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December 3, 2007
TOPICS TOPICS TOPICS
FCC Clears Tribune Co. Sale
The Federal Communications Commission approved the $8.2 billion buyout of the Tribune Co. by a 3-2 vote Friday, a move
that will allow the deal to close by the end of the year.
In approving the deal, the agency granted Tribune Co. a temporary waiver on rules barring ownership of both a newspaper
and a broadcast station in the same city in four markets and a permanent waiver for the city of Chicago.
Tribune Co. is owner of The Los Angeles Times, The Chicago Tribune, nine other dailies and 23 television stations. The
buyout is being led by real estate billionaire Sam Zell and will result in the publicly traded company becoming private.
The three Republican commissioners voted in favor of the sale while Democrats Michael Copps and Jonathan Adelstein were
opposed.
The company currently owns both newspapers and broadcast stations in five markets: New York City, Chicago, Miami-Fort
Lauderdale, Los Angeles and Hartford, Conn. It needed the waivers before it could complete the sale.
FCC Chairman Kevin Martin has proposed a permanent rule that would allow one company to own a newspaper and a
broadcast station in any of the 20 largest markets. The full commission is set to vote on the proposal by Dec. 18. While
Martin's
plan would grant Tribune some relief, it still would have pushed the closing date for the sale into next year, which the
company has said would jeopardize financing for the deal.
Martin began circulating the temporary waiver plan among the other four commissioners on Tuesday. The chairman,
anticipating that the ownership rules may be challenged in court, said Tribune Co.'s waivers, except for Chicago, will last six
months after any potential litigation is concluded, or two years, whichever is later.
Martin's proposed permanent ownership rule states that if a television broadcaster wants to buy a newspaper, the station may
not be ranked among the top four in the market. That posed a potential problem for the company in Chicago, where Tribune
Co. owns WGN-AM, WGN-TV and The Chicago Tribune.
But the FCC order grants Tribune Co. a permanent waiver in the Chicago market, noting that the combined ownership dates
back decades and was grandfathered when the rule was originally adopted.
Tribune said in a press release Friday the transaction is expected to close by year's end "following satisfaction of the
remaining
closing conditions, including the receipt of a solvency opinion and completion of the committed financing."
"We appreciate today's action by the FCC, which allows our transaction to move forward," said Tribune chairman and CEO
Dennis FitzSimons. "We look forward to implementing the new ownership structure that will enable us to focus all of our
energy and resources on Tribune's future."
The buyout plan calls for the company to be owned by an employee stock ownership plan. Zell, whose investment in the
company will increase to $315 million, according to Tribune, will become chairman.
Copps, an ardent foe of media consolidation, blasted the decision in his dissent.
"If this order were a newspaper, the banner headline would read "FCC Majority Uses Legal Subterfuge to Push for Total
Elimination of Cross-Ownership Ban," he wrote.
Copps accused Martin of enlisting Tribune as "an accomplice" in an attempt to get the cross-ownership ban overturned in
court.
Andrew Schwartzman, president of public interest law firm Media Access Project, said the decision was "deceptively
packaged
to make it seem more reasonable than it really is."
Martin did not submit a statement accompanying the order.
Ad Outlook Remains Healthy, Bolstered By Olympics, Elections, Other Stimuli
IN THE FIRST IN A series of revised outlooks for the U.S. and world advertising economies scheduled to be released this
week,
Publicis' ZenithOptimedia unit predicts advertising spending will rise at a relatively healthy clip despite growing uncertainty
surrounding the general economy. The gains, a 6.7% increase in global ad spending, and a 4.1% hike in the U.S., however, are
being driven largely by incremental spending attributed to cyclical events such as the Summer Olympic Games in Beijing,
China, the U.S. presidential election, and the European football tournament Euro 2008. "We see these overriding trends
being masked by the fact that we're coming up on a quadrennial year," Tim Jones, president-CEO of ZenithOptimedia North
America, tells MediaDailyNews, adding, "Thank god for those effects. If you took out the quadrennial issues, then the growth
would remain flat."
Jones says the Olympics would account for about $3 billion in incremental ad spending, and that the U.S. presidential
elections would contribute another $2 billion over the next year. The European football would tournament would add $1
billion in incremental ad spending, principally in Europe, he says.
Without those stimuli ZenithOptimedia predicts the advertising economy would likely continue to lose steam, especially in
light a downturn in the U.S. housing market and a global credit squeeze that have some economists fearing another
recessionary cycle.
"It's been losing about one [percentage] point, year-on-year," Jones says of the expansion of the advertising marketplace in
recent years.
Most of the underlying expansion has been coming from two distinct sectors: Online ad spending globally, and general ad
spending in emerging markets in Asia and Eastern Europe.
"By 2010, China will be the fourth largest advertising market in the world and Russia will be 6th," Jones says.
Among the major media, the Internet continues to be greatest catalyst in spending, and is also grabbing increasing shares of
global advertising budgets. In 2008, the Internet will overtake radio to become the fourth largest medium with 9.4% of global
advertising share; and in 2010, it will overtake magazines to become the third largest medium with an 11.5% share.
"In the early days of the Internet, it was very much an information medium, and not a branding medium, but now with the
move to video and the ability to download quickly, it's much more of a branding medium," Jones says, adding, "I think that
gives us more confidence at how much this medium is going to grow."
ZenithOptimedia Worldwide CEO Steve King will officially present the agency's updated outlook this morning during UBS'
annual media conference in New York, along side Universal McCann Director of Forecasting Bob Coen.
Holiday Sales Of Clothing Expected To Remain Weak
SO FAR, SCARVES AND SWEATERS don't seem to be very high on Santa's list this year, according to a new analysis from
Deutsche Bank.
Based on its analysis of consumer trends in the days following Thanksgiving, Deutsche expects a decline in comparable
storesales
of 4% for its apparel retail index in November.
And overall, the Deutsche report found subdued buying behavior, which means holiday results for these retailers don't look
promising. "The apparel retail segment has been challenging for market share shift reasons, and also for macro reasons
recently," it says.
"November sales for apparel retailers are not necessarily a proxy for holiday," writes analyst Gabrielle Kivitz. "The kick-off to
the holiday season has mixed implications for apparel retail companies, as post-Thanksgiving shopping patterns reflect
bargainhunting
rather than real holiday season shopping demand."
This year, the report notes, post-Thanksgiving shopping sprees are skewing increasingly toward big splurges like electronics
or
the special promotions and great deals at big-box retailers.
Some stores in its index are likely to do better than others. Of the clothing stores in its index that are considered Black Friday
players --those appealing to lower demographics, including Aeropostale, Victoria's Secret, Bath & Body Works and Charlotte
Russe--"Aeropostale was a standout with traffic and execution," the report says.
Earlier this week, Aeropostale reported strong results for the third quarter, and says its fourth quarter is also looking good.
"Over the important Friday and Saturday following Thanksgiving Day, we achieved mid-single digit comparable-store sales
increases compared to a mid-single digit increase last year," executives say. "We currently expect our November comparable
store sales to increase in the mid-single digits range."
And Talbots, which tapped Publicis as its new ad agency earlier this week, says that while comparable-store sales fell 8.2% at
Talbots and 6.5% at its J. Jill brand, there are "greatly improved comparable-store sales trends in the month of October for
both brands, as compared to August/September."
"In our own store checks on Black Friday, we generally observed consumers demonstrating restraint," the Deutsche report
says. "When we observed individuals in the cash wrap lines, a noticeable and common observation was that customers
generally were holding one or two (mostly one) low-ticket items, despite storewide promotions. Also, the frequency of
customers with handfuls of shopping bags was low."
Kirkland’s Plans Closures of Many Mall Stores
JACKSON, TN-In order to improve cash flow during a difficult environment for home furnishings, Kirkland's will accelerate its
closure of underperforming units, mostly in regional malls, executives said during its third-quarter conference call.
The company will close 30 stores in January 2008, and anticipates reviewing another 100 units over the next 18 months for
potential closure. Many of those to be closed likely will be mall units, as the company continues its shift to off-mall locations.
