Archive for the ‘Business & Economics’ Category

The Changing Landscape of TV and Other Old-School Media

On Tuesday’s (Jan. 19) edition of The Nightly Business Report, Harry Lin of lottay.com had an interesting commentary called “The Evolution of TV.” His opening remark was an observation that younger generations of TV viewers were more likely to watch their favorite programs over the internet, or pre- recorded on a DVR or TiVo set.  He was half-right, since more people in my age group (Generation X, and even Baby Boomers) are also following suit.

The point was that the old business model that broadcast TV companies followed religiously for nearly a century, has been effectively pushed into obsolescence by the advent of the internet and online entertainment. There has been a steady decline in live-action advertising since there is hardly anyone patient enough to sit through them.  As a result, broadcasters have seen their revenues all but evaporate completely.  In the not-so-distant future, producing even a new sitcom may become a losing proposition if there won’t be enough of a budget, since former sponsors will be watching every penny they spend on advertising. In fact, it’s happening now. Portable entertainment is going the way of cable, as it has been for a while.  The last vestiges of free TV are disappearing.

But Lin also noted that in general, the TV industry is following the same fate that befell the music industry. No amount of lawsuits or legislation will ever repair that damage or restore it to its previous grandeur.  There will be fewer and fewer TV stars emerging, just as there have been less rock stars sprout- ing.  What he didn’t say, but that we already know full well, is that print media was the first to fall victim to the revolutionizing effect of paperless reading on this wonderful thing called the Internet. As a result, newspapers, book publishers and now bookstores have been forced to look inward, in a manner of speaking.  Even copyrights don’t hold much power anymore; anyone could copy and disseminate your work, and it could spread like wildfire. If you were a struggling writer, would you prefer fame or opt for whatever cold, hard cash you can grab?

I see the same thing happening to movies – albeit very slowly.  Everyone in the film industry – from the biggest producer to the actors, and the crews that work with them – all ultimately make their living from the promise of large throngs of moviegoers seeing a large-screen flick when released.  The flops are still lucky enough to get revenue out of DVD’s and Blue-ray rentals and sales.  But the inevitable “What if” scenario has reared its ugly head: “What if” fewer and fewer moviegoers go out to see movies anymore? Large, flat-screen HD TV’s are becoming more and more popular, and more af- fordable to boot. Prices start at about $700, but with the increase in demand, prices will only be driven lower. The picture quality isn’t too bad either.  So instead of going out to see the movies, you could rent about 100 movies (via aforementioned DVD or Blue-ray media, or Netflix) over the space of a year, and get more than your money’s worth. If you invite some friends over, they could help pay for the movies and the meals. Score!

People will still see movies, just as they will still watch TV or listen to music or read books. However, the dynamics and profitability will change.  There will be less frequency and urgency to go see movies. The trend actually started when VCR & Betamax gave box-office flops a new lease on life –    and also created a downward trend in movie attendance. The latest trends     as mentioned above, coupled with the ease and accessibility of online video platforms (such as YouTube) for viral marketing campaigns, as well as newer and less expensive methods and technology for filming low-budget movies, will make a gross mockery out of expensive, big-budget movie productions, thus diluting the argument for costly ticket sales and adver- tising and driving down costs even more.

The writing is on the wall, so to speak.  What does that mean for the majo- rity of us who simply like to watch? Nothing except a new thing to marvel and laugh at. No laughing matter is how the face of our culture is rapidly changing. There are fewer “stars” that stand out from the rest of the crowd. Instead, a massive, confusing cacophony of delights that can be seen, heard, and read, are now literally at our fingertips. We are getting more choices that shape how we perceive the world. No single entity, public or private will have a monopoly on viewers’ opinions and choices. And that’s a good thing.

Copyright Anabasius 2010

Nightly Business Report Commentary – The Evolution of TV

TV Viewing Dropped this Fall: Is the Web Finally Cutting into Tube Time?

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Part 2 of Several Parts: Sovereignty Issues of a Mega-Company vs. a Host Country

Hot on the heels of yesterday’s post about China, I recently learned that Google had declared it would no longer be willing to self-censor content on its PRC-based servers. This is excellent news for human-rights activists, watchdogs, and armchair critics (such as myself), implying that the Ca- lifornia-based search-engine giant is taking a stand (finally) on human rights.  The last straw was when a “highly-sophisticated and targeted attack” on their Chinese base occurred last month, resulting in the theft of intellec- tual property as well as the hacking of Gmail accounts of Chinese, European and American human rights activists. There is already talk that they will be shutting down operations in the Red Star of the East as a sign of protest, dealing them a black eye in business operations.

Hold your horses. Google is neither completely altruistic, nor will it neces-sarily shut down all operations anytime soon. It’s a business, just like any other. First off all, if Sergey Brin and Eric Schmidt really gave a flying crap about human rights, they would not have ignored the crackdowns, the pur- ges and the routine abuses of individual liberties. They would have thought twice about rolling out Google.cn, and all the Faustian deals that were made in that 2006 bargain. Talk of “make meaningful and positive contributions” to development in China sounds great, until you consider the various in- dignities Google has put up with, all for the sake of economic growth.

