As with essentially every industry, the ways in which we consume sports are consistently refined by technological innovation. Radio, as well as broadcast, satellite and high-definition TV have raised the profiles of baseball, football (both kinds) and basketball. The Internet, too, modified the ways we watch sports, with the ability to analyze information no longer through merely a television screen or that morning’s newspaper. With the web fully entrenched in basic society, new streaming services offer consumers real-time information essentially whenever and wherever they want it, decreasing the need to be in front of the television for a particular program — except for sports, live content’s last bastion. These changing dynamics in streaming, doubtlessly, will further upend the model of sports consumption and threaten the viability of broadcast networks in favor of newer technology companies.  

The standard over the past few decades has been for sports leagues to sign “media rights deals” with content providers, who pay to broadcast their games and content throughout the nation and the world, primarily on television [source]. Technological advancements and the practice of economic globalization have enlarged the population of sports consumers; the “rapid rise in sports costs is consistent with supply/demand theory,” creating a “constant imbalance in favor of the … nearly permanent supply shortage of top talent [while] … there are more potential bidders for their services” and content featuring the minuscule number of superstars [source]. So, the value of the sports leagues’ content has leapt and will continue to leap, because the “number of competitors is relatively large … generating continuous high demand” [source]. To date, the majority of these sports media rights deals have been with television companies, which broadcast the sporting events and highlights into homes. As Mark Leibovich, author of the book “Big Game: The NFL in Dangerous Times,” notes: “60 percent of [NFL] revenues [come] from TV over most of their history, and the ratings are going down” [source]. The leagues are paid handsomely for their content, now at the level of billions of dollars per year. To illustrate, the NBA signed its most recent national TV deal in 2014, a $24 billion, nine-year contract with Disney (through its media networks ESPN/ABC) and Turner Sports, which took effect in 2016 at a rate of $2.667 billion per year [source]. To make revenues and account for the rising costs of producing live events such as sporting events, the operators charge a fee to consumers for the channels that show it.

The research firm SNL Kagan has estimated that in 2017, “$18.37 out of the typical cable subscribers’ [$103] monthly bill was allocated just to sports networks like ESPN and Fox Sports” [source]. Sports – live content – is king. Where pay-TV providers charge more for regional sports networks, it is even higher, as much as “$20 to $25” per month. This is a raise of over five hundred percent since the start of the millenium [source].

However, simultaneous with rising fees over that time period to help pay for the increasing sports rights came the new streaming services and technological advancements that have allowed people to access content, such as movies on Netflix or sports, in a mobile manner. Young people especially are not watching cable anymore; according to Pew, 61% of adults ages 18-29 use streaming services as their primary way to watch content traditionally only available on a television [source]. Choice is king for the people who are going to be consuming content for the next generation. These “a la carte” services, claims NBA Commissioner Adam Silver, are the future of how the majority of people will watch sports [source]. This season the league has started selling not just slices of the 82-game season on a game-by-game basis but also parts of games as well, in order to provide more “customized experiences to meet the needs of NBA fans” [source]. A la carte offerings are perfectly suited for the mobile-first methods of the digital natives, who will come to dominate the consumer base of the media industry.

As a result, they are the main “target in the push to increase TV-anywhere options. Unlike older viewers, they were brought up in the internet age. For them, spending a significant monthly fee on cable TV isn’t a necessity,” especially when they are paying for dozens of channels they never watch [source]. Paying as much as $25 monthly just for sports deters many from shelling out their hard-earned money, because they could pay that much to watch just the shows they want [source]. Why pay $100 for a buffet if out of three dozen items, you are only going to eat two, which cost a fraction of the buffet?  

As an executive at a top streaming service company said, the industry is changing rapidly [personal conversation]. Streaming and a la carte choice options are revolutionizing how we watch content and as a result the traditional cable and network companies need to adapt.

Because the “typical cable TV regional sports network (RSN) recoups less than 30% of its total revenue from advertising” they are desperate to retain as many subscribers as possible, who account for “the vast majority of revenue” [source]. National TV providers take in a similar level of revenue from subscriber fees, according to the FCC as well as an ESPN executive [personal conversation].

As sports rights rise, the companies charge more in fees to help break even; at $7.21 per subscriber, ESPN is now the most expensive single cable network available in one’s cable/satellite bill [source]. While the total subscribers is indeed falling, demand is not: because it is the one place live content still rules, where advertisers can be sure that people will tune in during the event, ESPN can afford to charge that much (to people who want to pay for it). For the people who want to buy the cable buffet because that is the only way they can watch their local teams or get blacked out, it is presently worth it [source]. As Rich Greenfield of BTIG wrote, “Sports is … the only content that is holding its audience viewership-wise and in turn supporting the $70 billion TV ad industry” [source]. However, the number of homes paying for ESPN declined over ten percent in the last five years, from 100 million in 2012 to just 87 million last year.

As 23 percent of U.S. households have either cancelled cable or never signed up in the first place, according to a 2016 PwC survey, the trend ESPN is facing should only continue [source]. Now more than ever, cable networks must extend or renew their TV rights to attractive sports programming. As PwC’s sports industry outlook notes, sports are essentially “the only thing keeping the lights on at the networks” [source], especially at ESPN, whose business model is solely based on 24-hours-per-day sports content. They literally cannot function without the content that has made them a behemoth in the industry.  

So, cable networks are jumping headfirst into the over-the-top and streaming game, threatened by new media’s rise and the decline of their own subscriber base. To survive and continue to have success in this changing media landscape, they cannot be satisfied with their current subscribers. Like Ariel in The Little Mermaid, the networks need to be “part of that world … where the people are” [source] — which in this case is streaming and “pay-anywhere TV.” Disney is spending millions of dollars on “ESPN+”, CBS on “CBS All-Access”, Turner on “B/R Live” – their attempts at creating streaming services. It remains to be seen whether the promulgation of streaming services (along with another Disney service to be launched next year, HBO, Amazon, Hulu, Netflix…) will cause a glut of menu items for consumers, which may be where we are heading in the near future as companies look to hoard their own intellectual property and control sports rights [source]. However, in sports, the possibility of a large media or technology conglomerate claiming access to a near-entirety of a league’s offerings could lower consumer angst. NBA Commissioner Emeritus David Stern wonders about the “unique possibility to have one buyer on a global basis. It could be Apple, Amazon, Hulu, Facebook, Google, AT&T—could be almost anything” [source]. The current battle over regional sports networks will perhaps be a test case.

In 2002, the New York Yankees developed the Yankee Entertainment and Sports (YES) regional sports network to strengthen the value of its content for local consumers and develop new revenue streams. Major networks such as ABC or FOX had only broadcast select numbers of games per season to people around the country; regional networks proffered the opportunity for viewers to watch nearly all their home team’s games. The Bronx Bombers’ enterprise introduced the RSN epoch: many teams in MLB and the NBA now have launched their own networks to take advantage of local revenues; in the MLB, these contracts are worth anywhere from $1.5 billion (Arizona Diamondbacks) to $3 billion (Los Angeles Angels) over twenty years [source]. Markets like Los Angeles or New York have greater demand and numbers of viewers for the same content as Arizona, therefore those media rights deals rake in as much as double the revenues (and is a key reason why the Angels changed their city name from “Anaheim” to “Los Angeles”) [source]. These dramatically different local media rights deals also affect competitive balance and league health: The Los Angeles Lakers’ local media deal dwarfs any other NBA franchise’s by about $25 million; they were the most profitable team in the league despite missing the playoffs for five consecutive years [source]. Moreover, in MLB, owning significant portions of these extra revenue streams has helped teams like the Red Sox and Yankees dominate free agency and acquire the “star talent”, like Alex Rodriguez, who drive content values high [source].

Over the last two decades, Fox acquired in exchange for a “yearly licensing check” majority stakes in 22 RSNs, the value of which has now ballooned to $44 billion due to all the exclusive premium sports content, according to Guggenheim Securities [source] [source]. And so it goes that Disney’s recent acquisition of 21st Century Fox will reshape not just the movie industry (decreasing the number of major studios from six to five) but also sports content [source]. Fox’s regional channels serve around 61 million subscribers around the country, a godsend to cable operators and a would-be boon to technology companies looking to seize market share and eyeballs from one another. The 22 RSNs that Fox owned will have to be divested as a result of the deal, to prevent “cable television subscription prices from rising even higher … and ensure that sports programming competition is preserved in the local markets,” according to Makan Delrahim, assistant attorney general and head of the Justice Department’s Antitrust Division. “American consumers have benefitted from head-to-head competition between Disney and Fox’s cable sports programming” [source].

The competition will only get fiercer, as more players enter to gain direct consumer attention, arguably the most valuable market good there is. The forthcoming battle for sports media rights will truly be the “ultimate test of the supply/demand equation, an underlying principle of the free enterprise system and free market economy” [source]. Fox’s 22 MLB regional sports networks is now up for grabs, and who is bidding for them will be a harbinger of the coming battle for sports content come the next decade once deals expire for the major leagues — and for viewers in the future of the 21st century. Consistent with supply and demand economics, the values of sports rights will rise, with the same amount of content, the escalating emphasis of live programming for advertisements, and more possible buyers. This could drive vicissitudes of fortune for traditional broadcasters. A Defcon 1 scenario would be if a traditional broadcaster loses out entirely on a sports rights deal. Amazon, Twitter, Alphabet’s YouTube, and Facebook have each already made forays into paying for live sports, streaming NFL Thursday Night Football, NBA games, and MLB games, respectively, via their over-the-top services. The Financial Times notes that these moves are “part of a wider shift toward so-called “skinny bundles”, whereby consumers are offered a smaller range of channels for a fraction of the price of a full cable package” [source]. Amazon has already put in a bid for the RSNs, if not merely to drive up the cost for another winner, then to implement them into Amazon Prime services similar to their actions with Thursday Night Football on the chance they end up claiming the networks. “It [would increase] digital advertising opportunities for Amazon, which is growing its market share against Facebook and Google. Perhaps most importantly, it brings even more people into the Amazon tent, exposing them to all of the products and services Amazon offers,” according to CNBC [source]. On another front, no less than Fox chief Rupert Murdoch has said that “Facebook is coming for sports;” Dan Reed, a Facebook executive, says that “sports is a natural fit” [source]. Having dipped toes into the water, the large technology companies are going to dive wholeheartedly into the sports media business in the near future. Even if tech companies do not win this RSN test run, they will no doubt be major players in the bidding for the future sports rights, 16 major auctions of which are coming worldwide over the next half-decade, according to GroupM [source]. Claiming some if not all of those rights and shoring up their relatively nascent streaming services will reshape media offerings.

