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    Published on: December 19, 2014

    by Kevin Coupe

    Some stories have emerged from the entertainment industry this week that I think offer some lessons for retailers…

    • The New York Times reported that AMC Theaters, the nation's second-largest chain, "has agreed to a pilot partnership with MoviePass, a three-year-old company focused on letting people attend a movie a day for one monthly fee … In January, AMC theaters in Boston and Denver will begin working in concert with MoviePass to offer monthly subscription packages for $45 and $35. More cities will be added later. "

    Essentially, this is the Netflix model. AMC is betting that by offering a monthly MoviePass, it can encourage young people - who have been staying away from traditional theaters - to go to the movies rather than embrace alternative entertainment options.

    I've always been a big fan of the subscription model. I don't just use it with Netflix, but also with Amazon's Subscribe & Save, for Starbucks coffee, for my barber (pay one monthly fee, get my hair cut as often as I like), and even for my underwear (I get a fresh supply once a year). And I think that - to use a word I've been employing a lot in recent months - what AMC is trying to do is create a kind of ecosystem that will embrace and nurture and even nourish its customers.

    I think they'll have to be careful. To a great extent, theaters are at the mercy of the movie studios. If movies are good, they do better than when movies are crappy. But AMC is taking a path that I think a lot of businesses would do well to consider…

    • The Wall Street Journal reports that "NBC is launching a live stream of its broadcast network, part of a broader effort at parent NBCUniversal to make more of its content available online via computers and mobile devices." To access the online stream, users will have to demonstrate that they already have a cable subscription (which is unlike what CBS and HBO is planning).

    But what this indicates is that a traditional business model is acknowledging that the next generation of consumers is not going to source content in the same way as previous generations; they have no loyalty to traditional models, and want things when they want them , how they want them, and where they want them. Savvy businesses - whether in the network TV business or in retailing - need to look beyond traditional boundaries and models and figure out how and where to be relevant.

    • Finally, there is the story about the hacking of Sony's internal website, the exposure of millions of documents (including inflammatory emails, budgets, and film scrips) and the decision to cancel the release of The Interview, the comedy about the attempted assassination of North Korean leader Kim Jong-un that seems to have prompted the hacking, not to mention threats of violence against theaters that show it.

    This is too complex to go into here (and I'll probably have more to say about it next month, once things have calmed down and we know more about the source of the threats). But I do have some thoughts…

    The hacking tells us that anyone and everyone is vulnerable, and companies need to be very careful about security. In addition, executives need to be vigilant about what they say in emails, because it is entirely possible that the messages could be exposed to the light of day.

    As for The Interview, my guess is that whoever is behind the hacking has made a tactical error. Most of the early reviews for the film have been negative, even scathing, and they've turned what might have been a forgettable movie into a cause. (Good lesson: Choose your battles wisely.)

    I must admit to being conflicted about the decision to cancel the film's release. On the one hand, I hate the idea that these hackers have managed to successfully disrupt how a major business operates, and think that Sony should not have knuckled under. But, there were serious threats being made, and I cannot imagine any responsible business wanting to do something that would put employees and customers in danger. Just from a business point of view, I'm not sure the studio or the theaters had much choice … and I hate that.

    But again, there's a business lesson. Because I suspect that the hacking community has just been enabled. It is hard to know what the next target will be. And it is not hard to imagine that if hackers/terrorists are willing to go after movie studios, they'll also be willing to go after any major public business.

    All Eye-Openers, I think.
    KC's View:

    Published on: December 19, 2014

    Bloomberg reports that Walmart is being accused by investors "of ignoring a court order to turn over more internal files" having to do with what company directors may have known about allegations of systematic bribery of Mexican officials in order to facilitate real estate deals there.

    Investigations of the charges, first reported by the New York Times, are being conducted by the US and Mexican governments. At issue is $24 million in "suspect payments," the story says.

    According to Bloomberg, "Wal-Mart said it has spent the past two years investigating allegations of bribery and corruption in Mexico and other countries, and is cooperating with a federal probe into those claims. In April, it said it had racked up legal fees and compliance costs of more than $400 million so far, and estimated it could spend as much as $240 million this year. The Bentonville, Arkansas-based chain said today that officials have worked hard to comply with the court order on the Mexican bribery files and reviewed more than 265,000 pages of information."

    However, the pension fund making the new charges claims that Walmart has balked at handing over all the documents and is dragging its heels to protect its own interests. For example, the story says, "the company is refusing to turn over e-mails about the allegations to former Chief Executive Officer Michael Duke and notes prepared by Scott Draper, a Wal-Mart vice president who oversees internal audits, according to the filing."
    KC's View:
    I'm not as familiar as I probably should be with the investigative process, but it is hard for me imagine why these probes have taken so long to conclude. But I continue to believe that when the results come down, they will not absolve Walmart of guilt, and that names will be named … and some of those names almost certainly have defense lawyers on speed-dial.

    And it is not a big leap to think that one of the reasons things have taken so long is that it is hard to get all the documents that investigators need.

    Published on: December 19, 2014

    The New York Times reports that Unilever, manufacturer of Hellman's mayonnaise, has decided to drop its lawsuit against Hampton Creek, manufacturer of a product called Just Mayo, which said that the item couldn't be called mayonnaise because it doesn't have eggs.

    Just Mayo apparently was stealing market share from Hellman's mayonnaise, and Unilever was not amused.

    According to the story, "Unilever said that it decided to withdraw the lawsuit so that Hampton Creek can address its label directly with industry groups and regulatory authorities. Hampton Creek says it marketed its product as 'mayo' to meet labeling regulations."
    KC's View:
    I realize there are regulatory issues at work here, but I have to admit that I found the premise kind of amusing. After all, how often does one pick up something like frozen blueberry pancakes, only to discover that there are no actual blueberries in them?

    It isn't like Hampton Creek wasn't being transparent. Unilever just didn't like what it was saying.

    Published on: December 19, 2014

    Men's Journal has what I think it is a pretty good and extensive debate about genetically modified organisms (GMOs) in food, in which experts offer their opinions about their acceptability.

    You can read it here.
    KC's View:

    Published on: December 19, 2014

    City Wire reports that Walmart may be "mulling a purchase of Nook from Barnes and Nobles as the Bentonville-based retailer continues to explore ways to expand its footprint and service offerings against Amazon … Wal-Mart Stores in recent years has recruited some of the brightest talent in Silicon Valley with a dozen tech acquisitions since 2011. But the retail behemoth has yet to put its name on a hardware device or ebook service to date."
    KC's View:

    Published on: December 19, 2014

    • The Seattle Times reports that Costco has said that it "has been informed by federal attorneys that they believe the company has violated civil regulations about the handling of prescriptions for controlled substances.

    "In a quarterly filing, the Issaquah warehouse club said it is cooperating with the U.S. Attorney’s offices in several districts on the matter. Costco had previously disclosed receiving subpoenas from the Drug Enforcement Administration and administrative inspection warrants concerning 'the company’s fulfillment of prescriptions related to controlled substances and related practices'."

    What prompted the investigation, the story says, was the discovery by the Drug Enforcement Administration (DEA) that a "West Sacramento Costco … had been buying more hydrocodone, a prescription painkiller, than any other pharmacy in California."

    Fortune reports that Rite Aid's Q3 financials were significantly better than expected, with profits that were double the same period a year ago. The reason, according to the story: "Rite Aid has been remodeling its stores from its older format into a wellness model that focuses on the pharmacy business. This includes a new product mix of wellness-centered items. To date, the company has revamped 33% of its stores nationwide. That’s helped boost same-store sales, which are up 5.4% year-over-year. Much of that growth can be attributed to its pharmacy business, which saw same-store sales rise 7.2% year-over-year."
    KC's View:

    Published on: December 19, 2014

    Crain's Chicago Business reports that Kraft Foods Group announced that "Chairman John Cahill will replace Tony Vernon as CEO next week, signaling that big changes may be ahead for the Northfield-based processed-food giant.

    "The changes might include the sale of some of Kraft's big but slow-growing grocery-store brands, analysts said … The Kraft board praised Vernon for his work rejuvenating mature brands, launching new products and helping place the company on solid footing following the spin-off. But lead independent director Mackey McDonald said in a statement that the company would benefit from a fresh perspective 'to fulfill our potential as an industry leader. The board and Tony agree that we need to accelerate the pace of change'."
    KC's View:

    Published on: December 19, 2014

    On the subject of how CVS is reshaping its approach to the drug store business, MNB user Jan Fialkow wrote:

    A few weeks ago I got a splinter in my right hand. Since I’m right-handed, there was no way I had enough coordination to remove the splinter using my left hand. So I drove over to the Minute Clinic at CVS and had it removed quickly and painlessly. The nurse-practitioner on duty had been a doctor in her native China. Our discussion revealed that like me, she was part of the early Baby Boom cohort, and CVS offer her a way to stay in the game without committing to a full medical practice. A true win/win for both of us. BTW, my insurance plan uses Walgreen’s for prescriptions, but I get very little else there. Minute Clinic got me into CVS a few years ago and it’s kept me there.

    Yesterday, in reporting that Gerry Storch, who I didn't think much of when he was running Toys R Us, is going to Canadian department-store operator Hudson's Bay as its new CEO, I commented that when he was at Toys R Us, "Storch struck me as someone who should be running Fort Courage, Kansas, not a major 21st century retailer."

    One MNB user wrote:

    I love when you put a hidden gem in your commentary.  When I used to call on Target, I always wondered if he was related to his namesake of F Troop fame.  Thanks for my first grin of the day!

    From another reader:

    I understand that Mr. Storch has two vice presidents named Forrest Tucker and Ken Berry.

    And another:

    So maybe he was at Fort Courage, KS while he waited to transfer to the Canadian Mounties from the US Cavalry and now he gets to be in charge of Hudson Bay. Not sure which Indians will be there but Snidely Whiplash, Dudley Do-Right and Nell Fenwick are sure to be available. Plus now he can ride Horse.

    Y'know what makes me happiest? When folks get the jokes … even the obscure ones … and then come back at me with their own.

    Got a lot of responses to yesterday's FaceTime, for which I thank you.

    One MNB user wrote:

    Kevin, I often feel the same way - in order to stay up on what’s going on both personally and professionally, I do a lot of reading of current events.  Some days I can hardly believe how bad people are.  And yes, I do see some hope in mankind through the kindness of some - just not often enough, or so it seems.

    A couple of years ago, I decided that I can’t change the world, nor make up for the cruelties of others, but I can do something about my corner of the world - the people I know and cross paths with everyday, and the town I live in.

    And it’s been such fun!  I have volunteered at an animal shelter, hospital tuck shop, been a docent at a museum, and volunteered to read with inner city kids.  It gave me such a wonderful feeling to at least make a dent, in some small way, to bettering our world.  So be happy for the things you CAN do, it helps you not focus so much of the bigger problems out there.  We can’t change the world, I so wish we could, but at least we can do small things that change it for us.

    And, responding to the fact that I'll be off for two weeks, one very kind reader wrote:

    How will I ever survive…I really look forward each day to see what topics are important to you and your opinion on those topics…an opinion I respect. Enjoy your time off. To bring you back to reality after two weeks off, I suggest watching the Rose bowl…as the Oregon Ducks face off with FSU over the soul of college football.

    No problem. I worship all things Oregon.

    Gonna be a good two weeks.

    And when I come back, one MNB user suggested a change in my approach:

    Maybe one of your New Year's resolutions could be less emphasis on Amazon, Apple and Wal-Mart and more emphasis on innovators that we don't see on page one of the business section.

    Happy New Year….stay positive.

    I will.
    KC's View:

    Published on: December 19, 2014

    In Thursday Night Football action, the Jacksonville Jaguars defeated the Tennessee Titans 21-13.
    KC's View:
    This has nothing to do with NFL football, but…

    The announced change in US policy towards Cuba sounds like it has the potential to have an enormous impact on the game of baseball … and it seems possible that baseball could have a big impact on Cuba. If players in Cuba - where they worship baseball - are able to come to the US to play their craft, it strikes me as at least possible that US baseball, and how it reflects our capitalistic culture, will begin to be seen more extensively in Cuba. And that could propel social and cultural change there.

    But I'm going to make a prediction right now. Within 20 years, we're going to see either a major league team or a minor league franchise in Havana.

    Published on: December 19, 2014

    If you see one movie over the holidays, I strongly recommend that you see a little film called Whiplash, which is both a compelling drama as well as being loaded with business lessons.

    Whiplash is about the relationship between a young drummer, played by Miles Teller, who attends an exclusive New York music conservatory, and a jazz teacher/conductor there, played by JK Simmons. Calling it a "relationship" actually is inaccurate - it is more like an ongoing heavyweight fight between two talented and obsessive men, portrayed by two actors at the top of their game.

    What Whiplash is about is actually the cost of obsession. Simmons - a talented and much-employed character actor getting a crack at a lead role and making the most of it - plays a man who believes that the path to greatness lies in psychological and even physical abuse of his students. He pushes and pushes and pushes some more, believing that it is the only way that the students can find transcendent moments. Teller's character actually believes it, and is willing to do whatever is necessary to achieve greatness as a musician; he believes he has it in him, even when his teacher does not.

    Whiplash poses some important questions. What is the cost of greatness? And is greatness worth the cost? Oddly enough, at the end of the movie, despite some devastating costs, teacher and student in Whiplash might actually agree … and the audience becomes almost complicit in that agreement.

    Whiplash is not a big Hollywood blockbuster movie. No CGI, no creatures, no guns, no explosions. (Well, there are some explosions … but they are all emotional…and more devastating than the other kind.) Most of it takes place within the walls of the music school.

    But I loved it. I urge you to see it, and then think about the issue of how we nurture and revere greatness in our schools and organizations.

    I've been on a tear lately, watching detective movies … and saw Bogart and Bacall inThe Big Sleep, directed by Howard Hawks, based on the novel by Raymond Chandler, with a screenplay co-written by William Faulkner. (That's what I call a strong lineage…) And despite the fact that the plot is largely incomprehensible (Faulkner reportedly called Chandler at one point to find out who killed someone in the novel, and Chandler had no idea), this is one terrific movie - loaded with atmosphere and sexual tension and some terrific performances. It is part of the template of virtually every detective novel since the thirties, with Bogart simply great playing the knight errant trying to make things right on what Chandler called "the mean streets" of Los Angeles.

    The full quote from Chandler goes like this:

    "Down these mean streets a man must go who is not himself mean, who is neither tarnished nor afraid. He is the hero; he is everything. He must be a complete man and a common man and yet an unusual man. He must be, to use a rather weathered phrase, a man of honor—by instinct, by inevitability, without thought of it, and certainly without saying it. He must be the best man in his world and a good enough man for any world."

    After watching The Big Sleep, I then watched two later films with Paul Newman playing a similar character - Lew Harper (a renamed Lew Archer from the Ross Macdonald novels). The original, Harper, is excellent, with its sequel, The Drowning Pool not quite as good … but taken as a package, they all make me miss these kinds of movies.

    Finally…last night's final edition of "The Colbert Report" was wonderful … funny, a little bittersweet, and as much as I already miss the lacerating satire that Stephen Colbert offered four nights a week, I'm already looking forward to the night he takes over for David Letterman on "The Late Show."

    Class act. All first.

    The only negative from last night's show: I can't get the tune "We'll meet Again" out of my head…
    KC's View:

    Published on: December 19, 2014

    As noted yesterday in FaceTime, today's edition of MNB is the final one for 2014.

    As is the custom around here, I'm going to take a little time off to catch my breath, sleep a little late, read some books, go to a bunch of movies, do a little non-MNB writing and just generally recharge the batteries. (There will, no doubt, be the annual viewing of Love Actually, my favorite Christmas movie ever. We're also thinking about an evening with The Godfather, complete with spaghetti, meatballs and sausages, and maybe even some Coppola wines.)

    I hope you’re able to do whatever it is that makes you happy over the next couple of weeks.

    As always, the MNB archives will be open. And I'll probably being posting from time to time on Facebook. (If something extraordinary happens, I'll be paying attention and will find myself back and the laptop filing a story and commentary for MNB, and I'll shoot you an email to let you know.)

    MNB will be back on Monday, January 5, 2015 … and I trust that the coming year will be eventful, energetic, prosperous and most of all, fun for all of us.

    Michael Sansolo and Kate McMahon, as well as Mrs. Content Guy and the entire Content Clan, join me in wishing you a happy and safe holiday … however and whatever you celebrate.


    KC's View: