Activist Hedge Fund Positions

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Buffett's Berkshire invests in Restoration Hardware, whose shares rise

Is Your TV Service a Streaming, Confusing Mess, Too?

(Bloomberg Opinion) -- When I read my colleague Tara Lachapelle’s column on Wednesday about how the “great unbundling” of cable television could turn into the “great re-bundling,” I had to chuckle. It was inevitable that once consumers got a taste of what an unbundled world looked like, they would begin to appreciate some of the virtues of the once-despised cable bundle.Yet not many people realized that a decade or so ago, when talk about a-la-carte television (as unbundling was then called) was all the rage. Back then, it seemed so simple. As cable bills grew more expensive, consumers questioned why they were forced to take — and pay for — 300 channels when they only really watched 9 or 10. Wouldn’t it make more sense to just get the stations they cared about? More to the point, wouldn’t it be cheaper once they were rid of the 290 stations they didn’t want? Obviously, the bundle was the problem.In Washington, two successive Republican chairmen of the Federal Communications Commission, Michael Powell and Kevin Martin, were big advocates of a-la-carte television back in the 2000s. Gene Kimmelman, an executive with Consumers Union, the publisher of Consumer Reports,  told me in 2007 that a-la-carte television “would create marketplace pressure to reduce prices.”  I wrote about cable television frequently in the mid-2000s, and the reader feedback was almost unanimous. “What we really need is a la carte TV,” one reader wrote. “That way I can buy what I want rather than what someone forces into my TV.”The one person I knew who never bought the hype was a Wall Street analyst named Craig Moffett. Today, Moffett is a partner at MoffettNathanson LLC, a research boutique he co-founded in 2013. When I first got to know him, he was with Sanford C. Bernstein & Co. LLC(1) covering the telecom and cable industries. I recently went back and looked at his old research — not only because it has turned out to be prophetic, but because a-la-carte television is a good example of why we should be careful of what we wish for.What Moffett understood, and unbundling’s proponents didn’t, was that the economics of cable was, in one important sense, illusory. Cable companies paid stations based on the number of total subscribers — not on the number of people who actually watched. This system had two big benefits. It allowed niche stations without a lot of advertising to reap enough revenue to make a go of it. And it allowed the more popular stations to charge more for advertising than if they were unbundled.Without the cable bundle, Moffett said, many of the niche channels wouldn’t survive. And the bigger ones would have to charge so much that it wouldn’t be long before consumers were paying more for their 10 channels than they had for 300.One example he used in a note to clients in 2007 was Black Entertainment Television.  Without the cable bundle, Moffett estimated that BET would need to raise its subscription price by 588% to maintain its revenue at the time — and that would have only been possible if every African-American household in the U.S. subscribed. “If just half opted in — a wildly optimistic scenario — the price would rise by 1,200%,” he wrote.Moffett saw early on that streaming, barely a blip on the horizon, would disrupt the bundle. During this past decade, millions of American households have cut the cord. Perhaps more important, according to one survey, almost three-fourths of all U.S. households subscribe to at least one streaming service like Netflix or Hulu.Streaming obviously has a lot of upside. The quality of a typical, streamed TV show today is superior to the vast majority of shows the networks used to offer. Being able to watch on demand is a blessing. The fact that shows on Amazon Prime or Netflix have no ads, well, who doesn’t love that?But there have also been downsides, just as Moffett predicted. Let’s face it: you’re not really saving money. I pay $15.99 a month for a Netflix premium subscription, $11.99 for Hulu premium (which means no ads), $14.99 for HBO NOW, $11 for Showtime, and $4.99 for the new Apple TV service. If I decide to add Disney+ that’ll be another $6.99 a month.Because I’m a sports fan, I need a way to get ESPN and ESPN 2, which remain tethered to the bundle because their costs are so enormous they would simply be unaffordable as stand-alone streaming services. I’ve been using PlayStation Vue’s mini-bundle, which costs $54.99. Sony Corp. recently announced it will be ending the service at the end of January, so I’ll have to find a replacement. But they’re all in the same basic price range.When you add it all up — something I’d avoided doing until I wrote this column — it comes to $113.95. A month. Ouch. And that doesn’t include the $12.99 a month I pay to be an Amazon Prime member, which gives me access to shows like “Fleabag” and “The Marvelous Mrs. Maisel.”Here’s another data point. Remember Moffett’s prediction about what would happen if BET left the bundle? We now have the proof.  Cable subscribers pay 27 cents a month for BET, according to research from Kagan, a media research group within S&P Global Market Intelligence. A subscriber to its spanking new streaming app, BET Plus: Try $9.99. So much for all the money we were going to save.The other problem, as Tara noted in her column, is the frustration that has come with dealing with all these different services. It means “knowing which TV programs and movies reside where, having to toggle among those different apps — which isn’t as smooth as simply channel-surfing — and managing multiple monthly subscriptions,” Tara wrote.Wouldn’t you know it: Moffett saw this coming too. In 2006, he wrote a tongue-in-cheek note to clients from sometime in the future. Streaming, he predicted, had become a burden:The complexity was overwhelming. Forgotten passwords. Balky navigation. And lord, were the subscription fees astronomical, what with the average consumer having to sign up for six or seven different companies’ offerings in order to satisfy all the different members of the family.The solution, Moffett projected, would come from a clever entrepreneur with a once-in-a-lifetime idea:What if we could aggregate all the channels in one place? Disney, Fox, Turner, ABC, NBC, YouTube, CBS, MTV, the whole works, accessible from a single source. For one monthly subscription, we could bring viewers all of this amazing content, smoothly and easily! One navigation framework. A single interface. One bill. All the channels at your fingertips. And even huge libraries of content, available on demand!!!We’re not there yet. But we’re heading in that direction. It won’t be cheap. But I have my own prediction: This time around, nobody’s going to be complaining about the bundle.(1) The firm is now known as AllianceBernstein L.P.To contact the author of this story: Joe Nocera at jnocera3@bloomberg.netTo contact the editor responsible for this story: Timothy L. O'Brien at tobrien46@bloomberg.netThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Joe Nocera is a Bloomberg Opinion columnist covering business. He has written business columns for Esquire, GQ and the New York Times, and is the former editorial director of Fortune. His latest project is the Bloomberg-Wondery podcast "The Shrink Next Door."For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.

How Amazon’s Klutzy Politicking Backfired in Seattle

(Bloomberg Opinion) -- For a company that is so good at so many things, Amazon is remarkably bad at politics.Exhibit A is the latest debacle in its hometown of Seattle, where the company’s push to seat a more politically moderate city council backfired. Campaign cash aimed at producing a less tax-happy council triggered the opposite result and turned a socialist headed for defeat into a martyr.Amazon has never been known for subtlety. The $1.45 million it spread around in political contributions to City Council candidates not only set a record, but also changed the trajectory of the election. Polls showed that voters who were poised to replace some leftist council members changed course. After Amazon’s donations became public, they elected five of seven candidates opposed by a business coalition. One of them was Councilmember Kshama Sawant of the Socialist Alternative party, who declared her come-from-behind re-election victory in front of a giant red sign that declared, “Tax Amazon.” Which the newly Amazon-unfriendly council almost certainly will do.Amazon employs 54,000 people in Seattle and owns or occupies 47 buildings there. That’s made the city seem like the biggest company town in the U.S., and has probably blinded Amazon’s leaders to the angst and tumult they’ve unleashed in a place that’s become both more prosperous and less livable.Sawant, who managed less than 40% of the vote in the August primary, went so far as to call Jeff Bezos, Amazon’s founder and chief executive, “our enemy,” and described her victory as a win for working people against the world’s richest man.“Amazon overplayed their hand,” said Egan Orion, the candidate who lost to Sawant. “I wasn’t able to make my closing arguments. There was so much noise.”Once Amazon donated in such a big way, the race became nationalized. Senators Elizabeth Warren and Bernie Sanders, the presidential candidates vying for the hearts of the Democratic Party’s left flank, chimed in via Twitter to trash the Amazon contributions.Here’s what Warren had to say:Here’s Sanders:Another winner, Tammy Morales, favors a bevy of local tax options to raise money for homeless services, housing and other needs. Her list includes revisiting an employee head tax similar to one Amazon successfully fought in 2018, plus a local estate tax and a tax on high salaries dubbed an “excess compensation tax.”Amazon has been trying to fine-tune its relationship with Seattle for years, and concern about relations with the City Council was among the reasons it announced in 2017 that it was looking for a second headquarters location — another endeavor that showcased the company’s limited political skills.That contest blew up in New York City when politicians and others protested the size of an Amazon enticement package — up to $3 billion in tax breaks and other incentives.In Seattle, Amazon had mostly maintained a quiet political presence until May 2018, when the City Council passed the Amazon Tax on larger companies, a head tax of $275 per employee.Amazon promptly announced that it would stop construction on one of its new buildings if the tax were imposed.The council then hastily repealed it when polls showed it could harm the council at the next election — the contest that ended so disastrously for the company this month.Starbucks, also headquartered in Seattle, took a different approach, donating a much smaller sum to the business campaign. A Starbucks executive also sent a letter to employees urging a vote for unspecified “change” and invited the public to have a cup of coffee. This was a subtle, defter move, in part because it was hard to tell exactly what the company was saying.At this juncture, perhaps after apologizing or remaining quiet a while, Amazon has a few choices. It could face probable new taxes gamely or think along the lines of Apple, which recently announced a $2.5 billion plan to ease the housing shortages and affordability crisis in California. Or take a page from Microsoft, the tech giant across Lake Washington from Amazon, which last winter offered a well received $500 million investment in affordable housing and homelessness relief across the region.To be fair, Amazon has invested in a homeless shelter in Seattle for families, Mary’s Place, which will eventually occupy eight floors in one of the new Amazon buildings. Mary’s Place does great work. But that answer to the enormous problem of homelessness and housing affordability now seems a trifle. The overall contribution to challenges facing the city is too small to those who believe Amazon needs to step up and invest in ways commensurate with its size and impact.To contact the author of this story: Joni Balter at jcbalter@gmail.comTo contact the editor responsible for this story: Jonathan Landman at jlandman4@bloomberg.netThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Joni Balter is a longtime Seattle columnist and writer who contributes to local NPR and PBS affiliates.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.

Icahn: Occidental Won't Hit Target Without Asset Sale

Activist investor Carl Icahn has urged the Occidental Petroleum management to immediately sell off some of its midstream assets following the $38 billion Anadarko takeover