League of Geeky Athletes: E-Sports and League of Legends

“He’s gonna find Santorim right before the dragon. Looks like he’s gonna try to get over the wall. Not gonna work though. Oh chilling spikes and now Santorim is in a lot of trouble.. he’s lost and WOOOOOOOOOO DENIED! HEAD BUTTING AND BACK, OUT OF THE LANTERN!” Believe or not, this quote is from a sports caster. What kind of sports commentary involves a dragon and chilling spikes? You guessed it, the E-Sports. Back in Fall of 2013, there was an unusual event held in Galen Center and Staples Center. The League of Legends World Championship semi-finals and finals were held in those arenas. Those events attracted about 23,000 fans to spectate the video game matches in both event halls.  In case of the finals held in Staples Center, the tickets were sold out in an hour. Even for a professional basketball event held in Staples Center, it is very extraordinary. On top of the arena attendance, the final matches in Staples Center attracted about 32 million viewers worldwide according to Riot Games. In the end, South Korean team SK Telecom T1 won the prize of 1 million dollars. 

It may seem totally outrageous by traditional sports fans because these so-called “Professional Gamers” (or Pro-gamers) are earning millions of dollars by simply playing a video game in front of people. Yet, pro-gaming is more than that. Donghun Lee, scholar at Ball State University, wrote a journal article about how the E-Sports players need to train rigorously just as traditional athletes do. According to Lee, the Pro-gamers need to train their eyes to follow fast movements of pixeled characters and objects on the computer screen, train their hands to react faster for mouse clicking and keyboard button pressing, and train their hearing for reacting to gaming effect sounds. Some pro-gamers like SangHyuck “Faker” Lee plays practice games for over 12 hours a day to master his finesse in League of Legends.

League of Legends is vital to E-Sports because it showcased how serious the professional gaming can be through the outstanding number of viewers over the world. League of Legends is a free-to-play online competitive multiplayer game developed by Riot Games in 2009. Two teams of five players are required to play the game and one match lasts about 35-45 minuets. Since its release, League of Legends has been gathering monthly active users in a very fast pace. The monthly active users have increased from 15 million in 2009 to 100 million in 2016.

As mentioned earlier for the League of Legends Season 3 World Championship, the final matches attracted 23,000 physical fans and 32 million fans streaming online. Chad Millman, the editor in chief of ESPN.com and ESPN magazine, praised how E-Sports market is attractive on Fortune Magazine interview: “We saw how responsive the fan base was, how tremendous the storytelling opportunities were and, for those of us not already immersed in the industry, how similar it was from a competitive standpoint to what we already cover [. . .] It didn’t seem like that much of a stretch then to get aggressive about creating a digital destination.”It is very apparent that the E-Sports industry is growing. In the same article, Fortune states how the revenue from the E-Sports industry will grow from $278 million revenue in 2015 to $765 million revenue in 2018.

Essentially, League of Legends has made E-Sports big enough to attract investors to bring a significant change; once a niche industry is now becoming a profitable mainstream industry. As shown on the info-graph on the left, 2016 League of Legends World Championship had accumulative prize of 6.7 million U.S. dollars to distribute to the competing teams. Besides the prize money, the player salaries are pretty crazy as well. For example, aforementioned star gamer Faker earns $2.5 million per year from his contract with SK Telecom. While being this successful, the model of E-Sport industry actually comes from overseas despite the origin place of League of Legend being in the United States.

South Korea has had the strongest market environment for E-Sports since late 1990’s. According to New York Times Article, the Asian Financial Crisis triggered South Korea to have the best environment for E-Sports because the government allocated its funds in telecommunication and Internet infrastructure. By 2000s, the PC Bangs (PC방, it is directly translated as Personal Computer Rooms) were formed and the wide community of gamers was created. PC Bangs are the Internet cafes on steroids that provide the fastest Internet speed, computers with great CPUs, and superior graphic cards for  very cheap price like a dollar for an hour. With the introduction of StarCraft, a game released by Blizzard Entertainment in 1998, the PC Bangs became the proving ground for early gamers and multiple tournaments were held in different PC Bangs. In my personal experience, PC Bangs are like the neighborhood basketball courts. If someone in my class was good at either StarCraft or WarCraftIII, he would have the same popularity as a varsity football quarterback would have in the U.S. PC Bangs has made an E-Sports culture in South Korea and the market was meant to do well because of the infrastructures.

As the competitive gaming became popular, the South Korean government created the Korean E-Sports Association to manage E-Sports. As a result, a TV station dedicated for broadcasting E-Sports and big companies such as Samsung, CJ, and SK started to organize, manage, and finance their own E-Sports teams. Those companies still act as major sponsors in South Korea. For League of Legends, those sponsoring companies put their players in a training houses so they can practice as a team at least 8 hours a day. This model of hardcore training has influenced other League of Legends teams in the world. According to New York Times, “the country’s success at League of Legends has led several Western teams [. . .] many foreign teams have also tried to emulate the group living and training approach used in South Korea.”

League of Legend’s popularity in global E-Sports market triggered the United States to take actions. The U.S. teams such as Team Solomid, and Cloud 9 are sponsored by HTC. Cer Wang, the chairman of HTC said in 2015, said that “E-Sports has seen significant growth in the past few years and we see synergy between people who are passionate about this sport and our own customer base. It was an easy decision for us to sponsor these talented teams and individuals.” Apart from HTC, many different companies like Red Bull or GEICO sponsor League of Legend Teams because they see the profitability. According to SuperData report, “Brands have taken notice of E-Sports’ popularity and many have become sponsors quicker than projected [. . .] By year’s end, sponsorship of tournaments, players, and esports-related sites will exceed $578 million, just 28 percent less than this year’s NBA sponsorship total.”

Just as Fantasy Sports exists for traditional sports fans in the U.S., the hype of E-Sports seem to extend its reach to the betting game as well. According to the Internet magazine Travelers Today, a casino in Las Vegas started to allow people to bet on the League of Legends. The magazine also mentions that XLIVE, an entertainment organization event, will have a betting panel for League of Legends this month in Las Vegas. Waco Hoover, founder of XLIVE says that “E-Sports  is a burgeoning industry that’s poised for significant growth in the coming years. Some estimates put the global sports betting industry over $1 trillion and with the growing popularity of E-Sports the industry is looking to capitalize on gambling. Unheard of in traditional sports – crowd sourced prize pools in excess of $20 million demonstrate the extraordinary fan bases that exist with E-Sports and their leagues.”

Moreover, there has been a deal going on between Major League Baseball Advanced Media and Riot Games recently. According to Los Angeles Times, Riot Games is finalizing a deal to sell streaming rights for League of Legend matches to MLB’s tech unit for $200 million over two years. This is quite significant because most of the E-Sports matches are broadcast on Twitch or YouTube. What this deal means is that the streaming of League of Legends can be done in MLB app. The LA Times suggests that there could be a synergy for MLB to purchase League of Legends streaming rights because Riot Games has proven the wide audience its game can reach. Both Riot Games and MLB could gain massive profit with advertisers. Yet, there are still concerns regarding E-Sports broadcasting because the profit generation in E-Sports broadcasting is still in early stages. Whereas South Korea has its own TV station dedicated for video games that the station can profit from advertisers, the American E-Sports are broadcast mostly online. In this regard, moving into a premium app may pose a danger to the League of Legends fan community because the matches may lose its audience and perhaps become unpopular.

