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Friday, October 17, 2014

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Friday Morning Eye-Opener: Well, That Didn't Take Long

by Kevin Coupe

Yesterday, we reported in this space that HBO had announced that beginning in 2015, it will make its programming available via a stand-alone, web-based service, allowing even those without cable television or an HBO package to see its shows. There are 80 million homes in the US that do not get HBO programming, and the move is seen as a potential financial bonanza for the company, generating hundreds of millions of dollars in new revenue.

That sound you hear, we said, is that of the walls tumbling down.

It did not take long for the next brick to fall. CBS said yesterday, the New York Times reports, that it will launch "a new subscription Internet streaming service … that allows people to watch its live television programming and thousands of its current and past shows on demand without paying for a traditional TV subscription."

And here's the line from the Times story that really matters:

"The moves by CBS and HBO signal the arrival of a new age of web-delivered television, where viewers have more options to pay only for the networks or programs they want to watch — and to decide how, when and where to watch them."

Expect more broadcast and cable networks to follow. (CBS owns Showtime, so it'll probably be next.)

The big lesson - that the balance of power in almost all cases has shifted to consumers … and marketing entities are upending even the most traditional ways in which they do business to cater to these changing consumer dynamics.

And the secondary lesson, in my opinion, is the fact that with the exception of the people who own cable companies absolutely no one is going to mourn the fact that they essentially are being disintermediated right out of business.

It is an Eye-Opener.

Amazon Fresh To Start Serving Brooklyn, NY, Market

The Seattle Times reports that Amazon will begin operating its Amazon Fresh service in the Brooklyn, NY, neighborhood of Park Slope beginning today - the first time Amazon has expanded the service beyond the west coast, where it has been serving Seattle, San Francisco, Los Angeles and San Diego.

According to the story, "The company said it plans to expand to other Brooklyn neighborhoods 'soon' … Fresh will be available only to members of Amazon’s $99-a-year Prime service, which offers two-day shipping at no extra charge. Those customers won’t have to pay any additional membership fees through the end of the year."

But, "Starting in January, New York’s Fresh customers will have to pay $299 a year to use the service, the same price Amazon charges in its California markets. Amazon has never charged its Seattle customers a membership fee in the seven years it has offered the service" there.

The Times also reports that…

"Fresh customers in New York will get free delivery on orders of more than $35. Fresh will tack on a $7.99 delivery fee for any orders less than that. The company said that customers who place grocery orders by 10 a.m. will have them by dinner, and orders placed by 10 p.m. will be delivered by breakfast."

"An Amazon spokeswoman said that groceries for Brooklyn customers would come from that warehouse in Avenel, N.J., a 23-mile drive to Park Slope. New York is one of a handful of markets with entrenched grocery-delivery rivals. Both FreshDirect and Peapod operate there, as well as some local grocers."

KC's View: Interesting choice by Amazon; I'm guessing it must have something to do with a manageable density of existing Amazon customers, plus they can avoid at least some of the parking tickets that companies like FreshDirect tend to get while serving Manhattan.

I still think that they're charging way too much for the Prime/Fresh membership … for a lot of people, $299 will be a deal-breaker. They say they're tweaking the numbers, but I haven't seen a ton of evidence of that. Maybe the competition in NY will force a lowering of prices.

Still, if they get traction in Brooklyn, expect them to expand into the other boroughs and suburbs pretty quickly.

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Starbucks Moves To Improve Appeal To Customers, Employees

Starbucks yesterday announced a promotion designed to encourage shoppers to enroll in its loyalty program and pay with its Starbucks card - ten winners in the US will receive one item - a drink, salad or pastry - a day, for free, for 30 years.

In addition, the Seattle Times writes, "Starbucks also will start letting customers in Portland, Ore., order using their mobile phones before the end of the year, a service that will spread to the rest of the U.S. through 2015."

USA Today writes that "for Starbucks, it's all about tapping into its huge, Millennial customer base, who widely prefer to use their smartphones to make purchases as well as do pre-purchase research. At the same time, Starbucks has built a massive customer-loyalty program via its mobile payment app. Customers generally like it because they earn rewards such as free lattes and munchies for purchases. An estimated 15% of all Starbucks purchases are made with mobile devices, the company says.

And, the Times says, the company has loosened its restrictions on employees, saying they can have visible tattoos on their arms (but not on their faces or throats). "Multiple piercings — formerly a no-no — are now allowed, as long as it’s no more than two earrings per ear and a small nose stud," the Times writes.

According to the Times, "The moves come as Starbucks seeks to navigate two important challenges: consumers’ migration from malls to online shopping, and growing concern about the quality of retail jobs, especially as these, once considered temporary, are filling the gap left by manufacturing in the American economy. Starbucks has long offered benefits unusual in the retail sector, such as health insurance, even for part-timers, and stock. Recently it launched a program to subsidize online college education at Arizona State University for its baristas; the first 1,000 or so began classes Oct. 15.

"But the company has been criticized over relatively low pay and over inconsistent and hectic work schedules."

KC's View: All good decisions, I think.

Frankly, I'm still sort of amazed that the tattoo thing was an issue. I just sort of assumed that a lot of Starbucks employees had tattoos … I didn't know they were covering them up until the potential policy change made news. That's something that a lot of companies are going to have to adapt to … tattoos have become a fact of life for many young people, and we're all just going to have to get used to it.

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Debate Over Proposed Minimum Wage Increase Continues

The New York Times reports that the National Retail Federation (NRF) has issued a report saying that a higher minimum wage "would simply eat away at many retailers’ bottom lines, and ultimately threaten retail jobs … the group said that retailers in fact offered jobs to millions of younger, inexperienced workers, as well as workers like teenagers and college students looking for scheduling flexibility, which was behind the concentration of low-wage jobs in the industry.

"The federation argued that retail workers earn above-average pay if temporary workers, including those hired for holiday sales, are excluded. Retail workers ages 25 to 54 who work full time for at least three consecutive months make an average of $38,376 a year, slightly more than full-time workers in nonretail jobs, the group said."

“Now is not the right time to be mandating a minimum-wage increase,” NRF's president, Matthew R. Shay, said in a briefing. “We’d rather much be focusing on what do we need to be doing to stimulate growth.”

Meanwhile, the Times writes, "On Thursday, organizers of a group called Our Walmart took to the streets in New York, Washington and Phoenix to draw attention to their campaign to change labor practices in retailing and other low-wage industries like fast-food restaurants. By not paying their workers a living wage, the activists say, such businesses squeeze the very people they hope to sell to … Fourteen Walmart employees and 12 others were arrested and charged with civil disobedience Thursday."

This came as Walmart CEO Doug McMillon told reporters this week that the company wants to address the compensation issue: "We only have a few thousand associates in the U.S., less than 6,000 of our 1.3 million associates in the U.S., that currently make a minimum wage and it is our intention over time that we will be in a situation where we don't pay minimum wage at all."

KC's View: I am sympathetic to the argument that a higher minimum wage could lead to fewer jobs … but the fact remains that there are a lot of people out there who work very hard for a lot of hours, but because of their circumstances, they don't make enough to support themselves and their families. And I worry that we're creating a kind of underclass in America, and I'm not sure that the current situation is culturally sustainable. (I'm okay with a different minimum wage for students working part-time than for adults trying to support themselves, by the way.)

Besides, wasn't it just yesterday that The Container Store's Kip Tindell said that as the incoming NRF chairman, he was going to try to change NRF's thinking on this issue?

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E-conomy Beat

• Amazon announced that it plans to hire 80,000 seasonal workers for the upcoming holiday season,, 14 percent more than a year ago.

According to the Seattle Times, "The employees will have temporary jobs at Amazon’s more than 50 U.S. warehouses … The company will also place some seasonal hires at its newly created “sortation” centers, where Amazon collects parcels from the fulfillment centers to sort them by ZIP codes for delivery to local post offices. Amazon now operates eight sortation centers in the United States."

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FastNewsBeat

Reuters reports that Wade Miquelon, the CFO at Walgreen until he stepped down last August, is suing his former employer, "alleging company executives defamed him in news reports that blamed him for errors in its earnings forecast."

According to the story, Miquelon's allegations relate to a story in the Wall Street Journal saying that "Miquelon and another top executive lost their jobs after a $1 billion forecasting error in Walgreen's Medicare-related business.. A series of articles followed in the newspaper that said Miquelon 'bungled' the company's EBIT forecast for fiscal year 2016."

The suit says that Miquelon resigned of his own accord, not under pressure.


Willamette Week reports that "the battle over labeling genetically modified foods is less than $500,000 from becoming the most expensive ballot measure fight in Oregon history.

"A $2.5 million contribution from Monsanto Company to the 'no' campaign on Measure 92, reported earlier today, brings to total donations in the fight to $15.4 million - nearly two-thirds of it coming from food giants who oppose GMO labeling. "

The story notes that not all the contributions are in cash. For example, "Ben & Jerry's changed the name of an ice cream flavor to “Food Fight Fudge Brownie” in support of Measure 92," and also has contributed T-shirts, posters and fliers, while "Whole Foods has given $32,939 of in-kind contributions, including its grocery bags."

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Executive Suite

• Fairway Group Holdings announced that it has hired Dorothy Carlow, most recently the CMO of Earth Fare, to be its new chief marketing officer. In taking the job, she is reunited with Jack Murphy, Fairway's CEO, for whom she worked at Earth Fare.

Yet Another Way In Which Red Wine May Be Good For The Body

ESPN reports that 31-year-old Amar'e Stoudemire, big man for the New York Knicks, has found a new way that he believes is helping him rejuvenate his body in his 13th season in professional basketball.

He bathes in red wine.

"The red wine bath is very important to me because it allows me to create more circulation in my red blood cells," Stoudemire said. "Plus, it's very hot, so it's like a hot tub. But it's also the red wine ... just kind of soothes the body."

The story says that this is not an unusual approach. "According to the Caudalie Vinotherapie Spa in the renowned Plaza Hotel in New York City, 'Grape polyphenols fight against free radicals, which cause 80 percent of skin aging. ... In addition to their exceptional antioxidant power, polyphenols reinforce microcirculation, protect elastin and collagen fibers and prevent the destruction of the fundamental elements of the skin's support tissues'."

Your Views: Zoning In

Got the following email from an MNB reader, reacting to our story about how sandwich chain Jimmy John's is asking even low-wage workers to sign non-compete agreements so they can;t work at many other fast food chains after leaving Jimmy John's.

I think your reaction was rather tepid. I would be somewhat more strenuous.

I remember asking, somewhere around 4th grade, what the difference was between a serf, and a peasant.

And I vividly remember my teacher describing how a serf was not allowed to leave their land. If the land was sold the serf went with it. Basically, a peasant had no rights but could always quit. A serf couldn’t even quit and go somewhere else.

Jimmy John's wants to bring a form of serfdom to 21st century America. Really, can we afford to tolerate this sort of nonsense?

I travel and see these places all over. I will never ever patronize them.


I agree. I was kind of tepid in my analysis. For which I apologize.

To be honest, this has been kind of a long-week travel-wise, plus I've had a bad cold … when I wrote MNB several nights this week, it was after mega-doses of Day-Quil and then Ny-Quil. I was a little zoned out … I'm just glad I was cogent.




Responding to statements made by Walmart CEO Doug McMillon this week, one MNB reader wrote:

In reading your piece on Walmart CEO  Doug McMillon's comments to the investing community, I couldn't help but shake my head and laugh out loud.  It seems to me he missed one important point (probably on purpose), and one point he made, made me wonder if he has ever actually been inside a Walmart store.

The point he missed; strolling the aisles looking for that great assortment he mentioned, and seeing gaping holes.  Walmart maintains a theory of great assortment.  In practice, not so much.  Shopping their stores is an exercise in frustration and futility.  And forget about voicing your concerns to WM corporate.  You send them a letter and it apparently goes straight to the deep six file.  No response, no acknowledgement, no concern.  Sadly, this is also the case when you take the time to write to compliment one of their employees.  They never acknowledge it, and never contact the employee.

The point that made me scratch my head: "Re: experience… Experience is about customer service. From our associates in stores to our engineers and data scientists, we’ll invent new ways to surprise and delight customers.”  Really?  He said this with a straight face?  Has he ever stepped foot into one of his stores?  The bar of "experience" is set so low at Walmart I would be surprised and delighted if just once I didn't wait in line 15 minutes to get to a cashier who never makes eye contact and never says a word to me until the order is totaled.

Baby steps, Mr. McMillon, baby steps.


From another reader:

Walmart CEO McMillon’s reference to inventing new ways to “surprise and delight customers” bares no resemblance to the reality in his stores.  But that’s okay, their sales allow them to be creative in describing themselves and their investors are only interested in their return.
 
Smaller operators, however, who make similar claims about their “experience” should be wary, because in reality it often doesn’t exist any further than in the mind of their CEO and during pre-arranged store visits and orchestrated grand openings where everyone is on their toes and everything is sparkling clean. 
 
In the end,  the operators who create a real customer experience – morning, noon and night – even when no one is watching --  in-store, online or both--will be the ones who are successful in the minds of customers.




