of Time Warner Cable (a separate entity than Time Warner Inc.) is allowed.

As online distribution continues to rise, consumers wouldn’t be faulted in wondering why content creators still kowtow to the Man. The answer will in no way surprise you: money A.K.A big bucks in the form of affiliate fees. Every year, $32 billion flows from the cable companies to content creators in order to grease the machine. “Estimates suggest that the annual affiliate fee revenue at companies like Viacom and Disney is around $1.5 billion and $2.0 billion respectively.” So for content creators, the strategy becomes entirely focused around “profit maximization.” Find a couple hit shows, while keeping the rest of the lineup relatively inexpensive to curb programming costs. “The ‘hits’ make you a ‘must have’ for any cable or satellite carrier – granting you the right to ask for fees.” Content creators want channels balanced at just the right point between costs high enough to give a few shows the production-cost/marketing edge they need, while still keeping the overall schedule cheap enough to reap the benefits of affiliate fees. Why are there so many sports channels? Remember the mantra: “If you own exclusive content, you might as well build a channel around it.” In this way, even with online distribution an option for the content creators, the cable companies still have them hooked on precious affiliate fees.

The case of Hulu is a great example. With stakeholders including Fox, Disney, and NBC Universal, the service was initially a consumer-friendly (read: free) way of streaming their favorite shows whenever they so desired. Nicely personified by Bill Gurley of Above the Crowd, pay-TV distributors smiled nicely at the content creators, while through gritted teeth said, “[w]e pay you an affiliate fee to distribute your content to the homes we serve. We understand you have multiple distribution partners. What we don’t understand is why you would give content to some of them for free, and still expect us to pay our fees…” And like that, Hulu became a subscription-model service itself. Join us or die, says Pay-TV…

Now the rebellion seems to have moved to a grassroots level. The cable bigwigs created the pay-TV model by charging customers a subscription price in exchange for a cable package of channels. Once-reasonable prices have grown with the scope of television, driven by our increasingly cinematic desires. Like the DVD boom fueled the booming budgets of Hollywood, TV scale has increased to the point where millions and millions of dollars can be spent on a single episode of Lost or Game of Thrones. Spectacle is where the eyes drift. Cable companies have also reduced spending in the customer service department, leading to an immense decline in consumer satisfaction, with jokes about Comcast’s lack of reliability just as relatable as the age-old classics like “what’s the deal with airplane food?” While $86 on average in 2011, cable bills are expected to climb as high as $123 by 2015. Addicts, and by that I mean television viewers, have realized they might be taking a ride they wouldn’t actually have to pay such exorbitant costs for elsewhere. So, they cut the cord, and end their subscription to cable. The age of “cord-cutters” and “cord-nevers” began.

Eyes opened when Netflix emerged as an instant streaming titan, alongside video purchase and rental systems like those present on iTunes and Amazon Prime. Combine such services with products like the AppleTV, the Roku, or the new Amazon FireTV, and a hassle-free solution to cable company headaches became clear to a lot of people. Instead of a high cable bill, a one-time purchase of a streaming device opened the door to a still-immense quantity of content. With many cable customers already in possession of a Netflix account, Amazon Prime login, or iTunes videos, it seems the costs ended there, with no messy dealings with Comcast needed. This ‘a la carte’ or ‘over-the-top (OTT)’ model of content consumption already had a popular infrastructure in place, and now quality products popped up to streamline the process further.

According to Jim Edwards of Business Insider, “1.3 million of [cable distributor] Charter Communications’ 5.5 million customers no longer want TV – only broadband [as of November 2013]…[p]eople are giving up on cable TV as a standalone product.” Fewer households are stocking televisions as a part of their personal American Dream, content to consume media on technology like mobile devices, tablets, and laptops. Instead of plopping down on the couch in front of the tube after a hard day’s work, people instead boot up their electronics, Mom upstairs, Dad in the basement, the kids in their rooms…it’s come to be known as “vampire media,” coming out after dark and sucking away life as the pay-TV industry knew it.

