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    Published on: March 20, 2017

    by Kevin Coupe

    Variety had an interesting piece the other day about Netflix CEO Reed Hastings, who continues to push for a change in traditional movie distribution models - essentially arguing that the industry has to accept the notion that at least some movies ought to be available in theaters and for home video at the same time.

    Theater owners have pushed back against this argument, saying that it would pretty much destroy their business. Variety writes that "Netflix has come under fire from major theater chains as well as organizations like the National Association of Theatre Owners for not sticking to the traditional release window model, which lets movies debut in theaters months before they transition to home video."

    However, there are cracks in the facade of opposition, since Netflix has made a deal "with iPic Entertainment, a small chain with 15 theaters. Under that deal, iPic will show 10 Netflix movies day-and-date with their online releases. This won’t give Netflix movies a huge theater audience, but the deal does allow the company to qualify its titles for the Academy Awards."

    The Netflix argument is that simultaneous releases actually will good for the movie business, expanding rather than contracting audiences; Hastings says that this is what has happened in the TV business, where a plethora of platforms - broadcast, cable and streaming - actually has turned television into a creative hub seen as far more friendly to artists than film.

    I agree with Hastings on this - but only to a point. The big-budget tentpole movies that studios tend to spend the most time, money and attention on probably are never going to get simultaneous release, and that's okay. But there are a ton of movies out there - small, low budget films that struggle to get attention - might actually benefit from multiple simultaneous platforms.

    But one thing that Hastings said to Variety annoyed me a bit - when he suggested that the only things that has changed about movie distribution business in the last 30 years is that "the popcorn tastes better, but that’s about it."

    That sounds like hubris to me.

    The fact is that movie theaters have changed a lot. Many theaters offer IMAX and 3D screens, there have been improvements in the comfort of the seats to the quality of the food, and some even offer alcohol and assigned seating. And while some would say that movies have gotten expensive, I think that's unfair - a couple of hours entertainment for $12 per ticket, if the movie is good, is a deal. (I bring my own Twizzlers, since movie candy remains way too expensive.)

    Have they changed enough? Probably not. There is resistance to simultaneous releases, just as there almost always is in any industry to the disruption of traditional business models.

    But the debate is an Eye-Opener. And one with echoes in a lot of other businesses, especially retailing.
    KC's View:

    Published on: March 20, 2017

    Bloomberg reports that Albertsons "has held preliminary talks" with Sprouts Farmers Market about a possible acquisition of the value-oriented organic supermarket chain.

    Neither company has commented on the report, which is based on unnamed sources.

    Phoenix-based Sprouts has a market value of $3 billion. Albertsons is backed by Cerberus Capital Management, which is described as having $30 billion in private equity holdings, distressed debt, other credit assets and real estate.
    KC's View:
    This is a potentially big deal, though its efficacy will depend on Albertsons' ability to learn from Sprouts, offer some economies of scale, and not screw up what to this point has been a pretty competitive business model.

    Not only would Spouts give Albertsons the wherewithal to compete more effectively in the organic-healthy space with a lot of mainstream grocers looking to do a better job there, but it also could give Sprouts the resources to give Whole Foods fits. Everything has to work right for this to play out, but it strikes me as a distinct possibility.

    Published on: March 20, 2017

    The Lakeland Ledger reports that Publix has struck an exclusive deal with BayCare Health Systems that will result in " BayCare screening stations in all Publix stores, and teleconferencing stations in selected Publix locations."

    The so-called "telehealth" locations are an interesting development, described as each offering "a private room with teleconferencing and medical diagnostic equipment — including stethoscopes, blood pressure cuffs, high-definition cameras and other tools necessary for common diagnoses.

    "The telehealth sites allow patients to speak directly, via video conferencing technology, with a board-certified physician through BayCare's physician network. The physician can direct the patient to use the available diagnostic tools in order to make a diagnosis and write any necessary prescriptions."

    The story says that "another component of the collaboration will enable BayCare patients to test their blood pressure and perform other screenings on the in-store health and wellness kiosks — known as 'higi' stations — and send their screening results directly to their BayCare physician at no extra fee."
    KC's View:
    I like the idea of being able to teleconference with a doctor, but I'm not entirely sure I trust my ability to use a stethoscope on myself. But assuming the medical instruments are connected to the internet and can feed the data to the doctor at a remote location ... well, this could be a very effective way of extending healthcare to people without immediate access to doctors.

    Published on: March 20, 2017

    The Los Angeles Times has a story about a major shift in the Los Angeles restaurant scene, describing it this way:

    "Although New Yorkers are accustomed to summoning any cuisine they want at any time, delivery hasn’t traditionally been a big part of Los Angeles restaurant culture, aside from pizza and Chinese food. But the advent of apps such as DoorDash, UberEats, Caviar, GrubHub and Yelp’s Eat24 - where users can browse a menu, place an order and have it delivered without communicating directly with a restaurant - has quickly given anyone with a smartphone (and the funds to cover the delivery surcharge) on-demand access to a wider swath of the city’s rich dining scene.

    "For many Los Angeles restaurants, app-enabled food delivery services have gone from being an afterthought to a core part of their business, with restaurateurs realizing that smartphone apps don’t cause a drop-off in dine-in customers, but instead help grow a new customer base."

    The Times points to a number of restaurants that have seen double-digit growth that can be traced directly to their delivery offerings, and says that the trend is such that some restaurants actually are rethinking their expansion strategies. Rather than opening a new restaurant in a community, the story says, some are considering the opening of "ghost kitchens" that can serve those communities effectively for deliveries, without all the costs and infrastructure that would be needed to open an actual restaurant.
    KC's View:
    Continuing evidence, I think, that the way people acquire things - including food - is undergoing dramatic, consistent and persistent change ... and that the companies unwilling or unable to keep up will find themselves in a competitive hole.

    Published on: March 20, 2017

    The Los Angeles Times has a piece about how farmers in places like the Napa Valley are facing "an urgent shortage of workers. The flow of labor began drying up when President Obama tightened the border. Now President Trump is promising to deport more people, raid more companies and build a wall on the southern border ... Farmers are being forced to make difficult choices about whether to abandon some of the state’s hallmark fruits and vegetables, move operations abroad, import workers under a special visa or replace them altogether with machines."

    The farmers who can afford it are improving wages and benefits, the story says, "but the raises and new perks have not tempted native-born Americans to leave their day jobs for the fields. Nine in 10 agriculture workers in California are still foreign born, and more than half are undocumented, according to a federal survey.

    "Instead, companies growing high-value crops, like Cabernet Sauvignon grapes in Napa, are luring employees from fields in places like Stockton that produce cheaper wine grapes or less profitable fruits and vegetables. Growers who can’t raise wages are losing their employees and dealing with it by mechanizing, downsizing or switching to less labor-intensive crops."

    Fascinating piece about dramatic changes taking place on America's farms, which have the potential of creating a tsunami of changes in America's supermarkets and on consumers' tables. You can read it here.
    KC's View:
    I know people in the produce business who tell me that anyone who thinks that the wrong immigration policies won't affect food prices and supply are living in a bubble. Which is why I thought this article was worth reading.

    Published on: March 20, 2017

    • As expected, Walmart acquired ModCloth, which has been described as "an eclectic women's fashion brand known for serving curvy customers."

    Terms of the deal were not disclosed, though it is believed to be between $50 million and $70 million.

    The purchase, USA Today writes, is "part of a big push to pick up smaller online brands as it tries to make headway against Amazon." The story also notes that "ModCloth CEO Matthew Kaness, his executive team and the company's 300-plus employees will stay based in San Francisco, Los Angeles and Pittsburgh, and will join Walmart's U.S. e-commerce retail organization."
    KC's View:

    Published on: March 20, 2017

    ...with brief, occasional, italicized and sometimes gratuitous commentary…

    • Target has announced plans to open a midtown Manhattan store in New York City, a 43,000 square foot, two-level small-store format in Herald Square on West 34th Street. It will be the company's third Manhattan store, with another two - in the east Village and Hell's Kitchen - over the next few years. The Herald Square store is scheduled to open this October.

    The company said that this is part of its focus "on expanding Target’s small-format stores in dense urban neighborhoods, with New York being a priority market for the company’s growth."

    • The Chicago Tribune reports that tomorrow Amazon will open a bricks-and-mortar Amazon Books store in Chicago's Lakeview neighborhood, about a half-mile west of Wrigley Field.

    The store will have a coffee shop, featuring Stumptown Coffee, and outdoor seating during the summer. As in other Amazon Books stores, it will offer best-sellers as determined by sales on the Amazon site, featuring reviews written by Amazon users. The store also will feature proprietary technology - Kindles, Fire TVs, Alexia/Echo voice-activated computer assistants - sold on the Amazon site.

    The Tribune notes that "Amazon's August announcement about the Lakeview store spooked some Chicago independent bookstore owners, pushing nearly two dozen shops to band together as the Chicagoland Independent Bookstore Alliance. The group is focusing less on Amazon and more on efforts to boost the city's independent bookstore community, including a week of events around Independent Bookstore Day on April 29."

    • The Chicago Tribune reports that McDonald's has expanded its use of fresh, rather than frozen, beef to more than 300 stores in the Dallas market; to this point, there were just 55 units there selling burgers made from fresh beef.

    The expansion, the story says, suggests that McDonald's "could be getting closer to introducing never-frozen beef patties nationwide ... McDonald's experimentation is part of its effort to change the public's perception of its food quality and freshness. In the past two years, it has made strides to tweak its food to improve the taste and quality, like toasting buns and searing burgers longer, switching to butter from margarine on its Egg McMuffins and stripping antibiotics and preservatives from chicken."
    KC's View:

    Published on: March 20, 2017

    The Associated Press reports that outdoor retailer LL Bean said that revenues were flat at $1.6 billion for the second straight year, following a run of five years' of growth before 2015.

    While the company did not directly comment on it, the fact is that flat sales may have been something of a victory since LL Bean - a famously apolitical company - has been dealing with a political controversy started with board member Linda Bean vocally and financially supported the Trump campaign. A sizable percentage of LL Bean's customer base found this offensive, and there were calls for a boycott, which led to a Trump Tweet calling for people shop at LL Bean, which only exacerbated the problem.
    KC's View:
    I'm a big fan of LL Bean - both the company and the products they sell - and I'm encouraged by the fact that its leadership is freezing pensions and offering voluntary early retirements, as well as giving a three percent cash performance bonus to its approximately 6,000 workers; it is letting people know that the company needs to be more efficient, while still rewarding employees who, the company knows, create much of its differential advantages. That's a lesson that a lot of retailers should learn.

    The AP story points out that one of LL Bean's current projects is rethinking its liberal free shipping and unlimited returns policies, and I'll be interested to see how this plays out since these will be seen as foundational tenets that it will adjust at its own risk. Transparency will be incredibly important here - and I think that all the evidence is that leadership knows this and will handle the challenge well. They have to, if they are going to get LL Bean moving up the growth curve again.

    Published on: March 20, 2017

    • Jimmy Breslin, who pretty much defined what it was to be a 20th century newspaper columnist by, in the words of the New York Times obituary, leveling the powerful and elevating the powerless, "with brick-hard words and a jagged-glass wit," died yesterday. He was 88.

    His old friend and fellow columnist, Mike Lupica, recalls this morning of how Breslin would write about ballplayers and mobsters and politicians and sanitation workers and cops and firemen and AIDS patients and civil rights activists and immoral priests and everybody in between - finding "eloquence in simplicity" while being both poetic and profane in the pages of the old New York Journal-American and New York Herald Tribune, and later at the New York Daily News and, finally, Newsday.

    The Times writes this morning, "Early on, Mr. Breslin developed the persona of the hard-drinking, dark-humored Everyman from Queens, so consumed by life’s injustices and his six children that he barely had time to comb his wild black mane. While this persona shared a beer with the truth, Mr. Breslin also admired Dostoyevsky, swam every day, hadn’t had a drink in more than 30 years, wrote a shelf-full of books, and adhered to a demanding work ethic that required his presence in the moment, from a civil-rights march in Alabama to a 'perp walk' in Brooklyn — no matter that he never learned to drive."

    Perhaps his most famous column came after the assassination of President John F. Kennedy; while everybody else covered what was going on with the government and the family, Breslin wrote a piece about a man named Clifton Pollard, who dug the grave for John F. Kennedy after the president was assassinated.

    • Chuck Berry, the iconic singer and guitarist who virtually created rock 'n roll in the fifties with songs like "Maybellene," "Johnny B. Goode” and “Roll Over Beethoven,” passed away Saturday. He was 90.

    The New York Times writes in its obituary that Berry's "guitar lines wired the lean twang of country and the bite of the blues into phrases with both a streamlined trajectory and a long memory. And tucked into the lighthearted, telegraphic narratives that he sang with such clear enunciation was a sly defiance, upending convention to claim the pleasures of the moment ... The music was bright and clear, a hard-swinging amalgam of country and blues. More than 60 years later, it still sounds reckless and audacious.

    "Mr. Berry articulated every word, with precise diction and no noticeable accent, leading some listeners and concert promoters, used to a different kind of rhythm-and-blues singer, to initially think that he was white. Teenagers didn’t care; they heard a rocker who was ready to take on the world."

    Two other notes. Berry's “Johnny B. Goode," the Times writes, "is on golden records within the Voyager I and II spacecraft, launched in 1977 and awaiting discovery" ... reflecting the best of Earth's musical heritage. And, remarkably, he has a new album scheduled for release in June, entitled "Chuck" and comprised mostly of new songs.
    KC's View:
    The world is poorer today with the loss of these two men, each of whom - with different talents and in different arenas - used language to illustrate varying facets of the human condition, and did so by touching not just our minds, but our hearts and souls.

    Published on: March 20, 2017

    We had a story the other day about how alcohol has been a bright spot for Costco, which prompted MNB reader Joe Davis to write:

    Kevin, I am not at all surprised by the surging alcohol sales at Costco.  They do a great job on three fronts – incredible prices, great curated selection, and a very high quality private label.  I’m stumped to offer another retailer that comes even close.  The one thing they haven’t tapped into (yet) is the craft beer craze which struggles in a bulk purchase environment, but it surely has not hamstrung them at all.

    It is true the vodkas are an outstanding value and I agree that the quality is comparable to premium brands.  I can get raked over the coals at our local liquor store and pay $40-$60 for a top shelf brand, or around $20 for Kirkland.  That kind of quality & value combination is the only thing – kid you not – that gets us to make the 30 minute drive to Costco out in the ‘burbs where we brave the crowds and madness of their parking lot.  I also find their Cabernet to be quite good for paying $7.99 for 1.5 liters of the stuff – great “round 2” party wine. 

    Count me in amongst the Cult of the Costco Imbibers.  The Russian ambassador ain’t no dummy on this.  In Costco Liquor, you don’t find deals – deals find you!

    I got a lot of email responding to last week's piece noting that it has been 20 years since I placed my first order on Amazon. Most of it was positive, but several folks disagreed.

    One MNB reader wrote:

    I don’t share your love affair with Amazon. I’m not a Prime member but have tried it with their free trial offer and they failed to win me over. About a month ago, I purchased a printer from them and chose the free standard shipping. When it hadn’t even shipped by the date they promised it, I chatted with their customer service rep. and finally received it, late. Now, on Sunday, I purchased some bike parts to deliver to my son, at his school. As of today, 4 days later, it still hasn’t shipped. It’s become clear to me that Amazon doesn’t just use a slower shipping method for standard shipping, which I’d be okay with, they actually hold non-Prime member orders back, intentionally. Their rep. told me yesterday, that it would be sent to fulfillment soon.
    So, while you celebrate the anniversary of your first order with Amazon, I may well have placed my last.

    And from another reader:

    I too use them, but I am disappointed in a way they could do better.

    Bought some outdoor solar charging diode lights that would be a perfect product if they would only last 3 years instead of 3 weeks. Ordered them twice, never paid for them, but sill cannot get confirmation that they have any that will last.

    It is near impossible to communicate very effectively with them and get any answers.

    They are not perfect yet!

    Never said they were perfect.

    And finally, from another MNB reader:

    Just think, for every week’s worth of Amazon purchases you make you indirectly put someone who works at a brick and mortar store (or mall) out of work….Sleep well tonight.

    I sleep fine. But not because I'm heartless. It is because I didn't put anyone out of work. It is not my responsibility to shop at bricks-and-mortar that are complacent about my business and irrelevant to my needs and wants. It is their job to compete effectively for my business.

    And the problems that afflict the bricks-and-mortar side of the retail business are summed up effectively in your email.
    KC's View: