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‘Surprise CEO Change’ at Kraft May Shift Focus Toward Deals and Cost-Cutting, Away from Marketing

‘Surprise CEO Change’ at Kraft May Shift Focus Toward Deals and Cost-Cutting, Away from Marketing

In favor of budget cuts, Kraft has chosen a new CEO who will likely shift focus away from advertising

Kraft’s new CEO indicates a potential change in business strategy that will focus less on innovation and advertising and more toward deals and acquisitions.

Kraft’s new CEO indicates a potential change in business strategy that will focus less on innovation and advertising and more toward deals and acquisitions.

Last week, Kraft’s board of directors announced that Tony Vernon, the company’s CEO since 2012, would be replaced by John Cahill, a chairman of the board. AdAge speculates that the change in CEO is not just a name swap but a sign of a new age of Kraft business strategy that will focus more on cutting costs and, potentially, less on the company’s marketing and advertising.

“The company might reduce spending on underperforming brands like Jell-O, or enter a new phase of deal-making that could lead to mergers or acquisitions of other food companies,” according to AdAge.

Vernon, who reportedly took time during earnings meeting to call attention to his favorite campaigns, favored a strategy of increasing advertising spending in order to better compete with other companies. However, as Kraft sales have struggled in a market that has opened to include more small brands, Vernon’s approach has failed to pan out.

In a statement, his successor John Cahill promised to "take a fresh look at the business to prioritize our investments and focus on sustainable profit growth."

In a note to investors, AllianceBernstein noted that while Vernon had been more focused on marketing and innovation, Cahill was “likely to be a more operationally focused CEO, potentially focused on more cost-cutting or more deal-making."


Organigram CEO Steps Away From Role, Will Continue to Act as a Special Advisor to the Board of Directors Interim Leadership Appointed

The Board of Directors (the "Board") of Organigram Holdings Inc. (" Organigram " or the " Company ") (TSX: OGI) (NASDAQ: OGI) has confirmed that Greg Engel is stepping away from his role as CEO effective today, however he will continue to act as a special advisor to the Board through a transition period. The Board is grateful for the contributions Greg has made since joining the Company in 2017.

Peter Amirault, current Board chairman, has been appointed by the Board to serve as executive chair on an interim basis, to oversee day-to-day management of the Company until a new permanent CEO is appointed. During this period, Geoff Machum, chair of the Board’s Governance and Nominating Committee, will serve as the independent lead director.

"Greg has brought innovative leadership as the Company created new structures around operations and increased capacity to serve the growing marketplace, while ensuring our successful launch into the adult recreational cannabis space and bringing leading innovative new platforms and edible products to the marketplace," said Mr. Machum. "Greg has also helped guide the Company during a global pandemic and through period of significant change within our sector, one in which he is a recognized leader. We are pleased that he will continue to serve as special advisor to the Board through this period of transition," stated Machum.

"We are equally pleased that Peter Amirault will be leading Organigram as executive chair, while we begin a search process for a permanent CEO," said Machum. "Peter has served as chair since 2017 and has deep senior and executive leadership experience in consumer packaged goods (https://www.organigram.ca/about#board-of-directors) and during his tenure he has demonstrated strong governance leadership skills and excellent business acumen."

About Organigram Holdings Inc.

Organigram Holdings Inc. is a NASDAQ Global Select Market and Toronto Stock Exchange listed company whose wholly owned subsidiaries include: Organigram Inc., a licensed producer of cannabis and cannabis-derived products in Canada and The Edibles and Infusions Corporation, a cannabis infused soft chew and confectionary manufacturer in Canada.

Organigram is focused on producing high-quality, indoor-grown cannabis for patients and adult recreational consumers in Canada, as well as developing international business partnerships to extend the Company’s global footprint. Organigram has also developed a portfolio of legal adult-use recreational cannabis brands including The Edison Cannabis Company, Indi, Bag o’ Buds, SHRED and Trailblazer. Organigram’s facility is located in Moncton, New Brunswick, with another leased manufacturing facility in Winnipeg, Manitoba. The Company is regulated by the Cannabis Act and the Cannabis Regulations (Canada).

Forward-Looking Information

This news release contains forward-looking information. Often, but not always, forward-looking information can be identified by the use of words such as "plans", "expects", "estimates", "intends", "anticipates", "believes" or variations of such words and phrases or state that certain actions, events, or results "may", "could", "would", "might" or "will" be taken, occur or be achieved, and include statements regarding the search process and anticipated skill set for a permanent CEO. Forward-looking information involves known and unknown risks, uncertainties and other factors that may cause actual results, events, performance or achievements of Organigram to differ materially from current expectations or future results, performance or achievements expressed or implied by the forward-looking information contained in this news release. Such risks include the risk that Organigram may not be able to identify or attract candidates having the desired skill set as permanent CEO on a timely basis or at all, and the factors and risks as disclosed in the Company’s most recent annual information form, management’s discussion and analysis and other Company documents filed from time to time on SEDAR (see www.sedar.com) and filed or furnished to the Securities and Exchange Commission on EDGAR (see www.sec.gov). Readers are cautioned not to place undue reliance on these forward-looking statements. The forward-looking information included in this news release are made as of the date of this news release and the Company disclaims any intention or obligation, except to the extent required by law, to update or revise any forward-looking information, whether as a result of new information, future events or otherwise.

Amy Schwalm, Vice President, Investor Relations
[email protected]
(416) 704-9057

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Crypto Slide, Gaming Slowdown Wipe Billions Off Tycoon’s Fortune

(Bloomberg) -- Kim Jung-ju, the billionaire behind Nexon Co., is having a turbulent month.Shares of the Tokyo-listed gaming company have plunged 21% since it forecast a decline in profit on May 12, suggesting its strong performance when the pandemic kept people indoors won’t be sustained as some countries reopen.That’s erased about $1.9 billion from the South Korean entrepreneur’s net worth, reducing his fortune to $8.1 billion, according to the Bloomberg Billionaires Index.On top of that, Kim’s diversification away from gaming into areas including cryptocurrency is facing obstacles. Bitcoin has dropped almost 38% since it rose to a record in April, a stark example of the swings in the prices of virtual coins that have left some mainstream investors skeptical.Kim, 53, has been an avid supporter of digital currencies, and has been acquiring cryptocurrency exchanges in recent years. Nexon also bought $100 million worth of Bitcoin last month.“It was bound to come down,” Matthew Kanterman, an analyst with Bloomberg Intelligence, said of Nexon’s earnings forecast. “Last year was a high base and they are not going to replicate that,” he said. On Bitcoin, “corporations don’t like buying stuff with too much volatility,” he said, suggesting Nexon is unlikely to add to its purchase for now.Crypto InvestmentsEven before Nexon bought Bitcoin, Kim’s holding company NXC Corp., which owns almost half of Nexon, snapped up 65% of Korbit Inc., a crypto exchange in South Korea, in 2017.The following year, NXC’s subsidiary in Europe acquired another cryptocurrency exchange: Luxembourg-based Bitstamp.Korbit’s book value plunged to about 3.1 billion won ($2.8 million) at the end of last year from about 96 billion won at the end of 2017, according to NXC’s financial statements for 2017 and 2020. A spokesman for NXC said there’s no plan to sell the exchanges that it bought.Kim was also keen to acquire Bithumb, one of South Korea’s largest virtual currency exchanges, according to local media reports earlier this year. The NXC spokesman declined to comment.Kim declined to be interviewed for this story. Owen Mahoney, Nexon’s chief executive officer, wasn’t available for comment.The company pointed to Mahoney’s Medium post in April on the Bitcoin purchase. Nexon sees Bitcoin as a form of cash that’s likely to retain its value, he said. The Bitcoin purchase represents less than 2% of the firm’s cash and equivalents.“The technology underlying BTC and other cryptocurrencies is beginning to creep into many areas of day-to-day use, such as payments, digital collectibles and other areas that are increasingly relevant for companies like ours,” Mahoney wrote.Embracing CryptoOther big names in the gaming industry have also embraced cryptocurrencies and related blockchain technologies.Kakao Games Corp., a subsidiary of South Korea’s most popular mobile-messenger operator Kakao Corp., added to its holdings in blockchain technology company Way2Bit Co. last year, becoming the largest shareholder. Mobile game publisher Gamevil Inc. invested last month in crypto exchange Coinone Inc.“As finance and payment systems are quite important in games, developers are thinking of ways to integrate blockchain technology to improve what they have now,” said Lee Seung-hoon, an analyst at IBK Securities Co. in Seoul. “Their investments are more like R&D efforts at this stage.”Square Enix Holdings Co., the Japanese publisher of popular role-playing games such as Dragon Quest and Final Fantasy, was among the investors that injected $2 million in cash and cryptocurrency into Ethereum-based game developer TSB Gaming Ltd. in 2019.‘Significant Presence’“Games using blockchain are no longer in their infancy and are gradually coming to represent a more significant presence,” Yosuke Matsuda, the Japanese firm’s president, said in a New Year’s letter last year.Kim founded Nexon in South Korea in 1994 after majoring in computer science and engineering at Seoul National University. In 2011, Nexon listed in Japan.Two years ago, he considered selling his stake in the company, held through NXC, triggering discussions with major players including Tencent Holdings Ltd. and Hillhouse Capital. He scrapped the plan when he couldn’t find a suitable buyer, according to local media reports.Nexon, famous for hit titles such as MapleStory and KartRider, posted net income attributable to its parent’s owners of 69.7 billion yen ($639 million) in the first six months of 2020 as lockdowns forced people to spend more time at home. For the same period this year, it forecast a range from 55 billion yen to 58.3 billion yen. The high end of the range would represent a 16% drop from last year.Kim said in a rare interview with South Korean newspaper Chosun Ilbo in 2012 that worrying about keeping up with new technological trends can even disrupt his sleep.“In order to survive, I have to accept new things,” Kim said.More stories like this are available on bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.

China’s crackdown on bitcoin mining is getting real

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Kevin Ulrich Scored a $2 Billion MGM Win. It Only Took a Decade

(Bloomberg) -- Hedge funds often measure their investments in minutes, not decades but for Anchorage Capital Group, its long-held stake in Metro-Goldwyn-Mayer Studios Inc. is proving that patience can also be profitable.The New York-based money manager stands to make roughly $2 billion on its investment in the film and TV producer, one that began almost 11 years ago with MGM in bankruptcy court. Amazon.com Inc. agreed to buy the company for $8.45 billion Wednesday, a price that includes just under $2 billion in debt.The deal is in many ways a vindication for Kevin Ulrich, the former Goldman Sachs Group Inc. trader who co-founded Anchorage in 2003 and was part of a group of distressed debt investors that took control of MGM as it went through the restructuring process. In recent years the stake looked to be an albatross for the fund, one that came with significant drama in its own right.Ulrich brought in and later fired a high-profile chief executive officer, resisted efforts by activist investor Carl Icahn to take control, and held out for a bigger payday after years of considering various exit strategies. By selling now, as demand for media content from entertainment and technology companies alike is booming, he’s proving his long-held faith in the investment was justified.“There was a lot of maneuvering, a lot of financial engineering,” said Steven Azarbad, chief investment officer at New York’s Maglan Capital, an MGM investor who sold his shares four years ago. “But they’ve done great.”A representative for Anchorage declined to comment.When Ulrich first invested in MGM, he was new to Hollywood. He helped pick Gary Barber, a South African-born producer of films such as “Ace Ventura: Pet Detective” as chief executive officer of the storied but debt-laden studio. Barber brought to the table a shrewd business sense, and connections into a world Ulrich long admired from afar.Barber shepherded MGM’s development of “The Hobbit” franchise, a co-production with Warner Bros., that became a global smash hit. He helmed the release of the James Bond film, “Skyfall,” which generated over $1 billion at the box office, and he revived the studio’s work in television. Barber also brokered a deal to bring on TV super producer Mark Burnett, which gave MGM access to reality show hits like “Survivor” and “The Apprentice,” but would ultimately become personally troublesome.In 2012 the company bought back Icahn’s stock for $590 million. It also filed paperwork for a possible public offering of shares, and considered other options, such as a sale.As Barber boosted MGM’s film and TV pipeline, Ulrich was increasingly entranced by the allure of Hollywood. He became a regular at movie premieres in Los Angeles and New York, and frequented industry parties in the Hamptons and elsewhere. He became active in creative decisions after becoming chair of MGM’s board -- somewhat unusual for a non-executive lacking Hollywood experience -- even getting involved with business granularities like casting.Growing RiftBut over the following years a rift began to open up between Barber and Ulrich. When it was time to renew Barber’s contract in 2017, Ulrich conducted an extensive search for a new CEO. When it ended, he ultimately chose to sign Barber to a new five-year deal. Yet around the same time, the pair split on whether to sell the company, with Ulrich wanting to hang on to the studio and Barber saying it was time to find a buyer.The company would hold buyout talks with Apple Inc. as well as Chinese investors that would ultimately prove fruitless.Only months after renewing Barber’s deal, Ulrich fired him. The shock departure meant the company had to pay Barber for five years of salary and buy out his equity, a package totaling $260 million. In the three years since Barber left, Ulrich hasn’t replaced him, instead operating an “office of the chief executive officer,” comprised of various people that each have their personal vision for MGM.Barber declined to comment via his spokesperson.Bounce BackAfter the initial period of success following the restructuring, the gains became harder to come by, as they did in Anchorage’s overall credit-focused business. Two senior managers left the firm in January 2020, and another in November. Anchorage’s flagship strategy, with about $8.5 billion under management, returned just 0.6% in 2018, 1.5% in 2019 and 4.4% in 2020, according to people familiar with the matter.In December, MGM hired investment bankers for a potential sale.MGM only released one film in theaters in 2020. Its biggest potential hit, the latest Bond film, “No Time to Die,” was pushed from last year to this October as a result of the pandemic.Yet the value of MGM’s library rose as everyone from media companies to technology giants have sought to build video streaming platforms that can compete with industry leader Netflix Inc. Earnings jumped 48% last year, to about $307 million, even as sales declined.Anchorage holds a roughly 30% stake in MGM, worth about $2.5 billion in the sale, said people with knowledge of the matter. Anchorage invested around $500 million in the company more than a decade ago. Including the MGM stake, Anchorage’s flagship fund is up 18% this year, the people added. The fund has gained about 8% in 2021 not counting the studio.More stories like this are available on bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.

Deutsche Bank overhaul ahead of plan, CEO tells investors

Deutsche Bank's multi-year overhaul is ahead of plan and remains its primary focus, Chief Executive Christian Sewing told shareholders on Thursday, promising an era of more sustainable profit. The bank's annual shareholder meeting, held online due to the coronavirus pandemic, took place in a more relaxed atmosphere than in recent years, a reflection of the lender's return to profit and rising share price. Three years into its restructuring, Sewing said Germany's largest bank wasn't over the finish line.

China Huarong’s Journey From Safe Bet to Bad News: A Timeline

(Bloomberg) -- It’s nearly two months since turbulence erupted around China Huarong Asset Management Co.At the end of March, its 4% perpetual dollar bond was trading at 102 cents on the dollar as investors figured the January execution of former chairman Lai Xiaomin for bribery put a line under past wayward behavior. But the failure of the company to release 2020 results by a March 31 deadline, and a subsequent report by mainland media Caixin that the firm will restructure, sparked weeks of turmoil. The same bond is now at 57 cents.The heart of the matter is whether the central government will rescue a state-owned company that’s integral to the smooth running of the financial system. While there are signs Beijing wants to ensure China Huarong can repay its debts on time, uncertainty prevails.Here’s a look at the key events for China Huarong:May 27Liang Qiang, who currently heads another bad-debt manager, is on track to become president of China Huarong, reports Bloomberg News.May 24China Huarong dollar bonds climb after the managing editor of Caixin Media wrote in an opinion piece that the asset manager is “nowhere near” defaulting on its more than $20 billion of offshore notes.May 21Some of China Huarong’s thinly traded onshore bonds slump after having held up better than the company’s dollar-denominated notes, signaling broadening concern about the firm’s financial health. May 18China Huarong has transferred funds to repay a $300 million note maturing May 20, Bloomberg News reports, the first dollar bond to come due since the delayed 2020 results. Prices for the firm’s dollar bonds slump earlier in the day after the New York Times reports China is planning an overhaul that would inflict “significant losses” on both domestic and foreign China Huarong bondholders.May 17The company has reached funding agreements with state-owned banks to ensure it can repay debt through at least the end of August, by which time China Huarong aims to have completed its 2020 financial statements, according to a Bloomberg News report. That as at least two of its onshore bonds see big price declines in recent days, worrying some investors.May 13The firm says it’s prepared to make future bond payments and has seen no change in the level of government support, seeking to ease investor concerns after a local media report that regulators balked at China Hurarong’s restructuring plan.May 6The company says it transferred funds to pay five offshore bond coupons due the following day, its latest move to meet debt obligations amid persistent doubts about its financial health.April 30China Huarong breaks its silence, with an executive telling media it is prepared to make its bond payments and state backing remains intact. The official also says the week’s rating downgrades “have no factual basis” and are “too pessimistic.”April 29Moody’s Investor Service downgrades China Huarong by one notch to Baa1, adding the firm remains on watch for further downgrade. The cut reflects the company’s weakened funding ability due to market volatility and increased uncertainty over its future, according to the statement.April 27China Huarong units repay bonds maturing that day. The S$600 million ($450 million) bond was repaid with funds provided by China’s biggest state-owned bank, according to a Bloomberg News report.April 26Fitch Ratings downgrades China Huarong by three notches to BBB while dropping the company’s perpetual bonds into junk territory. The lack of transparency over government support for the firm may hamper its ability to refinance debt in offshore markets, Fitch said.April 25China Huarong says it won’t meet an April 30 deadline to file its 2020 report with Hong Kong’s stock exchange because auditors needed more time to finalize a transaction the company first flagged on April 1. Securities and asset-management units said in the days before that they wouldn’t release 2020 results by month’s end.April 22The China Banking and Insurance Regulatory Commission asks lenders to extend China Huarong’s upcoming loans by at least six months, according to REDD, citing two bankers from large Chinese commercial lenders.April 21China is considering a plan that would see its central bank assume more than 100 billion yuan ($15 billion) of China Huarong assets to help clean up the firm’s balance sheet, according to a Bloomberg News report. Peer China Cinda Asset Management Co. was said to be planning the sale of perpetual bonds in the second quarter.April 20China Huarong’s key offshore financing unit says it returned to profitability in the first quarter and laid a “solid” foundation for transformation. Reorg Research reports that regulators are considering options including a debt restructuring of the unit, China Huarong International Holdings Ltd.April 19Huarong Securities Co. says it wired funds to repay a 2.5 billion yuan local note.April 16The CBIRC says China Huarong’s operations are normal and that the firm has ample liquidity. These are the first official comments about the company’s troubles. Reuters reports Chinese banks have been asked not to withhold loans to Huarong.April 13Fitch and Moody’s both put the company on watch for downgrade. The finance ministry, which owns a majority of Huarong, is considering the transfer of its stake to a unit of the country’s sovereign wealth fund, Bloomberg News reports. Chinese officials signal they want failing local government financing vehicles to restructure or go bust if debts can’t be repaid.April 9China Huarong says it has been making debt payments “on time” and its operations are “normal.” Bloomberg reports the company intends to keep Huarong International as part of a potential overhaul that would avoid the need of a debt restructuring or government recapitalization. S&P Global Ratings puts China Huarong’s credit ratings on watch for possible downgrade.April 8China Huarong is preparing to offload non-core and loss-making units as part of a broad plan to revive profitability that would avoid the need for a debt restructuring or government recapitalization, Bloomberg News reports.April 6Selling gains steam in China Huarong’s dollar bonds, following a holiday in China. Huarong Securities says there has been no major change to its operations, in response to a price plunge for its 3 billion yuan local bond.April 1China Huarong announces a delay in releasing 2020 results, saying its auditor is unable to finalize a transaction. Stock trading is suspended and spreads jump on the firm’s dollar bonds while China Huarong tells investors its business is running as usual. Caixin reports the company submitted restructuring and other major reform plans to government officials and shareholders.More stories like this are available on bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.

Crypto Slide, Gaming Slowdown Wipe Billions Off Tycoon’s Fortune

(Bloomberg) -- Kim Jung-ju, the billionaire behind Nexon Co., is having a turbulent month.Shares of the Tokyo-listed gaming company have plunged 21% since it forecast a decline in profit on May 12, suggesting its strong performance when the pandemic kept people indoors won’t be sustained as some countries reopen.That’s erased about $1.9 billion from the South Korean entrepreneur’s net worth, reducing his fortune to $8.1 billion, according to the Bloomberg Billionaires Index.On top of that, Kim’s diversification away from gaming into areas including cryptocurrency is facing obstacles. Bitcoin has dropped almost 38% since it rose to a record in April, a stark example of the swings in the prices of virtual coins that have left some mainstream investors skeptical.Kim, 53, has been an avid supporter of digital currencies, and has been acquiring cryptocurrency exchanges in recent years. Nexon also bought $100 million worth of Bitcoin last month.“It was bound to come down,” Matthew Kanterman, an analyst with Bloomberg Intelligence, said of Nexon’s earnings forecast. “Last year was a high base and they are not going to replicate that,” he said. On Bitcoin, “corporations don’t like buying stuff with too much volatility,” he said, suggesting Nexon is unlikely to add to its purchase for now.Crypto InvestmentsEven before Nexon bought Bitcoin, Kim’s holding company NXC Corp., which owns almost half of Nexon, snapped up 65% of Korbit Inc., a crypto exchange in South Korea, in 2017.The following year, NXC’s subsidiary in Europe acquired another cryptocurrency exchange: Luxembourg-based Bitstamp.Korbit’s book value plunged to about 3.1 billion won ($2.8 million) at the end of last year from about 96 billion won at the end of 2017, according to NXC’s financial statements for 2017 and 2020. A spokesman for NXC said there’s no plan to sell the exchanges that it bought.Kim was also keen to acquire Bithumb, one of South Korea’s largest virtual currency exchanges, according to local media reports earlier this year. The NXC spokesman declined to comment.Kim declined to be interviewed for this story. Owen Mahoney, Nexon’s chief executive officer, wasn’t available for comment.The company pointed to Mahoney’s Medium post in April on the Bitcoin purchase. Nexon sees Bitcoin as a form of cash that’s likely to retain its value, he said. The Bitcoin purchase represents less than 2% of the firm’s cash and equivalents.“The technology underlying BTC and other cryptocurrencies is beginning to creep into many areas of day-to-day use, such as payments, digital collectibles and other areas that are increasingly relevant for companies like ours,” Mahoney wrote.Embracing CryptoOther big names in the gaming industry have also embraced cryptocurrencies and related blockchain technologies.Kakao Games Corp., a subsidiary of South Korea’s most popular mobile-messenger operator Kakao Corp., added to its holdings in blockchain technology company Way2Bit Co. last year, becoming the largest shareholder. Mobile game publisher Gamevil Inc. invested last month in crypto exchange Coinone Inc.“As finance and payment systems are quite important in games, developers are thinking of ways to integrate blockchain technology to improve what they have now,” said Lee Seung-hoon, an analyst at IBK Securities Co. in Seoul. “Their investments are more like R&D efforts at this stage.”Square Enix Holdings Co., the Japanese publisher of popular role-playing games such as Dragon Quest and Final Fantasy, was among the investors that injected $2 million in cash and cryptocurrency into Ethereum-based game developer TSB Gaming Ltd. in 2019.‘Significant Presence’“Games using blockchain are no longer in their infancy and are gradually coming to represent a more significant presence,” Yosuke Matsuda, the Japanese firm’s president, said in a New Year’s letter last year.Kim founded Nexon in South Korea in 1994 after majoring in computer science and engineering at Seoul National University. In 2011, Nexon listed in Japan.Two years ago, he considered selling his stake in the company, held through NXC, triggering discussions with major players including Tencent Holdings Ltd. and Hillhouse Capital. He scrapped the plan when he couldn’t find a suitable buyer, according to local media reports.Nexon, famous for hit titles such as MapleStory and KartRider, posted net income attributable to its parent’s owners of 69.7 billion yen ($639 million) in the first six months of 2020 as lockdowns forced people to spend more time at home. For the same period this year, it forecast a range from 55 billion yen to 58.3 billion yen. The high end of the range would represent a 16% drop from last year.Kim said in a rare interview with South Korean newspaper Chosun Ilbo in 2012 that worrying about keeping up with new technological trends can even disrupt his sleep.“In order to survive, I have to accept new things,” Kim said.More stories like this are available on bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.

Australia's CBA to let customers check other bank balances on its app

CBA, Australia's largest bank, said its move came under the country's Consumer Data Right (CDR) law that will soon be extended to energy and other sectors. The bank said it would invest A$50 million ($38.68 million) in two startups, picking up a 23% stake in online shopping platform Little Birdie and 25% in Amber, which provides access to wholesale electricity prices. Amber offers a subscription service to users to get access to wholesale electricity prices, which have nearly halved over the past three years and tend to be lower than retail prices.


U.S. Consumers Trade Down As Economic Angst Grows

Spurred by economic worries, American shoppers have quickly decided that cheaper is better. They are trading down to store brands from fancy labels, to small cars from SUVs, and to deep-discounters from full-service stores.

Wal-Mart Stores Inc., which last year returned to its discount roots to try to reverse weakening sales, Thursday reported its best monthly sales gain in four years it benefited from bargain-hunters seeking deals on the most basic stuff.

Discount stores overall saw sales jump nearly 6% last month, while those of full-price department stores declined. Consumers' use of discount coupons is starting to rebound after a 15-year slide. In June, the lowly Toyota Corolla became the best-selling vehicle in America, a spot held for more than two decades by the beefier (and pricier) Ford F-150 pickup.

Trading down is a common consumer reaction to economic ills. But this time around, the change has come unusually fast and may be touching on the broadest array of goods since the recession of the early 1980s. The combination of historically high fuel prices and soaring food costs, combined with falling housing and stock values and tightening credit, are severely damping the spending habits on which the U.S. economy has long thrived.

The about-face in consumer behavior could bring striking changes to the marketplace, as retailers revamp everything from the size of their stores to the way they stock their shelves, and may force manufacturers to trim niche products in favor of more reliably selling basics.

"There has been a major shift in thinking by shoppers," says Thom Blischok, head of consulting at Information Resources Inc., which tracks spending on consumer goods. "Consumers are moving away from availability, to affordability." Dunnhumby Ltd., a consulting firm that tracks shopping habits for many retailers and manufacturers, says 20% of loyalty-card holders of its U.S. and European retail clients are "radically" reducing spending, according to its analysis of their purchasing data.

The shift challenges a 20-year embrace of ever-pricier exotic foods and a widening array of luxury goods. In the 1980s, Americans warmed to designer labels, Egyptian cottons, and shopping as a form of entertainment.

Now, consumers are pessimistic that their ability to spend will improve any time soon. Two-thirds of Americans expect the current slump to last for several years, according to the latest Reuters/University of Michigan survey of consumer expectations. Consumer confidence has dropped 38% in the monthly index since its January 2007 peak, and last month 57% of those surveyed reported their financial situation had worsened, the highest figure since the survey began in 1946.

Buying Habits

At almost every income bracket, Americans are changing buying habits and deciding they can live without old favorites. Bob Swanson, a 48-year-old Houston software salesman, drove BMWs for most of the past two decades. But as the price of premium gasoline jumped, he traded his 8-cylinder BMW 540 for a more frugal 4-cylinder Honda Accord that he bought secondhand. "I went from an average of 14 miles a gallon to an average of 24," Mr. Swanson says.

BARGAIN HUNTING: American consumers, like these shopping this week at Wal-Mart in North Little Rock, Ark., are increasingly seeking low prices on basic items, helping drive up discounters' sales.

Visits to department stores are down 6% this year, down 7% at office-supply stores and down 10% at home-improvement retailers, says market watcher Nielsen North America, which tracks store traffic and spending. But the downturn has proved a boon for retailers at the bottom of the price scale. Family Dollar Stores Inc., a small, discount department-store chain, forecasts same-store gains of 4% to 6% for its fiscal fourth-quarter ending Aug. 30. Dollar General Corp. , another discounter, recently reported same-store sales jumped 5.6% for the fiscal quarter ended May 2.

Trying to lure the newly frugal, big retailers and brand-name goods manufacturers are revamping their goods and promotional offers to suit the times, relying on increased efforts to track their consumers' habits. For instance, in Texas, grocer HEB Inc. has begun stocking up on inexpensive fare -- beans, rice and flats of eggs -- toward the end of the month, as customers run out of money.

Wal-Mart says it is putting more multipack items on its shelves at the start of the month when many customers are flush from being paid, then switching to individual items that require smaller outlays later in the month.

Thursday, the nation's largest retailer reported that U.S. same-store sales for the five weeks ended July 4 rose 5.8%, Wal-Mart's highest monthly increase since May 2004. The big results for the June reporting period were partly attributable to temporary factors benefiting many discount retailers. Federal tax-rebate checks were trickling in, and there were two first-of-the-month days in the period, when many customers get paychecks or government payments and visit stores.

Back to Its Roots

But Wal-Mart also returned to its roots at just the right time. Unlike other retailers, the discounter's less-affluent customers felt the pinch of rising energy and credit woes as early as 2006. Wal-Mart ultimately responded by cutting back on new-store construction and revamping its merchandise. It cut inventories and renewed its focus on reducing prices, just as the economy swooned.

This year, its stores were better equipped for consumers looking to trade down. Wal-Mart also increased advertising spending by 42%, rolling out a campaign that highlighted savings.

Sears Holdings Corp. , in contrast, last fall loaded up on clothing, home-goods and holiday merchandise. It was forced this spring to cut back on marketing and discount heavily to clear its shelves. Same-store sales in the quarter ended May 3 fell 9.8% at its Sears stores and 7.1% at its Kmart unit.

Some big-name brands are testing new approaches to try to keep customers. "The reality of the business is you've got to come to the table with an offer," says Bryce McTavish, vice president of retail and sports marketing at MillerCoors, a joint venture of beer makers SABMiller PLC and Molson Coors Brewing Co. One new strategy: Placing lower-priced Coors Light alongside Blue Moon premium beers in store displays, to encourage Blue Moon drinkers who want to economize to stay within the brand. Miller Coors also is weighing offering gasoline cards with purchases as an incentive.

The ability to capture trade-down shoppers will be crucial for some companies. New, cheaper favorites among brands or stores can be formed after as little as three or four favorable experiences, retail experts say.

But unfortunately for some retailers, "the tide is going out," says Credit Suisse analyst Gary Balter. He forecasts retail profits will struggle until "2010 at the earliest," when the current spending weakness should lift. Retailers now losing customers such as Borders Group Inc. and Circuit City Stores Inc., both of which reported widening losses compared with a year earlier, won't have relief from slow consumer spending anytime soon, he says.

The next step for retailers and manufacturers is to weed out niche products that don't have mass appeal, says John Rand, a director of retail insights at consultant Management Ventures Inc. Some retailers already are considering dropping suppliers or products that don't generate big sales.

Most at risk are premium-priced items that appeal to convenience over value. Consultants' studies of consumers' food baskets suggest that vitamin waters, 100-calorie snack packages, and children's lunches in a tray are being supplanted by tap water, value-pack snacks and home-made lunches, respectively.

One retail trend already under way may mesh well with the change in consumer habits. Retailers known for their "big boxes" -- Safeway Inc., Tesco PLC and Wal-Mart -- have or will soon introduce small 10,000- to 15,000-square-foot stores that fit into neighborhoods and contain just a few thousand products.

A typical 50,000-square-foot grocery store sells 20,000 items. But most homes buy fewer than 1,000 items a year. Stores that can correctly pinpoint customers' choices will earn higher returns on these smaller spaces.

Electronics chains such as Best Buy Co. and Circuit City are embracing smaller-size stores as a way to boost margins by shedding goods with slow sales. Such limited-assortment, high-turnover stores may be the next big wave in retailing, says Lee Peterson, a vice president at retail-store consultants WD Partners.

In the meantime, shoppers' eagerness to save shows up in all sorts of ways. Consumers do more one-stop shopping, buying groceries only once a week or twice a month to save on gasoline and by buying in bulk. When they do, they are more apt to stick to a grocery list -- and bring coupons.

Matthew Tilley, director of marketing at Carolina Manufacturers Services, a large coupon processor, says coupon redemptions last year already stopped falling for the first time since 1992, and the company forecasts increases for the rest of this year.

Consumer demand for lower-cost private-label and store brands also is leading retailers to license those brands to competitors to broaden their reach and increase sales. Best Buy now sells its Rocketfish private-label electronics through Japanese retailer K's Holdings. Safeway is selling its O brand of organic foods through restaurant supplier Sysco Corp. and the world's second-largest retailer after Wal-Mart, France's Carrefour SA.

Sales of private-label goods are up sharply, especially for staples with escalating prices. The cost of eggs has risen 33% this year, milk is up 18% and flour nearly 11%, says consulting firm Information Resources Inc. And even higher prices may be coming.

"We haven't yet seen the real impacts of rising commodity costs," says Mr. Blischok, IRI's head of consulting. "We're in a transformation that affects how you spend your money, where you go, what you eat," he says.

IRI's grocery-basket surveys show that sales of prepared foods such as Kraft Foods Inc.'s Lunchables have tumbled. Americans are eating at home more, buying multipurpose medications rather than separate medicines, and choosing a single brand of shampoo instead of one for each family member, IRI studies show.

U.S. premium gasoline sales so far this year are off 12.6%, compared with a just 1.3% decline in regular unleaded sales, according to delivery figures compiled by the U.S. Energy Information Administration.

In some cases, saving money is replacing conspicuous consumption as the object of awe. Linda Butler, a Portland, Ore., homemaker who has used coupons for decades, says that in the past six months she has often been approached in the checkout lanes by other shoppers seeking shopping advice. The 51-year-old homemaker routinely cuts a $150 grocery bill down to a $40 outlay through intensive use of coupons.

"People are asking me, how do you do that? Where do you get the coupons?" Mrs. Butler says. She is thinking of setting up classes on how to save money, she adds -- for a fee, of course.

Write to Gary McWilliams at [email protected]

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NFL celebrates 100th season with 2-minute ad featuring dozens of football greats

More than 40 current and past players, announcers and officials break into a brawl over a golden football in a two-minute ad from the National Football league that showcases iconic game moments over the years and debuted before the big game’s halftime show. In an attempt to be inclusive, "The 100-Year Game" spot also includes female youth player Sam Gordon, the league’s first female official Sarah Thomas and others pointing to football’s wide appeal.

The ad's debut on Sunday marked the kick off a year-long campaign from the NFL celebrating football. Other elements are a behind-the-scenes outtakes video, a NFL100 site and social media content using hashtag #NFL100. Original content will also be released throughout the year across multiple platforms. The NFL partnered with 72andSunny Los Angeles and director Peter Berg, known for his work on "Friday Night Lights," on the ad, which won USA Today's Ad Meter ranking of Super Bowl ads by consumer rating.


Green Lights

Corporate sustainability has come a long way in the past decade. Here is how it’s rolling out in the appliance, consumer electronics, and retail spaces.

Sustainability is such a buzzword these days that it can seem meaningless, especially when big tech and retail talk pledges to reduce emissions, invest in eco-technologies, or pay for carbon offsets. But brush off those self-satisfied marketing messages and seemingly hyped-up initiatives as just more “greenwashing” would be a mistake, especially for the retail sector. On a straight-up, save-the-Earth level, it’s essential: In January, research by the Boston Consulting Group and the World Economic Forum found that eight supply chains, including electronics, freight, and automotive, accounted for more than half of all global emissions. That’s why big retail from Amazon to Best Buy to Walmart, along with appliance and consumer electronics manufacturers, are doubling down and accelerating their sustainability initiatives.

Another motivator, of course, is the Paris Climate Agreement, which the United States recently rejoined, and its goals of reducing global emissions in half by the end of this decade. But the Paris Climate Agreement is not even the most ambitious of accords, some of which are coming from the private sector. Just last month, a consortium of tech companies including Dell, Google, Microsoft, and Vodafone, announced the formation of the Circular Electronics Partnership (CEP). This new platform aims to encourage, facilitate, and invest in systems that develop and implement “closed-loop” products and services — think recyclable packaging, materials, and gadgets — in the electronics sector.

But it’s not just a concern for the environment: Not only is it estimated that unchecked climate change will affect the bottom line — approximately $1 trillion is at risk due to climate change through 2024 per 215 global companies surveyed in a 2019 CDP report but consumers young and old also increasingly demand sustainability when shopping. Over the past year of mostly mail-order e-commerce, more than 72 percent of Americans said they would be more likely to buy from companies that have sustainable shipping practices, according to a 2020 Harris Poll, while a 2020 IBM and National Retail Federation study found that 70 percent of shoppers in the U.S. and Canada place a high value on eco-friendly brands.

And there’s progress from the consumer technology sector. Even though the consumer electronics industry grew by 11.4 percent between 2017 and 2018, it was responsible for 7.4 percent fewer emissions, according to the Consumer Technology Association (CTA).

These days, it’s hard to find a company in any sector that hasn’t deployed some kind of sustainability practice — just go to that tab on its website and you’ll find an entire section devoted to eco-practices. That goes for many appliance and CE manufacturers and retailers, as the entire subsection on sustainability at CES 2021 demonstrated. Some companies in this sector have been focused on sustainable practices for more than a decade, while others are just getting started. Here are some current highlights in the space.

Trading Out and In

Best Buy has singularly addressed its role as an electronics retailer in the proliferation of e-waste by leading on eco-trends for more than a decade its well-known trade-in and recycling program has processed more than two billion pounds of both appliances and electronics since it was first launched in 2009. The program is the largest electronics and appliances program in the U.S. and also the most comprehensive: In exchange for gift cards on newer products, anyone can trade-in or submit a wide range of items including TV and audio, cell phones, cameras, car audio, CDs and DVDs, and appliances. For ink and toner, the store will provide $2 in credit toward the next purchase. And even though it’s not free, Best Buy makes disposing of bigger items a cinch with its haul-away service that’ll go to homes and pick up everything from big TVs treadmills to dishwashers and wall ovens.

The store has added a boatload of additional initiatives over the past 10 years, including a special shopping category devoted to sustainable products, a marketplace for pre-owned refurbished gadgets, energy-saving LED lighting in its stores, and a fleet of hybrid GeekMobile vehicles for its GeekSquad house calls.

Corporate Collaboration

As with many tech companies of late, Best Buy has also signed on to The Climate Pledge, a global pact among companies to reduce carbon emissions to net-zero by 2040. Founded by Amazon and political and communications strategy organization Global Optimism, the Pledge has already been signed by 31 companies, including other tech firms such as IBM, Microsoft, Rubicon, Schneider Electric, Siemens, and Verizon — all of which have agreed to collaborate on the 2040 goal by updating their business and manufacturing methods, as well as quantifying, sharing, and offsetting their greenhouse emissions “Our ambition in joining forces with Jeff Bezos and Amazon was to get large, tip-of-the-spear companies together at a pre-competitive level to establish a framework for cutting operational emissions across supply chains with the greatest ambition,” says Global Optimism’s founding partner, Tom Rivett-Carnac, who previously worked the Paris Climate Agreement in his capacity as Executive Secretary at the UN Climate Convention. “Time represents ambition because it improves the chances of staying below 1.5 °C (34.7 °F), according to scientists.”

Besides its work on The Climate Pledge, Amazon is active on many sustainability fronts around electronics and appliances, including reducing the immense amount of waste inherently involved in shipping packages. As anyone who has ever had to pry open a shrink-wrapped box containing a smartphone or earbud can attest, e-commerce and consumer electronics businesses — despite some advances in eco-packaging — still use a lot of cardboard, plastic, polystyrene, and paper to store and transport products in a safe way.


‘Surprise CEO Change’ at Kraft May Shift Focus Toward Deals and Cost-Cutting, Away from Marketing - Recipes

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Can Netflix Survive in the New World It Created?

It helped to develop all the new ways we watch TV — on-demand, bingeing, mobile. But the Silicon Valley company still has to keep reinventing itself.

Credit. Illustration by Erik Carter

O ne night in early January, a little after 9 o’clock, a dozen Netflix employees gathered in the cavernous Palazzo ballroom of the Venetian in Las Vegas. They had come to rehearse an announcement the company would be making the next morning at the Consumer Electronics Show, the tech industry’s gigantic annual conference. For the previous year, Netflix had been plotting secretly to expand the availability of its streaming entertainment service, then accessible in about 60 countries, to most of the rest of the world. Up to this point, Netflix had been entering one or two countries at a time, to lots of fanfare. Now it was going to move into 130 new countries all at once, including major markets like Russia, India and South Korea. (The only significant holdout, for now, was China, where the company says it is still “exploring potential partnerships.”) Netflix executives saw this as a significant step toward the future they have long imagined for the company, a supremacy in home entertainment akin to what Facebook enjoys in social media, Uber in urban transportation or Amazon in online retailing.

Ted Sarandos, who runs Netflix’s Hollywood operation and makes the company’s deals with networks and studios, was up first to rehearse his lines. “Pilots, the fall season, summer repeats, live ratings” — all hallmarks of traditional television — were falling away because of Netflix, he boasted. Unlike a network, which needs shows that are ratings “home runs” to maximize viewers and hence ad dollars, he continued, Netflix also values “singles” and “doubles” that appeal to narrower segments of subscribers. Its ability to analyze vast amounts of data about its customers’ viewing preferences helped it decide what content to buy and how much to pay for it.

Sarandos can be an outspoken, even gleeful, critic of network practices in his zeal to promote what Netflix views as its superior model — on-demand and commercial-free streaming, on any device. That glee was on full display in these remarks. For years, he said, “consumers have been at the mercy of others when it comes to television. The shows and movies they want to watch are subject to business models they do not understand and do not care about. All they know is frustration.” That, he added, “is the insight Netflix is built on.”

When Sarandos was done, Reed Hastings, Netflix’s chairman and chief executive, took the stage. A pencil-thin man, he seemed swallowed up by the empty ballroom. He squinted uncomfortably under the lights. He and a number of other Netflix executives had spent the morning at a meeting in Laguna, Calif., where a rare torrential rainstorm grounded air traffic, forcing them to make the five-hour drive to Las Vegas. They arrived only a few hours earlier. To make matters worse, Hastings was feeling ill.

Haggard and tired, he stumbled irritably through his presentation. But as he neared the finale, Hastings broke out into a small, satisfied smile. “While you have been listening to me talk,” he said, reading from a monitor, “the Netflix service has gone live in nearly every country in the world but China, where we also hope to be in the future.” Even though this was only a practice run — and even though it would be a long time before anyone knew whether global expansion would pay off — the Netflix executives sitting in the ballroom let out a loud, sustained cheer.

They had good reason to celebrate. Netflix, since its streaming service debuted in 2007, has had its annual revenue grow sixfold, to $6.8 billion from $1.2 billion. More than 81 million subscribers pay Netflix $8 to $12 a month, and slowly but unmistakably these consumers are giving up cable for internet television: Over the last five years, cable has lost 6.7 million subscribers more than a quarter of millennials (70 percent of whom use streaming services) report having never subscribed to cable in their lives. Those still paying for cable television were watching less of it. In 2015, for instance, television viewing time was down 3 percent and 50 percent of that drop was directly attributable to Netflix, according to a study by MoffettNathanson, an investment firm that tracks the media business.

All of this has made Netflix a Wall Street favorite, with a stock price that rose 134 percent last year. Easy access to capital has allowed the company to bid aggressively on content for its service. This year Netflix will spend $5 billion, nearly three times what HBO spends, on content, which includes what it licenses, shows like AMC’s “Better Call Saul,” and original series like “House of Cards.” Its dozens of original shows (more than 600 hours of original programming are planned for this year) often receive as much critical acclaim and popular buzz as anything available on cable. Having invented the binge-streaming phenomenon when it became the first company to put a show’s entire season online at once, it then secured a place in the popular culture: “Netflix and chill.”

But the assembled executives also had reason to worry. Just because Netflix had essentially created this new world of internet TV was no guarantee that it could continue to dominate it. Hulu, a streaming service jointly owned by 21st Century Fox, Disney and NBC Universal, had become more assertive in licensing and developing shows, vying with Netflix for deals. And there was other competition as well: small companies like Vimeo and giants like Amazon, an aggressive buyer of original series. Even the networks, which long considered Netflix an ally, had begun to fight back by developing their own streaming apps. Last fall, Time Warner hinted that it was considering withholding its shows from Netflix and other streaming services for a longer period. John Landgraf, the chief executive of the FX networks — and one of the company’s fiercest critics — told a reporter a few months ago, “I look at Netflix as a company that’s trying to take over the world.”

At the moment, Netflix has a negative cash flow of almost $1 billion it regularly needs to go to the debt market to replenish its coffers. Its $6.8 billion in revenue last year pales in comparison to the $28 billion or so at media giants like Time Warner and 21st Century Fox. And for all the original shows Netflix has underwritten, it remains dependent on the very networks that fear its potential to destroy their longtime business model in the way that internet competitors undermined the newspaper and music industries. Now that so many entertainment companies see it as an existential threat, the question is whether Netflix can continue to thrive in the new TV universe that it has brought into being.

To hear Reed Hastings explain it, there was never any doubt in his mind that, as he told me during one interview, “all TV will move to the internet, and linear TV will cease to be relevant over the next 20 years, like fixed-line telephones.” Viewers, in other words, will no longer sit and watch a show when a network dictates. According to Hastings, Netflix may have begun as a DVD rental company — remember those red envelopes? — but he always assumed that it would one day deliver TV shows and movies through the internet, allowing customers to watch them whenever they wanted.

Now that future has begun to take shape. The television industry last went through this sort of turbulence in the late 1970s and early 1980s, when cable television was maturing. Previously, of course, television had been mostly transmitted via the public airwaves, and the major networks made the bulk of their money from advertising. But cable provided an indisputably better picture, and the proliferation of cable networks came to offer a much greater variety of programming. In time, consumers concluded that it was worth paying for something — TV — that had previously been free. This meant that in addition to advertising dollars, each cable channel received revenue from all cable customers, even those who didn’t watch that channel. By 2000, 68.5 million Americans had subscriptions, giving them access to the several hundred channels the industry took to calling “the cable bundle.”

Hastings knew the internet would eventually compete with that bundle, but he wasn’t entirely sure how. And so he had to be flexible. Sarandos says that in 1999, Hastings thought shows would be downloaded rather than streamed. At another point, Netflix created a dedicated device through which to access its content, only to decide that adapting its service to everything from mobile phones to TV sets made more sense. (The Netflix device was spun out into its own company, Roku.) In 2007, even as Netflix’s DVD-by-mail business remained lucrative, and long before the internet was ready to deliver a streaming movie without fits and starts, Hastings directed Netflix to build a stand-alone streaming service.

Netflix’s approach to what it streams has been similarly flexible. At first, the company focused on movies, logically enough: 80 percent of its DVD rentals were films. But despite deals with two premium movie channels, Starz and Epix, Netflix found the distribution system to be largely inhospitable. Netflix usually didn’t get access to a new movie until a year or so after it ran in theaters. It then held the distribution rights for only 12 to 18 months eventually, the movie went to free TV for the next seven or eight years. This frustrated customers who couldn’t understand why something was there one month and gone the next or why, for that matter, so many titles were missing entirely from Netflix’s catalog.

So the company shifted to television. Cable networks like FX and AMC were developing expensive, talked-about dramas, the kind HBO pioneered with “The Sopranos” and “The Wire.” But these series, with their complex, season-long story arcs and hourlong format, seemed to be poor candidates for syndication, unlike self-contained, half-hour sitcoms like “Seinfeld,” which can be watched out of order.

Hastings and Sarandos realized that Netflix could become, in effect, the syndicator for these hourlong dramas: “We found an inefficiency,” is how Hastings describes this insight. One of the first such series to appear on Netflix was AMC’s “Mad Men,” which became available on the site in 2011, between its fourth and fifth seasons. Knowing from its DVD experience that customers often rented a full season of “The Sopranos” in one go, Netflix put the entire first four seasons of “Mad Men” online at once. Bingeing took off.

Television networks lined up to license their shows to Netflix, failing to see the threat it posed to the established order. “It’s a bit like ‘Is the Albanian Army going to take over the world?’ ” Jeff Bewkes, the chief executive of Time Warner, famously joked back in 2010. The occasional voice warned that Netflix would become too big for the industry to control, but mostly the legacy media companies viewed the fees from Netflix as found money. “Streaming video on-demand” rights, as they were called, hadn’t even existed before Netflix asked to pay for them. And because the networks didn’t understand how valuable those rights would become, Netflix got them for very little money.

Everyone seemed to be a winner, including the shows themselves. In 2012, for instance, Netflix began streaming the first three seasons of “Breaking Bad,” the dark drama produced by Sony that ran on AMC. Though praised by critics, “Breaking Bad” had not yet found its audience.

“When the folks at Sony said we were going to be on Netflix, I didn’t really know what that meant,” Vince Gilligan, the creator of “Breaking Bad,” told me. “I knew Netflix was a company that sent you DVDs in the mail. I didn’t even know what streaming was.” Gilligan quickly found out. “It really kicked our viewership into high gear,” he says. As Michael Nathanson, an analyst at MoffettNathanson, put it to me: “ ‘Breaking Bad’ was 10 times more popular once it started streaming on Netflix.”

This was around the time that network executives started to recognize the threat that Netflix could eventually constitute to them. “Five years ago,” says Richard Greenfield, a media and technology analyst at BTIG who happens to be Netflix’s most vocal proponent on Wall Street, “we wrote a piece saying that the networks shouldn’t license to Netflix because they were going to unleash a monster that would undermine their business.” That’s exactly what seemed to be happening.

Worse, they realized that Netflix didn’t have to play by the same rules they did. It didn’t care when people watched the shows it licensed. It had no vested interest in preserving the cable bundle. On the contrary, the more consumers who “cut the cord,” the better for Netflix. It didn’t have billions of legacy profits to protect.

Yet the networks couldn’t walk away from the company either. Many of them needed licensing fees from Netflix to make up for the revenue they were losing as traditional viewership shrank. Negotiations between a network or a studio and Netflix became fraught, as the networks, understanding the value of their streaming rights, sought much higher fees. In some cases, those negotiations broke down. The Starz deal, for example, was not renewed after it ended in 2012. (Chris Albrecht, the chief executive of Starz, would later describe the original deal as “terrible.”)

This was also the moment that Netflix started to plot its move into original programming. In 2012, Sarandos began to argue internally that to stand apart from the crowd, and to avoid being at the networks’ mercy, Netflix needed exclusive content that it fully controlled. “If we were going to start having to fend for ourselves in content,” Sarandos says, “we had better start exercising that muscle now.” In short, Netflix needed to begin buying its own shows.

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“We could see that eventually AMC was going to be able to do its own on-demand streaming,” Hastings says. “Or FX. We knew there was no long-term business in being a rerun company, just as we knew there was no long-term business in being a DVD-rental company.”

Still, Hastings was cautious. Producing original material is a very different business from licensing someone else’s shows. New content requires hefty upfront costs — one show alone would most likely cost more than the $30 million a year Netflix reportedly once paid Starz for its entire library of movies. Developing its own series would thrust it into the unfamiliar business of engaging with producers, directors and stars. Back in 2006, the company set up a way to distribute independent films, called Red Envelope Entertainment, but it failed, and Hastings shut it down. (“We would have been better off spending the money on DVDs,” he told me.) Now it was going to give original content another try — with much higher stakes.

Sarandos had a show he was itching to buy: “House of Cards,” a political drama that was being pitched by David Fincher, the well-known director, and would star Kevin Spacey. Sarandos knew that, according to Netflix’s vast database, many of the company’s subscribers liked the kind of drama that Fincher and Spacey wanted to make. But algorithms alone weren’t the deciding factor. He and Hastings figured that Fincher, who directed films like “Fight Club” and “The Social Network,” would create a critical and popular sensation.

In any case, Sarandos said, the potential reward vastly outweighed whatever financial and reputational risk “House of Cards” represented. “If it is a flop, we will have overpaid for one series,” he told Hastings. “But if it succeeds, we will have changed the brand.”

In winning over Fincher, Sarandos faced two other obstacles: a competing offer from HBO, which also wanted “House of Cards,” and the fact that no one had ever made a show for a streaming service before. For decades, when movies went straight to video without a theater run, they were ipso facto failures in Hollywood’s view for a seasoned director like Fincher, picking Netflix presented the same risk of marginalization. Sarandos overcame both by offering freedom and money. “There are a thousand reasons for you not to do this with Netflix,” he told Fincher. “But if you go with us, we’ll commit to two seasons with no pilot and no interference.” Sarandos also offered Fincher a reported $100 million for 26 episodes, at the high end for an hourlong drama.

The first season of “House of Cards” became available in February 2013. It was an immediate hit with viewers and critics. Five months later, Netflix posted the first season of “Orange Is the New Black,” which Sarandos had ordered before “House of Cards” went into production. Critics lavished praise on the new show as well. Having begun its life as a Silicon Valley tech company, Netflix had somewhat improbably become a television network.

Reed Hastings doesn’t have an office. “My office is my phone,” he says. “I found I was rarely using my cubicle, and I just had no need for it. It is better for me to be meeting people all around the building.” On the several occasions I interviewed him at the company’s headquarters in Los Gatos, Calif., we met in the cafeteria. Although Netflix employees describe him as an intense, blunt boss, Hastings comes across in public as relaxed and undefensive. He spent our interviews leaning back in his chair, his arms folded and legs crossed, tossing off answers to my questions as if it were a day at the beach.

Born and raised in the Boston suburbs — his great-grandfather was the wealthy investor Alfred Lee Loomis, who played a critical role in the invention of radar — Hastings, now 55, is one of those tech executives who came to California to attend Stanford (grad school for computer science in his case) and never left. The tech company he ran before Netflix was called Pure Software, which made debugging tools for software engineers. Before Netflix, Hastings had no experience in the entertainment industry.

Although news coverage now tends to focus on its shows, Netflix remains every bit as much an engineering company as it is a content company. There is a reason that its shows rarely suffer from streaming glitches, even though, at peak times, they can sometimes account for 37 percent of internet traffic: in 2011 Netflix engineers set up their own content-delivery network, with servers in more than 1,000 locations. Its user interface is relentlessly tested and tweaked to make it more appealing to users. Netflix has the ability to track what people watch, at what time of day, whether they watch all the way through or stop after 10 minutes. Netflix uses “personalization” algorithms to put shows in front of its subscribers that are likely to appeal to them. Nathanson, the analyst, says: “They are a tech company. Their strength is that they have a really good product.”

It is no surprise that Hastings, given his engineering background, believes that data, above all else, yields answers — and the bigger the data set, the better. “The worst thing you can do at Netflix is say that you showed it to 12 people in a focus room and they loved it,” says Todd Yellin, the company’s vice president of product innovation. He likes to note that customers will at most consider only 40 to 50 shows or movies before deciding what to watch, which makes it crucial that the company puts just the right 50 titles on each subscriber’s screen. (All the data Netflix collects and dissects can yield surprising correlations: For example, viewers who like “House of Cards” also often like the FX comedy “It’s Always Sunny in Philadelphia.”)

There is another underappreciated aspect of Netflix that Hastings views as a competitive advantage: what he calls its “high performance” culture. The company seeks out and rewards star performers while unapologetically pushing out the rest.

One person who helped Hastings create that culture is a woman named Patty McCord. The former head of human resources at Pure Software, she was also Hastings’s neighbor in Santa Cruz. She car-pooled to work with him and socialized with his family on weekends. “I thought the idea for Netflix was kind of stupid,” she told me. But she trusted Hastings’s instincts and wanted to keep working with him. Her title was chief talent officer.

The origins of the Netflix culture date to October 2001. The internet bubble burst the year before, and Netflix, once flush with venture capital, was running out of money. Netflix had to lay off roughly 50 employees, shrinking the staff by a third. “It was Reed’s first layoffs,” McCord says. “It was painful.”

The remaining 100 or so employees, despite working harder than before, enjoyed their jobs more. McCord and Hastings concluded that the reason was that they had held onto the self-motivated employees who assumed responsibility naturally. Office politics virtually disappeared nobody had the time or the patience. “There was unusual clarity,” McCord says. “It was our survival. It was either make this work or we’re dead.” McCord says Hastings told her, “This is what a great company feels like.”

As luck would have it, the DVD business took off right around the time of the layoffs. By May 2002, Netflix was doing well enough to go public, selling 5.5 million shares at $15 a share. With the $82.5 million Netflix reaped from the offering, Hastings started hiring aggressively again. This time, he and McCord focused on hiring “fully formed adults,” in their words, go-getters who put the company’s interests ahead of their own egos, showed initiative without being asked and embraced accountability. Dissent and argument were encouraged, even demanded.

For those who fit in, Netflix was a great place to work — empowering and rational. There are no performance reviews, no limits on vacation time or maternity leave in the first year and a one-sentence expense policy: Do what is in the company’s best interest. But those who could not adapt found that their tenure at Netflix was stressful and short-lived. There was pressure on newcomers to show that they had what it took to make it at Netflix those who didn’t were let go. “Reed would say, ‘Why are we coming up with performance plans for people who are not going to work out?’ ” McCord says. Instead, Netflix simply wrote them a check and parted ways.

McCord also convinced Hastings that he should ask himself a few times a year whether he would hire the same person in the same job if it opened up that day. If the answer was no, Netflix would write a larger check and let the employee go. “If you are going to insist on high performance,” McCord says, “then you have to get rid of the notion of retention. You’ll have to fire some really nice, hard-working people. But you have to do it with dignity.

“I held the hands of people weeping, saying, ‘I want to be here forever,’ ” McCord says. “I would tell them, ‘Nothing lasts forever.’ I would say to Reed, ‘I love them, too, but it is our job to be sure that we always have the right people.’ ”

In 2004, the culture was codified enough for Netflix to put it on a sequence of slides, which it posted on its corporate website five years later. It is an extraordinary document, 124 slides in all, covering everything from its salaries (it pays employees what it believes a competitor trying to poach them would) to why it rejects “brilliant jerks” (“cost to effective teamwork is too high”). The key concept is summed up in the 23rd slide. “We’re a team, not a family,” it reads. “Netflix leaders hire, develop and cut smartly, so we have stars in every position.”

After Hastings, the executive I spent the most time with at Netflix was Yellin, a former independent filmmaker who joined the company in early 2006, when he was in his early 40s. Yellin quickly distinguished himself by pushing back hard whenever he thought Hastings was wrong about something. “There was a culture of questioning, but I pushed the envelope,” he says. He also helped develop a style of meeting that I’d never seen before. At the one I sat in on, there were maybe 50 people in a small circular room with three tiers of seats, like a tiny coliseum, allowing everyone to easily see everyone else. The issue at hand seemed pretty small to me: They were discussing whether montages on the opening screen of the user interface would be more effective in keeping subscribers than still images or trailers. But the intensity of the discussion made it clear that the group took the matter very seriously. Various hypotheses had been tested by sending out montages to 100,000 or so subscribers and comparing the results with another 100,000 who got, say, still images. (This is classic A/B testing, as it’s known.) Every person present had something to say, but while there were strong disagreements, no one’s feathers seemed ruffled.

One of my last interviews at Netflix was with Tawni Cranz, the company’s current chief talent officer, who started under Patty McCord in 2007. Five years later, McCord, her mentor, left. When I asked her why, she visibly flinched. She wouldn’t explain, but I learned later that Hastings had let her go.

It happened in 2011, after he made his biggest mistake as chief executive. He split Netflix into two companies — one to manage the DVD business and the other to focus on streaming. Customers were outraged for many, the move meant a 60 percent price increase if they kept both the DVD and the streaming service. With complaints mounting and subscribers canceling, Hastings quickly reversed course and apologized. In the three weeks following this episode, the price of Netflix shares dropped 45 percent, and Wall Street questioned the company’s acumen. Hastings decided to re-evaluate everyone in the executive ranks, using the litmus test McCord taught him: Would he hire them again today? One of the people this led him to push out was McCord.

“It made me sad,” she said when I called to ask her about it. “I had been working with Reed for 20 years.” Netflix had just given the go-ahead to “House of Cards,” and McCord said she “didn’t want to walk away in the middle of the next thing.”

But she also felt a sense of pride. She was gratified that Hastings had taken her advice so thoroughly to heart.

Bill Murray, wearing a tuxedo with no tie, stepped out of a black car and meandered through a throng of people toward Ted Sarandos. It was a crisp night in December, and Murray had just arrived at the New York premiere of “A Very Murray Christmas,” a loosely structured, thinly plotted musical-comedy special directed by Sofia Coppola and including guest appearances by George Clooney, Chris Rock, Michael Cera and others. In the fall of 2014, when Coppola and Murray first cooked up the idea, they went straight to Sarandos. By then, a year and a half after “House of Cards” became available, Netflix had a reputation for deep pockets, marketing savvy and a hands-off policy with the “talent.” The idea of doing away with a pilot, born of desperation when Sarandos was wooing Fincher, had now become Netflix’s standard practice, much to the delight of producers and directors.

“Ted,” Murray said, as they shook hands warmly, “you should get a promotion.” He grabbed Sarandos by the lapels, pulled him close and added loudly, “You are the future!” The two men laughed uproariously.

From the time he arrived at Netflix in 2000, Sarandos has had the final say on both Netflix’s licensing deals and its original programming. An Arizona native, Sarandos was working for a large video-retail chain when Hastings hired him to negotiate DVD deals directly with the studios. Sarandos had been in love with movies all his life: He worked his way through college by managing an independent video store. If he had chosen a different path, it’s easy to imagine him having become a traditional Hollywood executive instead of an industry antagonist.

When the networks complain about Netflix, Sarandos is the one who usually shoots back. Netflix doesn’t publish ratings! Ratings, he says, are irrelevant to Netflix because the only number that matters is subscriber growth Netflix doesn’t need to aggregate viewers for advertisers, and it doesn’t care when consumers watch their shows, whether it’s the day they are released or two years later. Netflix spends too much money for its shows! “Big Data helps us gauge potential audience size better than others,” Sarandos told me.

At an investment conference late last year, David Zaslav, the chief executive of Discovery Communications, which operates the Discovery Channel, articulated the case for having networks rethink their relationship with Netflix. Streaming video-on-demand platforms “only exist because of our content,” Zaslav said, in an obvious reference to Netflix. “To the extent that our content doesn’t exist on their platforms — not to be too pejorative — they are dumb pipes. We as an industry are supporting economic models that don’t make sense.”

Sarandos, who had spoken earlier in the day, had clearly anticipated the criticism: “Zaslav says that we built a great business on their content,” he said. “That’s just not true. We did not renew their deal when they wanted a premium. So we replaced it with other programming that got us just as many viewers for less money.”

Those who think Netflix will come to dominate television have a simple rationale: Netflix has exposed, and taken advantage of, the limitations of conventional TV. The more time people spend on Netflix — it’s now up to nearly two hours a day — the less they watch network television. “Our thesis is that bingeing drives more bingeing,” says Greenfield, the Wall Street analyst. “Once people start watching shows that don’t have commercials, they never want to go back. Waiting week after week for the next episode of a favorite show,” he says, “is not a good experience for consumers anymore.”

Still, despite the rise in Netflix’s share price over the past few years, the company has no shortage of doubters on Wall Street. Some distrust Netflix’s numbers, arguing that millions of people no longer watch the service anymore but keep their subscriptions because they are so inexpensive. Netflix has announced that it will raise prices this year, and the Netflix skeptics believe the price increase will cause subscribers to cancel in droves. Other critics note the slowdown in the growth of domestic subscribers, by far the company’s most profitable segment. In addition, Netflix, between its content costs and the cost of adding subscribers, is spending more than it collects in revenue. How long can that continue?

Finally, the pessimists point out that Netflix makes very little profit: In the first quarter of this year, for instance, Netflix had nearly $2 billion in revenue but only $28 million in profit. Despite the significant moves by Netflix into original programming, Wall Street still values Netflix more like a platform company — a business that uses the internet to match buyers and sellers, like Uber — than a content company, like a studio or a network. Its valuation is currently $5 billion more than Sony, for example. Hastings, who has been very blunt about the company’s strategy of plowing money back into the business, has promised bigger profits sometime in 2017. Whether he can deliver on that promise will be a significant test of investors’ faith in him.

One of the most prominent Netflix skeptics is Michael Pachter, a research analyst at Wedbush Securities, a Los Angeles-based investment bank. In his view, Netflix’s true advantage in the beginning was that it had the entire game to itself, and the networks, not realizing how valuable streaming rights would be, practically gave them away. He had a “buy” on the stock from 2007 to 2010, he told me. But, he added, referring to those years when Netflix had streaming all to itself, “If it’s too good to be true, then it will attract competition.”

Now, he said, the networks and studios are charging higher fees for their shows, forcing up Netflix’s costs. Netflix doesn’t own most of the shows that it buys or commissions, like “House of Cards,” so it has to pay more when it renews a popular show. In addition to the money it now spends on content, it also has more than $12 billion in future obligations for shows it has ordered. The only way it can pay for all of that is to continue adding subscribers and raise subscription rates. And even then, Pachter says, the networks will extract a piece of any extra revenue Netflix generates. “It is naïve to think that Netflix can raise its price by $2 a month and keep all the upside,” he said. “I defy you to look at any form of content where the distributor raises prices and the supplier doesn’t get more. That’s the dumbest thing I ever heard.

“Netflix,” Pachter concluded, “is caught in an arms race they invented.” He compared Netflix to a rat racing on a wheel, staying ahead only by going faster and faster and spending more and more: As its costs continue to go up, it needs to constantly generate more subscribers to stay ahead of others.

And if that doesn’t happen? If subscriber growth were to stall, for instance, then Wall Street would stop treating it as a growth stock, and its price would start falling. Slower growth would also increase the cost of taking on more debt to pay for its shows. The company would be forced to either raise subscription prices even higher or cut back on those content costs or do both, which could slow subscriber growth even further. Netflix’s virtuous circle — subscriber growth and content expenditures driving each other — would become a vicious circle instead.

Five years from now, will the networks have taken the steps they need to prevent Netflix from dominating television? Will they have improved their technology, withdrawn most of their shows from Netflix or embraced streaming without sacrificing too much of their current profits? Or is Netflix in the process of “disintermediating” them, offering consumers such an improved viewing experience that the networks will instead be pushed to the sidelines?

Matthew Ball, a strategist for Otter Media, who writes often about the future of television, thinks the latter is more likely. He says that today, when you have a cable subscription, you have access to hundreds of channels — in effect, they all share you as a customer. The cable bundle puts you in a television ecosystem, and you flip from one show to the other depending on what you want to watch. In the emerging on-demand world, television won’t work that way: All the networks will have their own streaming service and customers will have to pay a fee for every one. The days when networks could make money from people who never watch their shows will end.

One consequence is that networks will have to have one-on-one relationships with their viewers — something they have little experience with, and which Netflix, with its ability to “personalize” its interactions with its 81 million customers, has mastered. Another consequence is that as streaming becomes the primary way people watch television, they are highly unlikely to pay for more than a small handful of subscription-TV networks. What they will want, Ball believes, is a different setup: companies that offer far more programming than any one network can provide. Netflix, clearly, has already created that kind of ecosystem. “Netflix is ABC, it is Discovery, it is AMC, it is USA and all the other networks,” Ball said. “Its subscribers don’t say, ‘I love Netflix for Westerns, but I’ll go somewhere else for sci-fi.’ The old model just doesn’t work in an on-demand world.”

In this vision of the future, Netflix’s most potent competitor is likely to be Amazon, which is also developing an extensive array of content, including many of its own original shows. Early on, it, too, produced a highly praised series, “Transparent.” It, too, has no allegiance to the cable bundle. And it has the kind of revenue — exceeding $100 billion — that neither the networks nor Netflix can approach. Compared to the networks, Netflix may have an imposing war chest, but in a fight with Amazon, it would be outgunned.

According to Ball, what Netflix is counting on to maintain its primacy and to start making big profits is “unprecedented scale.” That’s where the effort to create a global network, the one that was announced in January at the Consumer Electronics Show, comes in. In April, when the company announced its first-quarter results, it said it had added 4.5 million international subscribers. Yet success, and profits, are still some way off, as Hastings is the first to acknowledge.

YouTube, he notes, is available in more than 50 languages Netflix can be seen in only 20 languages. Netflix was primarily attracting people in its new countries who speak English as it races to “localize” its service in each country. Netflix is ordering shows with an international flavor, like “Narcos,” but so far it has only a handful up and running. Netflix wants to make “the best Bollywood movie that’s ever been produced,” Hastings told an Indian publication it wants to make Japanese anime it wants to make local films for every market it wants global rights when it licenses shows — something that, once again, contravenes Hollywood’s conventional business model, in which rights are sold on a country-by-country basis. The company still has much to learn about each country’s quirks and tastes and customs, and it will be a while before it can hope to earn a profit from its global customers.

To my surprise, Hastings spoke to me about the current moment as a “period of stability.” It took me a while to understand what he meant, given how unstable the television industry seems to be right now. But Netflix has spent much of its existence zigging and zagging, responding to the pressures of the marketplace.

“When we were in the DVD business,” Hastings said, “it was hard to see how we would get to streaming.” Then it was hard to see how to go from a domestic company to a global one. And how to go from a company that licensed shows to one that had its own original shows. Now it knew exactly where it was going. “Our challenges are execution challenges,” he told me.

Asked what the competitive landscape would look like five years in the future, he returned to the analogy he used earlier with the evolution of the telephone. Landlines had been losing out to mobile phones for the past 15 years, he said, but it had been a gradual process. The same, he believed, would be true of television.

“There won’t be a dramatic tipping point,” he said. “What you will see is that the bundle gets used less and less.” For now, even as Hulu and Amazon were emerging as rivals, he claimed that the true competition was still for users’ time: not just the time they spent watching cable but the time they spent reading books, attending concerts.

And Hastings was aware that even after the bundle is vanquished, the disruption of his industry will be far from complete. “Prospective threats?” he mused when I asked him about all the competition. “Movies and television could become like opera and novels, because there are so many other forms of entertainment. Someday, movies and TV shows will be historic relics. But that might not be for another 100 years.”


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“I don’t get it” is no excuse – Facebook, Linked-in, Twitter, MySpace, Plaxo

Lock-in causes us to keep moving in the same direction, to continue behaving the same way, even when competition and market shifts makes it a surety that the direction we're heading will produce poorer returns.  Blacksmiths who ignore the shift to automobiles.  Printers who ignore the shift to photocopiers.  As I often point out, unless something attacks the Lock-in, we are amazingly able to keep right on going the same direction – blithely ignoring the inevitable problems.

"I read Playboy for the articles" is a Harvard Business School Working Knowledge article which outlines just how far we all will go to avoid dealing with internal conflicts caused by undertaking behavior we know is unjustifiable. (Download full pdf text of White Paper here.)  According to the article:

  • Because people do not want to be perceived as (or feel) unethical or
    immoral, they make excuses for their behavior—even to
    themselves.
  • People cope with their own questionable actions in a number of ways by rationalizing, justifying, and
    forgetting—a remarkable range of strategies allowing them to maintain a
    clear conscience even under dubious circumstances.

Which leads me to the #1 excuse I hear.  "I don't get it."  I bring up to people – especially those who are over 35 – the power of modern technology tools.  For example, ask a 40 year old why two 20 year old girls sitting across a table will text each other and the answer is "I don't get it."  Tell them you know teenagers who spend more time at the computer monitor on-line than watching TV and the answer is "I don't get it."  Hear someone say "my cell phone is more important than my car" and you hear "I don't get it.'  And the biggest one of all, tell this person they need to open up accounts and go everyday to Facebook, Linked-in, Twitter, MySpace and Plaxo and you hear "you're kidding – right?  Why anyone spends time on those – I don't get it." 

Every time I hear "I don't get it" I wince.  Because that person just admitted "I'm willing to get out of step with the market, and risk having my skills become obsolete.  I'm happy doing what I do, and I don't see why I need to doing something new and different.  I'm sure the world is not evolving away from me, and I've chosen to remain Locked-in to where I've been rather than learn what's going on with these new solutions."  See what I mean?  When you read my interpretation makes you wince, doesn't it?

Our parents used to tell us when we talked on the telephone "Why don't you just go to their house, I don't get it." When we listened to rock-and-roll "Your music makes no sense, I don't get it."  When we thought everybody needed a car they'd say "We always walked, why do you need a car?  I don't get it." 

"I don't get it" is the proverbial excuse justifying Lock-in.  It allows us to walk away from a shift that's right in front of us, and remain stuck.  It allows us to feel like we're OK to remain – well — ignorant

So, the next time you hear yourself saying "I don't get it" it's time to stop, Disrupt yourself, and find some time to get it.  It's time to review your willingness to remain Locked-in, and invest some resources in trying new stuff instead of Defending & Extending.  Because if you do create some White Space you can learn – and the first who "get it" will be the ones who do best in the market, getting the best results.

PART 2 – a personal extension for those with time to read.

When my son died last week, at age 21, he left a brother age 20 and a brother age 18.  He also left hundreds of friends his own age.  These people shared what all of us shared at that age – a deep desire to talk to each other, to communicate, to cry in groups, to grieve, to find things in the past that made them happy.  To capture time in a bottle by reflecting on Alex's life.  And they also shared the simple fact that they have almost no money, precious little time, and a host of responsibilities to school, family and work.

30 years ago my generation would have made a few phone calls.  Maybe a few of us gotten together for an hour.  But our talks would have been mostly a small group, and for a short time.

The last week I've been living on Facebook, Linked-in, Twitter, et.al.  I have used all these tools for at least several months, and in some cases years.  But I used these through the filters of my history.  I saw them as extensions (D&E) of old ways I communicated.  Finally, now, I get it.  These communities are an entirely different way of communicating.  I different way of building a community.  And in many ways, it is MORE vibrant and more honest than anything ever before.  LIkewise, it is real time.  And it is open to everyone. It is extraordinarily effective.  And it is unbelievably healthy.

For those who question their child's life on-line, you are looking from your historical reference.  What happens in this environment is incredibly open – thus very informative.  It is remarkably honest – in ways everyone finds very hard to be face-to-face.  And it is very fast.  There are no boundaries – no race, no origin questions, no location questions, no income questions.  It is the most egalitarian, comprehensive method of creating a self-forming community to accomplish a goal I've ever seen.  Way beyond anything I've ever seen my generation accomplish by developing plans and subsequently focusing on execution. 

Within hours, my son's friends found out he had died 500 miles away – and his Facebook page exploded.  It became a central hub to exchange information of all kinds about his accident, his life, his funeral.  Within hours almost his entire world new what happened – far faster than any "family call chains" we ever created.  As they searched to learn more, within a day someone found a video of the accident scene and the helicopter whisking him away —- something that would have taken my generation weeks to find (if at all) and share.  And the videographer was put in contact with me, able to give me first-hand info about the accident scene. 

His brother created a new Facebook site dedicated to honoring Alex the next day.  Within hours 200 people were hooked up.  Before week end the number went to 400.  This became universe central for this topic.  There was no CEO.  No Director of communications.  Just a self-organizing activity that brought together hundreds of people who wanted to talk about Alex.  Very effective discussion.

Since Alex's 22nd birthday is 9/30 – some spontenous person said a birthday party should be thrown.  Within hours an event had been created, and hundreds were talking about whether they could attend or not (by the way, it's going to be on 10/2 in Chicago.)  All kinds of talk about who had to work, who could come, what to bring.  Again, self-organizing and spontaneous and remarkably effective.

By the time the newspaper published an article on the accident, and my son's obituary, it was so old news I don't think anybody cared.  And certainly the only people who learned this way were those who were – over 40. 

If you aren't using these tools – if you don't "get it" – this is one place I would recommend some personal White Space investment.  If you do, the payoff is extremely high.  If you don't, you're likely to find yourself as out of date as cobblers and blacksmiths faster than you think.


Global CFO Signals: A Runway for Growth

For several quarters now, CFOs globally have shared similar concerns—in particular, where the European and Chinese economies were headed and what effect the crises in the Middle East and the Ukraine would have on future growth. With some of those fears tempered and others being managed, many CFOs have the opportunity and wherewithal to focus on corporate growth. And judging by the results of the 17 countries reporting in the Q1 2015 edition of Global CFO Signals report from Deloitte Touche Tohmatsu Limited (DTTL), many intend to take advantage of the opportunity.

The evidence is apparent in the strength of sentiment in several countries. In Australia, for example, CFO optimism has rebounded solidly in the wake of the lowering of interest rates in February. The number of CFOs in Spain reporting higher optimism (71%) reflects perceived continued momentum in that country’s economy. And in North America, CFOs recorded their ninth consecutive quarter of positive net optimism.

That optimism is translating into growth strategies, particularly through organic means, in several countries, including Ireland and Italy. And positive revenue expectations can be seen among most countries reporting. Topping the list is the U.K., where 82% of CFOs expect an increase—well above their long-term average.

As is common, there are some problem areas. In Switzerland, for example, where many CFOs were taken by surprise by the recent removal of the exchange-rate floor, a net 80% now rate the level of uncertainty as high. In Norway, CFOs are troubled by low oil prices, and in other countries economic uncertainty still weighs heavily.

“Overall, however, there have been some very positive signs on the European economy in the wake of the European Central Bank’s easing of monetary policy,” notes Dr. Ira Kalish, chief global economist for DTTL. In addition, he says, “the big drop in oil prices has reverberated positively throughout most of the global economy.”

Still, Dr. Kalish notes, there are reasons why levels of uncertainty are on the rise among CFOs this quarter, including the direction of the U.S. dollar, demand in overseas markets, such as China, and government policies. In the U.K., for example, uncertainty about post-election reforms was seen as the greatest threat to U.K. business, according to that country’s CFOs, who were surveyed before the voting. It’s one reason defensive strategies, such as cost cutting and increasing cash flow, reemerged as top priorities there—and never seem to go out of favor among CFOs.

Results by Region

How does CFO sentiment in Q1 2015 break down? And who will take advantage of the current runway for growth? Following is a synopsis by region.

The streak continues in North America: net optimism now sits at its second-highest level during a nine-quarter positive run. Moreover, emboldened by the strength of the region’s economy and the prospects for that economy, CFOs indicated their highest-ever bias toward growing revenue over cutting costs and toward investing cash over returning it to shareholders. And that confidence is translating into domestic hiring expectations, which now stand at 2.4%, matching the highest levels seen in four years. The tumultuous quarter in the energy sector, however, contributed to a dip in sales expectations, which fell to 5.4% from 6.0% the previous quarter. Capital spending expectations also declined slightly from 5.5% to 5.2%, but earnings expectations rose from 9.7% to 10.6%. On the other hand, in the one South American country reporting—Argentina—CFO outlooks remain tempered due to an apparent lack of confidence in the government’s ability to enact effective economic policies.

Australia and New Zealand

After three sluggish quarters, Australia’s CFOs are feeling much more upbeat with net optimism at 21%, up from 6% in Q4 2014. Driving that trend is a lower Australian dollar and record low interest rates, with more than 90% of CFOs now expecting the dollar to sit at or below US .80 in 12 months’ time. In addition, even though uncertainty is up, more than half of CFOs believe now is a good time to take on risk—up 24%—perhaps because policy uncertainty and a slowing China haven’t negated the strong underlying drivers of “lower for longer” interest rates and a falling exchange rate. Meanwhile, in nearby New Zealand, the third annual CFO survey finds finance chiefs optimistic, but a little less so than a year ago. And while they are bullish on both their country and companies, their main strategies for expansion are very much linked to growing existing businesses through organic expansion and the introduction of new products or markets.

Not surprisingly, there is much diversity across Europe. Spain’s CFOs, for example, are the most optimistic (net 67%) reflecting improvements in that country’s growth prospects following a double dip recession. At the other end of the spectrum, Switzerland’s CFOs are the least optimistic (net -58%) thanks to the appreciation in the Swiss franc. What CFOs seem united on, though, is that uncertainty is on the rise. CFOs in all major European countries surveyed, except Ireland and Norway, see a greater level of financial and economic uncertainty facing their businesses. In response, defensive strategies are particularly in favor in Europe, and cash is listed as a concern among nearly all countries surveyed. That is not taming their business expectations, however.

Most CFOs (except Switzerland’s) report strong expectations for revenue—particularly in Belgium, Germany, Ireland, Italy, Spain and the U.K. Ireland’s CFOs also are reporting solid increases in capital spending and hiring. Going forward, the CFOs also seem to know what measures should be taken to increase their prospects and resolve the current euro area growth crisis. In a special question asked in the inaugural European CFO Survey, the CFOs favored an increase in national structural reforms followed by an increase in public/pan-European investment spending. For more information, view the complete report at www.deloitteresearchemea.com.

Other Report Highlights

Risk—Appetite for risk is highly relative this quarter. In the U.K., a solid 51% of CFOs say now is the time to take greater risk onto their balance sheets—but that is actually a two-year low. The figure also stands at 51% in Australia, but that is a marked improvement fueled by the recent lowering of interest rates. And while just under a third of Germany’s CFOs cite an appetite for risk, that’s the highest level in three years. Meanwhile in Austria fears of increased regulation, among others, have led to the lowest level (11%) in this survey.

Uncertainty—Uncertainty continues to cause consternation. The CFOs of Germany and Switzerland, two countries that have historically benefited from overall stability, perceived the highest levels of uncertainty, at net 82% and 80% respectively. In Australia, uncertainty remains high despite the positive influence of lower interest rates and a weaker Australian dollar. Much lower levels were reported by CFOs in Italy, Norway, and Ireland, where a net 9% of CFOs view the external environment as uncertain, down from 55% last quarter.

Metrics—Revenue expectations remain solid. Some 82% of CFOs in the U.K. and Italy expect their revenue to rise in the next 12 months as do 79% of Australia’s CFOs. Moreover, half of Sweden’s CFOs say their companies can grow 4% to 6% in that time. Positive margins outlooks are also reported in Italy (77%), Finland (65%), and Belgium (62%), among others. In Switzerland, however, the exchange-rate situation has CFOs rethinking forecasts: just 17% expect revenue to rise, and there is a sharp decline in margin expectations.

Hiring—Globally, the news on the job front is somewhat encouraging. Domestic hiring expectations in North America, for example, rose to 2.4%, matching their highest level in two years. In Ireland, 70% of CFOs surveyed expect employee levels to increase over the next 12 months, as do almost 40% of Australian CFOs. In Switzerland, however, 59% of finance chiefs expect the number of employees in their companies to decrease in the next 12 months, and 25% of Finland’s CFOs expect cuts domestically in the next six months.

Corporate strategy—Many CFOs continue to eye growth. North America’s CFOs indicate their highest-yet bias toward growing revenues and investing cash. In Ireland, 82% of CFOs believe their company’s strategy is expansionary, particularly through organic means. Meanwhile, other countries, such as New Zealand and Italy also cite new product and new market introductions. Still, the importance of defensive strategies remains strong.

M&A activity—The ingredients for increased M&A remain: strong balance sheets, available financing and perceived opportunities. Some 96% of the Netherlands’ CFOs expect M&A activity to increase in the next 12 months, as do 83% of Spain’s, and the number is 67% among Finland’s CFO if you add in divestitures. In Belgium, 40% of CFOs have expansion through M&A activity on their list of business priorities.

About Global CFO Signals Survey

The purpose of Deloitte Touche Tohmatsu Limited’s Global CFO Signals report is to provide highlights of recent CFO survey results from Deloitte member firms. This issue includes the results of the first-quarter 2015 CFO surveys from Deloitte member firms in the following geographies: Argentina, Australia, Belgium, France, Finland, Germany, Italy, Netherlands, New Zealand, North America, Norway, Spain, Sweden, Switzerland and the United Kingdom. See page 31 in the report for member firm contacts and information on the scope and survey demographics for each survey.