On the subject of HBO's decision to offer its programming online, and not just on cable, one MNB reader wrote:

Count me among those who is ready for the walls to come tumblin' down. Just recently our local cable provider rejected the pricing demands of Viacom and pulled all its channels. Viacom really is not a "power" any more in my opinion and I didn't watch the bulk of their channels.

But, they do have Comedy Central and I no longer have access to Jon Stewart and The Daily Show, a real body blow to the soul. And, African-American friends are lamenting the loss of the Black Entertainment Network.

Obviously, we have been discussing "what to do." I think the move to major providers offering an a la carte menu you can stream - particularly through a "smart" TV - might over time send cable companies the way of Blockbuster.

It really is about the customer and I am one customer who finds the current (make that "old") delivery model meeting fewer and fewer of my needs and desires.


And from another reader:

I heard an interesting tidbit about this story on Entertainment Weekly radio this morning.  The HBO Show “Game of Thrones” is the most pirated show in the world.  I would think that a big part of this move is in hopes that a percentage of people currently pirating their shows would pay if it is available in this new format. The decision makes sense on every level and their revenue potential is astounding.  It won’t take long before many others follow their lead as quickly as possible.

And another:

This is HUGE!  We discontinued our  cable service (Time Warner) in July 2013 and haven’t looked back.  We considered getting cable back in March of this year solely because the latest season of “Game of Thrones” was coming back to HBO, however my brother was kind enough to let me use his HBO Go access (he never watches HBO online), which I am able to connect via Apple TV (“Thanks Bro!”).  If HBO Go had been optional as a stand-alone service at the time, we would have gladly paid $14.99 or whatever the cost would have theoretically been for it.  Their original content is outstanding and I frankly believe this is a great move for them to add revenue in a time when more and more cable subscribers are “cutting the cord”.  On the flipside of HBO’s decision, I wonder if the cable companies will retaliate by slowing down bandwidths?!
 
The only thing I miss is some of the College Football games that are exclusive to ESPN, but other than that, it’s great not draining over $125 a month into a cable bill (more $ for beer!).  Netflix/HBO Go have single-handedly replaced.  The notion that customers will be able to $14.99 (my assumption since that’s what the advertised cost is via Time Warner Cable for HBO) a month directly to HBO for their fantastic programming is another crushing blow to the cable companies. 
 
I’ve been saying for years that the only way the cable companies can ever make cable TV affordable for the average consumer is to offer a tier system (i.e. Package  A starting at $19.99; choice of 15 non-premium channels and so on and so forth).  The drawback to this rationalization is that many of the lesser-watched channels (i.e. C-SPAN, Lifetime, Oxygen, etc.) would very likely be eliminated altogether, especially if very few subscribers were including these channels into their package choices.  This would be to the subscribers’ advantage and cable’s detriment since many of us never cared for the majority of programming offered.  Just a thought…..

From The MNB Sports Desk

In Thursday Night Football, the New England Patriots defeated the NY Jets 27-25.

And, the San Francisco Giants defeated the St. Louis Cardinals 6-3 last night, winning the National League pennant by a 4-1 margin in the best-of-seven series. The Giants now go on to face the Kansas City Royals in the World Series, which begins next Tuesday.

KC's View: Two personal notes on the baseball scores…

Congratulations, Larree … I'll be rooting for the Giants in the series. Sorry, Joanie … wait 'til next year.

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Now back to regularly scheduled editorial...

OffBeat: Depraved, But Not In A Bad Way

Gone Girl is one of the more depraved movies I've seen lately … and I thought it was terrific.

The movie, based on the best-selling novel by Gillian Flynn (which I have not read), details the marriage of Nick and Amy Dunne, which moves from bliss to suspected murder. The movie pretty much starts out with the discovery by Nick, played by Ben Affleck in perhaps his best film performance to date, that his wife is missing and that it appears that an act of violence has taken place in their Missouri home. With every passing day, suspicions grow that Nick is responsible, and we see via flashbacks that Amy (played to a virtuoso turn by Rosamund Pike) seems to have been increasingly unhappy in her marriage.

My understanding is that the movie hews fairly closely to the novel, but director David Fincher does an excellent job of keeping the audience off-balance and (according to Mrs. Content Guy, who did read the book) keeping the material fresh. And, there are some excellent supporting performances, especially by Tyler Perry and Neil Patrick Harris.

In Gone Girl, very little is what it seems to be … except for the fact that it is Hollywood filmmaking at its best. Depraved, but completely engrossing.




That's it for this week. Have a great weekend, and I'll see you Monday.

Slàinte!

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