The tech giants’ enormous capital reserves [source] that could drive up the bidding to an exorbitant level ($4 billion for the NFL? $2 billion per NBA season?) probably won’t destroy the financials of some traditional broadcasters by the early 2020s, but that combined with growing rate of subscriber drop-off (could only 50 million homes be cable subscribers in five years?) will hamper networks’ abilities to spend as much on rights the next time around. It is quite a possibility that there could be an internecine battle between broadcasters, resulting in a pyrrhic victory for the winner. Already, rights have gotten so expensive that ESPN could not win the bidding for the Champions League and accentuate its investment in MLB rights [source]. Come the second wave of these types of deals in the late 2020s, the costs could deter some broadcasters from seriously bidding for them. Perversely, over the long term, rights deal valuations may fall as broadcasters drop out, although other technology companies could enter the fray and stabilize or even drive up pricing. As David Stern literally said today, “you have to look to the future or you die” [source]. Because broadcasters are slowly coming around to reality out of dire necessity, they may survive in the short term. In another decade, in 2030, though, we may all be watching sports through the services of our Amazon or Alphabet overlords, ironically with more customizable options.

 

Sources:

http://home.bt.com/tech-gadgets/internet/streaming-explained-what-is-it-and-how-does-it-work-11363860639261

https://business.comcast.com/about-us/our-history

https://www.crunchbase.com/organization/yes-network#section-overview

https://digiday.com/media/what-is-over-the-top-ott/

https://money.cnn.com/2017/07/19/investing/apple-google-microsoft-cash/index.html 

https://www.digitaltrends.com/movies/too-many-streaming-services-netflix-amazon-disney-att/

https://www.cnbc.com/2018/11/20/amazon-threat-to-buy-sports-rights-should-freak-out-media-companies.html  

https://adage.com/article/media/pwc-report-sports-m/311578/

https://mashable.com/2015/07/23/nba-league-pass-new-deal/#pRXrKXEIJgqz

https://www.washingtonpost.com/business/2018/12/06/david-stern-built-modern-nba-now-he-wants-change-how-we-consume-sports/?utm_term=.0ffeb77a5167

https://www.forbes.com/sites/bobbymcmahon/2017/08/18/turner-sports-uefa-champions-league-strategy-a-nod-to-the-long-tail/#5738b00d4594

https://variety.com/2018/digital/features/olympics-rights-streaming-nbc-winter-games-1202680323/

https://www.businessinsider.com/sports-media-rights-revenue-poised-to-grow-2017-12

https://www.forbes.com/sites/barrymbloom/2018/08/28/yankees-intend-to-buy-back-yes-network-after-fox-sale-to-disney/#5b70b9db161d

https://www.21cf.com/news/21st-century-fox/2014/21st-century-fox-acquire-majority-stake-yes-network/

https://www.ocregister.com/2015/01/07/los-angeles-angels-of-anaheim-10-years-later-how-big-of-a-deal-was-the-name-change/

https://www.theatlantic.com/business/archive/2017/05/espn-layoffs-future/524922/

https://www.youtube.com/watch?v=SXKlJuO07eM

https://variety.com/2018/biz/news/disney-21st-century-fox-justice-department-approval-1202859241/

https://www.forbes.com/sites/maurybrown/2017/05/08/why-espn-hemorrhaging-subscribers-will-impact-the-next-wave-of-national-tv-deals/#54aad835bf4f

https://finance.yahoo.com/news/youtube-amazon-fighting-sports-streaming-supremacy-114738861.html

https://www.theguardian.com/media/2018/may/14/streaming-service-dazn-netflix-sport-us-boxing-eddie-hearn

https://www.latimes.com/business/hollywood/la-fi-ct-disney-fox-sports-nets-espn-20171206-story.html

https://www.si.com/tech-media/2018/07/12/fox-regional-sports-networks-potential-buyers-comcast-disney

https://www.theatlantic.com/entertainment/archive/2011/09/the-many-problems-with-moneyball/245769/

http://time.com/money/4590614/cable-bill-sports-cord-cutting-streaming/

http://www.snl.com/Sectors/Media/

https://www.recode.net/2018/9/10/17838688/mark-leibovich-big-game-nfl-dangerous-times-book-drug-lord-crack-kara-swisher-recode-decode-podcast

https://www.amazon.com/dp/B078LTFG52/ref=dp-kindle-redirect?_encoding=UTF8&btkr=1

http://www.pewresearch.org/fact-tank/2017/09/13/about-6-in-10-young-adults-in-u-s-primarily-use-online-streaming-to-watch-tv/

https://www.businessinsider.com/espn-losing-subscribers-not-ratings-viewers-2017-9

http://time.com/money/4590614/cable-bill-sports-cord-cutting-streaming/

https://www.chicagotribune.com/sports/columnists/ct-sports-tv-future-spt-0828-20160826-column.html

https://www.washingtonpost.com/sports/2018/09/27/nba-fans-will-be-able-purchase-ends-games-streaming-services/?utm_term=.22f10653c3fc

http://www.pewresearch.org/fact-tank/2017/09/13/about-6-in-10-young-adults-in-u-s-primarily-use-online-streaming-to-watch-tv/  

http://www.nba.com/2014/news/10/06/nba-media-deal-disney-turner-sports/

https://beonair.com/history-of-sports-broadcasting/

https://transition.fcc.gov/enbanc/121897/anshand.pdf

https://www.ft.com/content/2234f4da-3ef8-11e7-82b6-896b95f30f58

https://www.latimes.com/business/hollywood/la-fi-ct-disney-fox-sports-nets-espn-20171206-story.html

http://www.pewinternet.org/2015/12/21/4-one-in-seven-americans-are-television-cord-cutters/

http://www.espn.com/mlb/news/story?id=1735937

http://www.espn.com/nba/story/_/id/20747413/a-confidential-report-shows-nearly-half-nba-lost-money-last-season-now-what

Personal interview/lecture, ESPN executive, Spring 2017

Personal interview/lecture, Professor Jeff Fellenzer, USC, February 2017

Personal interview, Professor Jeff Fellenzer, USC, November 2018

Personal interview/conversation, Perform Group executive, summer 2018  

 

The American newspaper industry has used advertisements as its main source of revenue ever since the very first colonial publication, the Boston News-Letter, printed a real estate ad in 1704. Though this “newspaper” was only a half-sheet, single-spaced weekly journal, it p aved a business model that would be used over the next three centuries. Then, nearly three hundred years later, the wheels came off the wagon. It no longer made economic sense to pair editorial content and advertising together in a printed product in the age of ad networks and digital distribution.  Paperboys found themselves unemployed and traditional reporting jobs dried up. The digital revolution’s effects are still playing out, but there seems to be a way for publishers to charge ahead—by focusing on differentiating content and by taking exclusive ownership of high-quality, specific data that is valuable to advertisers. Many papers have revised their business models to target younger, more internet-savvy audiences. After all, when an e-commerce pioneer like Jeff Bezos buys the Washington Post, it’s clear that journalism is merging into the virtual sphere. But the dust has not totally settled. The field may look like it is heading in certain direction now, but things are constantly changing. It’s important to remember that just a few decades ago, most people would have never guessed that physical newspapers would start to disappear.

 

Prior to the internet, publishers had the upper hand. They had limited space in their newspapers and advertisers were willing to pay for a section so that readers could see their product. Although not every reader fell under the demographic most likely to be interested in purchasing, advertisers could buy up as much space as possible and thus increase the likelihood of reaching people from that specific group. Technological advances, however, took out the element of scarcity—theoretically, anyone in the world could access the internet and read content that was once only accessible by purchasing a physical copy at a news stand. This made the price of a non-tailored advertisement close to none. Advertisers became much more interested in placing their ads on websites that attract their target demographic rather than buying as much ad space as possible and hoping that group sees it.

 

People who were only interested in reading one specific section did not have to buy the entire paper to access it—media was finally unbundled. It created the ability for businesses to choose to advertise in places where their target demographic frequents, making their strategy less reliant on volume and more reliant on consumer data and tailored audiences. If someone wants to read the latest updates in the fashion section, they do not need to buy the politics and sports section as well.

 

This kind of shift, however, has been seen before. Journalism is not the first industry to have been affected by the unbundling of media. When technology allowed people to purchase individual songs on handheld devices without buying the entire album first, the revenue landscape shifted. Suddenly, Apple and other streaming services had a slice of the revenue pie, and that pie was also shrinking. Overall recording revenue fell, and artists were getting the short end of the stick. Many songwriters, like Taylor Swift, fought back on social media. Taylor released a letter exposing Apple’s stingy licensing agreements. Artists who previously relied on selling music to make a profit are now more focused on merchandising and concert tickets.

 

Similarly, the internet has ushered in an urgent need for newspapers to adapt and find ways to make money. For the journalism industry, the unbundling of media was a good thing for everyone involved except for the publisher. It led to a major power shift—advertisers now want to do business with networking and search engine companies instead of newspapers. Facebook and Google have a virtual duopoly on the digital advertising market, which grew 21% to $88 billion in 2017. The two companies accounted for 90% of that growth, and reason is simple: access to information. More than one billion people—who have likes, dislikes, friends, and interests—are active on Facebook. Google has a similar advantage as it processes more than 70% of the world’s search requests. When you search something on Google, the company finds out where you are and tracks what you’re searching, compiles that information, and sells it to potential advertisers. Advertisers were no longer willing to pay newspapers high amounts because it makes much more sense for them to pay Facebook and Google.

 

 

Unfortunately, rapid technological changes have a tendency to force sink or swim results. Between 2008 and 2017, the total number of newsroom employees declined 23%.Though technology does create a demand for new jobs, so far, it has not been enough to offset the loss. The number of digital employees increased by 79%, but that only created around 6000 new jobs while there were 32,000 layoffs within the same time frame. It is important to note that these numbers could change within the coming years as the industry finds new ways to adapt.

 

One way the industry has started to adapt is by shifting away from using advertisements as its main source of its revenue. Big players like the New York Times, the Wall Street Journal, and the Chicago Tribune grew their digital subscriptions in 2016 by 46%, 23%, and 76%, respectively. While top performers have been able to keep their heads well above water, both digital and print circulation for the industry as a whole saw an 8% decline in that same year. Getting subscribers is not easy for a majority of newspapers with less of a cult following. People tend to trust far-reaching, big publications like the NYT, thus keeping the high-circulation outlets right at the top.