Though the MLB deal is still not announced to be closed, the concern LA Times brought up is very significant. League of Legends is not the only E-Sports game. Until recently, the League of Legends has been the most popular online multiplayer video game for MOBA (multiplayer online battle arena) genre. According to data on Statista, League of Legends hold 66.3% of the market share based on PC and console revenues in 2016. For the MOBA genre, League of Legends may still be secure in E-Sports arena; however, new competitive game was introduced in this year’s Summer to perhaps bring down League of Legends from its E-Sports throne. Overwatch, a competitive online first person shooter game developed by Blizzard Entertainment, recently gathered over 15 million users according to Forbes. Bringing the E-Sports to South Korea, the PC Bangs are now populated with more Overwatch players than League of Legends. Even though League of Legends matches are still broadcast on Korean TV station, Overwatch matches have been raising a great number of fans.

Does the emergence of Overwatch mean the downfall of League of Legends? According to major video game news outlet Polygon, the first Overwatch World Cup at Blizzcon 2016 had more than 100,000 viewers. According to Polygon, Overwatch definitely has a potential to be big in E-Sports scene. While League of Legends has been focusing on team construction in the beginning of each round, Overwatch provides more fluidity in game. This means that once players select their champion characters in the beginning of the game, the players are locked with the champions they selected; in other words, the strategy is already locked with the character choices in the beginning of the game. Meanwhile, players can switch their choice of characters at any time of the gameplay. Providing more fluidity in strategy, many hardcore gamers find Overwatch to be a great game in competitive setting. Yet, Polygon points out the flaw of Overwatch that may hinder it from entering the E-Sports market. Overwatch is not the best game for the spectators because it is a first person shooter and it confuses spectators on which characters are on the same team. For a fast pace gun-serking game such as Overwatch, it becomes very difficult for the spectators to see what is going on. For League of Legends, each teams’ health bars are color coded so it is intuitively easy to figure out what is happening in the battle field. In case of Overwatch, not so much.

Does an introduction of new exciting competitive game threaten League of Legends? Not so much. It is just like traditional sports. Basketball getting more popular than baseball does not mean that baseball is not relevant at all. Just like how League of Legends have been treated as sport, it will not have the same decline. Older games can still be relevant and profitable in E-Sports. For example, StarCraft I is still relevant in South Korea even though the competitive market started since 1990s. There are still StarCraft I matches in South Korea and they are broadcast, although StarCraft II came out and the tournament of its own has been getting popular. For this regard, I think the emergence of new games is not a threat to the E-Sports community or League of Legends. It just means that more sport genres are added and the fans will have more options to watch the pro-gamers competing with their passion. As E-Sports get popular just like League of Legends, maybe people will see E-Sports being part of Olympics.

When Americans Have Beef with Red Meat

Whether it be for ethical, environmental, or health reasons, vegetarians around the world have long been making a compelling case for why they do not eat meat. However, knowing Americans, perhaps the most persuasive reason of all lies in targeting carnivorous Americans where they would be most empathetic: their pocketbooks, as opposed to their hearts. With the difference of up to $200 billion dollars at stake for reducing meat consumption in the United States, the financial argument is one that could lead many to reconsider what they’re really putting into their mouths. However, red meat seems to be the main victim in an increasingly vegetable-dominated world.  

This is profound news for a country where meat has always been a large cultural and historical component of the American diet. A majority of American holidays include meat as a staple item, including Christmas, Thanksgiving, Fourth of July, and perhaps the most revered American Holiday of all: the Super Bowl party.

For the past few decades, demand for meat has steadily risen or declined, based on the type of meat. Americans have been adjusting their meat consumption patterns in accordance to the variations of meat pricing over the years. Global Meat News reported this past September that beef and veal recorded a three percent decline in consumption, compared to a global increase of meat consumption steady with the world’s growing population. In 1972 alone, the average American consumed 144 pounds of red meat a year, according to the USDA (National Chicken Council). Comparatively, in 2015, the average American consumed only 104 pounds of red meat. However, consumption of poultry has increased from 50 pounds per American in 1972 to 106 pounds in 2015 (National Chicken Council). This increase in consumption of poultry over red meat can be attributed to two factors: recent red meat health fears and rising red meat prices.

Behind the rising price of red meat in the United States is lower supply of cattle due to the drought. Raising cattle requires more room and feed than other animals like chicken or turkey, making it especially costly to raise throughout drought conditions, directly impacting the supply of cattle.

Cattle pricing strategy in an extremely volatile market is incongruent amongst internal sellers and producers. To combat unsteady prices are multiple safety nets are in place to protect sellers and buyers. These vary per seller/buyer relationship, ranging from simple forward contracts and more complex options and plans. Ultimately fueling the volatility in the cattle market is the strong basis levels, or the difference between the cash sales price and the futures price. According to Rabobank’s global strategist animal protein Justin Sherrard:

“In the event a producer has had the opportunity to place a hedge or further position at a price level that offers a positive price for the cattle, a strong basis can be viewed as a bonus. This is because it enables the producer to capture the difference between his cash sales price and the offset to the lower-priced futures position” (Global Meat News, “Extreme Volatility”). With ever-changing prices, both beef processors and buyers become weary as they find difficulty setting prices that will help the overall market.

Further impacting the demand for meat in the United States are alarming headlines and announcements from health organizations, including, “Red Meat causes Cancer” and, “CSPI calls for a cancer warning on processed meat,” Americans have understandably turned to alternative meat products to satisfy their desire for protein (Global Meat News). However, demand for meat in outside countries have remained high, and with the lifting of a Chinese import ban on U.S. beef in September 2016, the price of beef has not yet dropped despite the low demand (Global Meat News, “Food trends”).

Many Americans have not yet considered how their individual meat consumption patterns could have a larger significant economic impact. In March 2016, the Proceedings of the National Academy of Sciences published a global-specific health model study describing the varied effects of adopting a diet with pro rata reduction in animal products, including ruminant meat, total meat, and dairy. According to Marco Springman, one of the study’s researchers, “It’s always hard to really get your head around what it means if you avoid climate change to [a certain] degree, or have one less person dying from diet-related diseases. We wanted to illustrate the scale of those benefits.” In comparing the world’s current meat consumption patterns to diets that abstaining from meat or are less-meat heavy, they were able to examine the subsequent economic impact of current meat-heavy diets.

The five researchers from the University of Oxford compared hypothetical situations set to arise in 2050 if the world were to continue their current meat-heavy eating habits. They compared these hypotheticals to the recommended diets proposed by healthy global diets (HGD), vegan, and vegetarian diets, and examined the subsequent impacts that current diet trends could have on healthcare, environmental, and value-of-life benefits.In order to access the economic valuation of the health benefits associated with dietary change, the study relied on both “cost-of-illness” techniques which included direct and indirect costs of informal care and lost work days associated with deaths from specific diseases– and “value of statistical life” which would estimate the cost of the lives saved under each dietary scenario. They found that changes in diet, particularly in Western high- and middle-income countries would reduce the number of overweight and obese people, by 29-40 percent. Furthermore, in combined healthcare, illness, and “value of life” costs, the study found that current meat-heavy diets are costing Americans between $197 and $289 billion annually (PNAS). In particular, America, for its high per-capita healthcare costs, is in a favorable position to save more money than China, or all of the EU countries combined (Atlantic).

Though the current meat industry as a whole slowly declining as Americans begin to adopt more plant-based diets, meat will most likely remain a staple for a majority of Americans. In recent history, red meat has received its fair share of media backlash, and in conjunction with its steadily rising prices, Americans are filling their carts with more reasonably priced meat alternatives. As beef prices are set to increase, whether Americans continue their health-conscious meat-eating behavior, or revert back to their red-meat eating ways will reveal the true motivations behind their changing diet. However, the study published in Proceedings of the National Academy of Sciences suggests that continuing reducing meat-heavy diets could not only change the hearts of Americans, but also their pocketbooks.






Per Capita Consumption of Poultry and Livestock, 1965 to Estimated 2016, in Pounds






The Wells Fargo Scandal

Below is the link to my interactive timeline of the Wells Fargo Scandal:


Attached is the Google Doc I used to build it:


Works Cited
Blake, Paul. “Wells Fargo to End Product Sales Goals After Accounts Scandal.” ABC News. ABC News Network, n.d. Web. 09 Dec. 2016.
“Business News World.” Business News World – Wells Fargo Asks Court to Force Customers to Arbitration in Fake Accounts Cases. N.p., n.d. Web. 09 Dec. 2016.
Forbes. Forbes Magazine, n.d. Web. 09 Dec. 2016.
@grow_mag. “The Wells Fargo Fallout: How Does the Scandal Affect You? – Grow Magazine.” Grow Magazine. N.p., 29 Sept. 2016. Web. 09 Dec. 2016.
Https://www.facebook.com/CNBC. “How the Wells Fargo Case Will Impact the Broader Industry.” CNBC. CNBC, 16 Sept. 2016. Web. 09 Dec. 2016.
Lab, Northwestern University Knight. “Knight Lab.” 3 – Beautifully Crafted Timelines That Are Easy, and Intuitive to Use. N.p., n.d. Web. 09 Dec. 2016.
Lukomnik, Jon. “Five Steps for Wells Fargo to Rebound from Scandal.” Bank Think. N.p., 05 Oct. 2016. Web. 09 Dec. 2016.
@mjarmental. “Wells Fargo Formally Separates Chairman, CEO Roles.” The Wall Street Journal. Dow Jones & Company, 01 Dec. 2016. Web. 09 Dec. 2016.
Sabatini, Joshua. “SF Reacts to Wells Fargo Banking Scandal.” The San Francisco Examiner. N.p., 08 Dec. 2016. Web. 09 Dec. 2016.
WatchMojo. “Wells Fargo Scandal: 5 Things You Need to Know!” YouTube. YouTube, 15 Sept. 2016. Web. 09 Dec. 2016.





Following Chipotle: Can They Recover?

Chipotle Mexican Grill is an American fast-food chain that was opened in 1993 by current-CEO, Steve Ells. The company is known for its commitment to serving Food with Integrity, claiming that Chipotle understands the importance of how food is raised and prepared in order to produce quality taste. For this reason, Chipotle is one of the few fast-food chains that serves simple, fresh food without artificial flavors or GMOs. In fact, Chipotle was actually the first national restaurant chain to voluntarily disclose the presence of GMOs in their food until 2015, when they transitioned to only serve food made from non-GMO ingredients (Chipotle, 2015).

This dedication to serving the best food they can find is one of the reasons why Chipotle has found so much success. However, in the last five years, Chipotle has encountered two main problems that have significantly hindered their success. The most detrimental is the E. coli and norovirus outbreaks that hit a number of stores in 2015. The other is trying to manage the rising costs of Chipotle’s core ingredients, while still maintaining the high quality of food they adhere to. Chipotle is a chain that promised something different to their customers. Then, Chipotle discovered that it was much more difficult to manage its success than anticipated. Therefore, the way that Chipotle reacts in times of difficult decision-making and crisis is essential to understanding the core characteristics and values that the company holds.

In its 2015 annual report, Chipotle announced that it had its most challenging year in history, mainly as a result of undergoing the repercussions of their widespread E. coli and norovirus outbreaks. From July to December of 2015, Chipotle’s E. coli scandal, which was traced back to issues with supplier produce, sickened around 500 customers in the United States. The food health predicament initially came as a shock as 43 stores across Washington and Oregon were closed and deep cleaned after more than 40 cases were tied to the states. As cases continued to surface throughout the country, Chipotle had to take the same precautions to ensure that this would not occur in the future. However, the damage had already been done and had detrimental effects on Chipotle’s business and its reputation among customers.

These measures had serious economic implications on the company. In 2014, it was estimated that per year, each Chipotle store generates $2,300,000 in sales. Taking into account the 49 stores nationwide that were closed for up to 10 days due to the outbreaks, it can be estimated that more than $3,000,000 in sales were lost in that short period of time. There are also a number of costs that cannot be calculated, but had a lasting affect on the company’s bank account. For example, Chipotle had to conduct more than 2,500 tests for E. coli during the outbreak, in addition to deep cleaning and sanitizing all of the infected locations, and upping the costs of food testing for health and safety purposes.

Besides the significant monetary losses Chipotle endured in this period, the greater loss the company suffered from was the damage made to their brand image. By comparing Chipotle’s earning statements from September 30, 2015 to that of 2016, revenues decreased by 14.8%, which is $1.2 billion in 2015 to $997.5 million in 2016. The number of restaurant transactions also decreased by 15.2% in 2016, meaning that there were less customers eating at Chipotle in the year after the E. coli and norovirus scandals. Even more shocking is that, in the year following the outbreaks, Chipotle’s net income was $7.8 million, a decrease from $144.9 million in 2015. This dramatic decrease in net income is a clear sign that Chipotle has significantly suffered from a lack of consumer traffic to their stores. Therefore, in an attempt to repair the damages caused by the outbreaks, Chipotle has spent millions of dollars on increased advertising, customer reward programs, and better food health and safety procedures, in order to prove that they are willing to endure profit losses if it means regaining their customers trust back.

In addition to the detrimental effects the outbreak had on customer loyalty, the returns for its long-term shareholders were also greatly affected as the value of Chipotle’s stock plummeted. In the last year, shares lost as much as half of their value, mostly due to Chipotle’s first-quarter sales of 2016 that showed a decrease of nearly 30% because customers still feared that the restaurant chain did not resolve the causes of the outbreaks. In September of 2015, Chipotle’s diluted earnings per share was $4.29. One year later, the diluted earnings per share came out to be $0.27. Since the value of stocks is based on shareholder’s confidence in a company’s future, the dramatic decrease in the stock’s value proves that earning their customers trust back should be Chipotle’s main priority in order to ensure a more promising financial future.

To address these issues of customer and shareholder satisfaction, Chipotle stated that 2015 was a year of reinvestment in addition to a deep commitment to regaining the trust of their customers. If executed correctly, this will recover sales and once again create long-term shareholder value. One of the most significant consequences of the outbreak was the resulting contrast between practices put forth based on their slogan, “Food with Integrity,” and what was truly served to customers. Therefore, as a way of salvaging what they have left of their brand, Chipotle is standing by their vision to change the way people think about and eat fast food. However, this time around, it will be with a renewed focus based on serving a product that is safe by means of incorporating responsibly raised ingredients. Chipotle’s commitment to prioritizing their relationship with their customers, above making profits, is a strategic way of reestablishing the food chain as one of the quick, risk-free alternatives to fast food.

Chipotle’s brand is one of the key reasons for their success. However, pledging to serve their customers food made from the highest quality ingredients has made it hard for Chipotle to keep up with demand. Most of the ingredients that Chipotle uses tend to be more expensive because of their high quality standards. Certain economic conditions, seasonal fluctuations, weather conditions, global demand, food safety concerns, product recalls and changing government regulations also have a dramatic affect on food costs (2015 Annual Report). As a result, Chipotle has to make difficult pricing and purchasing decisions to maintain the desired level of quality they want to serve to their customers, while also generating a profit.

Chipotle has dealt with the rising cost of ingredients for decades. However, in 2011, the company introduced its first increase to its menu prices. As the prices of ingredients became too high to overlook, the only way that Chipotle could continue to provide customers with the same quality of food they expect was to raise the price of their meals. Chipotle had to do this again in 2014 due to a drop in margins by 40 basis points attributed to higher food costs for beef, avocados and cheese.

These three ingredients have caused Chipotle the most trouble over the last few years. In 2016, Chipotle’s food costs were 35.1% of revenue, an increase of 210 basis points from 2015, claiming that the increase was driven by higher waste costs and avocado prices (2015 Annual Report).

The rising cost of avocados has taken a toll on Chipotle’s production process. Guacamole is one of Chipotle’s most popular add-ons, but the high demand has been met with difficulties because of the scarce amount of avocados on the market. According to Chipotle, each batch of guacamole contains about 60 avocados. Due to the high demand, with all of their stores combined, Chipotle goes through more than 97,000 pounds of avocados every day. It takes 74 gallons of water to produce one pound of avocados, which means that Chipotle needs around 7 million gallons of water per day to produce the amount of guacamole to meet demand. However, California produces 95% of the avocados grown in the U.S. and with California entering its sixth year of drought, the price of avocados has spiked as a result of the state’s low water supply. With such high demand and little inventory, Chipotle must charge their customers an extra $1.80 for guacamole. While many customers are currently willing to accept this extra cost, if Chipotle continues to increase the price of their menu items, in addition to charging extra for guacamole, the chain could begin to lose customers.

Since 2013, Chipotle has also dealt with rising global cost of meat. In February of 2015, beef prices climbed by 19% since 2014 and were expected to climb by 5-6% throughout the year (Eller, 2015). Much of this increase can be attributed to droughts that have hit parts of the US in 2014 and 2015. By looking at Chipotle’s 2015 income statement, the company spent around $82 million more on food, beverage and packaging than they did in 2014. This increase was not solely due to the rises in meat products, but it definitely hindered the company’s success.

Not only did the spikes in meat costs affect Chipotle’s operations, but the high quality standards they set for themselves also created issues for the company. Between January and November of 2015, a number of Chipotle restaurants were unable to serve carnitas due to a pork shortage. The shortage was a result of one of Chipotle’s suppliers violating some of the company’s core animal welfare standards. As a result, Chipotle immediately suspended all purchases from the supplier and was unable to provide carnitas to about one-third of their 2,010 stores. This was a difficult decision for Chipotle to make. Removing a core menu item for more than eleven months could have posed an eminent threat to Chipotle’s revenues and customer’s satisfaction. However, Chipotle decided that standing by their mission statement was of the upmost importance. Therefore, the consequences that they endured from suspending the sale of carnitas was necessary in order to promote long term growth and brand loyalty.

Since the cost changes for Chipotle’s menu items were not significant enough, Chipotle did not lose much of its consumer base. However, as the E. coli and norovirus outbreaks plagued Chipotles throughout the nation, customers now had a legitimate reason to stop eating at the fast-food chain. Not only did the outbreaks cause customers to temporarily stop eating at the restaurant, but they also permanently damaged Chipotle’s brand image. When a business’ core value is to serve food made from the highest quality ingredients and then it sickens almost 500 customers around the nation, the company is going to lose a lot of its credibility. Therefore, it has been difficult for Chipotle to earn back the trust of their customers who have lost a lot faith in the company’s claims.

It is such a fragile time for Chipotle. In an effort to recover from what has happened in the past, Chipotle commits to fixing their damaged brand by showing customers the significant value they hold within the company. To jumpstart this plan, Chipotle created a rewards program, Chiptopia, to give loyal customers an incentive to return to the chain. Another strategy they employed was introducing new menu items, such as sofritas and chorizo, to boost interest in their stores. Even through the disease outbreaks, Chipotle has continued to open new locations with the hopes of expanding to new and more popular markets.

Although these are well thought-out strategies to boost consumer interest and bring customers back into their stores, Chipotle’s stock is still lower than it was in July of 2013, meaning that they have not even come close to making up any of their incurred losses. There are a number of steps that Chipotle should take in order to turn the company around. First, Chipotle should reinvent their relationships with their current and potential stakeholders and investors in order to foster trusting and attentive relationships by clearly outlining Chipotle’s plan for future earnings. In terms of their customers, Chipotle should utilize external channels and mediums to promote new levels of transparency, insight, and easier access to available information. It would also be helpful to re-emphasize the freshness and locally grown aspects of Chipotle’s suppliers, confirming that Chipotle knows where their food comes from. Chipotle is confident in their financial future and believe that there is a great chance that they can bounce back and produce all-time highs. Chipotle’s commitment to their company, brand, and customers is an indicator that the chain will find a way to come back out on top.
































The Mobile Ticket

“Life in the palm of your hands”; the common expression that comes with our lives today. Yes, I am talking about phones. Smartphones have changed the way we live our lives each day in a way that many think is for the better. With that, smartphones have transformed the way businesses and consumers interact with one another through digital and strategic methods to make their lives easier. The airline, sport, and hospitality industries have taken notice of this change in consumer behavior and have revolutionized the idea of digital ticketing.

Mobile ticketing conveniently provides customers with ticket options by utilizing the power of their smartphone. In my opinion, easy, quick, and convenient are all values that consumers take into account when having the option of using their smartphones over hard copies. Let’s begin with the actual convenience of having a mobile ticket on one’s phone. As technology progresses and mobile devices become “smarter”, this feature is going to take over the consumer dynamic. As per a study done by Juniper Research, “Mobile tickets are expected to account for more than one in two (>50%) ticket transactions on digital platforms by 2019”.

One of the major advantages of having a ticket on your phone is that it cuts costs for ticket providers as well as the customers. No shipping, no paper, no ink; these factors alone make mobile ticket more appealing than the traditional style. Airlines have increasingly promoted the use of mobile tickets through their mobile apps. American Airlines, JetBlue, and Southwest list the step-by-step instructions on how to download and access boarding passes from your smartphone. Apple, Inc. has made the downloading process simpler through an application called “Passbook”, which has now been simplified into “Wallet” (See right). Apple has formed partnerships with airlines, sports teams and credit card companies to create an all-in-one format for their clients in a development towards eliminating wallets. Additionally, industries of all kinds are adopting these mobile ticketing features as a way to increase customer experience in a variety of aspects.

Who is using the technology?

Sports stadiums and arenas have understood the niche when it comes to mobile ticketing and are constantly looking to find ways to enhance the consumer experience. According to the Ticketing Technology Forum, “with stadium owners looking to increasingly [utilize] the latest technology to improve their grounds and enhance the user experience, mobile ticketing looks set to take off”. Owners around the National Football League see availability within their stadiums that can increase the overall fan experience, surpassing just the mobile ticket. Also mentioned in the article, “No longer will the mobile [phone] just be another object in your pocket, it will now be a gateway device to stadium garages, the grounds, food and drink services, a security pass and an interactive device throughout the day”. There are endless possibilities for this technology and business leaders hope to acquire a rewarding service just like the airline industry does with its rewarding miles programs.

Inevitably, there is a promising future for the mobile ticket, and stadiums hope to use e-tickets as the entry point to many possibilities as previously mentioned. Making purchases within the stadium, finding seats more clearly by using an interactive map, ordering food directly to the seats so that fans will not miss any action, and locating the nearest toilets are all part of the expansion plans that have been spoken about.

Mobile ticketing goes much further than just being able to print your ticket and increase user experience. Through the capabilities of mobile ticketing, consumers amongst all industries are able to look at prices on a recurring basis and purchase a ticket up until the beginning of the event or trip. Pricing plays a tremendous role in ticket purchases, especially now that consumers can see these price changes instantly, all with a touch of a button. This technology enables customers to locate the best seats at the best value of any event they wish to attend.

The impacts of pricing strategies are detrimental. To start, there are two types of strategies: variable pricing and dynamic pricing.

Variable Pricing

Defined by the Houston Chronicle, variable pricing as a pricing strategy where a business offers varying price points at different locations or points-of-sale. For instance, let’s consider sports. This whole dynamic is based upon the price of tickets set in advance of the season, but understanding that prices can change depending on the game. The value and match up of the game impacts the pricing of the ticket.

The graphic above shows the ticket prices for the 2017 Los Angeles Rams’ home schedule. Putting the variable pricing strategy into action, the average cost to see the Rams play the Seattle Seahawks will cost you a lot more than when Miami Dolphins come to town. The ownership of the Rams anticipates that there will be much higher demand for a divisional matchup than an out-of-conference one.

Airline and hotel industries also play a role in using variable pricing methods. Airlines set their “Economy Plus” or “Economy Comfort” and standard economy seats at different prices due to the level of comfortability and on-board experience in the cabin. Consumers will additionally see a change in price based on the final destination city. As another example example, there will be a large difference in hotel price between booking in New York and Illinois. A post on Travelandleisure.com states a night in New York City will go for $244 on average as compared to $199 in Chicago.

Dynamic Pricing

On the other hand, is the concept of dynamic pricing. When it comes to this pricing strategy, there becomes a notion set as to the price of items determined by a customer’s perceived ability to pay. Again, let’s use sports to create a better understanding. If the forecast is projecting rain for next Sunday at an outdoor stadium, less fans will be expected to show up; therefore, teams must lower prices to draw a larger crowd for support. Rutgers’ NCAA Football Senior Associate Athletic Director and Chief Marketing Officer, Geoff Brown went into further explanation about his team and how the organization uses dynamic pricing. Mr. Brown states, “there’s a need to maximize ticket revenue and at the same time not penalize longtime, true Rutgers fans”. Schools that have college football teams adjust single-game prices upward or downward based on the marketing conditions of fan demand and ticket scarcity.

Aside from college football, consumers are aware that airlines also use this pricing strategy and have made note that they may be spending more when it comes to flying back home during the holidays. The graph below shows the change in prices of airline tickets as the date becomes closer to December 25th. According to the graph, it is recommended to book flights 90 days, or three months, before Christmas rather than dealing with a 27% increase of the original price ten days out (See left). Customers should understand this pricing inflation and make the necessary arrangements.

This idea also comes into play when booking a hotel in Houston during the Superbowl. Because of a national event like Super Bowl LI, consumers will have no choice but to agree to paying a higher price for their stay. The public is able to see all of the price changes, by exploring dates and locations through the power of their mobile devices. Mobile ticketing has allowed consumers to compare rates, track pricing changes, and locate the best deals available. The mobile ticketing platform operates through the use of dynamic pricing strategies. At any moment, applications like Google Flights can survey demand and change the prices of tickets accordingly by monitoring your search history.

Having the ability to track your favorite sports teams, or see if you will

be able to stay at your dream hotel all goes back to pricing and the power of technology. These pricing strategies impact the way customers interact on a mobile platform. Believe it or not, mobile device
s are transforming the way consumers travel. According to eMarketer, customer purchases on a desktop have continued to decline. In 2017, 59.2% of airline travelers are projected to book their travel itineraries through their small screens (see chart below).

Though technology is great in many aspects, it is crucial to look at the other end of the spectrum and discuss the downsides of the growing world of mobile advancement. Smartphones do not have unlimited battery. Questions arise as to “What happens if my phone runs out of battery?” and “Will my ticket still be retrievable?” This is major concern for users as they are hesitant to rely solely on mobile technology. While security and boarding lines are intended to decrease through the use of mobile boarding, the issue of pulling up your ticket and not being able to locate it becomes a problem that can hold up a line and infuriate others.

Fans Disagree with Mobile Ticketing

Jeff Gilbert, a San Francisco 49ers fan, expressed his concerns over abandoning physical tickets and introducing mobile ticketing. In the past, Mr. Gilbert could mail his friend one of his season tickets or exchange it in person. The only option now is to hope that Gilbert’s friend also has a smartphone and accept the ticket transfer. However, through the adoption of this new digital platform, the 49ers have implemented a 72-hour transfer process before the start of the game. This has resulted in widespread confusion amongst season ticket holders and has caused them to become fed up with the overall dynamic as per the article. This allows fans to print their tickets only when there are 72 hours or less before kickoff. The 72-hour window has proven to be an issue when fans want to donate their tickets to charity and other situations involving giving them away to random people.

Controlling Supply, Taking Advantage of Demand

In another case, the advancement of technology has caused an issue between supply and demand, leading to lives being lost. Industries across the board have unfortunately taken advantage of this concept. Martin Shkreli, an entrepreneur and pharmaceutical executive, acquired the manufacturing license for a pharmaceutical drug which allowed him to control the power of supply for society’s demand. Mr. Shkreli understood the need in the market and the people’s dependency on this drug in order to live. According to Dan Mangan’s article on CNBC, demand was extremely high and supply could not keep up with the market demand allowing Shkreli to have the authority to raise prices by 5,455%. A drug that once costed $13.50 at the time, soon became $750 per pill and consumers were forced to pay because they had no other options.

Technology Advancement and the Future

In retrospect, technology has taken our society to a whole new level. Its effects on supply and demand becomes more prevalent every day. While security and privacy issues arise from the growing use of mobile technology globally, consumers are able to look at mobile ticketing as a way to help understand the market and undergo an enhanced consumer experience.

The introduction of mobile ticketing has helped advance developing industries like hotels, airlines, and sports and their relevancy amongst the consumer demographics today. Through the innovation of technology, users will change the way they interact on a daily basis. We must sacrifice person-to-person contact in our transition toward a technological society. As a result, many people will lose jobs and payments will happen through fingerprint recognition. We have already seen this today through a variety of mobile applications, but really, we all know people are glued to their phones more and more each year. The advancements have both positive and negative effects on our lives, while it may not all be safe, consumers are drawn to the endless possibilities of technology, an industry controlled through the power of their mobile devices.












The Future of Universal Music Group



            Throughout the past fifteen years, the shifts in technology that have consumed our society have been dramatic, changing the way we conduct every day simple tasks and have altered business models in all different sectors of industry.  Although this can easily be attributed to modification in transportation (Uber), or hotel accommodations (Airbnb), this technological shift and advancement is very evident in the entertainment and music industries as well.

Over the past fifteen years, the music industry, and label conglomerates in particular, has dramatically shifted from a business model focused and reliant on physical album sales to a full service firm offering record production and distribution (that is mostly digital) and other ancillary services of the music industry, such as touring, brand partnerships, and merchandise.  With a reported loss of over 60 percent of revenue over the past fifteen years annually, it has been very clear to these huge, multi-national conglomerates that changes are needed in order to survive in this ever-altering industry.

The three major record labels, Sony Music Entertainment, Warner Music Group, and Universal Music Group, to be discussed in further detail, have taken years to catch up to the evolving technology and consumer demand of our current world, but are working to monetize and turn a strong profit on the world’s biggest artists and names in music once again. Although the days of selling just physical album sales are now over, the music industry is far from dying.



Universal Music Group, also known by many as UMG, is one of the current global leaders in music.  With over a 30% market share, UMG is considered to be the leader in the industry with a majority share in the global music market.  With this leadership and majority comes with responsibility, as many other companies in the industry, like other label conglomerates, indie labels, management companies, and live ticketing companies look towards the labels and their sales revenues as economic indicators, using them as a clear way of determining the health and vitality of the global music industry. 

The current music industry as we know it, with the three key players – UMG, Warner Music Group and Sony Music Entertainment, was born and created in 2011 with the acquisition and consolidation of EMI and Universal Music Group.

UMG has the largest market share, with a 36.2% share in 2015, followed by Sony with a 28.3% share, and lastly Warner with a 23.1% share.  Independent labels, in 2015, had about a 12% share in the global music industry as well.

2011 was a pivotal time for the music industry, as many lasting changes occurred, shifting the climate of music to today’s current state.  In January 2011, Lucian Grainge was appointed to CEO and then quickly chairman of UMG.  In November of that year, it was announced that EMI, a then big player in the industry would be splitting and merging, selling their recording business assets to UMG for $1.9 billion, and selling their music publishing to Sony for $2.2 billion.

The merger, which quickly changed the landscape of the music industry, was approved by the European Commission and the Federal Trade Commission in Europe and the US, respectively.  This merger changed the music industry landscape overnight, as UMG quickly became the world leader in recorded music and dominated the industry setting.

However, during this time period, the landscape of music purchasing was also changing, with the introduction of digital sales and iTunes, and soon after streaming. iTunes was revealed in 2001 by Steve Jobs at the 2001 MacWorld Expo, and quickly gained traction throughout the world.

In their first press release published in 2001 releasing iTunes 1.0, Apple stated, “iTunes is miles ahead of every other jukebox application, and we hope its dramatically simpler user interface will bring even more people into the digital music revolution.”  As this all became true over the next ten years, it is almost impossible to believe that the instigators of iTunes believed that it would transform the entire music as it eventually did.

It is estimated that iTunes sold over one million songs their first week, with only 200,000 songs available for purchase and download.  By working with the major labels themselves to make sure that their catalogues were available to be purchased, iTunes quickly became a massive music seller.  By 2007, with the release of the first iPhone, Apple became the largest technology company in the world, owning all aspects of our technology-filled lives from the hardware to the content we were consuming on our devices.  And, by the end of the 2000s, iTunes accounted for 26.7% of US sellers, serving as the number one seller of music in the US, either physical or digital.

With the iTunes revenue models, labels quickly began to work with Apple to ensure that their artist and their firms would be receiving adequate compensation, as they realized that the current trends of consumers would quickly begin to shift from physical album sales to singles sold online and downloaded digitally, a la iTunes.

However, by Spring 2011, just as UMG and EMI announced the acquisition, Spotify, a Swedish startup announce that they had just reached over one million subscribers globally and quickly launched in the United States by Summer 2011.  Over the next few years, Spotify and other streaming services would quickly change the entire landscape of the music industry, forcing the major label conglomerates, artists, and other key players to make key adjustments in order to survive in this changing market.


Current State of Affairs

            Although many people, especially consumers, today, believe that the music industry is dying and label conglomerates are no longer relevant or prominent in the world, quite the opposite was just recognized, as a new study revealed that the music industry is currently thriving. Even though streaming has easily passed physical album sales as the top way that consumers listen to their music, over the past few years, major conglomerates like UMG have developed new revenue models in order to sustain their businesses.

On November 10, 2016, Universal Music Group revealed their quarterly earnings for Q3 of 2016 and many
people were shocked.  In the first nine months of 2016, UMG reported earnings of over 3.6 billion euros.  This was a 3.8% growth compared to last year’s numbers.  UMG is currently more profitable than Spotify ever has been and is currently on track to have their best year since they were acquired by Vivendi over ten years ago.

Music streaming, in its current state, is expected to bring in close to $6 billion in revenue this year, and is expected to have an annual projected growth rate of 14.3%. (Statistica) With this massive growth in streaming, revenues for the major labels, like UMG are expected to rise in the streaming category as well, with revenue of over $1 billion for UMG alone already reported for 2016.

Streaming is expected to only grow immensely in popularity, as there is projected to be over 1.2 billion users of streaming services by 2021 with a steady increase from now until then.

Diversity of Services

One of the ways in which labels have begun to combat the changing tides of the music industry is to seek out and obtain alternative revenue sources for their artists.  In order to combat the lack of revenue that came from the change to streaming and digital downloads, labels like UMG had to look for alternative ways to make money.  So, they began to sign their new artists to a new type of deal called a “360 deal.”

The deals demand a portion of the artist’s income from record sales, streaming, touring, merchandise, publishing, brand partnerships, and any other type of revenue you might think an artist can receive.  Deals are estimated to range from handing over 5-50% of revenue to the label and can vary on the types of services and revenue streams included depending on the size and career strength of an artist.

Labels, like UMG, have begun to use this model, as they believe that they are investing in the careers of these artists and deserve to be compensated as such.  Because the lack of revenue coming from album sales has hindered their profits, many label heads believe that 360 models will allow them to remain profitable in this ever changing industry and support the artists that they have worked to develop and chosen to put their resources behind.

Artist Perspective

            Today, in 2016, many artists no longer believe that a major label conglomerate is necessary for success and profitability in the music industry.  Just a few days ago, the 2017 Grammy nominations were released.  Many believed that 2017 would serve as the Grammys that changed the music industry, as the Recording Academy was believed to focus on highlighting artists who were not signed under a major label and changed the landscape of the music industry based on their individual decisions.

Although many of the artists (including all of the Artist of the Year nominees) are still representing major labels, one of the most notable non-major label artists nominated is Chance the Rapper.

Chance the Rapper received seven Grammy nominations this year, only following major label artists Drake, Beyoncé, Rihanna, and Kanye West.  Chance received more nominations that Justin Bieber, Sia and David Bowie, all major label artists as well.

Chance, who is not signed to a major label, is known for releasing his music for free and only on streaming sites. His latest album, Coloring Book, was only released on streaming and is the first digital-only album to be nominated for a Grammy.  The album charted on the Billboard Top 200 with over 57 million streams (equivalent to 38,000 units) and his latest single reached the Top 40 charts as well. 

He explains his mentality on not signing to a major label and believes that he can better his career in a way that is in a superior way than any one of the major labels could. “I’m just trying to be an example for all the young artists that are becoming artists everyday and working on their craft and trying to help them avoid the pitfalls of the upper management in music and the non music side of music.  When it’s in your hands you’re just self motivated and have all the tools that are there. I just want people to avoid the convo.”

Although Chance the Rapper is not ever artist, and certainly not every well-known artist currently touring on the charts, he is a strong example of a type of business model that clearly works and is defying the traditional label/artist relationship that major labels like UMG have worked for years to grow and develop.


            UMG, and the record industry as a whole, is at a current crossroads.  From what originally began as conglomerates of music labels working to record and publish music, it seems as if labels are vying to take the control away from artists and other industry entities, like management and agencies, in order to still serve as the gatekeepers of the industry.  From a revenue perspective, major labels like UMG are still vital for many musicians to “make it” in the music industry in order to reach the massive audiences needed to tour or chart.

However, with artists, like Chance the Rapper succeeding without a label and making all of the business decisions with an a la carte team pieced together himself being nominated for multiple Grammys, the current landscape may change even more.  As Chance the Rapper gains notoriety, up and coming, and more developed artists, might begin to forgo the major labels even more and create and build their own teams and revenue models.  Regardless of what occurs in the next few years, it is very evident that the music industry is thriving, due to new technology inserted everyday into the climate.


Works Cited


360 Deals and What They Indicate About the Future of the … (n.d.). Retrieved December 8, 2016, from http://www.kentlaw.edu/perritt/courses/seminar/Basofin-360%20Deals-FINAL.pdf&p=DevEx,5045.1


Buyer Beware: Why Artists Should Do A 180 On “360” Deals. (n.d.). Retrieved December 08, 2016, from http://www.billboard.com/biz/articles/news/1209534/buyer-beware-why-artists-should-do-a-180-on-360-deals


Caught In Time: The Music Industry’s Struggle To Adapt. (n.d.). Retrieved December 08, 2016, from http://www.hypebot.com/hypebot/2013/02/caught-in-time-the-music-industrys-struggle-to-adapt.html


@. (n.d.). Chance the Rapper, Lil Wayne, and 2 Chainz Trash a Label Office on ‘Ellen’ Retrieved December 08, 2016, from http://www.ew.com/article/2016/09/15/chance-rapper-ellen


@. (2016). Chicago’s Chance The Rapper Of ‘No Problem’ Makes Grammy History; Gets 7 Nods Without Label Help; Even Exceeds Adele’s Number Of Nominations. Retrieved December 08, 2016, from http://www.newseveryday.com/articles/58262/20161207/chicago-s-chance-the-rapper-of-no-problem-makes-grammy-history-gets7-nods-without-label-help-even-exceeds-adele-s-number-of-nominations.htm


Crook, J., & Tepper, F. (n.d.). A Brief History Of Spotify. Retrieved December 06, 2016, from https://techcrunch.com/gallery/a-brief-history-of-spotify/


McElhearn, K. (2016). 15 years of iTunes: A look at Apple’s media app and its influence on an industry. Retrieved December 01, 2016, from http://www.macworld.com/article/3019878/software/15-years-of-itunes-a-look-at-apples-media-app-and-its-influence-on-an-industry.html


The New Pioneers: Chance the Rapper Is One of the Hottest Acts in Music, Has a Top 10 Album and His Own Festival — All Without a Label or Physical Release. (n.d.). Retrieved December 06, 2016, from http://www.billboard.com/articles/news/magazine-feature/7468570/chance-the-rapper-coloring-book-labels-grammy


NBA Franchises: 30 brick and mortar unicorns

On August 12, 2014 a California Court ruled that it was legal for the ex-Microsoft CEO and billionaire Steve Ballmer to purchase the Los Angeles Clippers for two Billion Dollars. This astronomical purchase price reverberated across the entire sports landscape as the figure was unprecedented for an NBA franchise.

The shock was further intensified because of the team being purchased. The Clippers were not a jewel franchise or a perennial powerhouse with a long tradition and sterling reputation. At best, Ballmer was investing in potential, as analysts agreed that the Clippers were woefully mismanaged with untapped revenue streams waiting to be exploited. Still, a two billion dollar purchase price was almost four times the highest recorded sale for an NBA franchise up to that point, when the Milwaukee Bucks sold for 550 million dollars earlier in 2014.  Based on those figures, the general consensus was, and still is, that it was an expensive premium to pay for upside.

Ballmer is enjoying his purchase

Ballmer is enjoying his purchase

So, how did the NBA achieve such rapid economic development? Just four years prior, the mere thought of a two billion dollar sale would have been laughable. In 2010, the economy was in the nascent stages of its recovery from the Great Recession. The NBA was not immune from the aftershocks of the economic turbulence, and many teams reportedly were losing money each year. With NBA owners suffering stagnant growth in other business interests, franchise ownership was ceasing to offer the benefits of a vanity asset and only serving as a money pit. The reversal in economic fortunes dimmed the allure of commanding an NBA franchise, and in turn both the perception and value of franchises stumbled.

According to Forbes magazine, audited financial documents show that in the 2009-2010 season, 23 of the 30 NBA franchises were unprofitable with an aggregate loss of 340 million dollars. This represented a slight improvement from the prior year when 24 teams were in the red and total losses were closer to 370 million dollars.

Admittedly, the NBA themselves painted a dire image of the league’s financial stability in order to better position themselves for the 2011 Collective Bargaining Agreement negotiations. However, Forbes was aware of this maneuver by the NBA and still presented their own estimates, which are acknowledged as unbiased and third party. Some of the figures and the accounting measures used are up for debate by Forbes competitors. For instance, 538.com founder Nate Silver has favored operating margin over operating income as the best indicator of an NBA franchise’s economic health.

Even with some debate over the specific valuations, as of 2010 there was a general consensus that the NBA as was struggling to keep pace with the growth of its bigger and more popular, domestically at least, competitor: the NFL.

Fast forward to the present day and the NBA is experiencing valuation growth unheard of outside of Silicon Valley. What makes this even more unique is the fact that the NBA is a relatively mature industry, yet valuations have increased six-fold for some franchises. The Clippers who in 2011 were valued at 302 million dollars sold for six and a half times that only three years later. The Knicks in 2016 are now valued at 3 billion dollars, the Lakers at 2.7 billion dollars, and the Bulls at 2.3, close to 500% increases respectively. The average NBA team is now worth over one and quarter billion dollars when only five years ago the teams were at around 340 million.

So what drives this exponential and incomparable growth? It’s an array of factors: an ever changing entertainment landscape, the popularity of individual players, a favorable collective bargaining agreement, and scarcity of options with only 30 teams. All of these factors, and many more, are playing their part in this contemporary NBA economic renaissance.

First, and probably most significant, is the rapidly increasing premium content providers place on live sports entertainment. With recorded television, streaming services, and unconventional multimedia platforms battling for consumers attention, traditional cable and television providers are doing their best to hold onto the crown jewel of live television, sports. The scarcity of content worthy of placing viewers in their seats and holding their attention for ad dollars has driven up the future value of television contracts for sports in general. As a fast paced game that connects with millennials, basketball is in a prime position to cash in on the lucrative TV rights deals. As Ben Thompson of the blog Stratchery points out, sports in general are signing such rich deals because “advertisers have nowhere else to go.”

This phenomenon is playing out at the local and national level. One of the driving factors in Balmer’s decision to purchase a franchise was the looming Clippers’ television deal. After the Lakers signed the largest regional TV rights deal in 2011, valued at four billion dollars over twenty years, Balmer felt he was in a great position to increase the Clippers revenue. As of September 2016, Balmer accomplished that goal by more than doubling his annual television deal with Fox Sports, bringing in over fifty million dollars annually while also including clauses for innovative and interactive services. At the regional level, these deals are taking place all over the country, with teams dramatically increasing their television revenue as content starved networks fork over immense amounts of cash for broadcast rights and in turn ratchet up the cost for advertisers.

At the league level, the NBA is mirroring each team’s strategy but achieving it through economies of scale. Since the league can offer a greater breadth and depth of offerings, and is able to negotiate with national networks, their new TV deal is landmark in scope. The strength of negotiating on behalf of a collective was in full effect as the NBA inked a deal in 2014 that will pay the league close to 2.6 billion annually. The deal, which is slated to start at the beginning of the 2016 season, represented an incredible 180 percent increase from the previous agreement struck with Turner Sports and ESPN in 2007. The NBA was a recipient of good fortune and timing on this deal, as they were the only major sports media deal up for negotiation until 2020. The league wide revenue sharing ensures that this deal contributes to each team’s top line growth in a significant fashion.

While TV rights are certainly driving healthy annualized revenue growth, there are other factors at play that also put the NBA in a unique position for this tremendous evolution. If it was just about live content for TV, Major League Baseball’s absolute advantage in games played would be the primary beneficiary of the paradigm shift within entertainment. Instead, it is lagging behind both the NBA and NFL across a wide array of metrics. What also is contributing to the NBA’s growth is the personality and value of its players. Social media has eliminated the middleman between players and their fans, allowing more athletes to build personal brands and connections with fans. This exposure to a wider demographic helps broaden the NBA’s audience and bring in more fans, and with them more revenue from ticket sales and merchandise.

The reason the brand appeal of these players is so significant is the favorable Collective Bargaining Agreement the NBA owners got after the 2011 lockout. The combination of posturing about losses and an incompetent union head placed owners in a prime position to lower wages and cut major cost drivers. NBA teams were able to lower salaries by an average of 280 million dollars per year across the league, which is a little bit more than 9 million dollars per year for the salary cap until the current CBA ends or is renegotiated. (LA Times)

Although NBA salaries skyrocketed this past summer because of the new TV deal, they could have been even higher had the NBA Players Union stood their ground on their share of the revenue instead of decreasing their cut by more than two percent. (LA Times) Couple this with the fact that many superstars are actually paid below their free market value and owners are getting a bargain across the board. For instance, Kevin Pelton of ESPN estimates through his formula that Lebron James production is actually worth close to 100 million dollars annually to the Cleveland Cavaliers, which is more than three times his salary of 31 million dollars next year.

More money should be flying down for Lebron James according to economists

More money should be flying down for Lebron James according to economists

This type of bargain for a major asset is a steal in any business, and it is obvious why NBA franchises are increasing in value so rapidly. They have incredible cost controls, domain over a scarce resource, and have a competitive edge in developing off the court recognition. This is not to mention the vanity aspect of the purchase as well as the fact that the NBA is leading the major American sports in their outreach to China and other global markets.

In times of economic success, scarcity also comes into play. This is variable depending on the economy as a whole, but it is a trend that shouldn’t be ignored. With only 30 NBA teams, and a bevy of egotistical billionaires, pure fundamentals don’t matter as much as having a rare and unique asset like an NBA franchise. It is hard to quantify the economic impact of an NBA team on an owner’s ego, but there is no question that it should be factored into this unrivaled growth. In terms of pure supply and demand, there is an incredible shortage and imbalance with countless billionaires waiting in the wings for an NBA team to fall into their lap.

NBA owner Mark Cuban enjoying one of the rarest assets of all: an NBA title

NBA owner Mark Cuban enjoying one of the rarest assets of all: an NBA title

Overall, the two major internal changes that have served as the catalyst for this furious growth are the shift in compensation formulas and technological adeptness in marketing and branding players. Combine this with an ever changing media landscape, and that is the fuel for a thriving business and exponential growth. That is what the NBA is experiencing, the only question is how long will it sustain this dramatic increase?

Is Cyber Monday a new Holiday?

Leading up to Thanksgiving, advertisements can be seen everywhere. Ads for shoes, ads for electronics, ads for department stores on virtually every outlet. This is due to the high quantities of sales that are made during the holiday season. This is also the case because of Black Friday, which has virtually become a nationwide event. However in recent years a new “holiday” of sorts has come about, Cyber Monday.

Cyber Monday is a marketing term that was created because of the deals that are offered online on the Monday following Thanksgiving. Cyber Monday has gained more and more popularity generating approximately $3 billion in 2015 and in one to the most profitable single days for online retailers.


One of the reasons Cyber Monday may be gaining in popularity is the shift in the way consumers are shopping. Shoppers are more and more comfortable with shopping online. It has been eclipsing Black Friday in some ways because people are able shop in the comfort of their own homes. This means not having to deal with parking, sifting through products, waiting in lines, and the crowds of people. This is also beneficial because consumers do not have to feel the urgency of snatching up the best products before everyone else. They also do not have to worry about things being out of stock or the store running out of their size and trying to locate a store that still has their sizes. In fact Cyber Monday’s success may have impacted sales on Black Friday. In recent years sales on Black Friday have decreased while sales on Cyber Monday continue to grow. With the two being so close together, shoppers may feel that participating in one is enough.


Other factors have contributed to the rise of Cyber Monday including the use of social media as an advertising medium as well as increased mobile shopping. While there are not many long-term effects on the stock market, it is important for major retailers to participate by advertising or giving promotions to stay competitive with other companies in their market segment. Cyber Monday has become such a phenomenon that by not being a part of it would serve as a disadvantage.

Rise of the Dad Sandal: Counter Culture’s Surprising Influence on

Birkenstocks. Tevas. Chacos. Mark’s.

mtiwotm3njizmzu0mjaymdayThough you may not recognize the aforementioned shoe brands, you almost certainly have seen these “dad sandal” brands sported by millennials riding the wave of the infamous counter culture trend. Though most of the older generation has laughed and many more have scratched their heads in confusion, the dad sandal lives on as a reflection of the a growing market for “counter culture” products. Today, as millennials are set to inherit a significant portion of the purchasing power, the economic influence of counter culture trends are increasingly prevalent.

Counter culture, often referred to as “being hipster,” is often known as the rise of appreciating originality and going against the grain of what would be considered mainstream. Though appreciation for alternative fashions and trends are not a new phenomenon, they have a new-found importance in today’s economy due to increased globalism and increasing uniformity. As ideas are spread faster than ever before, cultural uniformity is an undeniable byproduct. Now, being “hipster” is influencing decisions of mainstream companies and trendsetters as they look to consume products reminiscent of being different. This sincere appreciation for individualism has manifested itself in an appreciation of smaller, independent companies and brands reflecting authenticity and alternative trends.


Prada, SS14

Today, appreciation for counter culture has led to the rise of small craft breweries outpacing Budweiser at 16.1 million barrels of beer annually, a twenty percent increase of independent bookstores since 2009, and three billion dollars spent on funding more than four thousand independent feature films in 2014 (New Yorker). Even high-end fashion brands Prada and Marc Jacob’s took influence from counter culture in their 2014 Spring runway shows, where models donned strappy sandals eerily resembling the “dad sandal” made infamous by shoe brand Teva a few years prior (Fashionista). According to Lorie Pointer, global product director of Teva, they have always continued to stay true to their brand. She says, “I think that’s what’s resonating with consumers right now: We are original. This is authentic product. Trends come and go, but Teva has stayed true to our nature.” The authenticity and alternative nature of Teva compared to more mainstream brands is what entices Teva’s alternative consumers.

Teva continues to receive partnership offers with high-end fashion brands like Opening Ceremony (Fashionista) whilst the brand expands its core consumer base. Though brands like Teva catering to an increasing number of consumers seeking authenticity, alternative culture, and originality grow in popularity and influence, big brands and companies are still essential to “high income countries,” as described by Tyler Castle of American Enterprise Institute initiative called Values and Capitalism. These big companies provide goods and services at reduced costs and more efficiently than their smaller counterparts. However, as big companies grow, Americans are increasingly enticed by the diversification and trust provided by small companies like Teva. Perhaps in the future, Americans can expect to see more surprising and confusing fashion choices similar to the “dad sandal” today, reflective of an aversion to lack of diversity created by globalism.






How the Hipster Ethic Is Revitalizing the American Economy