The decision to say “no” has little to do with human-rights and plenty to do with corporate sovereignty.  As an avid spectator of business events, I have observed these [sometimes] drawn-out “tennis matches” between nations and industries. Governments love business, because it means more to tax (operations, land, leasing, profits, etc.) and push around. As with all things that entropize over time, taxes can and do increase. But instead of being a good citizen and taking the extra burden on the chin, any clever business owner will do the next best, and legal thing, which is to transfer operations to a more business-friendly state or country.  Think of businesses as being just like people (by definition, a “corporation”): If they don’t like the way they’re being treated, they can always up and leave.

Businesses like Google, Yahoo! and Microsoft are different from individuals in the sense that they do not necessarily see shades of black and white, but only gray. They do things if it profits their operations. They don’t do things if it doesn’t.  They will respect the laws of their host countries, as Google had willingly shown back in 2006. What they won’t put up with is a gross vio- lation of their own turf – especially if the methods are illicit and there is no reasonable justification. To order a company to surrender information on the basis of national security is one thing; to blatantly hack into its databases is one step short of declaring veiled corporate warfare.

Some activists in China have reacted to Google’s challenge to pull out, saying that they have no right to act as if they are above Chinese law. Google has made no such claim, and the activists do not get it. The search engine giant has proven its willingness to work with authorities. But if the authorities cross that ethereal line of sovereignty of corporations (that American and European governments know better to tread) – then all bets are off. Google has a perfectly-legitimate right to protect its own interests and constituents. I sure as hell wouldn’t want a commie or any other totalitarian invading my account and exploiting my information.  If Google takes steps to protect the rest of its customer base against such a belligerent entity, then my faith in corporate sagacity will have been vindicated.
I doubt if a complete Google pullout is forthcoming, or that it will have any significant impact. Indeed, Google has more to lose from the move than China, so that such a move would be premature. Just a warning to leave may be all that is needed, to get everyone to talk rationally. As long as there are no more Chinese-sponsored breaches of security, then all will settle down.  If not, then this experiment is as good as done – and good riddance.

While Google scored a coup for being the first to capture this market, there will be no love lost for them when they leave. Its operations there make up only 2% of its overall market. Rival Baidu.com and other home-grown search engines have all but nudged it out of competition among Chinese-language web-browsing content. In the long run, the biggest news here is more symbolic than anything else. This event exposes yet more of the prob- lems and perils that foreign investors and businessmen face as they venture into the Last Great Totalitarian State that is China. As for Google, it may lose its business now, but it somehow redeem itself and saves face, becoming a new and unwitting supporter of human rights.

Copyright Anabasius 2010

First of Several Parts: Why Investing or Dealing with China Won’t be Such a Good Idea in the Near Future

Contrarian investors get little love these days. They are the modern-day Cassandras of the business world who go against the popular trend, often blamed (unfairly) for market spikes and massive sell-offs.  Yet, professional naysayers from George Soros to Bill Gross of PIMCO Funds have routinely made predictions about the state of a country’s economy or currency – and on occasion, have nailed it down. To date, the most spectacular bet done in all of history was George Soros’ $10 billion speculation against the pound sterling, which almost effectively ruined the Bank of England, while making him all the more rich and famous (or notorious, if you’re a hater).

Just as important but not as well-known is James Chanos’ short-sale of the late behemoth Enron, as it came to a crashing end in 2001. Recently, the founder and president of hedge fund Kynikos & Associates made yet another bold prediction: That China the upcoming economic giant, would see its own economic bubble burst after it implodes from a critical mass of excessive cre- dit lending.  In a New York Times article dated Jan. 8, 2010, Mr. Chanos was reported to be looking for a way to profit from an impending collapse of China’s economy, whenever that may be. That won’t be easy to accomplish. China’s closed-society scrutiny of every scrap of information flowing  inhibits any kind of speculator action.

Governments dream about such tight controls but could never pull off such stunts because of constitutional restrictions. China’s case is a fulfillment to the extreme. So from a businessman’s point of view, what’s the problem? Nothing… unless a lot of that information happens to be false, even under so-called “regulation.”  A hallmark of a properly-functioning government is accountability and transparency,which the Chinese have rarely exercised, except as a matter of convenience. In the meantime, if an illegal practice in trade yields mighty profits for the merchant and his sponsor country, it has been standard practice by government officials (especially in Asia) to wink after generous kickbacks and favors.

You can bet money that even with corruption kept under control, such lax standards will eventually come back to haunt China in the form of subpar quality standards for products and services and poor labor practices. This would eventually lead to lawsuits and/or shortened contracts, and ultimately little or no desire from foreigners to do business. Not all dealings with Chi- nese subcontractors will be bad, but the tendency for regulators on that side of the Pacific to overlook ethically questionable practices will encourage unscrupulous businesses to act with even more impunity. Only when they become a major embarrassment will true regulatory action (often belated) will happen.  One bad egg might even merit a hanging.

What about several thousands of corrupt Chinese businessmen who are complicit in a major financial collapse?  If exposed, assume that they meet the same fate. That’s not exactly a figure you could sweep under the carpet, though. Nor will their elimination solve the fundamental problems they’ve created, long after they’ve been purged and buried.

Copyright Anabasius 2010