 

The other way to get subscribers is by targeting a specific readership. In a 2017 study by the American Press Institute, the top reason cited by subscribers who were willing to pay for news services was that the outlet offered unique content on topics they personally cared about.  Thus, if you do not have the clout of having the highest circulation in the country, differentiating your content could be the way to go.

Differentiating content does increase the likelihood of attracting a higher subscription rate, but it also has another crucial bonus—it appeals to advertisers. Sites like Buzzfeed and Refinery 29 have already employed a tactic known as “native advertising.” These sites target a specific audience and integrate advertising into their content, making the product placement relatively subtle and extremely valuable. Disney could pay for a pop-up ad that people click out of immediately, or they could instead pay Buzzfeed to create a quiz called “Eat Your Way Through Disney Parks And We’ll Guess How Old You Are.” Studies have shown that consumers find native advertising is more interesting, informative, and useful than traditional ads. Though Buzzfeed and Refinery 29 do not charge for subscriptions, the money they make in sponsored content keeps advertisers happy and their profit margins high.

 

 

Another way the newspaper industry is fighting back is by playing Facebook and Google’s game of controlling consumer data. Industry executives are well aware that advertisers are willing to pay high amounts for accurate and verified data about potential consumers who visit their sites. Several publications have started doing this by joining coalitions aligned with advertising technology providers, whose goal is to leverage audience data. One example is the Local Media Consortium, who says they are “focused on increasing member companies’ potential share of digital revenue and audience by pursuing new relationships with a variety of technology companies and service providers.” For newspapers, joining this kind of group instead of letting a third-party interfere can help put their profit margins back on track.

 

The dust of the industrial revolution has not fully settled, but there seems to be a path forward for news publishers. Though big names like the New York Times seem to be the ones most likely to forge ahead unscathed, smaller-scale publications still have a chance to succeed. Right now, newspaper companies may be discouraged and might blame technology for shrinking their profits. But this is just an example of technology doing what it does best: forcing progress. The internet has allowed billions of people to access news across the globe, connecting people to information like never before. The journalism industry just needs to catch up. And it will.

The past year has been a trashy year, and not just because of the United States’ tumultuous political climate. Rather, the problems with trash have become more central to environmental and economic reform than ever before.

For some, plastic straws sparked the conversation when Seattle banned single-use plastics this past summer, an event that swept the internet and inspired mass numbers to act against pollution. The real trash tale, however, is much grimmer than the sliver of environmental hope provided by any limit placed on plastic drinking tubes. With the United States producing the most waste globally and China recently enacting limitations on how much foreign garbage it will import, the trash is piling up. Americans are now coming face-to-face with a hard reality: reduce waste or suffocate under the consequences.

It’s no secret that the United States has a huge problem with waste. Though home to only 4 percent of the world’s population, the U.S. produces more than 30 percent of the planet’s total waste, according to a report by Frontier Group. The average American throws out 7 pounds of materials each day, with over half of all materials scrapped by homes and business ending up in landfills and only a third being recycled or composted.

Source: Frontier Group

The expanding $60 billion solid waste industry in the U.S. indicates the large-scale effort required to domestically manage all of the garbage produced. At this rate, however, the U.S. has not been capable of managing all of its own trash. While the wasteful reality of the U.S. may be “Land of the free, home of the brave… and lots of garbage in between,” the U.S. has made every attempt to steer away from such a reputation within its physical landscape. As a result, the U.S. has been exporting about one-third of its recyclables, with half going to China, according to NPR. To paint a global picture, nearly half of the planet’s plastic trash since 1988 — including single-use plastics, food wrappers and plastic bags — has been sent to China to be recycled into other forms of plastic goods, according to The Verge.

At first, this was a mutually beneficial trade agreement for both the U.S. and China: the U.S. would have significantly less trash to deal with on its home turf, and industrial China was able to acquire foreign currency while turning plastic into profit. The USC-US China Institute reported that, as time went on, the U.S.’s biggest dollar value export to China was trash, with Bloomberg reporting that Americans shipping more than $5.6 billion worth of scrap to China in 2016. At its peak, the Chinese recycling industry supported nearly 12 million jobs, and the recycled plastic was being turned into products valued over $64 billion a year. Environmentally, recycling also provided China a means to save energy when compared to industries like mining and logging. It was a business model that seemed to be indestructible.

Source: Bloomberg

Come 2012, however, what appeared to be an untouchable, powerful and productive market took a turn for the worst. China’s labor market shrunk for the first time. U.S. scrap exports to China fell for the first time since 1996. The next year, more foreign direct investment went to Southeast Asia than China. Then, the big one hit at the end of 2017: China notified the World Trade Organization that it had decided to ban imports of 24 categories of solid waste, effective March 2018. Now that China is post-industrial and rests on more financially-steady ground, the trash ban is the country’s next step toward improving the quality of life for its citizens by reducing emissions and creating a more sustainable nation.

“There was no doubt there was a great deal of discontent within China, and if they had announced a five-year transition, they would have faced domestic opposition,” said Dr. Douglas Becker, an international relations and environmental studies professor at the University of Southern California. “The reports coming out of the areas near the largest trash dumps in south China are a lot worse that people realized, and not by a small amount. So they sensed that they needed to do something fairly drastic.”