Even antennas are making a comeback, able to offer the Netflix-enabled population sixty channels or so of free broadcast content, in better-than-cable HD, and, if new company Aereo has its way, the ability to record and rewatch free broadcast content on the device of their choosing. In this case, broadcasters claim theft, while Aereo responds it’s only supplying the equipment (“arrays of small antennas – one for every subscriber – to stream over-the-air television signals to its customers”) and not the content.

Many like Aereo have taken up the ‘cord-cutting’ mantle and proclaimed it the future, a weapon to use against the supposedly greedy and inept cable giants. Video for the people, made by the people, distributed by…well, here’s where it gets tricky. Returning to Aereo, the company has found itself before the Supreme Court, its business resting in their hands, while cable calls for blood. The Court finds itself in a tight spot. While it views Aereo’s business as unconstitutional, their ruling’s wording must be very carefully constructed in our digital age – they don’t want to accidentally outlaw the Cloud alongside Aereo. With such a thin line between legal and illegal a distinct possibility, how is cable to combat the rising threat of Silicon-Valley-fueled distribution while keeping consumers firmly in their (certainly not free) corner? Enter Jeff Bewkes, CEO of Time Warner, circa 2008.

Bewkes, who once headed HBO and led it to success, watched as cable’s cultural grasp slowly loosened. He also noticed how HBO was experimenting with an online streaming service, in select Wisconsin cities, where as long as viewers could login as an HBO subscriber (‘authenticate’ their account) they could stream all the HBO they wanted. Bewkes, along with Comcast CEO Brian Roberts, saw such a model could be viable for cable subscriptions as a whole. Thus, TV Everywhere was born.

Bred slowly through systems like Time Warner’s TWCTV and Comcast’s Xfinity TV, TV Everywhere has now been picked up by the Cable & Telecommunications Association for Marketing (CTAM), rebranded in trendy lowercase ‘tv everywhere’, and put forward as cable’s Netflix-generation killer app. CTAM is readying its member companies (including A&E, Discovery, Disney, Time Warner, Comcast, Viacom; 16 cable companies and 25 content providers in full) to advertise all of their diverse subscription/streaming services under the singular new banner in order to promote unity and simplicity. “’The cable industry has been very good at not jumping too early on a technology, and watching it play out first,’ says Colin Gounden of Grail Research, which advises companies on new products. ‘They have a knack for getting the time right.’” CTAM’s goals for the new year have been set in stone by the board of directors, made up of programmers and cable operators from across the spectrum of the partnered companies. The First Commandment of tv everywhere is for half of all cable subscribers to be aware of tv everywhere by the end of 2014, up from about twenty percent now. The Second is to make the half already aware into devoted users.

Bewkes illustrated such a possibility with his battle plan to use viewers’ familiarity with cable’s huge brands and turn their love of streaming against the new independents by restricting digital rights to popular shows. The goal of tv everywhere is “to keep subscribers happy by letting them access cable content wherever they might be. In practice, this means lots and lots of apps,” like HBO Go, FX Now, and Xfinity TV. Comcast’s new X1 box operates very much like a Roku, full of app offerings like Pandora and even video games, but with a full cable subscription stacked on top. CTAM is also betting on the remaining cable figures: 56 million people are still subscribers, on top of their cord-cutting-enabling devices. To Multichannel News, CTAM CEO John Lansing said, “Compared to an $8-per-month over-the-top service, offering past seasons of shows plus some new original series, TVE is ‘all-original, it’s all last night, it’s live streaming [like the recent Olympics and Oscars] and it doesn’t cost you another nickel.” TV Everywhere was ‘broadcasting’ 150 million videos per month as of the end of 2013.

There are those within the industry that criticize CTAM’s label, saying it could distract or confuse consumers when they’re presented with the veritable cornucopia of tv everywhere services, and that it would be more valuable to expend effort improving the content instead. Cord-cutting proponents point to recent contract renewals between cable companies and content, where cable has been forced to loosen up on digital rights to make the increasingly pricey programming costs digestible. That said, controlling distribution is the pump that keeps the affiliate money flowing to the content creators in the first place. Right now, Netflix is profiting from the content owners’ need to reach the eyeballs of America. However, according to USA Today, Disney’s cable expenses soared over $8 billion last year, and “$7.99-per-month Netflix subscriptions are never going to float a ship that big.”

If tv everywhere, as a brand itself, is able to build enough of a reputation, USA Today suggests, “it may be just a matter of time before more of this content is kept in-house and Netflix finds itself stuck with whatever’s left.” Once tv everywhere, silly lowercase spelling or no, evolves into a more coherent form, and content creators settle down and move in, the disruption will end, most likely with a whimper. Remember, the cable companies know how to lie in wait, slowly absorbing technological advances, and then pouncing, armed with their special weapon: billions of dollars. Cord-cutters are right about one thing, at least. Get out your scissors, and cut that connection…but the cable companies have cut ties and migrated to the Clouds, too. The future of media is a big ol’ party, and everyone’s invited. Just remember there’s always got to be a cover charge, and the big guys like to collect. Personally.

Sources: Business Insider, Wall Street Journal, Forbes, New York Times, Above the Crowd by Bill Gurley, Businessweek, USA Today, CNN Money, Multichannel News, CTAM Official site

The Fizz is Gone: Will Coca-Cola One Day Be Soda-Less?

April 18, 2014 by Jackson Bentele Leave a Comment

While their advertisements continually convince me that the world is at peace and everyone loves drinking Coke, the truth is always revealed in the numbers: the company’s stock may have rose 3 percent last week and overall revenue increased, but heavy marketing costs and increased health concerns over the fizzy drinks of yesteryear may signal a downswing in the carbonated drink industry as we know it, calling for Coke to adapt its business.

Globally speaking, Coke’s actual soda sales dropped in their last quarter for the first time in fifteen years. American health advocates cheered, as not only less Coca-Cola was sold in the U.S., but Europe and Mexico. In the latter, historically the biggest market for Coca-Cola, a recently imposed soda-tax probably did most of the damage, and may lead the way for similar taxes in other countries.

“Healthier” alternatives like Diet Coke have not proved sustaining either, as claims against the beverage’s use of potentially dangerous artificial sweeteners have sunk sales.

So where does this revenue bump come from? Coke’s ‘still drinks’, like Powerade, Dasani, and Minute Maid, provide reliable backup, generating over $1 billion for the company every year. In the previous quarter, sales rose 8 percent for the company’s still drink brands. Also, while soda sales have fallen in big markets like Mexico, Eastern markets like China and Japan are starting to carry the foreign carbonated burden, and 80 percent of the company’s volume is still overseas.

Coca-Cola CEO Muhtar Kent plans to focus on the balance between the still and carbonated brands under their flagship, while also massively increasing marketing spending, adding $400 million to already billion dollar costs. Competition like Pepsi Co. are doing the same. That said, increased marketing may not offset the health side of the equation in the long run. The time could come where Coca-Cola’s name brand product will have to take a back seat to the less-carbonated brands. #DasaniIsBeautiful just doesn’t have the same ring, does it?

Official Selection Eats Away at Natural Selection – Independent Film Gets Bloated

March 25, 2014 by Jackson Bentele Leave a Comment

While Hollywood films have gotten bigger and bigger over the last few decades, the true rags-to-riches story seems to be the independent film market. Inconceivable only a short time ago, independent film became so successful, it became a new kind of studio film. The behemoths started in the nineties, from the cameras of Soderbergh and Tarantino, and raised small time wheelers and dealers like the Weinstein brothers to immortal mogul status. That said, when Reservoir Dogs was released, only 249 other films made it to the theatres that year. This year? There were 1,500. Meanwhile, the money these movies make has actually decreased. Many in the indie business are beginning to sweat. Is this the sign of a possible market bubble?

Filmmaking, with the advent of cheap digital camera technology and the age of Kickstarter, has become a by-the-people, for-some-people medium. With a new level of accessibility, an influx of hopeful artists began producing work and sending it forth into the world. Film festival culture has spawned from this new supply of infinite content. According the Salon, “in the last 15 years, the U.S. alone has seen nearly 7,000 film festivals.” Reaping the rewards of entrance fees and, especially with high-profile events like Sundance and Telluride, market visibility, the festivals themselves have done very well for themselves. Herein lies the problem: “[The industry] is built on supply…film festivals, film schools, crowdfunding sites, film festival submission aggregators, video-on-demand distributors – all apparatuses that have a vested interest in encouraging filmmakers to keep making films, demand for those films be damned.”

A modern film production may look something like this: a group of young creatives raise money through crowdfunding in order to qualify for tax incentives, that they then subsidize to cover the likelihood that the film grosses under budget. Such productions produce little economic activity, as crews and cast are underpaid, and the finished product generates very little revenue. A lot of those 1,500 films made last year did not qualify for theatre runs. Instead, their producers rent out the screens for more money, just to grab a few reviews before dying a quick death on the VOD (video-on-demand) market.

The art of filmmaking takes time and skill to perfect. With so much amateur work taking up so much market space, there’s a chance the next Tarantino will simply get lost in the masses of mediocrity. Salon presents a few possible solutions, be it refocusing film festivals to screen work only created through their selection-based filmmaking labs (basically, a class for qualified filmmakers to create a thesis of sorts) or fitting independent productions into the vertical-integration model of the golden Hollywood studio system.

Film is an important part of American culture and art, but is in danger of falling into the same trap to which many American industries have become victims. Independent film is a beautiful thing, and with our digital age, the American Dream of making it in Hollywood seems closer than every before. However, the bloat of supply threatens the holy market competition that fuels both increased creativity and economic success. Young dreamers aren’t going to stop flooding the market with movies, so it may be time to start building a dam – for all our benefit.

Other sources:

The New York Times, http://www.nytimes.com/2014/01/12/movies/flooding-theaters-isnt-good-for-filmmakers-or-filmgoers.html?_r=0

Nofilmschool.com, http://nofilmschool.com/2014/02/kentucker-audley-stop-making-indie-films-petition/?fb_action_ids=10201041474228386&fb_action_types=og.likes&fb_source=other_multiline&action_object_map=%5B259881744187942%5D&action_type_map=%5B%22og.likes%22%5D&action_ref_map=%5B%5D

The Cost of Hollywood: Runaway Production

March 13, 2014 by Jackson Bentele Leave a Comment

Hollywood, California: long synonymous with film and television production; the Mecca of the entertainment industry. If you weren’t here, you weren’t anywhere. That said, movies and TV aren’t all about entertainment. To the hand that feeds them, they’re investments, and huge ones at that. Putting together a budget for the production of a film is a complex and intimidating process. That’s where state-based tax incentives come in, easing the financial burden and encouraging productions to stick around the area to generate future economic benefits. However, such incentives have spread to other states and countries, disrupting California’s film business at its core and bringing into question it’s worth.

Dubbed runaway production, it has waged a war of attrition on Hollywood production over the last decade, and if not for the government incentivized projects (represented by black on the graph below, provided by runaway production outreach program FilmWorksLA), 2010 would have been a record low year for Los Angeles productions.

California’s legislation on film production credits was established as a defense system to incentivize production in-state. “The motion picture and television industry is responsible for 191, 146 direct jobs and $17.0 billion in wages” in California, according to the Film Commission of California. In an interview with the Los Angeles Daily News, Louis Friedman, producer of 2013’s Lone Survivor, believes production planning around tax credit is “’the single most important financial decision made” and it “affects both the creative look and financial bottom line from day one.’” This production season is bread and butter for the highly skilled – and highly populated – pool of artists, technicians, and other crew people in the state.

However, that legislation has served as a model for other states’ and regions’ incentive programs to surpass. In California, the program was “crafted with limits, from a $1 million minimum to $75 million maximum [in regards to overall budgets] on feature films, and further restrictions on drama series,” not to mention a lottery system that deals with the high demand. This leaves out a lot of areas of production, as major tentpole films’ budgets soar higher and higher and TV shows take bigger and bigger slices of the market. Sensing this sitting-duck situation, the film lobbies of other regions responded.

Canada was the first big player to encroach on Hollywood’s territory in any serious way, putting into law their first production tax incentive in 1997 (just one year after the “all-time high in 1996” of film productions in Los Angeles, noted by FilmWorks). For awhile, Variety reports, “it was only lower-budget series for cable that set up shop outside of Southern California…usually in Canada…[b]ut now the network-studio congloms play a kind of incentive sweepstakes” and pit California cuts against out-of-state cuts. As Variety points out, “these days studio chiefs insist that filmmakers…take advantage of out-of-state incentives…[whose] savings are crucial in a franchise-obsessed era when big-budget movies commonly cost north of $200 million to produce.”

States like New York, North Carolina, Louisiana, Michigan, and many others got into the game. Kevin Klowden, director and managing economist at the Milken Institute’s California Center, estimated a total loss of “4500 production jobs…between 2005 and 2012,” compared with the “7900 production jobs the state should have gained during that period.” New York now has a $420 million annual cap on tax credits, compared to California’s $75 million cap, and has begun to offer additional incentives for productions that complete post-production work in New York as well. Stan Spry, founding partner of up-and-coming management and production company The Cartel, knows this reality very well: “Tax incentives and rebates have been a massive part of our financing plan. We’ve been able to finance up to 40% of production budgets due to incentives…why stay in LA when you can save almost half the money somewhere else?”

Another industry professional, Michael Karnow, creator of SyFy’s Alphas, mentions for that show “we shot in Toronto to save money,” but out-of-state locations “could end up being an asset. It can turn out to be very exciting to turn a problem into an opportunity, and not only let the benefits be financial, but creative.” He mentions Breaking Bad as such an example, one of the most groundbreaking shows of the last decade…almost completely shot in New Mexico, and tailored specifically to the state. It’s interesting to note the original pilot of Bad was written to take place in Southern California…until AMC heard those incentives calling.

This competition, though, now faces the same question that California does: what exactly are the economic benefits of these incentive programs? Other states and countries realized Hollywood was a state of mind, and put into action measures to replicate that mindset for cash-desperate filmmakers. At its peak around 2010-2011, 42 states were offering over $1.4 billion combined in tax credits to productions, hoping to reap economic gains. However, it helps to recall that California’s incentives were built to keep productions inside of its already-developed infrastructure, not to lure runaway production away from Michigan or New Mexico. Historically, California remained the center for production because it housed the developed pool of workers, artisans, and talent, aged like fine wine. Other states don’t have that history, and therefore may not have the job force or economy in place that would benefit from film and television productions.

Take Michigan: leading up to 2011, $57 million had been given out annually to productions each year, with high profile movies like Oz, The Ides of March, and Transformers 3 basing their filming in the state. The problem here became that the Michigan Film Office did not have to disclose the true costs/benefits of the program. Responding to fervent state government criticism, who believed the program wasn’t bringing the economic growth its proponents promised, the program was scaled back in 2011, capping total credits at $25 million and changing the classification of the credits from tax breaks to grants. Michigan legislature, led by Gov. Rick Snyder, now “obligates the [Michigan] Film Office to report back on the specific movie projects that it finances; and to openly declare the criteria it uses to award subsidies,” according to the Tax Foundation. Snyder argues this new criteria makes transparent expenditures that were once “hidden in the tax code.” The Tax Foundation analyzed Michigan and other states’ specific programs, and ruled the incentive programs “distort[ed] the allocation of resources, provide[d] only temporary jobs and benefit[ed] special interests at the expense of the taxpayer.” Other states have scaled back recently as well, with only 35 states offering incentive programs currently.

However, there’s still been a huge increase of programs spanning the globe, and California and its competitors face a race to the bottom. New Los Angeles Mayor-elect (and therefore Prime Minister of Hollywoodland) Eric Garcetti is well aware of this possibility. “’We lost feature films. That’s sad. They may come back to some degree, but probably by and large won’t.’” Instead of competing neck and neck for the most generous incentives, Garcetti wants California to stay ahead of the curve, focusing on creating an environment for a wider spectrum of media production. His plan is to remove the $75 million cap, and make incentives a more viable option for premium cable shows, commercials, visual effects, and even videogames. Garcetti admits he’s seen unfavorable studies, projecting the state seven cents on every incentive dollar spent, but believes there is an unseen multiplier in effect due to California’s historical place as the home of production, and that productions spur economic activity up to five times that incentive dollar’s worth.

Garcetti has charmed his way into many meetings in Sacramento already, but he is facing strong opposing arguments from other neglected California groups. A coalition, made up of the MPAA, the Directors Guild, the Teamsters, and the IATSE artisan union, will work to “win over powerful [opposing groups]…such as the California Teachers Assn.” Groups like the teachers believe more Hollywood tax cuts are merely “giveaways to the glitterati,” similar to the arguments that shut down other states’ programs’ momentum. The Tax Foundation rebuffs Garcetti’s and groups like FilmWorks’ arguments about the film and TV’s key place in states’ economies, believing state legislators should make sure they’re not just lining the pockets of “one particularly vocal and connected industry.” While it is certainly true that the Clooneys and the Spielbergs don’t need much pocket padding, California is a unique economic home of the production worker, and Garcetti wants to make sure it stays their home. An ally, assemblyman Mike Gatto, quoted in Variety, says, “’incentives offer a return on investment that has more to do with individuals’” than studios. “’This is about the regular, workaday people who make a living from production.’”

Despite questions of its long-term economic worth, California undoubtably has a large group of uniquely skilled workers that are facing the possibility of major disruption and possible migration. Garcetti’s planned innovations are important to the future of the state now that Hollywood has proved to not be as stationary as it once appeared.

Interviews with:

Stan Spry, Co-Founder and Head of Production, The Cartel Management & Production, West Hollywood, California

Michael Karnow, writer & creator of SyFy’s Alphas, Venice, California

Other sources:

MPAA, State-by-State Statistics http://www.mpaa.org/policy/state-by-state

Tax Foundation, http://taxfoundation.org/blog/filmworks-blog-criticizes-tax-foundation-industrys-dependence-film-tax-credits

The Red Blood (and Blue Collar) Cells of the Port of Los Angeles

March 1, 2014 by Jackson Bentele Leave a Comment

Thirty miles south of the city proper lies the heart of L.A.’s economy: the Port of Los Angeles. In the words of the Port’s economist Michael Keenan, “logistics is the Silicon Valley of Los Angeles,” and the well-oiled machine of the San Pedro harbor proves that statement. While our tour out on the water was relatively quiet, my drive there and back provided me a firsthand look at the worker ants of this Los Angeles behemoth: the port truck drivers. Looking into their role specifically, I came across a recent article in the Los Angeles Times focused on a recent battle the truck drivers have faced as Los Angeles and other ports across the nation classify the truckers not as higher-paid employees, but independent contractors. Freed of the responsibility of guaranteeing higher wages and working conditions, ports are reaping the benefits while the truckers suffer.

Out of a total 75,000 truckers who serve the ports of the United States, 15,000 of those work in the Los Angeles/Long Beach port area. They handle more than a “trillion dollars of cargo annually.” A common trucker works a six-day week, up to 14 hours a day, and takes home about $200. According to the report in the Los Angeles Time, “the median earnings of an independent contractor is…$29,000 a year, compared with $35,000 for a trucking company employee.” Even though trucking companies control their business, where and when they work, and what their fees are, most drivers are still considered independent contractors in company eyes, and have to pay for gas and repairs on the company-owned trucks, reducing their earnings further.

Throughout this, trucking companies desperately work to find more drivers, claiming a shortage of workers. Here’s a graph from the American Trucking Associations:

However, drivers respond, if such a shortage actually exists, why are their real wages still kept so low? Wages for the trucking industry grew 2% less than the entire private work force. Either the trucking companies are drastically overstating their need for drivers as an excuse to avoid more risk in this post-recession world, or the number of truckers is truly declining due to other reasons. Amongst those reasons may be the large number of truckers approaching retirement age and others, like the frustrated parties in Los Angeles, leaving the field for greener and less uncertain pastures.

Trucking, once “one of the backbones of the blue-collar middle class,” according to Jared Bernstein of the Center on Budget and Policy Priorities, has turned into “sweatshops on wheels.” So far in L.A., “400 complaints” have been filed to the state agency, and a few have already gained rulings confirming their misclassification as independent contractors. Due to these early successes, the number of potential lawsuits may grow, and the thriving port of L.A. is going to have a problem on their hands.

Other source:

http://www.overdriveonline.com/driver-shortage-countdown-to-a-capacity-crunch-and-a-boost-in-rates/

Mosaic: USC’s Growing Student Housing Community

February 4, 2014 by Jackson Bentele Leave a Comment

Five years ago, George Alva, a former private equity investor in the corporate world, opened the doors of his student housing company, Unica Properties, now Mosaic Student Communities. Expanding from a few properties near Berkley and Cal Poly, Mosaic is now a growing competitor in USC-area market, against other more established companies such as StuHo and North University Park Properties (NUPP). Although starting fresh in a neighborhood with a plethora of student housing companies, Alva hopes to attract students through a slightly different type of business plan.

“I enjoy serving the student community, and I’ve really enjoyed the results from renovating these old, beat-up homes and bringing them back to life for people to enjoy once again. We think most of USC student housing providers have terrible to mediocre customer service and property management. We intend to set a new standard in the neighborhood.” Mosaic markets itself by appealing to specific groups of students, like sports teams, film students, or clubs. They hope by doing so, they can draw more community-oriented groups of students away from other, less personal housing companies (the aforementioned StuHo).

“Student real estate is more restrictive than other kinds of real estate because you can only buy property around university campuses, which narrows your target market,” Alva admits. “It’s very management-intensive, because every year you need to lease out all of your units again, while dealing with inspections, repairs, and prepping for new tenants.” However, there are benefits to a student market. “Real estate is cyclical in general, but student housing is insulated from that cycle because there are always going to be an influx of students.”

One only has to look around the USC/West Adams area to guess that the financial crisis would affect local homeowners and neighborhoods. However, for Alva, “[t]he housing crisis was the best thing that happened to my business, as I started buying properties in this area at very low prices.” For a housing company it’s acquire or be acquired. “NUPP had to sell six properties during the crisis, and have been left in a worse off position than companies that were able to purchase properties instead.” Those who can’t acquire are left behind. Not wanting to sound cold, Alva states it was just the “right place at the right time”, as his business arrived a year after the housing bubble burst, not to mention most of the properties bought were “almost abandoned and in really bad shape…a lot of people wanted to sell.” And unlike StuHo, who usually tear the original properties down to build new, larger units on top, Mosaic keeps more than the foundations of these sometimes historic houses in an effort to truly revitalize the past.

Perhaps surprisingly, the USC student housing market has only grown in the last five years. With the arrival of huge, luxury complexes such as Icon Plaza, Gateway, Tuscany, and the Lorenzo, “the USC area has become a much more desirable place to be.” Instead of fearing these monstrously big developments, Alva welcomes them. “Despite the increased supply, when, theoretically, prices should go down, these new developments are bringing more and more students back to the USC area.” Alva’s desired customer base also differs from students who would move into such complexes. “We cater to larger groups of students, groups of friends usually, who want to live in a house together.” In other words, Mosaic is a different type of honey, attracting a different flock of bees.

That’s not to say Alva disregards the growing USC real estate market. Alva brings up the future University Village/USC Village development. “The 1.1 billion dollar UV project starting in May will add 4000 units over 15 years.” Alva theorizes it will make the North University Park a more college-town-like environment. “Everyone will want to live around USC, students and young alumni alike. It’s becoming less of a commuter school than it was ten years ago…the more you have improvements from big developments, the more the tide rises. And rising tides lift all boats.” At least, it lifts the smart boats. Mosaic been forecasting the UV development, and is in the process of purchasing more houses in the North University Park area. The following map displays Mosaic’s current properties (marked with yellow houses), and the area where they hope to purchase and develop new properties (marked with the red circle) in response to the coming UV development (the blue mark in the lower right portion of the circle):

“The smart move is to grow into the North University area in order to meet the incoming business.” Alva hopes such planning will put the young Mosaic ahead of the “more aggressive, and deep-pocketed” StuHo. “The biggest challenge is finding new, well-priced properties. That’s what I worry about at night. The important question to never stop asking is: How are we going to keep growing?”

Google, the People’s Economic Indicator of the Future

February 4, 2014 by Jackson Bentele Leave a Comment

It began in 2009, near the mountains of Northern California, the Cradle of Digital Civilization…Google headquarters. Hal Varian, the company’s economic analyst, was struck with an idea: What if Google search queries could be accurately used as an economic indicator? Now, the national banks of Britain, Italy, Spain, Israel and others, along with the US Federal Reserve, have followed up with studies of their own. The results? An intriguing “probably”.

Known as the Google Domestic Trends Index, it can be accessed by anyone simply through, you got it, searching Google. Unlike a lot of indexes which merely act as trailing indicators, the Google Index can act as a current, if not leading, indicator. While it takes most index reports a few weeks or more to gather data and report, Google “makes its updated data available one to three days after searches”.

Take, for example, the above graph of Google searches related to buying automobiles. The US governments Cash for Clunkers program launched in July ’09, and, accordingly, the searches for buying and selling cars increased dramatically. Not limited only to cars…

This graph catalogs Google searches relating to unemployment and unemployment benefits. From the time of the ’08 recession on, the increase is visibly clear. With many other examples, there appears to be a clear relation between Google searches and real fluctuations in the US economy.

With research on the dependability and accuracy of the Google Index currently ongoing by many inside and outside the US, its move toward acceptance marks an exciting and modern evolution of economic indicators and the way we can watch the interaction between the “digital” and real world in almost real-time these days; a real-time Census in some ways.

However, there are some who warn that utilizing Google as a true indicator right now might be a risky thing to depend on. Lucrezia Reichlin, of the London Business School, thinks that, while “Google is sexy” and may prove useful as the Internet Age progresses, more time is needed. Its search figures only go back to 2004, and it doesn’t take into account those who don’t use the Internet as often (namely, the “elderly and the poor”).

Progress, though, might be the key word. The Internet is an ever-expanding tool and the number who don’t interact with it shrinks every day. Circling back around to Google, Project Loon aims to bring easy internet access to those who are in more out-of-the-way, remote, or impoverished locations via high altitude Wi-Fi balloons. Greater connectivity will make this small world even smaller, and the reliability and correlation of Internet searches to market trends will only increase. There are already some studies that claim models using the Google data more accurately reflect real market movement than models excluding the data. The future is now. Probably.

Links: Businessweek “Google: Central Banks’ New Economic Indicator” by Aki Ito & Alisa Odenheimer, August 9^th 2012. http://www.businessweek.com/articles/2012-08-09/google-central-banks-new-economic-indicator

Google Domestic Trends; http://www.google.com/finance?q=GOOGLEINDEX_US%3AUNEMPL&ei=eUrcUsjKCYqWiQLmCQ

MMM

Money Marks & Media - Spring 2014