Category Archives: Business and Economy

A disconnect: having electric car chargers at Costco

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The story that Costco is getting rid of electric car chargers in their parking lots because of a lack of use could be taken in several directions. One could ask: doesn’t there need to be an infrastructure in place before electric car owners would go to Costco? But I think there is a more interesting question: are electric car users really the sort of people who would shop at Costco?

Costco is a big box store, plain and simple. They offer bulk goods at cheap prices. Their buildings are bland and surrounded by parking lots. Is this the sort of place that electric car users would go? Are there people who would shop at Costco but wouldn’t shop at Wal-Mart (and I assume there are quite a few)? From a broader perspective, the picking and choosing between the “righteousness” of certain big box stores (Wal-Mart versus Target versus Costco versus Sam’s Club versus Home Depot…) is odd: they all operate on similar principles though their particular implementation varies some. To shop at any of them is to encourage standardization and sprawl. This doesn’t really go with the electric car culture/vibe.

So where should electric car chargers be installed? A few retail options: Whole Foods and Trader Joe’s. I suspect these would get a lot more use.

From luxury item to throwaway good: cable TV

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Following up on Joel’s post from Wednesday, Figures from the last quarter suggest the cable TV industry continues to lose customers:

The phone companies kept adding subscribers in the second quarter, but Dish lost 135,000. DirecTV gained a small number, so combined, the U.S. satellite broadcasters lost subscribers in the quarter — a first for the industry…

Sanford Bernstein analyst Craig Moffett estimates that the subscription-TV industry, including the untallied cable companies, lost 380,000 subscribers in the quarter. That’s about one out of every 300 U.S. households, and more than twice the losses in the second quarter of last year. Ian Olgeirson at SNL Kagan puts the number even higher, at 425,000 to 450,000 lost subscribers.

The second quarter is always the year’s worst for cable and satellite companies, as students cancel service at the end of the spring semester. Last year, growth came back in the fourth quarter. But looking back over the past 12 months, the industry is still down, by Moffett’s estimate. That’s also a first.

The article goes on to mention a number of reasons for this: a bad economy so consumers are cutting back, younger people don’t see the necessity of cable, and there is a lot of content available through the Internet.

More interesting to me is the idea that cable TV is no longer the luxury good that it once was. Once the industry began in the 1970s and later consolidated, cable moved from being a rarity to being a necessity. As late as mid 2009, “11% of U.S. TV homes only have the capability to receive TV reception “over the air”.” Having cable simply became part of how Americans spend their disposable income. Cable became prism through which many Americans viewed the world. Certain channels arose, such as MTV which has been getting a lot of attention recently because of its 30th anniversary or ESPN which was the subject of an interesting book, and became part of the national consciousness. These channels, for better or worse, came to represent American culture and were exported around the world. I wonder if having cable at home signaled a middle-class lifestyle even if other traits don’t match this standing.

But now the world may have moved on. (At the same time, despite all the articles suggesting people stop paying for cable, bad economic times, and more competition, the drop in subscribers was only 0.2-0.3%.) How exactly will cable companies convince people that their product is a necessity, particularly among the younger generations? What will be the new narrative regarding cable that will push people to include this in their lives?

AP: “Cord cutting” is real

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Associated Press is reporting its analysis that, for the first time ever, both cable and satellite providers fell:

The U.S. subscription-TV industry first showed a small net loss of subscribers a year ago. This year, that trickle has turned into a stream….The phone companies [Verizon and AT&T] kept adding subscribers in the second quarter, but Dish lost 135,000. DirecTV gained a small number, so combined, the U.S. satellite broadcasters lost subscribers in the quarter — a first for the industry.

I guess cord cutting is more real than some would like to believe…

Ebooks looking for a class (action) of their own

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Ars Technica is reporting a new class action lawsuit in the ebook market:

The essence of the claim is that these publishers [HarperCollins, Hachette Book Group, Macmillan, Penguin Group Inc., and Simon & Schuster Inc.], in coordination with Apple, conspired to nix the low price e-books that Amazon launched in 2007.…

The accusation is that the publishers and Apple fixed prices via two means. First, the publishers embraced an "agency model" arrangement with Apple in which Apple would act as an agent for the publishers, accepting their pricing and simply taking a cut of the proceeds. (Compare this to a model where a company agrees to "buy" each e-book at a set price, but it can then offer those e-books at any price it chooses. Amazon, in fact, was widely believed to be taking a loss on many e-books in order to encourage adoption of e-readers like the Kindle and e-books at the $9.99 price.)

Second, the publishers allegedly agreed not to sell books to any other online venue (like Amazon) at prices lower than those offered to Apple (a "most favored nation" agreement).

It’s far too early to tell whether the Hagens Berman litigation group will able to prove any of this.  Each publisher had the incentive to raise their own prices, and that’s not illegal.  The question thus becomes whether they colluded with Apple and/or the other publishers to do so.  Only time (and very expensive discovery) will tell…

The threat to iOS

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Ars Technica has a post about Apple’s latest response to a lawsuit filed by Lodsys, a reputed patent troll, against of Apple’s app developers:

Lodsys began threatening both iOS and Android developers with lawsuits in May if the developers didn’t pay licensing fees for its claimed in-app-purchasing-related patents. Many independent developers lack the financial and legal resources to litigate a patent infringement claim, so a number of iOS developers began a campaign to get Apple to help, threatening a boycott of in-app purchasing if only to avoid such legal threats.

Lodsys acquired its four patents from former Microsoft CTO Nathan Myhrvold’s Intellectual Ventures patent holding company. It turns out that Apple already has a license to those patents by virtue of an investment deal in Intellectual Ventures. That deal gave Apple (among other companies, including Google) a license to some 30,000 or so patents under Intellectual Ventures’ control.

(In case you missed it, this is the same Intellectual Ventures that was the subject of a recent This American Life episode, which has sparked—to put it mildly—quite a discussion around the blogosphere.)

If Apple isn’t successful in defending its developers here, the whole iOS app ecosystem may be in jeopardy.  As innovative as Apple has been in creating and updating iOS devices—iPhone, iPod Touch, iPad—over the past few years, a lot of their success is due to non-Apple creativity.  There’s no way that Steve Jobs’ company could have created 425,000 apps over the past four years, and those apps are a (the?) main selling point for consumers purchasing iOS.

If Apple’s licenses with Lodsys/Intellectual Ventures don’t cover its developers and those developers can get sued one by one, two things will probable happen.  First, the largest/financially strongest developers will (like Apple itself) reluctantly pay off the patent trolls, surviving by ultimately passing the costs onto consumers.  Second, small developers will go out of business.

Third place lesson from Borders and Starbucks locations in NYC: they still need to bring in money

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The story that Borders is closing many locations (see earlier posts here, here, and here) is related to news that some Starbucks locations in New York City are going to cover up their electrical outlets to discourage people from staying too long:

Well, now some Starbucks in New York City are reportedly pulling the plug on that idea, actually covering up their electrical outlets to discourage squatters.

“Customers are asking (for it). They just purchased a latte and a pastry and there is nowhere to sit down in some of these high-volume stores,” Starbucks spokesperson Alan Hilowitz said…

It is a move that has some Starbucks regulars saying … it’s about time.

Some, including Starbucks CEO Howard Schultz, say these two businesses provide “third places” between home and work. Thus, if the companies do things that inhibit social behavior, such as close locations, the suggestion is that they weaken the social realm as people will then be more isolated. (See a recent example of this argument here.)

But these businesses are not just providing a public good and this is one lesson that joins these two stories: they need to make enough money to keep the third places open. At Starbucks, the people who sat too long and used the free Wi-Fi ended being a nuisance to customers who wanted to pay for coffee, sit down for a short while, and then leave. At Borders, the best way to make sure the locations would stay open was to purchase more. Sure, a book at Borders might cost more but the purchase helps subsidize the cafe and the social life that may come with it.

This leads to a bigger question: would Americans be willing to pay for third places with their consumer dollars? If given the choice between a cheaper book at Amazon.com or a book at the nearby Borders, which would most people choose?

This is also a reminder that these locations are not public spaces: they are privately owned and can set their own priorities and values for the space. There still are public spaces in the United States: public parks like Rittenhouse Square in Philadelphia draw attention (in this book – though it also talks about shopping malls and markets, both privately owned). Instead of lamenting the loss of Borders or Starbucks, one could fight instead for taxpayer supported public spaces that should be open to all people.

Attracting legal talent to the Chicago suburbs

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Apparently Kane County wasn’t paying assistant state’s attorneys enough to keep them around until recently:

“This is a significant (economic) downturn historically, but at the same time we have to be aware the failure to pay a competitive wage will lead to our talented and experienced assistant state’s attorneys going to other counties. I want the best and brightest to work here in Kane County. That has a direct impact on public safety,” [Kane County State’s Attorney Joe] McMahon said.

It does seem that Kane County was out of sync with the rest of western Chciagoland:

McMahon said the current starting salary for a Kane County assistant state’s attorney is $40,000.

He is proposing to raise that to $53,000.

In surrounding counties, McMahon said, starting salaries are $51,600 in McHenry; $54,100 in DuPage; $53,700 in Lake; and $51,600 in Will.

Brian may have some additional insights on this, but it strikes me that most of this previous disparity in salaries could be explained by different costs of living in each county.  Still, if Kane wasn’t able to keep experienced prosecutors around, these proposed salary increases might be money well spent.

Comparing the economies of US cities to countries

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A little fun information: New York’s GDP is similar to Canada, Los Angeles’ GDP is similar to the Netherlands, and Chicago’s GDP is similar to Switzerland.

This is a reminder that US cities/metropolitan regions are economic powerhouses.

h/t Instapundit

Back to the burbs

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I usually leave the demographic articles to Brian, but one of my Brooklyn-dwelling friends (and a new father) pointed me to Joel Kotkin’s post at Forbes making the case that “America’s young and restless will abandon cities for suburbs”:

Some demographers claim that “white flight” from the city is declining, replaced by a “bright flight” to the urban core from the suburbs. “Suburbs lose young whites to cities,” crowed one Associated Press headline last year.

Yet evidence from the last Census show the opposite: a marked acceleration of movement not into cities but toward suburban and exurban locations. The simple, usually inexorable effects of maturation may be one reason for this surprising result. Simply put, when 20-somethings get older, they do things like marry, start businesses, settle down and maybe start having kids.

Kotkin also doesn’t think there’s much chance of substantially increasing suburban density (for reasons that long time readers of Legally Sociable have heard before):

[T]he notion of mass suburban densification is likely to meet strong resistance from local residents. This will be particularly marked in attractive, affluent “progressive” areas like the Bay Area’s Marin County, Chicago’s North Shore suburbs and New York’s Hudson Valley. People who move to these places are attracted by their leafy, single-family-home-dominated neighborhoods and village-like shopping streets. Nothing short of economic catastrophe or government diktat would make them accept any intense program of densification.

Still on the road after all these years

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In light of the recent heat wave, Derek Thompson over at The Atlantic asks why more people don’t telecommute:

The answer might have more to do with psychology than economics. Even if we’re technically more productive at home, we feel more conspicuously productive at work. You might think a recession would lead to more telecommuting since it reduces overhead and increases work hours. Instead, telework among the formally employed has slowed in the last three years.

Thinking back through my personal experience, this strikes me as correct. In the past, I’ve held several jobs that I could telecommute into, but I always felt like my time was suspect since it couldn’t be obviously verified by showing up to the office. For all of the inconveniences of commuting, at least I clearly received “credit” for my office appearances.