China is not backing down from the ban. Considering this change was essentially put in place immediately, though, the policy threw the U.S.’s trash processing system for a whirlwind.

“If it doesn’t go to China for two to three months, you’ll have 1 million tons of paper stacked somewhere in the American economy,” said Ranjit Baxi, president of the Brussels-based Bureau of International Recycling, to Bloomberg.

Baxi was exactly correct, as the U.S. is already feeling the effects of the ban. The Washington Post reported that states like Massachusetts and Oregon are changing some of their waste restrictions, dumping recyclable material into landfills. In California, the effect has been “heavy” according to a Waste Dive report that has been tracking the outcomes of China’s scrap limitations since Nov. 2017. Locally, an LA County Sanitation Districts official told Marketplace that 15-20 percent more material is ending up in the Puente Hills facility as residual contamination. Managing waste domestically in a sustainable fashion already posed a significant challenge, but now with China out of the picture, trash is pouring out of American landfills.

“Depending on the areas and cities, landfills are filling a bit more quickly, and I know there has been some talk about large cities trying to find the landfill space further and further from their city centers, perhaps even in different states,” Becker said. “That tends to engender quite a bit of opposition.”

The scariest thing? Even though the trash trade went on for decades, the ban has only been in practice for less than a year, but the consequences are already eliciting drastic results.

Source: Asian Review

China’s decisions to limit its importation of trash is like a form of self-care: by cutting out toxic relationships, the country is now able to focus on improving the life quality of its citizens. America, however, cannot function without exporting its scrap, so Southeast Asian countries have become China’s replacement. Thus, China itself may be on a greener path, but the waste problem at large simply has simply shifted from one landmass to the next, raising the same environmental issues for different people groups.

“I think the same concerns the Chinese had with the areas of toxicity are also valid in South and Southeast Asia where the trash is going,” Becker said. “As far as Southeast Asia is concerned, for some, they do want the materials to help them industrialize, but it’s largely a means by which to make money. So, I imagine [importing trash] would be pretty bad for the local populations, the same reason why the Chinese chose to end this.”

In essence, Southeast Asian countries are importing waste for similar reasons that China did. Recycling was an introductory means toward progress, but processing trash is not a long-term environmental or economic solution. Countries such as Malaysia and Thailand are already expressing frustration at the burden the increasing amounts of trash have placed on the countries.

Steve Wong, managing director of Fukutomi, a plastic recycling and trading company in Hong Kong, told Asian Review that Southeast Asian nations cannot handle even half of the volume China imported in the past.

“The abrupt China ban leaves [Southeast Asian] countries unprepared to receive the huge influx of waste,” Wong said.

Waste in Thailand. Source: Asian Review

From Jan. to March 2018, Thailand imported 121,000 tons of trash, a 17.7 percent increase from the same period a year before, according to data released by the Global Trade Atlas. Malaysia’s trash importation increased fourfold, and Vietnam, Taiwan and South Korea also have seen significant increases. Meanwhile, China and Hong Kong have seen more than 90 percent decreases.

Just because China banned the import of scrap in favor of the environment, however, doesn’t mean Chinese recyclers were financially happy with the decision. According to Wong, an estimated 1,700 licensed Chinese recyclers were affected by the import ban, and about 40 percent of them have relocated their operations to Southeast Asian countries.

“Up to 1,000 Chinese businessmen are asking for licenses to do recycling in Thailand, with total investment of up to 250 million baht ($7.6 million),” said a senior official at Thailand’s Industry Ministry. As a result, Thailand has put an indefinite hold on licensing to counter Chinese land ventures, according to Asian Review.

Between fights for land, trash and the environment, the entire trash trade narrative boils down to the same core problems: How do we fix our massive trash habits, and why is waste so problematic?

Frontier Group lists several environmental consequences of waste production. Most notably, about 42 percent of all greenhouse gas emissions are created from the production, transportation and disposal of goods, which is a direct contributor to global warming. Garbage that does not get dumped in landfills or recycling plants often ends up in the ocean, which is detrimental for marine biodiversity, habitats and overall water quality. Air quality is affected. Discarded materials waste natural resources. Landfills decrease property value and overall quality of life. The list, really, could go on forever.

U.S. citizens, however, can only do so much because the larger issue of waste is a top-down problem. Though each American disposes an average of 2,555 pounds of materials per year, those materials only make up 3 percent of all solid waste in the United States. When a majority of waste comes from industrial processes like mining, manufacturing and agriculture, encouraging individual choices, ultimately, can only make so much of a difference.

So, as a quick anecdote, let’s return to the plastic straw ban. Though Seattle issued a ban in July on all single-use plastic straws and utensils at all food service businesses, it was not the first city of its kind to enact such a ruling. Seattle made the plastic straw ban trendy, though, because the city is the birthplace of Starbucks, which is an inherently trendy brand. Therefore, the small-scale straw issue became widespread as Seattle-based Starbucks no longer could utilize their famous green single-use plastic straws.

As the negative view of plastic straws caught on, many were suddenly switching their plastic straws for paper or stainless steel ones and felt they were saving the planet as a result. The truth? There are eight million tons of plastic streaming into the ocean annually, and plastic straws only make up 0.025 percent of that waste, according to National Geographic.

“[The plastic straw ban is] not going to solve the problem, but it’s at least raising awareness for a lot of people — an increasing amount of recycling, pressure being placed on corporations in particular to try and manage some of the packaging issues,” Becker said. “There’s a greater public awareness as a result of this. I think that’s probably going to continue.”

The plastic straw ban is more of a poster child for larger environmental and economic problems associated with waste than it is the actual solution to waste itself. Even if the U.S. were to completely rid of every plastic straw in sight, the U.S.’s need to export recyclables and deal with the environmental consequences of trash would not be impacted. The plastic straw ban, however, does have the potential to start a chain reaction with eradicating bigger forms of plastic. With China’s limitations on trash and increased awareness surrounding waste, maybe in coming years the world won’t be such a trashy place after all.

As innovation in technology expands, so does the impact on many traditional industries. Accompanying these advances comes a shift in which jobs are in higher demand, and which jobs are threatened. Uber has revolutionized the car service market. It provides its customers with low prices, convenience, and comfort. This has caused harm to taxi companies, especially in cities like New York with an embedded high demand for taxis. Uber and other similar services have caused devastating change for traditional taxi drivers. New York City has made attempts to regulate Uber and other for-hire services in order to create a more competitive field for taxi drivers. Despite these efforts, it is unclear how long the advances in technology can be controlled. 

New York City taxis operate under a system that is controlled by medallions which are essentially licenses needed in order to operate a yellow cab. A driver who bought a medallion for a low six-figure sum could borrow against its rising value, and then use those proceeds to improve his quality of life. There are some family-run fleet operators who own hundreds of medallions. Unfortunately for established drivers, the cost of a medallion has plummeted since Uber has entered New York. (Berger) In 2013, the cost to purchase a medallion hit $1.3 million. However, by March of 2017 the price of a taxi medallion crashed to its lowest level in a decade when one was sold for $241,000. In January 2017, medallions accounted for 48% of total trips logged by yellow taxis, which is down from 68% in January 2016. Additionally, in 2016 lenders foreclosed on 39 medallions, which is more than triple the amount of 2015. (Agovino) Banks stopped lending to the majority of medallion buyers a few years ago because they were no longer solid investments. Mr. Daus heads a firm with several clients with large medallion portfolios. He believes that taken together the sales show that “the market has already bottomed out,” and indeed there are signs that the market for medallions may have stabilized. New York City closely controls the issuance of medallions, which number around 13,600 which prevents further devaluation. The problem is that given the market declines, many medallion owners owe more than the value of their medallions. (Berger) Once Uber entered the New York City market, too many drivers were chasing too few passengers and that pressure seems unlikely to change.

While it was originally assumed that Uber was only targeting neighborhoods with an already limited supply of taxis, this appears to not be the case.  

This graph demonstrates that there is an increase in Uber drivers in the central business district, which is known to be a hotspot for taxi hailers. From June 2013 to June 2015, Uber’s pickups in the central business district rose from around 175,000 to 1.8 million, while taxi pickups have fallen by around 1.4 million. This means that in a neighborhood where Uber and taxis directly compete, only 13% of the growth in Uber rides resulted from a growth in demand. The remaining 87% have replaced trips that would have gone to taxis. Additionally, passengers tend to use Uber more for late night trips due to its convenience and comfort. Citywide, taxi rides between the hours of 11pm to 5am have fallen by 22% from June 2013 to June 2015, while taxi ridership has declined by 12% in the hours of 5am to 11pm. (“A Tale of Two Cities”) Given the meaningful market share of Uber, it is clear that many passengers seems to favor Uber’s services. 

Uber’s original business approach was geared towards growing quickly so that others couldn’t replicate its model. CEO Travis Kalanick instilled a hyperactive management style that valued speed over integrity. He did this to preemptively wipe out competition by gaining market share and dollar gains in its early days. However, the finish line for this strategy is yet to be in sight. Despite the disruptive effects of Uber’s aggressive pursuit of market share, the overall demand for rides is still surging. Uber has recorded that the number of completed rides in the first quarter of 2017 has tripled compared to the first quarter of 2016. Currently, the momentum of the company coupled with its $7.2 billion cash hoard should ensure Uber’s survival. Looking forward, Uber’s best plan of action would be to engage in vertical integration in order to beat out its competition. This would consist of controlling the newest automobile technology. While Uber does not seem to be willing to lock down its employees using employment contracts, it could dominate the market by eventually owning a fleet of self-driving cars. These vehicles could be the realization of Uber attaining tech-giant status. (Mims)

Uber’s business model relies on the network effect. This means that the indirect values and goods of the company grow as more people use the service. Uber was able to out-compete traditional taxis with lower prices. However, it is impossible to determine how long Uber can maintain these low prices. Uber does offer its customers other advantages in addition to pricing. It provides ease of use through its simplified ordering process, ability to track the driver, simplified payment process, and easy ability to split fares. It instilled practical features such as its method of rating drivers, its consistent branding, its electronic receipts, and its choice of cars which range from standard to lux. The business model of Uber in itself is quite simple. It does not own any cars so all that is required is the use of technology to connect drivers with rides. The company, then, takes a portion of the transaction. In the early stages of the company, Uber spent almost no money on marketing relying on word of mouth. Uber’s initial challenges consisted primarily of: how easily and cheaply competitors could replicate the service. Competitors could improve on Uber’s model in certain cities and take market share. Additionally, the requirement that Uber launch in many cities around the world in order to preempt competition was difficult to manage. Clearly, Uber’s biggest obstacle is competition. (Koch)

In seeking growth, Uber hugely effected the lives of taxi drivers. Some drivers suffered extreme consequences. Nicanor Ochisor was an immigrant from Romania who worked as a NYC taxi driver. Ochisor had bought his medallion almost three decades ago. Initially that was an excellent investment, but after the introduction of Uber, the value plunged by 2018. Despite working 12 hour shifts, he was bringing home less money than before. In March of 2018, Nicanor Ochisor committed suicide. There has been a marked increase in deaths of drivers  given the economic pressures facing many taxi and livery drivers. Between January of 2018 to May of 2018, 4 drivers took their own lives. (Fitzsimmons) The situation has become so drastic that it has become clear that regulations are needed to prevent Uber and other similar services from destroying the taxi industry. 

To combat Uber’s growth, the New York City Council created a cap on the number of for-hire delivery and transportation vehicles in the city. Additionally, in August 2018 the council put a halt on issuing new for-hire vehicle licenses for 12 months giving the counsel time to study the rapidly growing industry. Companies like Uber and Lyft will be required to provide the council data on usage and charges or they will face a $10,000 fine for noncompliance. New York is Uber’s most profitable market, yet it is the first United States city to propose a temporary restriction on the total number of vehicles. Yellow taxis are a staple of New York and the council is fighting to keep them afloat. Uber is arguing that creating a cap will leave drivers without an income. It will also disproportionately harm low-income and minority residents in New York’s outer boroughs who lack easy access to many forms of public transportation as well as access to taxi services. (Wodinsky) Despite Uber’s protests, New York does plan on mandating benefits for Uber drivers with these new changes. 

New York City regulators are planning on raising wages for Uber and similar services. Uber is known to be less expensive and more comfortable than taxis, but many of the drivers are struggling to earn a good living given the pay structure. Under the new regulation, if a driver’s profit fall below $17.22 per hour over the course of a week, the companies will be required to make up the difference. Currently, in New York City, about 40% of drivers have incomes so low that they qualify for Medicaid while about 18% qualify for food stamps. Some drivers bought vehicles believing the claim that they could make up to $5,000 during their first month of driving. They now feel trapped as their earnings fall short. (Fitzsimmons, Scheiber) Uber’s objection is that this will cause a rise in prices for consumers. This impact on pricing actually helps the regulators’s initiative. If Uber must pay their drivers higher wages, then the number of drivers hired will be limited and the cost of Uber will go up. Being unable to hire more drivers will enforce the cap on Uber and higher Uber prices will create more equal competition between Uber and taxi drivers. 

Taxi drivers in European cities have also faced decline in business due to Uber. The responses there have been more aggressive. In London, drivers brought streets around Trafalgar Square to a stop while honking their horns and holding signs in protest of the new technologically savvy driving services. In Madrid, hundreds of drivers marched through the streets blowing whistles. One banner read, “For the security of passengers and the future of taxis: Uber is illegal.” Also in Madrid, protestors surrounded and pounded on two black sedans that were unlicensed taxis. The front and rear windows of the one of the cars were broken. In Italy, taxi drivers handed out leaflets denouncing Uber and hung a banner that read, “Illegality Reigns Sovereign!” In Naples, dozens of taxi drivers protested in the city’s center, blocking traffic for hours. In Paris, hundreds of cabbies led strikes causing traffic jams and altercations between taxi drivers and drivers for other services. Finally, protests spread as far as Rio de Janeiro. While the city prepared itself for the 2014 World Cup, dozens of taxis formed lines and moved slowly along the Copacabana. (Fleisher) Clearly, taxi drivers around the world are prepared to fight for their jobs.

Uber was created as an industry disrupter seeking to defeat many of its competitors. Uber’s goal was to revolutionize the for-hire car service industry. The strategy was to grow quickly and gain a large customer base. Uber accomplished its goal by starting up in cities all over the world and by providing low prices. Unfortunately, this strategy decimated traditional taxi companies and its drivers and owners. Taxis have experienced massive declines in ridership which is especially felt in New York City where Uber has one of its largest customer bases. While regulations have been put in place to help the taxi industry, it is unclear whether these trends will ever be reversed. 

https://www.wsj.com/articles/with-kalanick-out-ubers-troubles-are-just-beginning-1498049054

https://www.entrepreneur.com/article/286683

https://www.cbsnews.com/news/how-much-is-a-nyc-taxi-medallion-worth-these-days/

https://www.wsj.com/articles/is-the-market-for-new-york-taxi-medallions-showing-signs-of-life-1516228199

https://www.nytimes.com/2018/07/02/nyregion/uber-drivers-pay-nyc.html

https://www.theverge.com/2018/8/8/17661374/uber-lyft-nyc-cap-vote-city-council-new-york-taxi

https://www.nytimes.com/2018/05/01/nyregion/a-taxi-driver-took-his-own-life-his-family-blames-ubers-influence.html

https://www.wsj.com/articles/londons-black-cab-drivers-protest-against-taxi-apps-1402499319

https://www.economist.com/united-states/2015/08/15/a-tale-of-two-cities