Britain’s Leader in Bind of Own Making

Abstract: Prime Minister David Cameron of Britain has boxed himself in with one of his demands for renegotiating Britain’s relationship with the European Union. If Mr. Cameron doesn’t find a way of extricating himself from this position, Britain may quit the bloc. Mr. Cameron’s bind is entirely of his own making. A year ago, he decided that he needed to slow the flow of European Union citizens to Britain. Net migration was 180,000 in the year ended in June. The prime minister initially wanted to put a cap on migrant numbers, but he nixed that idea after he realized that other European Union leaders would block it. Free movement of people is one of the European Union’s core principles. Instead, Mr. Cameron decided to stop European Union migrants receiving “in-work” benefits until they had lived in Britain for four years. These payments are made to low-paid workers to top up their salaries. Mr. Cameron argued that the benefits were a big attraction to people from the rest of the European Union and made removing them the central demand of his renegotiation of Britain’s relationship with the bloc. This demand is not economically justified. Not only are European Union migrants good for the British economy, there isn’t much evidence that cutting in-work benefits would deter many people from going to Britain to work. But Mr. Cameron felt that the migration issue had become so hot domestically that he had to have some policy to address it. The snag is that the policy he chose is discriminatory — and nondiscrimination among citizens of different countries is an important European Union principle, even if not quite as sacrosanct as the free movement of people. In order to make the policy legal, the European Union’s treaty would have to be changed — an elaborate process that requires the consent of all 28 countries. Hence, the suggestion in some British newspapers in early December that Mr. Cameron would campaign to take Britain out of the European Union if other leaders didn’t immediately agree to a new treaty legalizing his demand. A referendum on whether Britain should stay in the European Union will probably be held next year but must take place by the end of 2017. Other leaders don’t want Britain to quit the European Union, for a host of economic and strategic reasons. The timing could be hardly worse given that the European Union is buffeted by multiple crises, including the influx of refugees, jihadi terrorism, the growth of right-wing populism and the lingering economic problems in the eurozone. Despite this, other European Union countries cannot bend over backward to accommodate Mr. Cameron. Some — like Poland, about 850,000 of whose citizens live in Britain — don’t want to sign a deal that would involve discrimination against their own people. Others are reluctant to set a precedent that any leader can get a special deal by threatening to quit the club. Mr. Cameron’s initial idea was to bring things to a head at a summit meeting in Brussels later this week. Fortunately, Mr. Cameron changed his mind after he was persuaded that he wouldn’t get his way. Although the issue will be discussed this week, he is now targeting a final deal at the next summit meeting, in February. A delay gives the chance for a compromise. There are three main options. From Mr. Cameron’s perspective, the best hope is that the other leaders agree now to let him ban European Union citizens from receiving in-work benefits when the bloc’s treaty is next revised. Although that could be many years away, he could claim he had got what he asked for. The second option would be for Mr. Cameron to impose the ban on in-work benefits in a nondiscriminatory fashion — for example, by denying them to Britons who hadn’t worked or lived in Britain for four years as well as newly arrived European Union citizens. The problem is that would hurt British youngsters or expats returning home, depending on the exact rules. It is hard for Mr. Cameron to agree to such a proposal because his government was forced into an embarrassing U-turn on reducing tax credits received by low-paid Britons in November. But after a couple more months, maybe he could swallow this pill. The final idea would be to abandon the ill-considered in-work benefits plan and instead get some other concessions from the European Union. Mr. Cameron is already close to securing a deal on issues that are economically more important, like protecting Britain from being marginalized by eurozone countries. Maybe the prime minister could also get an emergency brake to control the inflow of migrants if there was a really big surge in numbers. The snag is that this would wouldn’t reduce the current flow. What’s more, Mr. Cameron has made such a big deal out of in-work benefits that he will be hard-pressed to back down. But Mr. Cameron has to find some solution. Otherwise, he may indeed be forced to campaign to quit the European Union — something it still seems he really doesn’t want. Hugo Dixon writes a weekly column for Reuters Breakingviews. More financial commentary at breakingviews.com.

David Cameron
Immigration
Great Britain
EU


Wall St. Hiring in Anticipation of an Economic Recovery

Abstract: While much of the country remains fixated on the bleak employment picture, hiring is beginning to pick up in the place that led the economy into recession — Wall Street. The shift underscores the remarkable recovery of the biggest banks and brokerage firms since Washington rescued them in the fall of 2008, and follows the huge rebound in profits for members of the New York Stock Exchange , which totaled $61.4 billion in 2009, the most ever. Since employment bottomed out in February, New York securities firms have added nearly 2,000 jobs, a trend that is also playing out nationwide at financial companies, commodity contract traders and investment firms. Though the figures are small in comparison to overall Wall Street employment, executives, economists and headhunters say they expect the growth to pick up steam in the coming months. “I think we’re seeing some hiring in anticipation of better times,” said Rae Rosen, a regional economist at the Federal Reserve Bank of New York . “Wall Street typically hires in anticipation of the recovery, and there is a sense that the economy has bottomed out and is slowly improving.” The increase in hiring and cautious optimism stand in sharp contrast to the mood among workers in other fields, where jobs have been slow to return or are disappearing altogether. Since June 2008 the number of jobs has shrunk by nearly 14 percent in manufacturing and by 22 percent in construction, but only by 8.5 percent in the financial industry nationwide. It is also the opposite of what is going in other highly paid, white-collar professions like law, where employment nationwide in June was the lowest since late 2001, according to data from the Bureau of Labor Statistics . The financial work force in New York has shrunk by more than 28,000 since its peak in January 2008, but is still slightly above its level in 2003 after the tech bubble burst, meaning it actually weathered this recession — the worst since the Depression — better than the previous one. Nationally, staffing is back to where it was in late 2005, while employment in the overall economy is near 2004 levels. As hiring has picked up on Wall Street, salary packages recalling the boom years are reappearing at the most senior levels. Richard Stein, president of Global Sage, an executive search firm, said corporate clients had offered compensation packages worth more than $1 million annually to 12 candidates in recent weeks. “The offers are not near where they were in 2006, but there is still a war for talent,” he said. “Everyone thought the ice age had returned, but the thaw has come and we’re in catch-up mode.” For the local economy, Wall Street’s rebound is a rare bit of good news. New York City is cutting services like day care and adult literacy programs to help balance its budget, while Albany is facing a $9.2 billion deficit in the state budget this year. “These are jobs that bring a lot of money into the city and have an impact that is out of proportion to their number,” said Carl Weisbrod, former president of the Alliance for Downtown New York and the president of Trinity Real Estate. That has a critical effect on city and state finances, driving both tax revenue and job creation. Each job in the securities sector generates two additional positions in New York City, according to the federal Bureau of Economic Analysis. In part, that is because the average salary is much larger, with Wall Street employees earning an average of $392,000, compared with $63,875 for other workers in the city. “It’s a big deal for both the city and the state,” said Robert D. Yaro, president of the Regional Plan Association , a leading independent planning group. “This is a significant turnaround.” Twenty percent of the state’s tax revenue comes from the financial sector, he said, while Wall Street accounts for about 12 percent of the city’s budget. The hiring is not just a local phenomenon. Major investment banks are quietly rebuilding their global work forces. Goldman Sachs added 600 jobs worldwide in the first quarter, while JPMorgan ’s investment bank has hired slightly more than 2,000 people globally since the beginning of the year. Closer to home, Credit Suisse ’s investment bank, based in New York, filled 600 positions in the first quarter, with a significant portion in New York. Deutsche Bank has hired 414 people in New York, including 98 directors and managing directors since the start of the year. Hiring is also picking up at boutique firms and at smaller foreign banks seeking a beachhead in New York. Nomura of Japan has been especially aggressive, recently hiring several top bankers from Deutsche Bank. Nomura’s New York-based securities unit has increased its staff to more than 1,700, from 1,000 in March 2009, and the bank says it will hire 300 more workers by March 2011. Macquarie, an Australian investment bank, has also rapidly expanded, even taking over new floors in its Midtown Manhattan headquarters to accommodate new trading operations. One morning last week, long rows of traders there worked the phones and watched a multitude of screens, evoking the heady days before the Bear Stearns and Lehman Brothers downfalls. “We are very bullish on the U.S.,” said Tim Bishop, who leads Macquarie’s United States operations. On Thursday, Macquarie added six fixed-income traders in New York, and it plans to announce the hiring of six equity traders on Monday. At Centerview Partners, a boutique investment bank that specializes in corporate advisory work, 10 bankers have joined the firm in New York this year, bringing its roster to 75. “I think hiring has turned the corner,” said Blair W. Effron, a former UBS vice chairman who was a founder of Centerview in 2006. To be sure, Wall Street has long been the quintessential boom-and-bust industry, hiring rapidly on the way up and shrinking even more quickly on the way down. Employment in the securities industry in New York was at 160,400 in May, up from the trough of 158,500 in February, but still well below its peak of 188,900 in January 2008, according to data prepared by the state comptroller’s office. As the nascent increase in jobs suggests, the recovery is still very fragile. And executives say it could halt or even reverse if earnings reports for the second quarter, which begin this week, are disappointing. As a result, some banks are hiring in stages, with one eye on the economy. In recent months, Morgan Stanley has hired 100 private bankers in the United States to serve wealthy clients but is holding off on plans to hire 400 more, waiting to see how the market performs. Still, top banks and brokerages remain well aware of their reputation for taking reckless risks in the pursuit of profits, and they insist they are not simply reanimating the trading desks and other brash operations that caused the problem in the first place. Of 400 recent hires in the sales and trading unit at Morgan Stanley, for example, the bank says only 100 are traders. For all the criticism of Wall Street’s recent excesses, the industry remains New York’s growth engine. “We’ve thought several times in recent decades that Wall Street was doomed and the city would go into decline,” said Kenneth T. Jackson , a professor at Columbia University and an expert on New York history. “The stock exchange goes back more than 200 years and has had lots of ups and downs, but like the city, it’s very resilient.”

Economy
Bank
Job Recruiting and Hiring
US Economy


Zeckendorfs Pay $40 Million for Park Avenue Church’s Air Rights

Abstract: The price of air in Manhattan apparently knows no bounds. The developers William L. and Arthur W. Zeckendorf are paying a record $600 per square foot this week for unused development rights, sometimes called air rights, so that they can add floors to a planned ultraluxury tower on 60th Street in the old Silk Stocking District, according to real estate executives. The prior record for the cost of air rights was set only last fall when another developer snapped up rights from an adjacent parcel in Chelsea for $500 a square foot for a planned tower at 21st Street and 11th Avenue. Now the Zeckendorf brothers are topping that number by paying more than $40 million for 70,000 square feet of air rights from Christ Church , at the northwest corner of Park Avenue and 60th Street. Prices for the 30 apartments in the new 51-story building are expected to fetch upward of $8,000 a square foot, which would be $48 million for a 6,000-square-foot apartment. “They’re building what I call a Viagra building: a tall slender tower with great views at a great location,” said Robert I. Shapiro, a real estate broker who specializes in these kind of deals. “What difference does it make if you pay $100 more per square foot if you’re selling condos at over $4,000 a square foot? But there aren’t many sites where you can do this.” Height matters, especially in an era when Russian oligarchs, Arab princes and South American billionaires are snapping up apartments for tens of millions of dollars in New York, which is considered a relatively safe haven for their capital. So developers are willing to pay a premium for development rights that will allow them to add more floors, building higher than they otherwise could. Under the city’s zoning code, a taller building could sit on the land occupied by the church. Air-rights rules allow the property owner to transfer the unused development rights — the difference between the existing building and what is allowed under the zoning code — to an adjoining property owner. Some other cities allow similar transfers, but only in Manhattan do the prices reach eye-popping levels. The Zeckendorf brothers built 15 Central Park West, one of the city’s most successful condominium buildings, which was designed by the architect Robert A. M. Stern, who will also design the new tower. New York is currently in the midst of a frenzied contest between two developers, Gary Barnett and Harry Macklowe, to build the tallest, most expensive residential building in North America, on 57th Street. “Height is where the profit is,” said Jonathan Miller, an appraiser. “There’s a premium for views and floor levels. The higher you go in a building, the higher the price you can get.” The Zeckendorfs declined to comment, as did Christ Church, a United Methodist church. Their transaction actually marks the revival of a deal first struck in 2005. The brothers then agreed to pay more than $37 million for air rights from Christ Church and the adjoining Grolier Club, which are on the east side of the Zeckendorfs’ development site. M. Myers Mermel, a real estate broker at TenantWise and a trustee of the church, represented both sellers. But for a variety of reasons, the deal with Christ Church never closed. After a contentious meeting of the club’s members, the Grolier Club concluded the sale in 2006. The new tower will cantilever over the club. Under the current deal, one executive briefed on the transaction said, the church will get about $30 million in cash and an assortment of other payments and several apartments in the new building that it can sell, bringing the total value to more than $40 million. The church plans to use the proceeds for a variety of programs.

Manhattan
Real Estate
Housing
Urban Planning
Arthur W Zeckendorf
NYC
Commercial Real Estate


Greece on Track for More Aid, German Official Says

Abstract: BERLIN — With Greece’s debt crisis an issue ahead of Germany’s election next month, the highest-ranking German in the European Central Bank said on Monday that Athens could be eligible for additional aid and debt relief next year if it continued to fulfill promises for its current assistance. “The Eurogroup will support Greece for the lifetime of the current program, and beyond,” said Jörg Asmussen, a member of the central bank’s policy-making executive board, referring to the group of euro zone finance ministers. Mr. Asmussen took care to note in an interview here that he was not signaling a new attitude toward Greece by its euro-zone benefactors. “There is no change of policy,” he said, explaining that euro-zone leaders already decided in November that they would re-examine Greece’s needs early in 2014. But his comments fed into a debate set off last week when Mr. Asmussen’s former boss, Wolfgang Schäuble, the German finance minister, put Greece back on the public agenda, saying that more aid was certain, rather than merely very likely. Mr. Asmussen was a top aide to Mr. Schäuble before joining the European Central Bank in 2011. Mr. Asmussen declined to comment on whether Mr. Schäuble had discussed his remarks ahead of time with Chancellor Angela Merkel. Her party, the Christian Democratic Union, has made what many Germans see as her deft management of the euro crisis a focus of her push for re-election. Hermann Gröhe, general secretary of the party and a main architect of Ms. Merkel’s campaign, tried to suggest at a meeting with foreign reporters on Monday that the chancellor and her finance minister, who have a reasonably close if sometimes contrary partnership, had discussed the issue before Mr. Schäuble spoke out. Mr. Gröhe indicated that the purpose was to acknowledge that Greece might need more money, but to make clear that investors holding Greek debt would not be asked to take losses as a way to ease the burden carried by Athens. “It was necessary to show a clear ‘No’ to a haircut,” Mr. Gröhe told reporters, referring to a partial write-off of Greek debt. Political commentators have asserted that Mr. Schäuble, who is 70 and the longest-serving political stalwart in Ms. Merkel’s cabinet, acted on his own last week — partly to avoid exposing the party to accusations after the elections that it had somehow deceived voters about the need for more aid for Greece. Polls show Ms. Merkel with high popularity ratings, and the Christian Democrats as likely to win most parliamentary seats. But Ms. Merkel and Mr. Gröhe are stressing that it will be a tight race. Mr. Asmussen’s comments on Monday referred to a decision taken last November by the Eurogroup. The ministers agreed that Greece would be eligible for a fresh look at its needs as soon as it was able to finance current government spending, improve the economy and fulfill other promises to its lenders — the European Central Bank, the International Monetary Fund and the European Commission. If “the debt is still considered to be too high, the Eurogroup will consider to take additional measures,” Mr. Asmussen said. “That is the point of time when we will look at the debt question again. This is already decided and made public in November last year.” The monetary fund has estimated that Greece will have a financing shortage around 10.9 billion euros, or $14.6 billion, for 2014 and 2015. Greek Finance Ministry officials have suggested that the shortage will be smaller than the fund’s estimate, but they have been exploring ways to plug the gap. In an interview over the weekend with the Greek newspaper Proto Thema, Greece’s finance minister, Yannis Stournaras, cited a figure of 10 billion euros for the likely shortage. Mr. Asmussen, who met in Athens last week with Prime Minister Antonis Samaras, said there were signs of stabilization in Greece, which has suffered from soaring unemployment and plummeting economic output. Referring to recent economic data, Mr. Asmussen said, “For the first time in years there were no negative surprises.”

Greece
Germany
European Central Bank
Euro Crisis


Luis Severino’s Strong Outing Carries Yankees to Victory

Abstract: ATLANTA — Luis Severino pitched six shutout innings, and Didi Gregorius and Brian McCann delivered key hits for the second consecutive game as the Yankees beat the Atlanta Braves, 3-1, on Saturday. The victory allowed the Yankees to stay a game and a half behind the Toronto Blue Jays in the American League East. The Yankees never trailed, but they never built a comfortable lead, instead relying on Severino, who continued to shine after being called up from the minor leagues this month. Severino, in his fifth major league start, allowed four hits, walked three and did not give up a run in six innings. Three times he wriggled out of a jam with two men on base, finally leaving when Alex Rodriguez pinch-hit for him in the seventh inning. The Yankees took a 1-0 lead in the first inning as Jacoby Ellsbury led off with a double and eventually scored on a wild pitch by the Braves’ Matt Wisler. They added a run in the seventh, knocking Wisler from the game as Chase Headley and Gregorius hit back-to-back doubles. Gregorius had driven in six runs Friday, his most in a game in his career. The Braves closed the gap to 2-1 in the bottom of the inning when the return throw on a 3-6-1 double-play attempt bounced off the glove of Yankees reliever Justin Wilson, allowing Christian Bethancourt to score from third. But the Yankees restored their two-run lead in the eighth when Carlos Beltran walked and pinch-runner Chris Young scored on a double by McCann, a former Braves star who drove in four runs in his return to Turner Field on Friday. Like Severino, reliever Dellin Betances was at his best with runners on base. He came on to relieve Wilson in the seventh, with two runners aboard, and ended the inning by getting Freddie Freeman to tap back to the mound. In the eighth, he struck out Andrelton Simmons with the tying runs on base.


Hakeem Nicks Is at Giants Minicamp; Victor Cruz Isn’t

Abstract: EAST RUTHERFORD, N.J. — Hakeem Nicks arrived at Giants minicamp on Tuesday without an explanation for his surprising absence from the recent voluntary organized team activities. “I’m not here to talk about that,” Nicks said. “I’m here to talk about me being here right now.” Nicks, 25, is entering the final season of the five-year, $12.54 million deal he signed after being selected in the first round of the 2009 draft. Nicks allowed a wry smile when his contract was mentioned, but declined to confirm or deny its role in his absence. “I told y’all back in the spring I don’t really talk about my contract in the media,” Nicks said. It does not appear Nicks provided greater insight into his motivations to Coach Tom Coughlin, who expressed frustration about Nicks’s unexplained absence. “I feel where he was coming from on that,” Nicks said. “I could have done a better job at reaching out, but we finally got to talk, so we got things straight on that end. Coach Coughlin, that’s my guy, so I think that relationship can’t go sour.” Nicks said he had been in contact with General Manager Jerry Reese, “so Mr. Reese knew the situation.” Nicks had arthroscopic surgery on his left knee in March and was limited in Tuesday’s practice. “He’s definitely not in tune with where we are,” Coughlin said. “We’ve had nine O.T.A.’s and we’ve thrown a lot at him. He’s just had one meeting. But if he’s around, he’ll pick it up quick.” Slowed by the knee injury and a fractured right foot sustained in organized team activities last May, Nicks had a career-low 692 receiving yards in 13 games last season. Despite Nicks’s return, the Giants still are missing their most productive wide receiver, Victor Cruz. A restricted free agent, Cruz skipped organized team activities and was absent from minicamp Tuesday because of protracted contract negotiations. Cruz, who caught 86 passes for 1,092 yards last season, received a one-year, $2.879 million tender from the Giants in March. Both sides are interested in a long-term extension, but there has been minimal progress in negotiations. “I’ve been optimistic since Day 1 and it hasn’t gotten me anywhere, has it?” Coughlin said. “I’ll just continue to be that way. The clock is running.”

Hakeem Nicks
Giants
Victor Cruz
Football


Mixing Old and New, Williams Began Surge With Racket Change

Abstract: WIMBLEDON, England — The sight of Serena Williams sending a ball zooming past a helpless opponent, as she frequently did during the first week of Wimbledon, has become familiar at the All England Club in the last 15 years. But for Williams, who is on a career-best 34-match winning streak, the equipment that sends the ball across the net has changed significantly. In late March 2012, Williams switched from playing entirely with natural gut strings, made from dried elastic fibers extracted from cow intestines, to using a mix of natural gut and synthetic strings. Her rackets now contain a hybrid of old and new technology, with natural gut in the mains, or vertical strings, and Wilson Luxilon 4G in the crosses, or horizontal strings. Since making the switch, Williams has been on perhaps the best run of her career, compiling a 94-4 singles record. In that 15-month stretch, she has won 13 titles, including three Grand Slam titles (Wimbledon and the United States Open last year and the French Open this year), her first Olympic gold medal in singles and her first three titles on red clay since 2002. Williams sought a change after a disappointing straight-sets loss to Caroline Wozniacki in Miami. She asked Wilson representatives to replicate the strings of the only active player who had more Grand Slam singles titles than she did: Roger Federer. (At the time he had 16 to her 13; now he has a 17-16 lead.) “She inquired: ‘Hey, what’s Roger using? That seems to be working out pretty well for him,’ ” said Ryan Polito, the global product manager for Wilson. Williams tested Federer’s setup, a hybrid of natural gut and a different type of Luxilon string, but was not satisfied. Wilson representatives then gave Williams some Luxilon 4G string that had not been released. “Honestly, she went out on the court for an hour, and she said she loved it,” Polito said. “And she wanted as many sets as I could give her, so she could go practicing and playing with it in tournaments.” Williams’s switch was unusual because it came midseason, Polito said. “Most players tinker with equipment in the off-season, even though tennis has a very short off-season, and the time to tinker is very limited,” he said. “It’s just kind of a unique circumstance, where she just wasn’t happy with the loss and wanted to see what else was out there. And lo and behold, she found something.” The synthetic string keeps its tension longer and is less affected by the weather. It also adds control while sacrificing some power, a trade Williams can afford to make. “Some of those balls that may have landed an inch or two out as an unforced error, she was able to bring those balls back into the court,” Polito said, “and she’s just become lethal out there.” Image Serena Williams asked Wilson representatives to replicate the strings of the only active player who had more Grand Slam singles titles than she did: Roger Federer. Credit Vincent Kessler/Reuters Williams said that she felt “zero difference” with the new strings, but that her success since the switch spoke for itself. “I loved the results, and I just love playing with them,” she said, adding, “I’ll try anything.” Polito said that Williams’s continued use of natural gut had made her one of the last holdouts in the top 100 of singles or doubles. He said he could “count on one hand” the number of players still using it. Williams’s older sister Venus made the switch about a month after Serena did. “No one wants to get left behind in the arms race, essentially,” Polito said. “If they think someone has an edge, they’re going to try it and see if it works for them.” Serena Williams’s longtime hitting partner Sascha Bajin likened her stubbornness to Bjorn Borg’s decision to attempt a comeback in 1991 with an outdated wooden racket. Bajin said he had been trying for a long time to persuade Williams to switch. “I was asking for a while, because she was one of the last players who was playing all gut,” Bajin said. “But she’s also one of the girls who doesn’t want to change a winning way. I think she won more than 20 Grand Slams basically with all gut, combining singles, doubles and mixed. And it is a big decision to change string and try something new.” Williams, 31, said she had become more open-minded with age. “I definitely have grown on that,” she said. “I always want to keep my mind open because I don’t want to be someone that’s just so used to just one way and looking at things one way.” Bajin said that he had seen changes in Williams’s playing style since the switch and that her feel for the ball had improved. “She’s actually starting to play drop shots; she’s got nice volleys,” he said. “I think that the string is affecting her net game, too, where she has a better feel for the ball. It stays longer on the strings compared to when you play just all-natural gut.” Bajin adjusts the string tensions of Williams’s rackets, taking into consideration factors like altitude and the weather forecast. “I have been with her for so long that I know what she wants without her even saying it,” Bajin said. Despite his happiness that Williams made the switch, Bajin made clear that Williams, not the strings, deserved the most credit for her success. “All of these little points coming together with finding the right tension, finding the right string, finding the right racket for each player, of course, is important,” he said. “But then you’ve got to be out there, hitting the ball at 30-15, 5-5 in the third. The string is not going to get the ball in for you.”

Serena Williams
Tennis
Wimbledon Tennis,Wimbledon
Sporting Goods


‘Shrek’ Unites With M&M’s to Draw a Crowd

Abstract: EVERY Broadway producer wants a show that will draw big crowds to the box office. But how do you attract those crowds if your show is in a theater several blocks away from the throng of tourists in Times Square? Faced with a location problem, the producers of “ Shrek the Musical ,” which is housed in the Broadway Theater on Broadway between 52nd and 53rd Streets, cast their eyes southward and saw a steady stream of shoppers packing the M&M’s World store on 48th Street. With its towering outdoor LED screens facing Times Square and three floors of retail space swarming with tourists, M&M’s World looked like an attractive partner for “ Shrek the Musical .” “We thought about the M&M’s store first because they are one of the key tourist attractions in New York,” said Bill Damaschke, president of DreamWorks Theatricals, which is producing “Shrek” for the stage. “We had been partners with M&M’s with movie outings in the past, and it felt like a logical arrangement.” So DreamWorks Theatricals approached the Mars Retail Group, the division of Mars Inc. that operates M&M’s World, about holding a daily ticket lottery in the store for “Shrek.”  Lotteries , which give theatergoers a chance to buy cheap seats to popular Broadway shows, are typically held at a theater’s box office. But DreamWorks was looking for a marketing opportunity closer to Times Square. Mars Retail, on the other hand, was looking for a new experience to bring to its customers at the store, which includes a full-size Ford Fusion racing car, a 17-foot green M&M dressed as Lady Liberty and an interactive area for children. “It wasn’t something clever or an out-of-the-box way to make more money,” said Lanita Isler, marketing director for M&M’s World and Mars licensing. “For us, it’s really more about the fun partnership and bringing something different and interesting to the store.” “Shrek” also has a marketing partnership with Chase Card Services, a division of JPMorgan Chase, which promotes the musical on its high-definition electronic displays in Times Square, and with Sheraton Hotels and Resorts. To grab the attention of the tourists, M&M’s World uses its LED screens to promote the lottery, while DreamWorks pays for other promotional materials, including fliers that are passed out in Times Square. Once in the store, visitors follow green ogre-size footsteps up to the third floor to an area called Shrek’s Swamp Shoppe, where they can enter their names in the lottery and browse through a selection of “Shrek” merchandise while they wait for the drawing. “The lottery itself is incredibly successful,” Mr. Damaschke said, adding that it will move to the theater’s box office on Aug. 1. “Even if they don’t enter the lottery, it’s more awareness and exposure for the show.” And it helps drive traffic into the store at a time when most tourists are still planning their day. The drawing, which is run by “Shrek” employees, is held at 10 each morning, typically a slow time for retailers. It draws 20 to 50 people on average, and as many as 100 people have shown up. “It attracts a lot of customers,” Ms. Isler said. “We wouldn’t have a hundred people on the third floor of the M&M’s store at that hour.” Lottery winners can buy up to two tickets for $26.50 apiece, a far cry from the $121.50 to $146.50 it costs to buy a single seat in the orchestra. Mr. Damaschke said he hoped the discounted tickets would be a better fit for family budgets. If some family members do not win seats in the lottery, they are directed to the theater’s box office and the TKTS discount ticket booth in Times Square.  “In these times, people looking for a deal,” he said. “If they can get two tickets at the lottery, the entire experience ends up costing something within their budget.” Ms. Isler also said M&M’s World had its eye on families. “The ‘Shrek’ characters and the M&M’s characters, they have a mass appeal to family members of all ages,” she said. Indeed, when Kristen Wells and her mother, Debbie, decided to celebrate the end of Kristen’s first year at Shenandoah Conservatory, Shenandoah University’s performing arts school in Winchester, Va., they took a trip to New York to take in some Broadway shows. On a budget, they decided to attend a few lotteries in the hope of getting some cheap tickets. Waiting patiently at the “Shrek” lottery, Kristen got excited when she heard her name called. But hers was the last name drawn, and there was only one ticket left. Her mother would have to find another way to get a ticket. “How lucky it was that she got the last ticket,” said Debbie Wells, who was already plotting how to get a ticket so she could attend the show with her daughter. “She’s probably going to get it anyway,” Kristen Wells said. “I’m sure she will end up getting a seat somewhere.”

DreamWorks Theatricals
Advertising and Marketing
Shopping and Retail
Mars Inc
Times Square and 42nd Street (NYC)


Agency Scraps Plan for Explosives Test

Abstract: A federal agency announced yesterday that it had canceled a plan to detonate 700 tons of conventional explosives in the Nevada desert as part of a study of ways to target underground weapons facilities or bunkers. The test, known as Divine Strake, at the Nevada Test Site would have been conducted near a place used for decades for atomic testing. Opponents said the explosion would create a two-mile-high mushroom cloud and release radioactive dust from long-undisturbed radioactive material. Utah’s Congressional delegation and thousands of Utah residents have written to the Defense Threat Reduction Agency of their opposition to the test. The agency said yesterday that it would look at alternative means of testing. A news release from the Department of Defense, which is seeking alternatives, said the decision “was not based on any technical information that indicates the test would produce harm to workers, the general public, or the environment.”

Nevada
Tests and Testing
Defense Department


As Panel Admits Defeat, Battle Shifts to Automatic Cuts

Abstract: WASHINGTON — Leaders of the Congressional committee charged with finding at least $1.2 trillion in deficit reductions conceded on Monday that panel members had failed, setting up what is likely to be a yearlong political fight over the automatic cuts to a broad range of military and domestic programs that would go into effect starting in 2013 as a result of their inability to reach a deal. Speaking an hour after the committee’s failure was announced by its leaders in an e-mail statement, President Obama promised to veto any legislation that seeks to avoid the automatic cuts. The president also pledged that “one way or another” the deficit would be trimmed by at least $2.2 trillion, the only question being whether it was with a “scalpel, not a hatchet.” “There will be no easy off-ramps on this one,” Mr. Obama said. His reference to $2.2 trillion includes $1 trillion in savings that both parties agreed to in August. The committee’s failure appeared to alarm some state officials. In New York, Gov. Andrew M. Cuomo held a conference call with his Council of Economic and Fiscal Advisors to discuss the impact on the state, which he said “could lose approximately $5 billion in federal funding over 10 years beginning this coming fiscal year.” The panel’s demise followed more than 10 weeks of bitter partisan division that seemed to seal the image of Congress, and all of Washington, as a place where nothing can be accomplished, even when the consequences of failure are clearly visible to the American people and abhorrent to both political parties. In a statement, the panel’s leaders, Representative Jeb Hensarling, Republican of Texas , and Senator Patty Murray , Democrat of Washington, said, “After months of hard work and intense deliberations, we have come to the conclusion today that it will not be possible to make any bipartisan agreement available to the public before the committee’s deadline.” The statement left open the possibility of a new stage of negotiations in the full Congress, where lawmakers will try to hammer out an agreement on a tax overhaul, changes to entitlement programs and new revenues as a way to avoid automatic across-the-board cuts over 10 years. “We remain hopeful that Congress can build on this committee’s work and can find a way to tackle this issue in a way that works for the American people and our economy,” it said. Short-term matters, like the expiration at the end of this year of a payroll tax cut and jobless benefits for the long-term unemployed, will most likely be dealt with in stand-alone legislation or as bill amendments next month. But given the depth of the divisions between the parties, there is no guarantee of an agreement. And a meeting of the minds on two central points — the scheduled expiration of the Bush tax cuts , which Republicans oppose, and scaling back entitlement programs, which Republicans accuse Democrats of having approached too modestly — seemed on Monday like a mirage. Democrats in the Senate said they planned to use the Bush tax cuts, which expire at the end of next year, as leverage in future attempts to avoid large cuts to the budget. Many Republicans said they would try to find a way to spare at least some of the automatic $500 billion in reductions to the Pentagon budget over the next 10 years. Representative Howard P. McKeon, chairman of the House Armed Services Committee, said on Monday that he would soon introduce legislation “to prevent cuts that will do catastrophic damage to our men and women in uniform and our national security.” Defense Secretary Leon E. Panetta has said the cuts would result in “the smallest ground force since 1940, the smallest number of ships since 1915 and the smallest Air Force in its history.” He also raised the specter of deep cuts to America’s nuclear arsenal. Independent analysts of the military budget said that the situation was not as dire as Mr. Panetta described, but that the cuts, which by law cannot be “backloaded” to leave the biggest reductions for later years, would put a large strain on the Pentagon. Mr. Obama’s potential Republican rivals wasted no time framing the failure of the committee, whose talks he was almost completely absent from, as the president’s failure. At a campaign stop in New Hampshire on Monday, Mitt Romney said the most disappointing aspect of the panel’s failure was “that our president has had no involvement with the process.” In a speech Monday, Newt Gingrich , another Republican candidate for president, called the failure of the committee “good for America.” It was a view Mr. Obama vigorously disputed. The president noted pointedly after the talks failed that he had sent Congress his proposal to trim the deficit. “It’s a plan that would reduce the deficit by an additional $3 trillion, by cutting spending, slowing the growth of Medicare and Medicaid and asking the wealthiest Americans to pay their fair share.” Republicans, he said, “simply will not budge” from their refusal to consider tax increases on the wealthy. “That refusal continues to be the main stumbling block that has prevented Congress from reaching an agreement to reduce our deficit.” Obama administration officials say they believe that a majority of Americans support the president’s proposals. A senior official on Monday night told reporters that the administration believed that “at some point,” public pressure would persuade Republican lawmakers to strike a deal. Beyond that, Mr. Obama’s advisers say privately that they believe Republicans have more to lose than Democrats if there is no deficit reduction deal in the near term. “No one, I repeat, no one wants the trigger to go into effect,” an administration official said Monday on the condition of anonymity. “But let’s face it — those guys really don’t want it going into effect.” Asked whether the official believed that the desire to protect the Pentagon from big cuts would force the Republicans to compromise next year, the official replied, “We’ll see.” At a final meeting Monday, seven of the 12 committee members discussed a new proposal from Senator John Kerry , Democrat of Massachusetts . Republicans left early, their faces grim, their moods dark. Mr. Kerry, walking later through the Russell Senate Office Building surrounded by reporters, said his last-ditch plan would have created a procedure for “expedited tax reform” next year, allowing the committee to defer decisions about the fate of the tax cuts enacted in 2001 and 2003. A Republican close to the negotiations saw it differently. “Kerry went rogue,” he said, “and tried to float another iteration of a trillion-dollar tax hike .”

Joint Select Committee on Deficit Reduction


Reinstalling Windows 10

Abstract: Q. The Windows 10 upgrade is a free download for Windows 7 and Windows 8.1 machines, but it doesn’t seem to have its own serial number and obviously didn’t come with an installation DVD. What happens if I need to reformat my hard drive and reinstall the operating system? How do I reactivate Windows? A. Depending on how you upgraded to Windows 10 and the version you were previously using, you may not need a product key (serial number) to activate Windows 10 again after a clean installation. Microsoft notes that product keys for many versions of Windows 7, Windows 8 and Windows 8.1 can be used now, starting with Windows 10, version 1511 , which was released as a system update last November. The product keys for Enterprise editions of those older Windows versions, as well as those from volume licenses or counterfeit copies of Windows, will not work, though. When Windows 10 was first released as an upgrade for Windows 7 or Windows 8.1 users, Microsoft was activating the new software with what it called a “digital entitlement” that took the place of a product key. As long as the computer is running a fully upgraded and legitimate version of Windows 10 that was activated without errors , the digital entitlement should allow you to reinstall the system on the PC as needed. (However, the company says that if you have made major changes to the computer’s hardware, like swapping in a new motherboard, you may have to call Microsoft Customer Support to reactivate Windows 10.) Before you reinstall Windows 10, make sure the system has indeed been activated by going to the Start menu to Settings, then to Update & Security and on to Activation. Later, if you are asked for a product key during the reinstallation (and did not use the number from an older version of Windows to originally activate the software), click the Skip button; Windows 10 should automatically activate itself after it finishes installing. If you have to fully reinstall Windows 10, you can do so in several ways , including from a previously created recovery drive or from Windows 10 installation software on a DVD or USB drive. The Microsoft Software Download page on the company’s site has the software and tools you need to create a bootable Windows 10 DVD or make your own USB recovery drive, as well as a frequently asked questions page that may have some useful answers.


Leveling the Playing Field, in Soccer and Finance

Abstract: OVER the last month, one question seemed to be on everyone’s mind at the economic conferences I attended in Europe: How did referees miss a goal that England scored against Germany in their World Cup match? The goal in question struck the crossbar, bounced down and landed a full yard inside the goal, then flew out onto the field, all in the blink of an eye. Soccer reform wasn’t the stated focus of these conferences. But thinking about how to improve the sport’s regulations comes naturally to economists, especially after a few beers, because some of the same principles should be applied to economic regulation. The first is that the regulator — in this case, the referee — is fallible. So the rules should make the regulator’s job as easy as possible. Second, regulators can’t detect every irregularity, so the emphasis has to be on getting the big stuff right. Finally, we want performance, not regulators, to determine the outcome. The best regulators are those we don’t notice. In soccer, one head referee has to cover a “pitch” larger than an American football field. He has three assistants who must stand on the sideline. There is plenty of evidence beyond that missed English goal that referees are indeed human. For example, referees call more fouls against the visiting team, and against bigger players. So, what can be done? Here are a few suggestions, and some general lessons for regulation in other domains. The first two changes are easy. ADD REFEREES Put at least one more ref on the field. (Basketball has three referees on a much smaller court.) The idea is under consideration by FIFA, the soccer organizing body. This is a no-brainer for the World Cup, which generates billions of dollars in revenue, but in the world of financial regulation , adding referees is costly. Governments will need to cut budgets, not expand them, so we need to make regulators more efficient, not more numerous. ADD TECHNOLOGY Although instant replay showed that England’s goal should have counted, FIFA officials have resisted using technology that could help. Many technological solutions, including embedding an electronic chip in the ball, would make the determination of goal scoring faster and more accurate. Technology can help in other regulatory areas as well, and is a good way to increase efficiency. For example, requiring banks to file their compliance data electronically drastically reduces the time it takes to conduct an audit. INCREASE SCORING In the most recent tournament, the teams together scored 2.27 goals per match, the second-lowest number in history. In early years of the World Cup, scoring was twice as high, and the problem with low-scoring games is not just that they bore uncultured Americans like me. Low scores magnify the importance of referees’ decisions. When a team is awarded a penalty kick, it scores about 75 percent of the time, and that’s very likely to affect the outcome of a low-scoring game. In finance, a useful analogy is to increase the capital requirements for banks. By requiring banks to have a bigger security blanket, regulators themselves have greater margin for error. REDEFINE ‘OFFSIDE’ The offside rule is now too hard to enforce. When a player passes the ball downfield, no one on his team can have any part of his body farther downfield than any defender, aside from the goalkeeper. The linesman calling these violations runs along the sideline, keeping parallel with the offensive player closest to being offside — all while watching the ball. This requires wide-angle vision that humans don’t possess. (A bird called the woodcock, with 360-degree vision, would be good at it.) Short of eliminating the rule, we might limit offside calls to players whose entire body is ahead of the defenders. That should be easier to detect, and might lead to more goals scored. The general point is to make the judgment tasks of regulators easier. The Securities and Exchange Commission had trouble assessing the technical arguments that strongly suggested that Bernie Madoff was a crook, but they could have easily had a rule requiring him to document his assets under management. RETHINK PENALTIES Another idea is to adjust the silly yellow/red card penalty system. There are three levels of fouls in soccer, depending partly on whether the action is “careless,” “reckless” or “using excessive force.” It is asking too much to think a referee can distinguish between careless and reckless on the fly. A system similar to basketball’s, in which accumulated fouls lead to expulsion, and “flagrant” fouls are heavily punished, would be easier to put into practice, especially if an off-field official kept track of the running totals. The general principle here is that we don’t want small differences in behavior, which are difficult for a regulator to distinguish, to lead to large differences in punishment. REDUCE FAKING Finally, there is the problem of diving. After falling, players routinely writhe on the ground until the referee either believes they’ve been injured, ignores them or, rarely, imposes penalties for “simulation.” These instant injury judgments are very difficult for a single on-field referee. Such decisions might be turned over to referees watching video monitors — and empowered to impose stiff penalties for faking. Diving is the soccer version of the inevitable attempts to influence financial regulators. We can’t expect to eliminate special pleading by financiers for taxpayer bailouts, of course, but perhaps we can reduce the impact of such efforts by opening them to public view through increased disclosure about the process and its beneficiaries. Thinking about revising the rules of soccer is a nice summertime relief from worrying about more serious regulatory overhaul, but it also illustrates the key principles that apply to both. New rules in either soccer or finance shouldn’t put any more burden on individual referees. As Larry Summers, the director of the National Economic Council, said recently, in revising financial regulations, we do not want to require anyone to get any smarter. Consider the Consumer Financial Protection Bureau now being established. Above all, I’d urge the head of this agency to devise rules under the assumption that, someday, he or she will be succeeded by a nitwit.

Dodd-Frank Wall Street Reform and Consumer Protection Act (2010)


Lolita Lebrón, Puerto Rican Nationalist, Dies at 90

Abstract: Lolita Lebrón, who blazed her way to notoriety with a Luger pistol and patriotic shouts as she led three other Puerto Rican nationalists in an attack on the United States House of Representatives on March 1, 1954, died Sunday in San Juan, P.R. She was 90. The cause was heart and lung failure, said Linda Alonso Lebrón, her niece. In the attack in the Capitol, Ms. Lebrón and the other assailants fired from a spectator’s gallery just above the House floor, raining as many as 30 bullets into a chaotic chamber and wounding five congressmen. Ms. Lebrón was imprisoned for 25 years and widely condemned as a terrorist, although proponents of Puerto Rican independence hailed her and her associates as revolutionary heroes. She ascended into a leftist pantheon with figures like Che Guevara, becoming the subject of books and artwork. Ms. Lebrón always said she remained proud of the shooting, which came two years after Puerto Rico, formerly a territory of the United States, had become a commonwealth. She dismissed that status as only more colonization and demanded complete independence. On the day of the shooting, she said she had fully expected to give up her life. Her political convictions never disappeared. In her 80s, she was arrested twice for protesting an American military base on Puerto Rico’s island of Vieques. She served 60 days in jail. But in her latter decades she came to believe that civil disobedience, like that at Vieques, was not only more moral than violence but more effective. “There is no need now to kill for freedom,” she said in 1998. After her release from prison, Puerto Ricans of all political stripes would hail her on the street — she typically dressed in black — as a sort of national elder. They called her only Doña Lolita. No last name was necessary. On the blustery, rainy day of the shooting 56 years ago, Ms. Lebrón was a stylishly dressed 34-year-old woman with the looks of the beauty queen she had been as a youth. She wore bright lipstick. Firecrackers suddenly seemed to be exploding in the House chamber at 2:32 p.m., interrupting a debate about Mexican farm workers among the 243 representatives present. Congressmen dived and fell, though none were killed. Piercing the confusion was the voice of Ms. Lebrón: “Viva Puerto Rico!” She emptied the chambers of a big Luger pistol, holding it in two hands and waving it wildly. She then threw down the pistol and whipped out a Puerto Rican flag, which she waved but never managed to unfurl fully. As she shouted, her companions trained their weapons on the House floor. After she was arrested, the police found a note in her purse. “My life I give for the freedom of my country,” it read. Ms. Lebrón was convicted of five counts of assault with a dangerous weapon and sentenced to serve from 16 years and 8 months to 50 years in prison. Her colleagues, Rafael Cancel Miranda, Andres Figueroa Cordero and Irving Flores Rodriguez, were convicted on more serious counts and each sentenced to 25 to 75 years in prison. Although Ms. Lebrón fired eight shots, she was cleared of assault with intent to kill because she had fired at the ceiling. All four shooters were later sentenced to an additional six years in another trial for seditious conspiracy. Dolores Lebrón de Perez was born on Nov. 19, 1919, in Lares, P.R., a small town where her father was a coffee plantation foreman. She finished eighth grade, and she was elected “Queen of the Flowers of May” in a beauty pageant. She had a daughter and a son, both of whom died years ago. Ms. Lebrón is survived by her husband, Dr. Sergio Irizarry; her sister, Aurea Lebrón; and two grandchildren. In the 1940s, she moved to New York seeking a better life and found work as a seamstress. She became a follower of Pedro Albizu Campos, a nationalist leader. Deciding a drastic event was needed to highlight his cause, he assigned Ms. Lebrón to lead it, making her responsible for every detail. “I had all the secrets, all the plans,” she said in an interview with The Washington Post Magazine in 2004. “Me and me alone.” The planning was not perfect. The conspirators got lost on the way to the Capitol from Union Station and had to ask a pedestrian for directions. At the trial, Ms. Lebrón sharply repudiated an argument by her own lawyer that the conspirators were mentally unsound, shouting “No! No! No!” When the prosecution let a Puerto Rican flag drag on the floor, she whispered to her lawyer and he successfully objected. In prison, she built an altar in her cell and said she had repeated ecstatic religious visions. She refused to apply for parole because that meant apologizing. In 1979, President Jimmy Carter, saying he was acting out of “humane considerations,” released Ms. Lebrón and two other assailants, a move that was expected to clear the way for the release of four Americans being held in Cuban prisons. He had released the fourth assailant in 1978 because he had cancer. Many Puerto Ricans opposed the clemency. Puerto Rico’s nonvoting representative in Congress at the time, Baltasar Corrado del Río, said the assailants had been “kept in jail for their criminal conduct, not their political beliefs.” Ms. Lebrón herself remained defiant after her release, saying it “was done for political expediency and not because of a concern for human rights.”

Puerto Ricans
House of Representatives
Puerto Rico
Deaths (Obituaries)
Lebrón Lolita


Pension Funds Strained, States Look at 401(k) Plans

Abstract: Lawmakers and governors in many states, faced with huge shortfalls in employee pension funds, are turning to a strategy that a lot of private companies adopted years ago: moving workers away from guaranteed pension plans and toward 401(k) -type retirement savings plans. The efforts come as the governors of Wisconsin and Ohio , citing dire budget problems, are engaged in bitter showdowns with public-employee unions over wages, pensions and collective bargaining rights. The new plans allow states to set a firm, upfront limit on the amount they will contribute and leave it up to the employee and the financial markets to make the money grow. In a traditional pension system, the employer promises a certain benefit, then must find a way to pay for it. Like private employers, which in droves have terminated traditional pension plans, many government officials like the idea of shifting much of a pension plan’s risk to the worker. And some workers prefer a 401(k)-type system because it gives them more control over their retirement assets, including the ability to take the money with them when they change jobs. Utah lawmakers voted last year to make a partial changeover to a 401(k)-type plan, following in the footsteps of Alaska , Colorado , Georgia , Michigan , Ohio and several other states, which offer at least some version of it. In February, Kentucky ’s Senate approved a full switch to a 401(k)-type plan, although the bill faces uncertain prospects in the House. In Oklahoma and Kansas , legislative committees will be studying the issue intensively over the next few weeks. Gov. Sam Brownback of Kansas has made it clear he hopes the state Senate will embrace some form of a 401(k)-type plan. Texas is also considering a switch. Utah decided to adopt a 401(k)-type plan after the stock market plunge in 2008 caused the shortfall in the state’s pension plan to balloon to $6.5 billion. “We said, ‘O.K., how do we prevent this from happening again?’ ” said Dan Liljenquist, a state senator who pushed for the changes. “How do we eliminate the bankruptcy risk for our pension fund?” Under the new plan, Mr. Liljenquist said, the state’s retirement contributions for new workers will be roughly half that for current employees, potentially saving $5 million a year for every 1,000 new workers hired. Still, these plans — similar to 401(k)’s, but named after other sections of the tax code — are not being embraced in states with the biggest pension problems like Illinois , California and New Jersey , which have shortfalls so immense that a switch would not solve their problem. Unlike private companies, most states are constitutionally or contractually barred from changing the pension plans of current employees without their consent. So the new rules are generally voluntary or apply only to new employees. In fact, switching workers to 401(k)-type plans can make the underfunding problem even worse. As contributions move to individual investment accounts, less money goes into the traditional plan to help finance pensions promised to other workers. “There’s no free lunch here,” said Alicia H. Munnell, director of the Center for Retirement Research at Boston College . “People say, ‘We can reduce our costs here if we have a defined-contribution system.’ Well, if you do this, you still haven’t done anything about your unfunded liabilities.” California’s problems are so acute that just last week a government-appointed commission of experts urged the state to consider at least a partial switch to 401(k) plans; six years ago, an effort by Arnold Schwarzenegger , then governor, to move new employees into such plans was blocked by local governments and public-employee unions. The long-term benefits of restructuring pension systems are alluring to many public officials. The new governors of Florida and Kansas, Rick Scott and Mr. Brownback, and lawmakers in North Dakota , Oklahoma, Virginia and several other states are seriously discussing adopting 401(k)-type plans for state employees. “Every state has to solve this problem or else there’s going to be a very dire consequence,” said Mike Mazzei, a Republican state senator in Oklahoma who heads the Senate select committee on pensions and is backing an overhaul of a system that faces $16 billion in unfunded obligations. The push to switch to 401(k)-type plans comes overwhelmingly from Republicans, who see them as more individualistic and free market. Democrats generally oppose the change, partly because their union allies are eager to keep traditional plans. Utah chose to take a hybrid approach to limit taxpayers’ liability and keep money flowing into the old plan. Starting July 1, new state workers will be able to choose either a traditional pension plan or a 401(k)-type plan, with the state contributing 10 percent of an employee’s salary (12 percent for uniformed workers) to whichever plan a worker chooses. But there is an important twist: Utah will never pay more than 10 percent of a new employee’s salary to the pension plan. If the plan becomes too underfunded, employees who have joined the plan will have to pay a percentage of their paycheck to help eliminate the shortfall. The Utah plan is meant to give workers a choice, said Mr. Liljenquist, who became such an expert on pension overhauls during Utah’s debate that lawmakers in other states have sought him out for advice. “Some state workers who will just work for the state a few years — take, say, bank examiners — I imagine 75 percent of them will choose defined-contribution plans,” he said, referring to 401(k)-type plans. “And I think 90 percent of cops and firefighters and 75 percent of teachers will want a defined-benefit plan because they look at their government jobs as a single career.” Casey Parry, 32, a research consultant in the Utah human resources department, would prefer the 401(k) option. “It’s hard when you’re starting a job to make a decision whether to stay with an employer for 30 years,” he said. “I prefer the security of having a defined-contribution plan that I know I can take with me. It’s under my control. I can plan for it.” But Debra McBride, a Medicaid policy analyst who has worked for the state for 35 years, said she was happy with a traditional pension plan. “I imagine that anyone who went through the recession with a 401(k) and saw the stock market nosedive wished they had a pension plan instead of a 401(k),” she said. Lawmakers considering changes are trying to balance competing needs. Georgia officials — fearing that many employees would retire with paltry amounts in their plans — stopped short of embracing a full-fledged 401(k) plan, setting up a hybrid plan different from Utah’s. New employees join both a traditional pension plan, with a far less generous formula than the old formula, and a 401(k). The state contributes an automatic 1 percent of salary into the 401(k)-type plan and matches half of the next 4 percent that employees contribute. “Georgia realized that having people solely in a 401(k), they have sole control and they might lose a lot of money in it,” said Pamela L. Pharris, executive director of the Employees’ Retirement System of Georgia, adding that such people eventually “might become dependent on the state.” The National Association of State Retirement Administrators has voiced support for traditional pension plans. “Defined-contribution plans are a very unreliable vehicle for promoting retirement security,” said Keith Brainard, the association’s research director. “Many workers don’t know how to invest, many don’t contribute enough to their 401(k)s, and many cash out much of what’s in their 401(k) long before they retire, leaving them too little to live on when they retire.” Mr. Brainard said it would be wiser for states to ask employees to contribute more toward underfunded plans than to switch to 401(k)-type plans. And in fact, some states have shored up their pension plans by requiring employees to pitch in more of their salary. Despite the cautions, Bette Grande, a Republican state representative in North Dakota, vowed to continue pushing for 401(k)-type plans. Ms. Grande sponsored a bill to switch new employees entirely to such plans, but it was blocked by the House on Feb. 18. “I think it’s condescending to say that workers aren’t wise enough to manage their own investments,” said Ms. Grande, who said she would push to revive the bill. “I refuse to think I’m going to have a bunch of teachers on welfare.”

Retirement
Pensions and Retirement Plans
US states
401k


Nickelodeon and PBS Pursue Preschool Apps Alongside TV Shows

Abstract: In 2014, the preschool cable network Nick Jr. plans to introduce a television show featuring a little boy, his miniature pet dragon and a magic stick. But the show, “Wallykazam,” will not be new to users of smartphones and tablets. Educational applications built around it will start appearing in app stores late next year, making “Wallykazam” Nickelodeon’s first major show to be introduced as a mobile product first, said Steve Youngwood, Nickelodeon’s executive vice president and general manager for digital media. Driving the change, at Nickelodeon and other preschool television brands, are parents who are increasingly putting mobile devices into preschoolers’ hands and laps. According to new research commissioned by Sesame Workshop, producer of PBS ’s “Sesame Street,” mobile device ownership is booming as TV set ownership declines. Eighty-eight percent of the parents surveyed said they owned a television, down from 95 percent in 2010. Twenty-one percent said their children first interacted with “Sesame Street” someplace other than television, with YouTube and PBS.org the top alternative sources. (PBS said separately that its free PBS Kids Video app, which has been downloaded 2.4 million times, reached 120 million streams of PBS Kids shows in November, surpassing 100 million for the first time.) “On-air does still drive digital,” said Diana Polvere, Sesame Workshop’s vice president for market research, citing the 79 percent of viewers who still come to television first. But given the rapid changes, she said, Sesame’s research will now be conducted every six months instead of every two years. Nickelodeon’s research, done in April and updated in October, shows striking growth in educational app use. In October, 27 percent of United States households with children ages 3 to 5 had an iPad, up from 22 percent in April. In those households, 40 percent of preschoolers used the iPad for educational apps, up from 27 percent in April. The study also found that Apple device users were willing to pay 15 to 23 percent more for educational apps than for general apps. “Parents want to feel good about what they are purchasing and downloading for their kids,” said Scott Chambers, Sesame Workshop’s senior vice president for digital worldwide distribution. Adding an educational element to an entertaining app, he said, “makes everybody feel better.” Parents’ feelings aside, apps are strong educational tools, said Lesli Rotenberg, who oversees PBS’s children’s programming, including its more than two dozen apps. While television “is somewhat of a passive experience” for children, she said, interactive apps give them immediate feedback and tailored experiences that become more difficult as they gain skills. Though numerous producers are entering the app business, three of the top 10 paid educational apps in the iTunes store last week were Nickelodeon’s. They included the $1.99 Bubble Guppies: Animal School Day, already profitable six weeks after its introduction, Nickelodeon said. A Team Umizoomi math app was still in the top 10 after a year on the market. Originally scheduled for August release, the Bubble Guppies app, filled with the same silly jokes as the show, was revised after focus group testing with preschoolers showed, among other things, that their small fingers had a hard time maneuvering a virtual latch and that the children wanted more control over their exploration. “We were hearing kids say in testing: ‘I want to play with the dolphin. I want to play with the penguin,’ ” said Jordana Drell, Nickelodeon’s senior director of preschool games. Nickelodeon’s educational apps normally take six to eight months to create and, even with lush graphics like the shimmery underwater background in Bubble Guppies, cost about half as much as a single episode of one of the company’s preschool shows, officials said. The Bubble Guppies creators, Jonny Belt and Robert Scull, said they approached the app as they would a television episode, reading the 90-page game document aloud, technical material and all. “That really brings it to life, and you know what you’re getting,” Mr. Scull said. A Nickelodeon rival, Disney Junior, has taken a less integrated approach to apps, developing television shows first and apps later to expand on the content, said Albert Cheng, executive vice president for digital media at the Disney/ABC Television Group. The free Mickey Mouse Clubhouse Road Rally Appisode, released in May, is a repurposed version of an episode of the “Mickey Mouse Clubhouse” television program, reconfigured to be highly interactive. It proved so popular that “we definitely feel there’s something here we want to invest in,” Mr. Cheng said. Although the app had educational elements, it was not intended as such. The sprawling Walt Disney Company has published educational apps through other units, however. Since releasing its first app three years ago, Sesame Workshop has added more than three dozen, including Elmo Loves 123s , which was introduced Dec. 10 and draws on new research for developers and parents that Sesame plans to release this week. App users, Mr. Chambers said, tend to come back regularly, a loyalty that executives have noted as they consider future expansion in the category. The rush to apps is changing the development process for PBS, which will no longer develop television-only shows, Ms. Rotenberg said. PBS’s newest property, “Daniel Tiger’s Neighborhood,” came out as an app — already the company’s third best-selling — the day of the television premiere in September. Ms. Rotenberg said her team had “sent away” a number of producers who came to PBS with ideas for television shows with no thought-out mobile component, telling them, “ ‘Come back when you have a plan.’ ”

Nickelodeon
Television
Mobile Applications
Public Broadcasting Service
Children and Childhood


Creative People Say Inspiration Isn’t All Luck

Abstract: SUCCESSFUL inventors, entrepreneurs and writers say they are often asked where their big ideas came from. They will acknowledge that serendipity often plays a role. But equally as important, they say, is having an open mind — especially in tumultuous times like these. Big and small ideas are out there, they say, if you are looking for them. Consider the experience of Lopa Mehrotra, who was studying to be a political scientist. One hot summer day, she said, she was watching her 6-year-old daughter outside playing. “Look,” her daughter said, as she scraped two gray rocks on stone and watched them turn white. “It’s magic.” “I said, ‘Actually, it’s science,’ ” Ms. Mehrotra said recently, explaining how that moment inspired her to create TestToob.com , a social networking site that allows students to showcase scientific experiments. Jacques Heim, who founded Diavolo Dance Theater, was in Aspen with his dance company, using an elementary classroom as a dressing room. Naturally, it was full of toys, he recalled. He saw a box of blocks, including three in particular that caught his interest: identical five-sided pyramids that created a cube. “I was inspired by the geometry behind it,” he said, “and played with it for months.” Ultimately those cubes led to a performance piece called “Foreign Bodies,” set to music by Esa-Pekka Salonen, music director of the Los Angeles Philharmonic. Members of Diavolo, based in Los Angeles — gymnasts, actors and dancers — use everyday objects, like doors, stairs and chairs for dramatic movement, as well as the three mobile pyramids for “Foreign Bodies.” His choreography, Mr. Heim said, is influenced by what he can see, feel, touch and hear. “I believe if you have the child inside you and you walk down the streets, things happen to you,” he said. “Intuition. That’s how I operate.” Diandra Leslie-Pelecky, a physics professor, said she got her idea when she was changing the channels one day and happened upon a Nascar race. Without warning, she recalled, one of the cars hit an outside wall. None of the cars had bumped, she said, and there were no engine failures or flat tires. So what happened? It was not idle curiosity. To solve the problem, she immersed herself in racing by spending time with pit crews, crew chiefs, mechanics and drivers, and eventually wrote, “The Physics of Nascar.” The book traces a race car from its design to its race to the finish line. Sometimes, Ms. Leslie-Pelecky said, she finds herself on the track and thinks, “How did I get here?” It is because of her “pit bull gene,” she decided. “When you get to a problem, you don’t let go until you solve it.” (The answer to the mystery of the Nascar crash, by the way, was that a trailing car had changed the shape of the air-flow over the first car, which in turn had reduced the downward air pressure on it, causing its wheels to slip as if it were on ice, and it skidded into the wall.) Ms. Mehrotra, Mr. Heim and Ms. Leslie-Pelecky were invited to share their moments of inspiration at the 2008 IdeaFestival in Louisville, Ky., last month, created by Kris Kimel after he had his own “Aha!” moment. Mr. Kimel was in Park City, Utah, in the late 1990s, he recalled, and witnessed the success of the Sundance Film Festival . Why not, he thought, have a diverse festival that celebrates ideas? And so, in 2000, he helped create the IdeaFestival, which brings together creative thinkers from different disciplines to connect ideas in science, the arts, design, business, film, technology and education. The goal, according to the festival’s promotion, is to promote “out-of-the-box thinking and cross-fertilization as a means toward the development of innovative ideas, products and creative endeavors.” It is not your typical “business day,” said Mr. Kimel, who works with small businesses. And that can be frustrating. Whether it is a festival, a concert, a speech, a convention or a book, creative thinkers say, you have to actively look for inspiration, and that takes time. Carving out time to find inspiration may seem unrealistic to a small-business owner working 90 hours a week. But Mr. Kimel said it must be done to find and keep a competitive edge. “You cannot afford to say, ‘I don’t have the time to get out of my little circle here to understand what’s going on,’ ” Mr. Kimel said. “You can’t make the mistake of thinking the only place you’ll learn is from colleagues who are doing exactly what you’re doing.” But what if you are not creative? “Hang out with creative people who are interested in the kinds of things you hope to contribute to,” advised Sandy Goldberg, an author and philosopher. Mr. Goldberg suggested, “Don’t neglect thinking when you’re not thinking,” for example, on a run. When people ask her about how she comes up with an idea, Jane McGonigal, a top game designer and future forecaster, tells them, “You have to systematically expose yourself to things outside your domain because the breakthrough ideas will come from areas where you are not constrained by doing the daily job.” Then, when you come up with an idea, or, as Dr. McGonigal put it, “you feel a connection to something,” then, she said, “deep exposure is a prerequisite.” “Otherwise, you are doing what others in the field have done and it won’t be a breakthrough.” As a researcher of alternate reality games, Dr. McGonigal focuses on how games can help the real world. In her research, she has also found a connection between gamers and the science of happiness, which led her to an moment of inspiration. “Games give you new models for looking at the world,” she said. They are the “ultimate happiness engine,” because they work better than reality — there are better instructions, better feedback and better community. Dr. McGonigal stumbled on positive psychology and sensed it was important. The challenge was to bridge the gap between games and reality. That is the focus of her work for the Institute for the Future. “It was a light-bulb moment” as a game designer, she said, “because I realized that making things work well matched up perfectly with happiness research.” In the end, Dr. McGonigal said her experience and research taught her this: “We don’t have to be famous or rich. But we have to be good at something. We are happiest when we are applying our signature strength.”

Small Business
Entrepreneurship
Science and Technology


A Quarterback Not Afraid to Let It Fly

Abstract: SEATTLE, Jan. 27 - A game in which people bet on the coin toss is a game made for Matt Hasselbeck. It was, after all, a coin toss that gave the sports world an unforgettable heads-up on Hasselbeck. His reaction when he won that toss -- "We want the ball and we're going to score!" -- demonstrated an unusual ability to make the mundane worth watching. Which brings Hasselbeck to Super Bowl week, with all of its ritual public appearances. If anyone can spice up the traditional activities, it is a bald-headed Bostonian talking about clown shoes, fishing worms and whirlybirds. The shoes, the worms, the birds -- they are all part of the Hasselbeck legend, just as much as the coin toss. Next Sunday, Hasselbeck will play quarterback for the Seattle Seahawks against the Pittsburgh Steelers in the Super Bowl, a game so loaded with significance that casinos really do set lines for the coin toss. But between now and then, Hasselbeck can play Super Bowl M.C., building the hype just by being himself. Of the National Football Conference championship victory last Sunday, Hasselbeck said: "I felt like we should play in a way that makes our parents proud. I don't know what that means." On the Steelers' decision to wear white uniforms for the Super Bowl, forcing the Seahawks to wear blue: "Our linemen don't look too good in white-on-white, anyway." About those linemen: "I don't know if it was just because they were the heavy kids in the pool with their T-shirt on or what," Hasselbeck told reporters this season. "But every team I've been on, those guys have been really, really close." The public is not used to hearing many sound bites from quarterbacks, who are generally expected to be extensions of their coaches, ambassadors of their organization, always diplomatic and often a little dull. But Hasselbeck is a quarterback by position only. In a rhetorical sense, he goes over the middle without fear. When he was playing at Boston College, and Coach Dan Henning informed him that he would not be the starting quarterback, Hasselbeck famously told Henning, "You should wear big red shoes and a big red nose because you are a clown!" The creativity of the outburst had to appeal to Henning, who eventually designated Hasselbeck the starter. Drafted by the Green Bay Packers in 1998, Hasselbeck threw only 29 passes in three seasons with the team, but he made an unforgettable impression when he managed to sneak some fishing worms into Brett Favre's tobacco tin. The Packers were amazed. For a sixth-round draft choice to punk a future Hall of Famer showed serious moxie. "Here was this guy who had no pretense to him whatsoever, who did no sugarcoating," said Ron Wolf, Green Bay's former general manager. "His confidence was enlightening." That confidence got him the starting job in Seattle, then it got him benched. During the quarterbacks' meetings, Hasselbeck would invent plays and feverishly scrawl them on the chalkboard. During practices, he would run around in the backfield, freelancing as if he were Favre. Jim Zorn, Seattle's quarterbacks coach, asked Hasselbeck to conform. Hasselbeck told Zorn he hated the very meaning of the word. "You can't imagine what it was like," Zorn said. "He used to tell me, 'We should do this differently, we should do that differently.' He would tell me, 'What you want to do makes me feel so confined.' I would tell him, 'Good.' " Eventually, Hasselbeck embraced the system, but he always brought his own flair. In the playoffs after the 2003 season, when the Seahawks went to overtime against the Packers at Lambeau Field, Hasselbeck proclaimed into the referee's microphone that he wanted the ball and he intended to score. Two series later, he threw an interception that was returned for a game-ending touchdown. In the playoffs last season, the agony continued. The Seahawks trailed the St. Louis Rams by 7 points with 27 seconds left when Hasselbeck threw incomplete into the end zone. He collapsed to the turf at Qwest Field and pounded his fists into the ground. Those who complained that they did not see enough emotion from quarterbacks had a new favorite. To start this season's playoffs, Hasselbeck appeared a bit more reserved, but he did take a moment to rediscover his inner whirlybird. Dropping back to pass against the Washington Redskins, he scrambled from the pocket, did a 360-degree pirouette, then launched the ball into coverage downfield. "Did anyone happen to notice that one whirlybird?" Seattle Coach Mike Holmgren said after the game. "He doesn't do it very much anymore. But I still have my moments with him." Hasselbeck, 30, has been groomed for this stage since his time as a ball boy with the New England Patriots. His first Super Bowl week came in 1984, when he was in the third grade. His father, Don, was playing tight end for the Los Angeles Raiders against the Redskins. Steve Grogan, the Patriots' quarterback, stopped by the Raiders' hotel in Tampa, Fla., to say hello. "I have this vivid memory of Matt in the parking lot, throwing the ball for about an hour," Grogan said. "He was just throwing it to himself." When the N.F.L. did not invite Hasselbeck to the combine out of college, Green Bay dispatched its quarterbacks coach, Andy Reid, to give him a private workout in Boston. The Packers drafted Hasselbeck on Reid's recommendation, and the Seahawks traded for him after Holmgren moved to Seattle from Green Bay. "You can't hold him back," said Tim Hasselbeck, Matt's brother and a quarterback for the Giants. "I think he realizes: 'I'm 30 years old, I play a sport for a lot of money and I'm in the Super Bowl. This is fun, man.' " Because Hasselbeck has endured some particularly embarrassing moments -- many of them on national television -- he has learned to laugh at himself. His problems have become part of his appeal. Hasselbeck, who started losing his hair in college, is now an inspiration to a large segment of middle-aged men. "I know who I'm rooting for in the Super Bowl," said John T. Capps III, founder of Bald-Headed Men of America. "I like him because he doesn't hide his baldness. When you see him in interviews, he's right out there, in your face, letting it shine." Hasselbeck's fashion sense is a popular topic of conversation in the Pacific Northwest. To news conferences in the playoffs, he has worn an argyle sweater, then a pink shirt with a pink handkerchief, then a pair of shorts with knee-high socks. When he starts talking in his high-pitched New England accent, it is hard to take him seriously. "More or less, we tolerate him," Seahawks center Robbie Tobeck said. "He's a wisenheimer. But he also fits in really well here." While some quarterbacks buy their offensive linemen Rolexes or island vacations, Hasselbeck presented his oversized bodyguards with a few hundred pounds of meat last season. It showed some thought. Hasselbeck's ability to find secondary receivers, a function of beefed-up pass protection, has helped make him a Pro Bowl player. Of all the story lines next week, two will probably dominate the buildup in Detroit -- Jerome Bettis, the Pittsburgh running back, going home for his first Super Bowl, and Hasselbeck, the wisenheimer quarterback, being exposed to the masses. If there is any connection between Bettis and Hasselbeck, it has to do with coin tosses. On Thanksgiving in 1998, the Steelers played at Detroit and the game went to overtime. Standing at midfield for the coin toss, Bettis said he called tails. Referee Phil Luckett said he heard heads-tails. Detroit got the ball. This Super Bowl may not be a glamorous matchup, and it may not be in a ritzy locale, but it would be hard for the oddsmakers to find a more intriguing coin toss.

SUPER BOWL
SEATTLE SEAHAWKS
PITTSBURGH STEELERS
FOOTBALL
HASSELBECK MATT


Russia Claims Its Sphere of Influence in the World

Abstract: MOSCOW — President Dmitri A. Medvedev of Russia on Sunday laid out what he said would become his government’s guiding principles of foreign policy after its landmark conflict with Georgia — notably including a claim to a “privileged” sphere of influence in the world. Speaking to Russian television in the Black Sea resort of Sochi, a day before a summit meeting in Brussels where European leaders were to reassess their relations with Russia, Mr. Medvedev said his government would adhere to five principles. Russia, he said, would observe international law. It would reject what he called United States dominance of world affairs in a “unipolar” world. It would seek friendly relations with other nations. It would defend Russian citizens and business interests abroad. And it would claim a sphere of influence in the world. In part, Mr. Medvedev reiterated long-held Russian positions, like his country’s rejection of American aspirations to an exceptional role in world affairs after the end of the cold war. The Russian authorities have also said previously that their foreign policy would include a defense of commercial interests, sometimes citing American practice as justification. In his unabashed claim to a renewed Russian sphere of influence, Mr. Medvedev said: “Russia, like other countries in the world, has regions where it has privileged interests. These are regions where countries with which we have friendly relations are located.” Asked whether this sphere of influence would be the border states around Russia, he answered, “It is the border region, but not only.” Last week, Mr. Medvedev used vehement language in announcing Russia’s recognition of the independence of South Ossetia and Abkhazia. Though he alluded in passing to respecting Georgia’s territorial integrity, he defended Russia’s intervention as necessary to prevent a genocide. Mr. Medvedev, inaugurated in May, was an aide to Vladimir V. Putin , the former president and now prime minister. Mr. Putin appeared on Russian television on Sunday from the nation’s far east, where he was inspecting progress on a trans-Siberian oil pipeline to China and the Pacific Ocean, a clear warning to Europe that Russia could find alternative customers for its energy exports. He was later shown in a forest, dressed in camouflage and hunting a Siberian tiger with a tranquilizer gun. Leaders of the 27 members of the European Union , who will meet in an emergency session on Monday, were considered highly unlikely to impose sanctions or go beyond diplomatic measures in expressing disapproval of Russia’s conflict with Georgia. The members in Eastern Europe have tended to be more wary and more confrontational toward Russia, while Western European countries have tended to be more concerned with not jeopardizing energy imports from Russia.

Russia
European Union
Medvedev Dmitri A
International Relations
Putin Vladimir V
Georgia (Georgian Republic)


Movie Studios See a Threat in Growth of Redbox

Abstract: LOS ANGELES — In 1982, just as the VHS tape was taking off, a “Star Wars” buff named Mitch Lowe had a radical idea. What about building a vending machine that could rent movies? He called his invention Video Droid. It failed. People were not yet comfortable using credit cards for casual transactions, the tapes broke easily and the technology involved with manipulating their bulk proved too expensive. But Mr. Lowe did not give up, and his moment seems to have finally come. Mr. Lowe, 56, is now the president of Redbox, a fast-growing company in Illinois that rents movies for $1 a day via kiosks. By December, there will be 22,000 Redbox machines in spots like supermarkets, Wal-Mart Stores and fast-food restaurants. Redbox’s growth — it started with 12 kiosks in 2004 and now processes about 80 transactions a second on Friday nights — has Hollywood’s blood boiling. Furious about a potential cannibalization of DVD sales and a broader price devaluation of their product, three studios (20th Century Fox, Warner Brothers and Universal) are refusing to sell DVDs to Redbox until at least 28 days after they arrive in stores. Redbox is suing them on antitrust grounds. Leery of waging their own battles, two other studios, Sony Pictures and Paramount Pictures, have signed distribution deals with the vending company. Walt Disney permits third-party distributors to sell to Redbox but has so far shunned a direct relationship. Redbox and its vending rivals now have 19 percent of the rental market, compared with 36 percent for rent-by-mail services (Netflix) and 45 percent for traditional stores, according to the NPD Group, a market research company. NPD estimates that vending will grow to a 30 percent share by the end of next year, at the expense of traditional stores. Studios, aware that consumers are unlikely to pity their plight and muzzled by the lawsuits, are keeping quiet. Fox, Universal, Warner and Disney each declined to comment for this article. But Hollywood’s powerful public relations machinery is in motion behind the scenes to connect the news media with a group that is equally threatened by Redbox but much more relatable: mom and pop rental store owners. “These machines are to the video industry what the Internet was to the music business — disaster,” said Ted Engen, president of the Video Buyers Group, a trade organization for 1,700 local rental stores. Mr. Engen is enlisting lawmakers to attack Redbox for renting R-rated movies to underage viewers — the machines simply ask customers to confirm that they are 18 or older by pressing a button — and trying to rally the Screen Actors Guild and other unions. “It’s going to kill the industry,” said Gary Cook, business manager for UA Local 78, which represents studio plumbers. Mr. Lowe, meanwhile, is portraying the studios as greedy giants scheming to trample the little guy. “Don’t let a few movie studios prevent you from seeing the latest DVDs for an affordable price,” reads a headline on a new Redbox Web site, savelowcostdvds.com . Redbox, formerly owned by McDonald’s and now part of Coinstar, is only the biggest of a host of DVD vending companies. DVDPlay, whose kiosks are also red, has been aggressive in California, while MovieCube is big in Canada. Blockbuster is scrambling to introduce its own rental kiosks. There are now about 500 Blockbuster Express machines, and plans call for 2,500 more by the end of the year; the company expects to open 7,000 in 2010, a spokesman said. The kiosk boom is fed by several consumer and business currents, all related to the recession. For starters, the dismal economy has made people think twice about buying DVDs, especially as the likes of Redbox have made renting easier. Consumers are also tiring of the clutter: The average American household with a DVD player now has a library of 70 DVDs, according to Adams Media Research. Over all, DVD sales are down 13.5 percent for the first half of 2009 compared to the first half of 2008, according to the Digital Entertainment Group, a trade organization. Studios say some new titles are selling 25 percent fewer copies than expected. Rental revenue is up about 8 percent over the same period, according to the group. Retailers, struggling to keep people shopping, have realized that having a DVD kiosk in a store creates foot traffic, making it easier for companies like Redbox to sign wide-ranging installation agreements. Some partners, like Walgreens, have offered discounts that essentially make rentals free. Redbox is also getting a hand because of Hollywood’s troubles. Analysts say Sony and Paramount signed agreements with the company in part because their home entertainment units are under pressure to meet financial targets, set before the DVD decline. Sony’s five-year deal is worth about $460 million in DVD sales to Redbox. Paramount’s deal starts with a four-month test; if the studio decides Redbox represents a net gain to its home entertainment business, it can extend its relationship for five years and a guaranteed $575 million. Paramount’s deal involves revenue-sharing, a rarity for Redbox. The kiosk operator primarily follows the mom and pop model: it seeks to buy discs wholesale and makes a profit with repeat rentals. (Revenue-sharing deals typically allow a rental store to buy discs for half the wholesale cost or less.) Redbox can price rentals at $1 and still make money because its machines eliminate so much overhead. The $1 price is not the main issue for the studios, although they do not like that, either; it is the timing. New DVDs sell for about $25. Video-on-demand services price them at about $5. Multiday rentals of new titles cost $4.99 at Blockbuster. Now there is a $1 option at the same time. That could put downward pressure on the industry’s price structure. “Anyone whose business involves selling movies should be enormously concerned,” said Richard Greenfield, an analyst at Pali Research. Analysts also see a threat to studios in Redbox’s practice of selling about half of its DVDs into the used market (after renting them about 15 times at an average of $2 a transaction). By signing deals with Redbox, Paramount and Sony got the kiosk operator to agree to destroy their discs rather than resell them. “Our position is that this is a strong consumer trend, and we figured out a way to minimize the negative aspects and maximize the positive ones,” said David Bishop, president of Sony Pictures Home Entertainment. Rob Moore, vice chairman of Paramount Pictures, said, “This trial gives us access to information that will allow us to make an informed decision about Redbox’s impact on our home entertainment business.” Mr. Lowe dismissed worries about the cannibalization of sales. He cited internal research indicating that 20 percent of Redbox’s volume is additive — people who did not previously buy or rent DVDs — and that partners like Wal-Mart have had only a 1 percent decline in sales after Redbox machines have been installed at their entrances. The kiosks hold about 500 DVDs and focus on new mainstream releases. Customers follow a series of touch-screen prompts to use the kiosks, which vend from slots on the side. Once a selection is made, the customer swipes a credit card through the reader. The card is charged a dollar (and tax) for each DVD rented; the charges for additional days, if any, are added when discs are returned. The charge for lost DVDs is $25. “If you make renting affordable and fun, people are going to watch a whole lot more movies than they did before,” Mr. Lowe said.

Movies
Redbox
Warner Brothers
Renting and Leasing
DVD (Digital Versatile Disc)
Shopping and Retail
Prices (Fares Fees and Rates)
Twentieth Century Fox
Lowe Mitch