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    Published on: March 4, 2016

    by Kevin Coupe

    Talk about disruption.

    Variety reports on a new study by MoffettNathanson saying that "in 2015, Netflix accounted for about half of the overall 3% decline in TV viewing time among U.S. audiences ... Moreover, Nathanson predicts Netflix’s total streaming hours as a percentage of TV viewing will continue to rise to about 14% by 2020."

    The study makes clear that Netflix hits certain networks harder than others, and in some cases, it appears that households that use Netflix also tend to consume a lot more television programming than households that don't. And, it seems clear that Netflix has a lot of growing still to do. The story points out that "one big challenge for Netflix now will be increasing its reach among older consumers, according to Nathanson, an age group that watches more traditional TV than younger demos."

    But while Netflix has challenges, here's a simple statistic - "Netflix’s domestic subs streamed 29 billion hours of video last year," representing roughly six percent of what's called "live plus 7" TV viewing (shows seen within a week of original airing) in the US, up from 4.4 percent in 2014.

    This is what can happen when upstart businesses challenge traditional businesses.

    By the way ... Netflix begins streaming the fourth season of "House of Cards" today. It is about the political power-grabbing machinations of a con man who seems to have no allegiances except to himself and his own ambitions. And assuming we aren't getting enough of that in the nightly news, "House of Cards" should yet again be an enormous hit. Which will make Netflix's numbers go up even more.

    It is an Eye-Opener.
    KC's View:

    Published on: March 4, 2016

    Amazon yesterday announced two additions to its line of voice-controlled household assistants, referred to as "Alexa," which started with the Echo and became a hit last year.

    They are the Tap, described in the New York Times as "a slimmer, shorter, portable version of the Echo ... Rather than requiring an electrical wall connection, the Tap runs off a rechargeable battery. It connects with phones and the Internet through Bluetooth and Wi-Fi. The Tap acts as an ordinary wireless speaker for a phone, but it also provides Alexa on the go. People can ask about weather and traffic, ask for the news, tell it to play a song from a streaming service, or do any one of dozens of other tasks. The device, which will begin shipping at the end of the month, will sell for about $130."

    And then there is "the Echo Dot, essentially an Echo without that device’s powerful speaker. The Dot, which will sell for about $90, looks like a hockey puck, and is meant to provide Alexa’s voice functions for existing speaker systems. The Dot connects to those speakers either through a wire or over Bluetooth; after that, it functions as another Echo."

    The Seattle Times writes that "the release of these new products underscores how prominent the voice-controlled interface is becoming for the world’s largest online retailer. Amazon Echo has been something of a hit, outselling all other home audio speakers on Amazon’s website."

    And The Verge website notes that " while we’ve all been busy looking down at our smartphones, Amazon has slowly been filling in the pieces of the smart home puzzle, the smart life puzzle. The original Echo is now a kind of spine for Alexa in the home; the Fire TV and Echo Dot are part of the peripheral nervous system; and the new portable Tap speaker is the first attempt at giving Alexa legs to roam. It’s simultaneously amazing, and terrifying (if you consider the security implications)."

    And there's one other thing about the new products. They only are available for the moment to people who already own an Echo.
    KC's View:
    One of the interesting observations in the Verge piece was that if Amazon had been successful with its Fire Phone, it might not have been as focused on Alexa's prospects. It learned a lot from its disastrous smart phone entry, and those learnings are being integrated into the Echo and its progeny.

    I'm looking forward to the Alexa app, so I can interact with Alexa via my iPhone. That strikes me as the inevitable next step ... and it'll expand Amazon's shopping ecosystem even farther...

    Published on: March 4, 2016

    When Kroger announced its fourth quarter numbers yesterday - revenue of $26.2 billion, up from $25.2 billion during the same period a year earlier, operating profit if $928 million, up from $912 million, net income of $559 million, up from $518 million, and same-store sales that were up 3.7 percent - the company also spoke encouragingly about its acquisition of Roundy's.

    The Cincinnati Business Courier writes that "CEO Rodney McMullen said Roundy’s is positioned for a lot of the improvements that Cincinnati-based Kroger, the nation’s largest operator of traditional supermarkets, made in recent years."

    "When you look at Wisconsin, it really reminds me of where Kroger was several years ago,” McMullen said. "It’s really embarking on the same journey that we have been over the last several years." And he said that the Mariano's banner "is incredibly strong and it’s really supporting the brand that has been built and continuing to build on that."

    McMullen said that Kroger should be able to bring Kroger's purchasing power to the various Roundy's banners, plus its data analytics, which will combine to strengthen the division.
    KC's View:
    Kroger continues to impress as it grows its footprint and expands its ambitions. As important ads the Roundy's and Mariano's acquisition is, I'm as interested in things like its Main & Vine experiment in Washington, which includes an "endless aisle" feature that integrates online shopping, and the possibility that it could acquire Fresh Market. It all adds up to a compelling retail mosaic.

    Published on: March 4, 2016

    CBS MoneyWatch reports that Costco is raising "minimum pay for its workers this month for the first time in nine years, hiking its base pay by $1.50, to $13 to $13.50 an hour."

    The story notes that "the move follows a pay increase to $10 an hour this year by competitor Walmart, which operates the Sam's Club chain."

    Company CFO Richard Galanti told analysts yesterday that "the increase will hurt its earnings for the current quarter by a penny per share, and 2 cents per share each quarter for the following three quarters."

    The announcement was made as Costco said that while Q2 sales were up 2.6 percent and same-store sales were up one percent, Q2 profit was down almost nine percent because of "rising costs."
    KC's View:
    Costco understands that if it invests in its employees, the long-term impact on the business will be positive. Kudos to the company for realizing that it must manage for Main Street, not Wall Street.

    Published on: March 4, 2016

    The Oregonian reports that California-based In-N-Out Burger pledged this week "to stop serving beef that was raised with most antibiotics."

    While no timeline has been established for the shift, the company said the announcement is designed to push suppliers to "speed up the process."

    The story notes that "In-N-Out already boasts using fresh ingredients whenever possible. The ground beef is never frozen, and the fries are hand-cut. However, a growing number of advocates are saying that is not enough. This time, CALPIRG Education Fund, Friends of the Earth, the Center for Food Safety and other groups joined together to pressure In-N-Out Burger, which has a fervent following."

    Companies such as Chipotle and Subway have made similar declarations.
    KC's View:
    The thing about the Oregonian story that I found to be most heartening was something I did not know ... that In-N-Out is coming to Oregon.


    Published on: March 4, 2016

    Fortune is out with its annual "100 Best Companies To Work For" list, and a dozen retailers have made the list, with Wegmans ranking highest at number four.

    Other retailers are on the list are Nugget Market (#13), The Container Store (#14), REI (#26), Build-A-Bear (#45), IKEA (#63), Publix (#67), Whole Foods (#75), QuikTrip (#76), CarMax (#85), Nordstrom (#92), and Sheetz (#97).

    Google was number one on the list, for the seventh time in 10 years.
    KC's View:

    Published on: March 4, 2016

    The New York Times has a story this morning entitled "Why Barnes & Noble Isn’t Going Away Yet," which can be instructive for companies facing disruption and potential irrelevance.

    It notes that "Barnes & Noble had another not-so-bad quarter, which these days counts as good for the struggling bookstore chain. When the company reported its earnings on Thursday for the third fiscal quarter of 2016, there were signs that the steep losses that have plagued it in recent years may finally be leveling off."

    Part of this, the Times suggests, "is a result of the company’s push to be more than just a bookstore."

    You can read the entire story here.
    KC's View:

    Published on: March 4, 2016

    • Ahold USA announced yesterday that all of the seafood sold from the service counters at its retail divisions of Stop & Shop New England, Stop & Shop New York Metro, Giant Landover and Giant Carlisle are now 100% sustainably and responsibly sourced." In addition, the company said, "100% of Ahold USA’s Nature’s Promise and Own Brand seafood products are also sustainably sourced, including frozen shrimp and canned tuna. In total, customers will find more than 200 sustainable seafood items at Ahold USA’s retail divisions."

    • The Canadian Press reports that Loblaw is expanding its line of Naturally Imperfect produce, which offers "ugly apples and potatoes" that it says taste good and cost less even though they don't look great.

    The line, which started in Ontario and Quebec, now is being rolled out to the company's banners nationwide, and is being expanded to include "more types of cheaper, but blemished and misshapen, produce," such as peppers, onions and mushrooms.
    KC's View:

    Published on: March 4, 2016

    It is important to note - if only for balance - that not everybody has a great Amazon experience. MNB user Andy Casey wrote:

    I’ve never used same day delivery but my son in Atlanta recently ordered something using that option on his Prime account and later that day received a notice it had been delivered.  However, when he went to check the package wasn’t there so he called Amazon and was told sometimes the delivery guys mark it delivered before they actually deliver it and if it didn’t show up by 8 that night it would likely come the next day.  Apparently they get dinged if they don’t at least say they delivered it on time.

    We had a story the other day about how low gas prices are good for Costco because they give people more money to spend in its stores, plus allowing it to lower prices more slowly than others and make more money on margin. Which prompted one MNB user to write:

    At least in my area, Costco is always the first to lower gas prices.  Other stations play catch up.  And, without exception, at least in my area, Costco has the lowest gas prices.

    On the subject of minimum wage increases around the country, MNB reader Gregg Raffensperger wrote:

    This entire minimum wage thing is such a political ploy for votes, it is amazing.  No businesses want it.  And, people that understand economics don’t want it.  Only the incumbent political figures.

    It is real simple, higher costs = higher prices.  The sales per store will not magically go up with higher wages.  The currently disgruntled employee now making more money will not miraculously become that stellar employee.  Plus if that employee is lucky enough to keep their job due to inevitable layoffs, they will be even more disgruntled since they have a greater work load.  Layoffs = more people on assistance = more votes.

    Final point, if the supporters of this mandate think that you will attract higher caliber employees, they will be sadly mistaken.

    This is a truly self-serving political push.

    All classes of trade needs to stand up against this and do it now.

    I understand your reasoning, but let me suggest to you at least one fallacy in your logic. You suggest that nobody wants an increase in the minimum wage except for politicians seeking election, but that's not entirely true. There are a lot of actual citizens out there who are working hard yet having trouble making ends meet, and they're very much in favor of it. And there are economists who think it is a good idea - more than 600 of them signed a letter to that effect last year.

    So can we at least agree that there are opinions on both sides of the issue?

    I don't think that higher wages will magically create better and more productive employees, but I do believe in the idea that a broader emphasis by business in the idea that employees ought to be treated as an investment rather than a cost.

    Employees who feel valued may respond by being more productive, and more productive employees may help businesses be more profitable, not less so.

    This does not all happen automatically when a paycheck goes higher. On the other hand, how many high level executives would dispute the idea that if you pay them more and value them more highly, they'll respond by working harder and being more productive? Somehow, in some companies, this philosophy comes into play at the highest levels of the food chain, but not the lowest.

    I'm not sure the self-serving push you refer to is always happening in the way that you think.

    Yesterday, we took note of a Daily News report that New York City officials "are wading into a lawsuit against Walmart for selling the bullets that were used to kill three people," arguing in a friend-of-the-court brief that "victims’ families should be able to sue the chain in state court for negligence for selling handgun ammunition to a customer they charge was too young to legally buy it and visibly drunk."

    The actual case is playing out in Pennsylvania, but New York City officials say that holding retailers accountable will give them another tool in fighting the "iron pipeline" that funnels guns bought out-of-state into the city. Walmart is hoping to get the case moved into federal court, "where they’re likely to prevail under federal laws shielding gun manufacturers and sellers from liability."

    I commented:

    Not being a lawyer, it is hard for me to evaluate the legal issues here; my guess, just based on history, is that Walmart will succeed in getting the case moved to the federal courts. This will allow it, to coin a phrase, to dodge the bullet ... something that a lot of innocent victims are unable to do.

    But I have to admit that I hope Walmart loses. Companies ought to be culpable for these sorts of things, and laws that shield companies and industries from taking responsibility when and where appropriate are a joke.

    One MNB user responded:

    Do you also think auto manufacturers and dealers should be held liable when some drunk drives the wrong way on a freeway and kills a few people?

    And another wrote:

    Where does the madness stop?  Will they next be sued for the guy who died of heart disease, caused by the bacon they sold? Will the car manufacturer be held accountable for the car driven by a drunk, that killed someone...or Goodyear for selling the tires on the car? Maybe Shell for supplying the gas in the car?

    Are you for real?

    Damned right I'm for real.

    Read the original story again. It said that NYC is arguing that "victims’ families should be able to sue the chain in state court for negligence for selling handgun ammunition to a customer they charge was too young to legally buy it and visibly drunk."

    I wasn't arguing a store should be be help responsible if it sells guns and/or ammunition to someone in entirely legal ways, and that person goes out and commits a heinous crime. That's a different debate.

    And for the record, if a drunk driver kills someone you cannot sue the automaker ... but you can go after the bartender who over-served the person who committed the crime. And that is a better comparison.

    I struggle with the issue of gun rights for cultural reasons that I've detailed numerous times here on MNB. (I do not come from a gun culture but my experience is not everyone else's. I try to be respectful of that even while being appalled by the gun violence in this country.) And I think that we need to find ways to dis-incentivize people companies from filing frivolous lawsuits.

    But the one thing I try not to do is have a knee-jerk reaction to stories and opinions. I'm not always successful, but I try.
    KC's View:

    Published on: March 4, 2016

    The Best Picture win by Spotlight last weekend was enormously satisfying ... not that I put all that much stock in the Academy Awards as a measure of quality, but because I thought it was a wonderful movie about a subject that I think is incredibly important, about a business - journalism - that I think of in religious terms. (I'm aware of the irony of that statement, since Spotlight is about a religion that did not keep faith with its members, and was called to account by investigators for the Boston Globe.)

    I bring this up because I watched another movie last weekend about journalism that I found to be troubling on a number of levels. The film was Truth, which is about the scandal that took place at CBS News when "60 Minutes" did a story saying that President George W. Bush was given preferential treatment while serving in the Texas Air National Guard, and even failed to live up to the minimal requirements of service. The validity of the documents that purported to prove these allegations were successfully called into question, and a subsequent internal investigation led to the retirement of news anchor Dan Rather and Mary Mapes, the producer of the segment.

    The movie is based on a book by Mapes that makes the argument that the story was essentially true even if the sources that provided the information were significantly flawed. I haven't read the book, but the problem for me is that the movie simply does not make the case ... and doesn't even adequately present the frustration that journalists feel when they know something is true but can't prove it ... and therefore can't report it. When a journalist makes a mistake in a reported story, that can be an agonizing moment; you may remember that the film version of All The President's Men actually ends with a mistake made by Woodward and Bernstein, and how it put the Washington Postin a very tough position.

    Truth just doesn't get it right, and that's too bad, because it actually features some very good performances, especially by Cate Blanchett, who gives Mapes a little bit of edgy desperation. She doesn't want the story because of any political leanings ... she just wants it because it's a good story. Robert Redford plays Rather as a bourbon drinking lion in winter, and it struck me as a good performance that deserved more time, especially because there seem to be moments where Rather/Redford knows that his best days are in the past, and his eyes take on a mournful quality.

    I expected Truth to be about how difficult it is to discover the truth, and about how illusory it can be. Facts are facts, but truth is something different, something deeper. But Truth missed that central truth.

    I found myself to be disappointed in Truth more than anything else. I love journalism movies in general, and the casting of this one intrigued me. But I can't really recommend it.

    Watch Spotlight instead. Or All The President's Men or Broadcast News or Absence of Malice or Good Night and Good Luck or even His Girl Friday.

    One other quick note about Spotlight, if I may. I didn't realize it until after the Oscars, but the production company behind the movie is Open Road Films, which was launched in 2011 by two major movie theater companies - AMC and Regal - that wanted to have greater input into the kind of product they were showing in their multiplexes. I didn't realize it, but one of the co-chairman of Open Road when Spotlight was green-lighted was a fellow named Gerry Lopez, who at the time was the CEO of AMC.

    Gerry Lopez, who used to be at Starbucks and currently is CEO of Extended Stay Hotels, happens to be a friend of mine ... and he provided one of the nicest "blurbs" for the book that Michael Sansolo and I wrote together. ( is entitled The BIG Picture: Essential Business Lessons from the Movies, and it available from

    I can't tell you how thrilled I am that I know a guy who was responsible for one of the best movies of recent years ... and I can't wait to buy him a glass of wine next time I see him.

    Cheers, Gerry.

    I loved this story from National Public Radio...

    Apparently there is a family from a rural Southern town that has had a pretty good week.

    NPR reports that the family (which wishes to remain anonymous) was sifting through a great-grandparent's possessions and found inside a crumpled brown bag seven identical Ty Cobb baseball cards from the early part of the 20th century.

    Until these cards were discovered - and authenticated - only 15 of the limited release cards were known to exist.

    The value of the cards is a little vague at this point, since their very existence makes them a little less rare than previous thought. But the total value likely is in the millions.


    During a recent visit to Oregon, I found myself one evening sitting at the bar of the Pfriem Brewery in Hood River. Don't know quite how it happened, but it did. Must've been kismet.

    I took a quick glance at the menu and ordered a Flanders Red, assuming it would be a red ale ... and instead, when I got a Belgian-style, barrel-aged beer that was thick and delicious, a little bit tart, and completely unusual. I loved it.

    Like I said. Kismet.

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

    KC's View: