Weakonomi¢s » media

Fast Forward Through The Commercials

The Weakonomist — Thu, 24 May 2012 14:16:45 +0000

These days a lot of people don’t like watching commercials. Many people record their favorite TV shows which makes it easy to fast forward through the commercials. Some can stream their favorite shows through the internet or on websites. A few even watch pirated versions. It’s not always about the pursuit of not watching ads, but by and large we’re watching fewer advertisements these days than we did 10 years ago.

And television execs aren’t too happy about this. The issue seems to have come to a boiling point with Dish Network announcing a new DVR that lets viewers skip commercials altogether. Folks like Fox and NBC are refusing to air the commercials for the device (the irony is palpable).

But I’m here to say you should keep fast forwarding through ads as much as you want. Avoid ads as much as you can.

Those of us that watch TV on Hulu have become painfully aware of how much ad time eats into a show these days anyway. An hour long show is really more like 42 minutes. The average prime time show has about 14 minutes of ads and 10 minutes of product placement. According to Wikipedia, back in the 1960s a typical hour long program was 51 minutes. It’s no wonder we’re sick of ads.

You just go right on ahead and skips over any ads you don’t want to see. If I were a marketing manager, I’d only want to reach interested customers anyway. So it’s the television execs that are really in a bind. They’ve got a way out but it requires more work than they’d like to put in.

The new era of advertising is much more targeted. Most of the ads you see on my site come from Google which has been analyzing your activity online to try and target relevant ads to you. When I go on my site I see ads for new running shoes. My dog would see Busy Bones and tennis balls.

Television studios have already embraced other forms of advertising like product placement. But the savvy ones are going much deeper. On American Idol two companies have found ways to imbed advertising within the stars of the show themselves. Every week Ford shoots a commercial that features their vehicles and the stars enjoying them while singing some kind of Kidz Bop version of a pop song. The show airs the commercial as if it’s a regular segment and viewers watch it because they want to see their favorite contestant. Likewise, the resident talent expert Jimmy Iovine pimps Beats By Dre (which he co-owns) everywhere in the show. It’s on his hats, the contestants use Beats mics to practice, and various Beats products are dropped into segments. They also air a Beats commercial with a former American Idol star.

These companies and the show know how to do ads in the 21st century. Some do not. GM just announced they will stop advertising through Facebook because it doesn’t work. Ford said they’re sticking with it and GM just isn’t doing it right. Sounds like GM and the traditional networks would get along.

So please keep skipping over ads. Block mine if you want too. If I can’t effectively reach an appropriate audience I deserve not to make money. Those big guys who can’t adapt will likely go down kicking and screaming trying to defend a 20th century business model. Let em die.

Further reading: What if TV networks embraced ad skipping?

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The Three Biggest Campaign Issues No One Will Talk About

The Weakonomist — Mon, 21 May 2012 14:27:20 +0000

In just a few weeks the presidential campaigns will kick into a higher gear and we’ll have more media coverage than anyone cares to actually be exposed to. Already the ads have started. Obama is all over my Pandora stations and anti-Obama PACs are on the TV. But things are only going to get worse.

And the only thing anyone will be talking about is the economy. I’ve already talked about why that shouldn’t matter at all and what kind of economic situation we’d need to be in for the campaigns to even matter. Though those conversations will undoubtedly dominate headlines (along with unimportant things about Romney’s past and misrepresented statements from Obama’s 2008 campaign), there are some real issues that no one is ever going to talk about.

There are certainly more than three, but these are the concerns I have the most:

Campaign reform and term limits

Politics took a few steps back in progress when PACs were suddenly allowed to collect unlimited amounts of money from anyone, including corporations. We will see in the presidential campaign that tons of money will be spent with likely no measurable improvement in either candidate’s odds of winning. But local elections, and Congressional ones can be heavily influenced now by one individual’s checkbook. Worse though is the continued pandering to donors that our Congressional representatives continue to do. Planet Money has a good profile of how much time is wasted on this process. Part of the problem could be fixed with reforms to the campaigning process but what is really needed are term limits. If our elected officials didn’t spend all their time worrying about getting reelected, they might for once represent the interest of their population.

Odds of this becoming a real issue: 1/100

Education

At the macro level our education system looks to be in good shape. We have some of the best schools in the world. People come from all over the world the study in the US not only due to our economic strength, but because of the quality of education that can be obtained here. Things aren’t so great everywhere though. We’ve got schools being dishonest about graduation rates and salaries. They’re saddling students with a huge debt burden and the schools carry none of the risk of their students being able to pay it off. Public schools are facing huge cuts in the midst of state budget crises. And all the while we’re graduating fewer scientists and engineers than we should be for a nation teetering on the peak of its prosperity. For now, a college degree is still worth the time if you’re smart about where and what you study. But how long will that be? The education system from K-PhD is in need of an overhaul on an Obamacare scale. But who will touch it?

Odds of this becoming a real issue: 1/80

Foreign policy

We like to say Romney has no foreign policy experience. But that’s as far as the conversation goes. When the media starts talking about foreign policy all they really mean is Israel and the wars. Campaigners just shift the conversation from there to defense spending and everyone forgets that will are still playing world police. Not only are we still engaged in two conflicts, but our friends in Israel want to use the multi-billions we’re giving them to pick a fight with Iranians (who are kind of asking for it to make things worse). All the while our president is slowly shifting our military resources to Asia instead of truly scaling it down. Why is it that no politician will stand up and say, “the reason the most of the developing world hates us is because we keep meddling in their business?” We don’t have to be isolationists, but we’re viewed in many parts of the world as war mongers. Foreign policy isn’t just about conflict, but because this has only ever been a superficial issue even in non-election years no one knows anything about it.

Odds of this becoming a real issue: 1/50

Based on the odds, none of these issues will be actual points of contention in presidential campaigns or even your local representative’s elections. But they should be. The media plays a crucial role in making sure we talk about these issues and others like tax reform (not tax increases, real reform) and what role government should play in the economy. We aren’t framing conversations this way though. Why? Because even our very own populous doesn’t care about them. But if we could show them how these issue do affect the individual citizen, you would probably see them start to care a lot more.

Don’t get your hopes up though. Instead, expect an economic pissing match, stupid stories about how much someone’s shirt cost (she ain’t alone people), and some kind of lousy story about how both of them went Harvard Law. You know, things that matter.

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Black Comedy

The Weakonomist — Sat, 19 May 2012 15:01:53 +0000

The Weakonomist is about as white as drywall. But I’ve said many times before that I was raised in a household and time where race really didn’t make much of a difference. No more than hair color or gender. It’s all indifference. There were people I didn’t like that happened to be of other races, but it was because of their individual actions. I can’t fathom having any true feelings about a population based on generalizations.

But not everyone was fortunate to grow up in such a world. Many people who didn’t are still very much around today. So it’s easy for me to forget about the struggles that many people have been through. Most notably, what African Americans went through in the decades (and centuries) before I was born.

I don’t care much for artistic expression of ideas. Art can depict all kinds of things but as someone that thinks like an economist I tend to prefer the concrete. The literal. That’s why I love stand-up comedy. It can approach issues of all kinds in a literal sense while still being artistic and entertaining.

This week I was introduced to a documentary about black comedy as told by the comedians themselves. In it they point out that many comedians address the issues of their time through comedy. One of my personal favorite comedians is Chris Rock. Without knowing the struggles of black people personally I can only assume Chris Rock’s bit on “Niggas Vs. Black People” (that is the official title, not my words) is somewhat representative of what the documentary is talking about. You can watch him here but I didn’t imbed the video because the jokes are not suitable for children (like children are reading this) nor entirely relevant to the point of this post.

I haven’t gotten a chance to watch the documentary myself but hope to soon. You can read a review of it here and watch the trailer below.

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Imagine A World…

The Weakonomist — Fri, 11 May 2012 13:59:07 +0000

Wall Street is all a-flutter right now because it’s earnings season. The term is a bit odd since earnings are reported 4 times a year. Every season is technically earnings season. But most companies do report their earnings over a stretch of a few weeks and so that is a hot time for the market.

Company earnings are the primary driver of a stock’s performance. If the earnings meet investor expectations, prices are more stable. But if they are much higher or lower, the stock can move a lot in a couple of days. To help avoid surprises, companies provide what’s called “guidance”. Guidance is the company’s best guess at what they think their earnings will be. An industry veteran debates whether or not companies should provide guidance here.

Guidance is one of many things that can influence stock markets. Stock markets are quite volatile, and some people’s careers can be made or broken in a matter of seconds. A headline alone can move a market into the red, even if the headline was published in error. Economic reports like unemployment or Gross Domestic Product can also shift markets in one direction or another.

With dozens and potentially hundreds of factors impacting the movement of the stock market, it’s a wonder anything ever gets sorted out. Trillions of shares, trillions of dollars, and split-second decisions; it’s enough to drive a trader to lunacy.

Imagine a world then that is much more stable. Instead of seeing an economic report every month, it comes out once a year. Instead of reporting earnings once a quarter, how about yearly? Maybe stocks even only traded for an hour a day, or for one day a month.

This is about giving people time to digest the news. Whatever it is, the news can lead to people making rash decisions. These decisions have to be made quickly or else you’ll miss out on whatever opportunity is there. If you couldn’t act on the news immediately, you might have time to really dig in deep and determine if it’s something worth acting on.

Behavioral economics has already taught us that we don’t make good decisions when faced with lots of choices. It would be interesting to know if we make the right decision if we have to act that second compared to being given 5 minutes, or 5 days to really mull it over.

This is all flies in the face of the advantages of the stock market as it is today. News is digested quickly. The market is considered efficient. It’s liquid. These are all true things. But fear and panic made the financial crisis worse than it had to be. It’s at least food for thought. What would the world look like if markets were given more time to make decisions?

Image: Alex E. Proimos

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Movieconomics

The Weakonomist — Tue, 08 May 2012 14:15:40 +0000

The film industry never gets much attention. They make movies and you either go and watch them or don’t. You read reviews to maybe help decide what to see or maybe ask some friends if anything is good. Those with children probably go see whatever it is the kid wants. But for the most part, we don’t know how the industry works, or what’s changed for them lately.

Movies are essentially investments for production companies. They have a cost to purchase and there is an expected return on the investment. Purchase costs can be difficult to predict though. The cost to produce a film may run over your budget. The payoff can be risky too. Depending on what type of company you are, you might produce the film and sell the rights to distribute to another company. Or if you’re one of the larger companies you might produce yourself and distribute. Distribution is a huge cost, as it often include the marketing of the film as well.

Theaters basically purchase the film wholesale and sell it to viewers at a retail price. Unfortunately for the theaters, they don’t make much money on the film itself. They make their profits on concession items and nowadays selling advertising to play before the show starts.

But movie ticket sales have been on a downward trend for years. The recession slowed this trend as people likely gave up more expensive outings for a family trip to the movies, but sales are still falling. The cost to produce blockbuster films have gone up though. This has started to squeeze profit margins and the poor showing of John Carter illustrates this well. This has led to the studios taking on considerably less risk than they would have in prior years. Much like banking, they aren’t just going to throw good money after bad anymore.

So the industry is taking a page from banking and making smarter investments. They’re also building a pipeline of movies that play off each other. A series of well-produced sequels are much more likely to be successful the a collection of unrelated movies with each having its own risk. The pipeline can easily be dumped too if the first film doesn’t work out.

This is very obvious in The Avengers, which just came out last week and is already breaking box office records. They’re costs were similar to John Carter but the return on investment will be triple. This is because they’ve been building up to this movie for years. One of the heroes in the movie is Iron Man, and they’ve been teasing an Avengers movie in the Iron Man films since the first one came out in 2008. There have been Captain America and Thor movies as well since then, each building up a character that is in the Avengers. This makes for a franchise that is sure to be very profitable since each plays off the previous.

What does all this mean for the customer though? Falling ticket sales forces the movie makers to be smarter. The collective pie is smaller so if you want the biggest chunk you have to go after films more likely to be successful. This means a lot less crap in the movies. The quality of films that make it to the theater is likely to be much higher.

But don’t expect movies to get any cheaper. For some reason all movies cost the same price. What would it look like if popular movies like The Avengers cost more at the theater?

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Here’s Why I Don’t Care About The George Zimmerman Case

The Weakonomist — Thu, 12 Apr 2012 14:19:03 +0000

Notice I didn’t call this the Trayvon Martin case. It’s the Trayvon Martin story, a George Zimmerman case. Notice how this is the only thing you’ll ever read or see about this case that doesn’t actually include a picture of either person (some links do to illustrate a point).

The following are unorganized thoughts summing up why I do not care at all about this entire thing.

Since Mr. Martin was killed 161 other minors have also been victims of homicide (based on 2010 statistics). Of them 78 were black. Of them, about 61 were male. That means at least once per day (and often twice) one minor, black, male is murdered. And in total 3.5 minors are murdered every day. Where’s the story about them? How many of them deserved to die? How many of them are unsolved? How many parents know who the killer was but can’t prove it in a court of law? How many were based on provable facts far worse than Mr. Martin’s?

Here’s the CNN, MSNBC, and Fox News homepages last night. If a high profile politician were killed I would understand this kind of coverage. But the media have been self-reinforcing a narrative that drives page views for their own benefit. And by talking about it 24 hours a day, some idiot will fuel flames further by saying something stupid that was really only intended to fill time during the news cycle. They have literally only made things worse.

I grew up in world where at varying times my best friends were African American, Indian, and even Irish. I work with people that joke about their cultural and racial differences because it’s funny, but we make fun of ourselves. The Civil Rights Movement is only a history lesson to me. To make anything a racial issue today reminds the younger generations that there are people out there that still think about race in negative ways. Children would not think about race in this case if adults didn’t talk about it. You do not want your children thinking about race.

People have the right to bear arms. Even if they didn’t, people would still find a way to acquire them illegally. It’s quite easy. People will die from gun fire no matter what the law says. There will be tragedies. But they have not been, and never will be, worthy of national attention.

In the Democratic Republic of Congo, children are recruited as soldiers and kill each other. In 2010, at least 194 children were killed in Iraq as a result of conflicts; some of which were forcibly recruited by Al-Qaida and blew up not knowing they were carrying bombs. More than 100 children were killed by Afghanistan security forces or their supporting militaries (including the US) alone in 2010; an additional 34 killed in crossfire. This is the tip of the iceberg of the awful things happening to children around the world. Where’s their front page story? Where’s the justice? Who marches for them? Where’s Nancy Grace?

It is not that I have no pain for those that lose loved ones. That’s irrelevant. It’s that there is so much death, so much tragedy, so much horribleness, that it’s impossible to give it all national attention. This story deserves outcry in Florida, perhaps a visit from Al Sharpton, and local conversation on whether the current gun law in Florida is appropriate. But that’s it. The rest of the country should have never known this happened.

To my family: If I die in some way that gets into the national news cycle, please take every opportunity in front of the camera to draw attention to a bigger issue.

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Following Bond Through Casino Royale

The Weakonomist — Mon, 09 Apr 2012 14:23:37 +0000

Maybe I’m getting dumber, or older. Maybe that’s the same thing. But many modern action films are quite difficult to keep up with. They have so much action and move so quickly it can be hard to keep track of the plot. Over the last few years I’ve struggled with Star Trek, Transformers, and the two Daniel Craig era Bond films. Thankfully as they come on to TV (and my provider has given me a free DVR) I am now able to watch them many times over.

Casino Royale was a reboot of the James Bond franchise and started with Bond becoming a “double O” agent still young in his career. His first major assignment is to track down a mysterious organization that has infiltrated all aspects of business and government around the world and provides financing for terrorism.

The plot gets complicated quickly and it wasn’t until the 3rd or 4th time I watched it that I connected all the dots. I will not focus on every aspect of the storyline, as this is Weakonomics, I’m only focused on the parts that relate to money.

If you have not seen this film and do not want to be given spoilers STOP READING NOW! Just read Six Lessons James Bond’s Casino Royale Can Teach Us About Money instead. It’s fun and doesn’t have spoilers.

Bond’s investigation leads him to a guy who arranges acts of terrorism for money. The villain, Le Chiffre wants to blow up the prototype of a new commercial airplane (likely the fictional equivalent to the Airbus A380). As the company is strapped for resources blowing up the plane during a public showcase would make the stock tank (let’s ignore the fact the manufacturer probably has it insured). Le Chiffre has put up many millions in investments that make money if the stock prices fall. So, if the plane blows up and the stock tanks, the villain will have yacht-loads of money.

Bond’s boss, M, alludes to someone having placed similar bets before 9/11 – connecting the plot to real life events and implying Le Chiffre’s organization financed those attacks. This is also why the CIA is interested in him.

In typical fashion, Bond stops the explosion from happening. Seconds before disaster.

Le Chiffre’s investments go to nil. Now you would think that’s so sad for him but whatever. There’s just one problem. It wasn’t Le Chiffre’s money. He bet someone else’s money and those funds were supposed to go and finance some terrorism or war (presumably in Africa judging by the visitors to his hotel room). Le Chiffre is just a banker for the terrorists, and as a banker he bet money he didn’t have and lost it all. Notably: this movie was made in 2005, before the financial crisis. But it feels like it was made in 2009.

His organization will want that money back. The governments of the world hope that he will turn to them for asylum in exchange for information about the organization. In a last ditch effort to save his own skin, he organizes a high stakes poker game with a bunch of rich people with millions to lose. Le Chiffre is an excellent player and almost wins, which would allow him to continue his original transaction as banker. But Bond eventually bests him, and wins it all.

If this were anyone but Bond, Le Chiffre would have accepted an offer for asylum right then and there. But with Bond there’s always “the girl”. She’s kidnapped and Bond is captured trying to save her. They torture him to get the information needed to get Bond’s winnings but Le Chiffre’s own organization turns on him and puts a bullet in his head. They value secrecy and people they could trust. Even if Bond gave them the money, he clearly can’t be trusted with it.

And that pretty much sums up the main plot.

If you don’t understand what happened with the girl keep reading. Vesper is the love interest. She works for Her Majesty’s Treasury and provides public funds to finance Bond’s entry to the poker tournament. She also provides the account number to transfer the Treasury’s money back to the government. Bond has the password, which he gives to the escrow agent after Vesper provides the account. Later, Bond gets a call from his boss asking when the money will be transferred back. Vesper has betrayed him* and transferred the money to another account. She had a boyfriend who supposedly (see the second film) had been kidnapped by Le Chiffre’s organization and held hostage. So she delivered that money back to the organization and Bond tried to stop her. I can’t remember if they got it or not, it’s not important though. Vesper, who did love James, dies.

So, hopefully this helps with the plot. The movie is great and with this knowledge it’s a lot easier to follow.

*Quantom of Solace, the second film, ties up the loose end with Mathis. He was guy who Bond originally thought betrayed him earlier.

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Congratulations to Toyota

The Weakonomist — Sun, 18 Mar 2012 16:19:27 +0000

Press Release:

Prius c Launch Kicks Off with Strong Sales
Prius Family Sales Nearly 10,000 in First Half of March

TORRANCE, Calif. – Toyota’s subcompact Prius c five-door hatchback, the newest member of the Prius family of hybrid vehicles, is off to a quick start since going on sale March 12.

In its first three days on the market, it sold 1,201 units, making it one Toyota’s fastest-selling vehicles and eclipsing Chevrolet Volt and Nissan Leaf sales for the entire month of February.

“A number of factors drive the auto market, and fuel prices is one of them,” said Bob Carter, group vice president and general manager of the Toyota Division. “With 53 miles-per-gallon in the city and priced under $19,000, the timing for Prius c couldn’t be better.”

During the first half of March, the four-member Prius Family, including the new Prius c, roomy v, third-generation Liftback and new Plug-in Hybrid, accounted for sales of 9,821. Last month Prius sales totaled 20,593 and 32,593 year-to-date.

It is absolutely impressive that Toyota was able to outsell cars that cost 50-100% more than their Prius C, are considerably different types of vehicles, and aren’t able to leverage an existing brand as strong as Prius to get sales moving. My mind is just blown.

In other news: Apple’s iPad outsells the Kindle Fire and Acer tablet you never considered.

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Charts Tell A Story

The Weakonomist — Fri, 16 Mar 2012 14:39:48 +0000

Whatever story you want to tell, you can make a chart that tells it. We see this all the time in politics, but anyone can use a chart to make a point. Earlier this week Bruce Krasting of Business Insider used the following chart as a part of a long-winded way of saying stocks are either going to fall or interest rates will rise:

Basically, this chart is saying that China has had to sell some of their holdings of US debt to pay for their oil imports. And if the Chinese aren’t buying our government debt and no one else will then interest rates are going to have to go up. Bruce outlines his reasoning for why others aren’t going to buy the debt. Fair enough.

But look at the chart closely, do you see anything weird? Maybe two things weird?

The chart seems to be going backwards through time. It starts with a peak in July and then goes back to January. This implies that Chinese borrowing has never been higher. And unless my arithmetic is off I think that’s closer to a change of $160 billion, not 260. Bruce left off some of the chart.

This shows the falloff Bruce probably meant to illustrate. But all I’m seeing is a huge increase in debt buying last June and then a reversion to the mean. January’s numbers indicate a pickup in Chinese lending has resumed, despite the rise in oil prices.

But, for the sake of argument let’s assume Bruce is right and China has been selling off their US debt holdings to pay for gas. Bruce’s other assumption was that no one else has the money to lend and so Federal interest rates have to go up. Well, let’s see if everyone has taken a step back in their purchases of US debt like the Chinese have.

Hmmm. I thought no one had the money to keep buying US debt? But China is so big their small percentage decrease offsets everything else right?

Hmmm. It looks like Japan has upped their game recently. It couldn’t have been that when one buyer exits a market a small price change could tempt another buyer into the market right? No. That doesn’t happen.

But let’s ignore even that. Let’s assume everything Bruce has said is right. Let’s look at his headline: Either Stocks Will Fall Or The Ten-Year Is Headed To 3%

The ten year is currently at around 2.3% has been around 2% for some time. My audience won’t necessarily see anything Bruce’s prediction. But please know this is a statement as obvious as a presidential candidate’s pandering.

If stocks go up, it’s usually a sign of an improving economy. If the economy improves then the Fed will allow interest rates to rise. If the economy doesn’t rise, then stocks will fall and the Fed will keep interest rates low. This headline might have well just said “I’m either going to eat supper or dinner tonight”.

Know that my charts may be no more right or wrong than Bruce’s. All charts tell the story the creator wants to tell. Just be wary, and make sure you understand all the circumstances that influence the chart before drawing any conclusions.

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Weakend: La Niña

The Weakonomist — Sat, 03 Mar 2012 16:10:25 +0000

If you live to the right of the Mississippi you’re all too aware of the storms that swept over that part of the country over the last few days. Tornadoes took apart some towns and there were sadly some fatalities. This isn’t too rare as Tornado Alley often gives birth to such storms with a little carryover storm once it crosses the Appalachians.

But this year when the storms are reported there’s always a reference to La Niña. The meteorologist reports of this phenomenon are never phrased correctly so that the layman can actually understand it. Much like economists don’t want you to really understand the economy, meteorologists probably want to make sure you don’t understand everything they know either. So here’s a quick lesson:

La Niña is a cyclical change in the temperatures in the Pacific Ocean. In La Niña the surface temperature drops below average. El Niño is the opposite and is a rise in average water temperatures. No one really knows if and how this might be connected to global warming, so best to just keep in it in your back pocket. We are currently going through La Niña which typically results in more extreme versions of weather we normally deal with. If you get snowy winters, they might be snowier. If you live in a temperate climate, you’d look at a warmer winter. If you live in Tornado Alley, you probably see more Tornadoes. That’s about as simple as can be explained. NOAA has a good FAQ about La Niña if you want to learn more. The Wikipedia article has a good map showing the change in sea temperature during La Niña.

Also, the normal news media aren’t the only ones that create an atmosphere of fear to drive traffic to their sites. Seriously, why Weather Channel? Why? (Click to make big)

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