Currently, about 41% of the company’s stores are located in malls, and Kirkland’s is aiming that percentage to drop to
between 15% and 20% of the store count, located in a much tighter geographical spread.
“We are committed to aggressively closing stores. This effort to close underperforming stores will allow us to focus our
personnel strategically and geographically,” said Robert Alderson, Kirkland's CEO. “A large number of really nasty stores will
close a year from January, mainly a group in Philadelphia, New Jersey and New York State that have been underperforming
for quite some time.”
The 100 units to be reviewed are nearing the end of their leases or can utilize kickout clauses. Just three units, already
contracted, will open next year. By the end of the fiscal year, the company will have opened 35 stores in fiscal 2007.
Net sales for the quarter were $88.7 million, down 7.8% from the same period last year. Comparable store sales for the
quarter decreased 12.1%. Comparable store sales in mall stores declined 13.1% for the third quarter while comps in off-mall
stores declined 11.3%. The company reported a net loss of $10.7 million, compared with a net loss of $2.9 million last year.
Kirkland's operates 358 stores in 37 states.
Big Lots Plans More Stores, but Lowers Comps
COLUMBUS-Big Lots Inc. chairman and CEO Steve Fishman said during a conference call that it has cut the number of stores
to
close this year, and looks to open more stores next year, through more favorable commercial real estate terms. The company
reported higher net income of $14.3 million, or 14 cents per diluted share, compared to $1.7 million, or two cents per
diluted share in Q3 2006. However, the recent quarter comp-store sales dipped slightly and are projected to go further into
the negative.
Fishman said during the call that the company opened seven new stores so far this year, and now plans to close just 30 of the
company’s 1,368 stores by January, “not as high as a store-closure count of what we thought would be 45 to 50 stores. We
were able to negotiate favorable lease terms in a number of stores we thought we would close. Additionally, we have more
new stores in the pipeline in 2008 than we had at this same time last year for 2007.”
He says that he’s gone to pains to make sure the company can grow profitably without having to continuously open new
stores. “We have wanted more stores,” he said, “but our business cannot support the rent being demanded in certain
markets and locations. If we can’t invest in a new store and generate an acceptable return, we absolutely will not sign the
deal. Real estate rents need to be more appealing, and we may be starting to see that change ever so slightly.”
The company reported its comparable same store figures in the third quarter decreased 0.5% from last year’s strong showing
of 5.8% growth in Q3 2006. Fishman said the current retail environment is tough for anyone to drive meaningful high-end
growth. “It’s just too pervasive to say that the macro environment is not affecting retail,” he said during the call. The
company is now projecting same-store sales in the fourth quarter to be “slightly negative,” during a time that brings in a little
more than half of the company’s income for the year.
Bon-Ton jumps on the cyber retail bandwagon
The department store chain that includes Boston Store, Elder Beerman and Younkers in Wisconsin made its "Cyber Monday"
debut this year -- at least one-half-decade behind many competitors, but demonstrating a new commitment to online sales.
The stores' parent company The Bon Ton Stores Inc., which has many corporate functions in Milwaukee but is based in York,
Pa., launched the Web sites for six of its store brands in October. However, executives viewed Cyber Monday -- the Monday
after Thanksgiving and the start of the online holiday retail season -- as the first test of the site and new online distribution
centers in Rockford, Ill., and Fairborn, Ohio.
Traffic on the Web sites "jumped up" on Cyber Monday, said Ken Burke, chairman of MarketLive Inc., a Petaluma, Calif., firm
that provided the platform for Bon-Ton's online store.
"It's apparent customers are responding," Burke said. "Sales are up considerably."
However, Bon-Ton executives declined to disclose sales figures.
The Web sites are administered through Bon-Ton's office in Milwaukee, which also is the site of vice president of e-commerce
Jimmy Mansker. Bon-Ton recruited Mansker from Radio Shack Corp., Fort Worth, Texas, where he held a similar position and
launched that chain's online sales site in October 2005.
Bon-Ton previously ran a Web site for its namesake Bon-Ton chain, but it only carried about 500 items. The previous owner
of Boston Store, Elder-Beerman and Younkers -- Saks Inc. -- had no online sales site. Bon-Ton executives decided after
digesting the $1.05 billion March 2006 acquisition to embark on creating an online presence, said spokeswoman Mary Kerr.
By entering the online sales industry several years after competitors, Bon-Ton has been able to learn from others' mistakes,
Mansker said. Some retailers encountered difficulties with deliveries and suffered from customer complaints, he said.
The sites for each of the Bon-Ton store brands are identical, but each has its own Web address such as
www.bostonstore.com
and www.elderbeerman.com. They currently carry 3,500 items, but that number will continue to grow, Kerr said. Prices are
the same as those on the store shelves.
Bon-Ton is promoting the Web sites in its print advertising sections and in stores. The company also is using Web search
optimization and paid Web search advertising to attract shoppers.
GM, Chrysler Still Spend Big on Incentives
If you're wondering how effective incentives are, just ask yourself: Where would this industry be without them? Or, better
yet, ask Chrysler and General Motors. Chrysler LLC has cash rebates to customers on just about every model in the store.
The
top giveback is $5,000 on the Dodge Ram 1500 pickup. What is Chrysler's best-selling model? The Ram 1500 pickup, of
course. GM isn't spending as much on individual 2008 models, but its list is longer than Chrysler's. GM's top payment is
$2,500
on the Chevrolet TrailBlazer and GMC Envoy. Thirty-one other nameplates pay the buyer $500 to $2,000. Twenty of them
are trucks. The GM and Chrysler incentives expire Jan. 2. As November ended, Ford Motor Co. was tinkering with its
December program.
Mercedes To Roll Out Diesel Promotion In U.S.
MERCEDES-BENZ NEXT YEAR WILL ROLL out a grassroots program to promote its BlueTec diesel powertrain in the U.S.
The company, which introduced BlueTec in 2006, has until now marketed the technology only in Europe, and in the U.S. has
offered it only in the E320 sedan. That will change, though, as the company, which is on the rebound with its new C-Class
sedan and M-Class SUV, will introduce BlueTec in its M-Class, GL-Class and R-Class SUVs.
The company first introduced BlueTec at the North American International Auto Show in early 2006, and launched the E 320
BlueTec in the U.S. that fall. In August this year, the company rolled out an E 300 BlueTec car in Europe.
Steven Cannon, vice president-marketing at the Montvale, N.J.-based Mercedes-Benz USA, says the effort--which will
probably take place next August--will be the sort of national city-by-city tour it launched in August to promote the new C-
Class
cars. That program, C-Drive, visits 11 markets this quarter, wrapping test drives around a venue showcasing complementary
products from the likes of W Hotels and Bon Appétit magazine.
Currently, the BlueTec-powered E320 is being offered lease-only in California. Cannon says the challenge inherent in
bringing the diesel Mercedes-Benz back to the U.S. market is that while older loyalists know and love Mercedes diesels,
younger consumers have a different view.
"We know we have some myths we need to debunk," he says. "There's this notion of diesel as dirty technology, so there are
some consumer perceptions we need to confront."
The company will pitch BlueTec for its ability to generate up to 600 miles on a tank with fewer tailpipe emissions. We are not
taking for granted that we have to do 30-second TV spots."
Todd Turner, president of Car Concepts, Los Angeles, says consumers will give the vehicles a chance if they see it is not
their
dad's diesel--one of the cars of yesteryear that gave diesel a bad name in the U.S.
Mike Omotoso, senior manager of global powertrain for J.D. Power, agrees that the challenge will be overcoming consumers'
attitudes. "Diesel will be a tough sell in California and other states with stringent air control standards," he says, "because
hybrids are already so popular in those states, and they have already such a 'clean' image."
He says hybrid vehicles like Toyota's Prius get better fuel economy in city driving, but they are about even on the highway.
"And the price premium for a hybrid is bigger," he says. Per Omotoso, the price premium for BlueTec is likely to be around
$1,000 for the option. "They haven't confirmed it yet, but we expect it to be a grand or two, but for hybrid it's $4,000 to
$5,000."
"Mercedes will have to launch a clever PR campaign to convince people clean diesel is just as clean as hybrid."


Cyber Monday Spending Propels Holiday E-Commerce to Strong Week of More than $4 Billion in
Sales
Buying from Work and Home Account for Nearly Same Share of Online Holiday Spending
RESTON, Va., Dec. 2 /PRNewswire-FirstCall/ -- comScore, Inc. (NASDAQ:SCOR) , a leader in measuring the digital world,
today
released an update of holiday season e-commerce spending covering the first 30 days                   -30) of the
                                                                                                                      -
(November 1                                                                                           November
December 2007 holiday season. More than $13.4 billion has been spent online during the season-to-date, marking an
18-
percent gain versus the corresponding days last year. The heaviest online spending day of the season thus far was
Cyber
Monday (November 26) with $733 million in sales, marginally higher than sales on Thursday, November 29.

2007 Holiday Season To Date vs. Corresponding Days* in 2006

                                        Billions ($)
Holiday Season to Date                     2006                   2007                           Pct Change

 November 1 - 30                          $11.41                 $13.43                             18%
 Week Ending November 30                   $3.43                  $4.06                             18%
 Thanksgiving Day (November                $0.21                  $0.27                             29%
22)
 "Black Friday" (November 23)             $0.43                   $0.53                             22%
 "Cyber Monday" (November                 $0.61                   $0.73                             21%
26)
* Corresponding Shopping Days, Not Calendar Days

"This most recent week saw several very strong days for online retail spending," said comScore Chairman Gian Fulgoni.
"Beginning with a record $733 million on Cyber Monday, each of the next three days also surpassed $700 million in
sales,
resulting in more than $4 billion in online spending during the week."
 Some additional observations since Cyber Monday include:
 -- The fastest-growing retail sites since Cyber Monday compared to the corresponding days last year (within the top 20
most
frequently visited retail sites) were: Yahoo Shopping, Target, Apple, Circuit City and Toys "R" Us.
 -- A number of the traditionally more popular product categories for holiday gifts saw strong growth in dollar sales
versus last
year: video games, consoles and accessories (+170%), toys (+36%), computer hardware (+21%), sports and fitness
(+19%).
Most Online Holiday Shopping Occurs at Work
Cyber Monday has historically represented the first significant spike in online holiday spending because it is the first
working
day after the Thanksgiving holiday, and shopping from work remains a key component of total online shopping
behavior. For
the first 30 days of the holiday season, 45.5 percent of all online retail spending came from work locations, edging out
the
44.1 percent of spending from home.
"Even though the vast majority of Internet-enabled homes now have high speed connections, shopping from work
remains a
key component of online holiday retail spending," added Mr. Fulgoni. "This suggests that the privacy afforded by
shopping at
work, without family members looking over one's shoulder, is one of the important factors in determining where
consumers
choose to shop online. Also interesting is that despite the declining value of the U.S. dollar, the share of spending from
international locations dropped versus last year. This would appear to indicate that maturing international e-
commerce
markets are succeeding in keeping more foreign online spending overseas."

The Short Life of the Chief Marketing Officer
The New Media world is bewildering, and few CMOs can live up to the sky-high expectations
Stroll through the C-suite at many companies, and it's an easy bet which executive is a dead man (or woman) walking:
the
chief marketing officer. CMOs last 26 months on average these days, says recruiter Spencer Stuart, vs. 44 months for
CEOs. In
the past few weeks, CMOs at Chico's (CHS), Home Depot (HD), MySpace (NWS), and Rite Aid (RAD) all have left their
posts after
short tenures.
The CMO job is a lot more complicated and arduous than it was just a few years ago. And that, say recruiters and CMOs,
helps
explain the high turnover. At a time when marketers are faced with a bewildering array of New Media options and
consumers
are better informed than ever, Wall Street-obsessed CEOs are increasingly impatient for a payoff. "CMOs are expected
to
deliver instant results," says Mark Jarvis, Dell's (DELL) CMO since October. "It makes for a deadly cocktail of high
expectations,
resistance, and complexity."

CMOs have always struggled to justify their existence. "You might be surprised how few people have strong opinions about
what the chief financial officer or chief information officer is doing," says John Costello, CEO of hearing-aid maker Zounds,
who has been CMO at Home Depot, Sears (SHLD), and Yahoo. (YHOO) "But CMOs have almost everyone second-guessing
[them] and looking over their shoulder."
FUZZY ASSIGNMENT
Chief executives understand that the CMO's role needs to change to suit new circumstances, but few have figured out how to
do so. "Probably 70% of the companies I work with don't know what they're looking for when they recruit a CMO," says
Patrick
A. Delhougne, who headhunts marketers for executive recruiter Korn/Ferry International (KFY). Jeff Jones, who was the
chief marketer at Gap (GPS) for two years before leaving to run ad agency McKinney (HAVSF), says he discussed 22 CMO
positions over five months. Not one, he says, spelled out coherently what he would be accountable for.
It's not hard to see why companies are grappling with this. As recently as five years ago, the CMO's role was much simpler.
Chief marketers devised a brand message, hired an advertising agency to create clever ads, managed promotions, and then
waited for their bonus or pink slip. "You would run a major ad campaign and trust it," says Jim Speros, a veteran marketing
executive who is currently CMO at Marsh & McClennan (MMC). But that won't fly in a world where blogs, social networks, and
cell phones are fast changing not just where ads go but how people shop.
It doesn't help that chief executives and chief marketers often have very different imperatives. Building or even maintaining
a brand is a long-term process that requires patience and incremental change. But CEOs operate at a time when investors
fixate on quarterly or monthly results as never before.
Anne MacDonald, who became CMO at Macy's (M) in February, 2006, wanted to move the brand upmarket. Doing so would
take time and meant the retailer had to quit its habit of using discounts and promotions to hit monthly sales targets. It seemed
like a great idea--till sales started slipping. Without those regular jolts to the top line, analysts began downgrading the stock.
After 15 months, MacDonald left Macy's. (She and the company declined to comment on her departure.)
Corporate bean counters, who have long deemed marketing a squishy discipline, increasingly are demanding data to prove
that a CMO's strategy is valid. One of the first things Cammie Dunaway did upon taking the CMO job at Yahoo! in 2003 was to
hire a consultant to track return-on-investment for her marketing department. But Dunaway, who left to take the top sales
and marketing job at Nintendo last October, says: "Your peers are always suspicious you have ordered up your own proof of
accountability." Her next move was to enlist Yahoo's own CFO to handle the analysis. "When you have the CFO's staff making
marketing's case, instead of trying to make your case to the CFO," she says, "the credibility spreads fast."
Few chief marketers understand the importance of being accountable more than James Farley. When he left Toyota Motor
(TM) recently and joined Ford (F) as global CMO, Farley knew he'd probably fail if his job had no hard connection to monthly
sales--every automaker's report card. He also understood that Ford's regional operating chiefs might fight global marketing
strategies from a CMO with no skin in the game. So Farley asked CEO Alan Mulally to give him responsibility for sales in the
company's most difficult market, the U.S. That way, he'd be in same pressure cooker as his peers. Now, when Farley tries to
globalize the Ford brand strategy, he'll have more credibility. "Being accountable for sales in the U.S.," says Mulally, "will
make
the team tighter."
Even as the bean counters scrutinize their every move, CMOs are under enormous pressure to navigate a strange new world.
Consider three typical workdays for Ted Ward, marketing chief at Geico insurance. Over 72 hours, he reviewed how many
people had visited Geico's Web site the previous week, how many were clicking on ads and then buying insurance, and how
much he was spending on Web marketing. He met with his ad agency to fine-tune three separate campaigns. He strategized
about the evolution of Geico's Caveman Web site, the most effective ways to use social networking sites such as Facebook,
and how deeply to venture into Web TV. It's hard to choose marketing options, says Ward, "when the sands keep shifting."
WILY WEBSTERS
That's why CMOs spend much of their time educating themselves. Marc Lefar, who was chief marketing officer at Cingular
(now AT&T (T)) until leaving for personal reasons in April, knew he needed to get his head around a geeky marketing tool
called search engine optimization (SEO). Now more important than Nielsen ratings, SEO is used to make sure a company's
site
shows up as high as possible on search results. Getting this right can mean the difference between capturing a potential cell
phone customer or losing him to a rival.
So Lefar sat down with wonks from ad agency Digitas for an intensive course on the mysteries of SEO. "The average 45-
yearold
chief marketing officer cannot possibly figure out what's cool and what's going to drive the business," Lefar says. "You've
really got to have an investment in your own education [to] keep yourself exposed to things out of your comfort zone."
Lefar might have added that CMOs also must expose their colleagues to newfangled marketing techniques, and then get them
to pitch in. Speros recently overhauled his company's Web site, adding studies and research papers that showcased Marsh &
McClennan's varied expertise and, he hoped, would attract new customers.
To make the new site credible, Speros needed to get all the company's divisions, from human resources consultant Mercer to
security and risk shop Kroll, to help design them. Then he had to make sure that every employee who interacts with
customers at panel discusions was adequately versed in the site's contents. Speros had three months to get the job done and
needed to coordinate teams around the globe. This new emphasis on intracompany diplomacy, he says, helps explain the 75-
hour weeks and the 300 e-mails and 70 voice mails he receives each day. "It's substantially more difficult [than in the past],"
Speros says. "There's a whole sell-in that you have to do across different departments. And that takes time." Which is
precisely
what many CMOs don't have.
Let the CMO Die
"Perhaps we should just call for the end of the CMO position," Advertising Age editorialized on Oct. 29. "Put the job out of its
misery. It isn't really working anyway, is it? Let's just divvy up the responsibilities among the chief sales officer, the chief
information officer, the chief operations officer, and the chief financial officer. The CMO was having too much trouble trying
to figure out how to get them to understand marketing anyway. And CEOs were having too much trouble defining the CMO
role and making heads or tails of what the value was. At the very least, let's change the title to chief maybe officer--as in,
maybe he'll stick around; maybe he won't. Maybe her new initiatives will be well-received and move the needle; maybe they
won't."
Same Old, Same Old
In a recent survey of marketing professionals, McKinsey found that while most respondents were experimenting with New
Media, TV remained the most widely used vehicle. "Many continue with the tried-and-true approaches because the
alternatives lack the scale to achieve brand priorities, and because the absence of a widely accepted measure of digital media
makes it challenging to measure spending effectiveness. That's why more than one-third of all respondents devote less than
10% of their marketing budgets to non-traditional media."
Pitching Between the Lines
In-text ads tied to keywords on Web news pages are growing fast—and causing a stir in some newsrooms
For sale: "Boston," "telephone," "football," "Indianapolis"...and just about every other word that appears on some Web news
pages. Having shifted much of their advertising budgets from print to online, big consumer-brand companies are increasingly
attaching ads to selected words on newspaper and other media Web sites.
So-called in-text advertising, purchased by companies such as Ford (F ), Intel (INTC ), and Microsoft (MSFT ), pops up in small
windows when a reader moves a cursor over highlighted, double-underlined words in a story. Pausing over a link produces a
bubble containing written pitches, voiceover, or even video.
This year the Web sites of several Gannett newspapers, including The Indianapolis Star, The Arizona Republic, and the Reno
Gazette-Journal, began using in-text ads. New York City-based Vibrant Media, one of the leading firms that specializes in
selling in-text advertising, has nearly doubled the number of publishers showing its ads in the past year. It delivers ads to 110
million Web users a month on nearly 3,000 sites, including the online arms of Cox Enterprises' The Atlanta Journal-
Constitution and Hearst's Popular Mechanics, and the Web sites of TV networks such as Fox News (NWS ), MSNBC, and the
Bravo cable channel. McGraw-Hill Broadcasting (MHP ), owned by BusinessWeek parent The McGraw-Hill Companies (MHP ),
runs the ads on Web pages for some of its TV stations.
The ongoing shift of ad dollars from print and TV to the Web has increased pressure on publishers to try unconventional
formats. Last year ad spending on print newspapers in the U.S. declined 1.7%, to $46.6 billion, according to the Newspaper
Association of America; spending on all U.S. Internet advertising rose 27%, to $19.6 billion, says research firm eMarketer.
Many journalists believe that selling the words in a story blurs the line between editorial and ad content. Some worry it
creates an incentive to insert ad-linked words or order up certain types of stories. Forbes' online arm caused a ruckus in 2004
when it rolled out in-text ads. After an outcry among the editorial staff and negative media coverage, Forbes ended the
practice.
Marketers claim it would be hard for journalists to know which words trigger an ad. Advertisers buy hundreds of words they
consider related to their product. Vibrant's computer programs scan Web pages and choose words based on prominence on
the page and story content. And word lists change constantly.
The Indianapolis Star began using the ads in August, initially in its auto racing pages. Now they can be found on stories
throughout the paper's Web site. Patricia Miller, online sales manager, says some newsroom employees and readers voiced
objections, but those "tapered off." "Certainly, everybody is trying to figure out the best way to generate revenue from their
online properties," she says.
In a Nov. 20 story about Thanksgiving recipes on the Star's Web site, the words "cooked rice" were double-underlined.
Scrolling over them launched an ad to buy a Sanyo rice cooker from Amazon.com (AMZN ). Vibrant provides the paper with up
to three ads per article. They're not placed in stories with a high percentage of negative words, such as "murder," or with
words that advertisers feel could tarnish their brands, such as "gas guzzler," a phrase an SUV dealer could ask to avoid.
Publishers are paid by Vibrant and other marketing companies based on how many times readers scroll over a word.
Advertisers only pay Vibrant for how many times a reader actually clicks on an ad. In-text ads draw a higher response than
traditional Web ads: About 0.2% of Web users click on posterlike ads known as banners; Vibrant CEO Douglas Stevenson
says
3% to 10% scroll over and click on in-text ads, depending on the category.
Struggles of a Mad Man
Saatchi & Saatchi CEO Kevin Roberts toiled to make his firm a force among creative agencies. Now--in today's splintered
advertising universe--he's scrambling to keep it relevant
Kevin Roberts may well be the most successful adman of his generation. Over the past decade the British-born chief
executive of Saatchi & Saatchi Worldwide has transformed his agency from one of Madison Avenue's biggest jokes into one
of
its brightest stars. Roberts has been signing up clients at an impressive clip--adding J.C. Penney (JCP ), Wendy's
International
(WEN ), and Ameriprise Financial (AMP ) to a blue-chip roster that already included Procter & Gamble (PG ) and Toyota (TM ).
His agency has been scooping up awards for its creative work. Saatchi is back in the black and expects operating profits of
about $117million this year on $780 million in revenues. Not bad for a guy who, prior to becoming Saatchi's chief in 1997,
hadn't worked a day in advertising.
And yet it's not enough. Despite the brutal hours, the nonstop schmoozing with clients, the hopscotching around the planet
chasing the next piece of business, Saatchi is eking out 6% revenue growth. That's better than other traditional agencies but
not so impressive at a time when there are more places than ever to stick ads--online, on cell phones, on the men's room
wall.
Despite Roberts' best efforts, Saatchi is not getting enough of that newbusiness. He may be flirting with irrelevance.
Here is what Roberts sees when he looks at the world: TV viewers are using digital video recorders to blast through the
commercials that are Saatchi's bread and butter. Marketers are stampeding online, where Saatchi lacks the tools and talent to
compete. Digital boutiques are proliferating, staffed with '90s tech vets and Gen Y video artists dedicated to making ads for
social networks and whatever comes after them. Meanwhile, chief marketing officers are looking for data to justify their ad
budgets to the bean counters.
Where does that leave Roberts? Buying time--working to keep clients coming in the door as he experiments with new
marketing services, shops for acquisitions, and even contemplates moving away from traditional advertising altogether into
"green communications" and retail design consulting. "We've got to reinvent and transform the way we work," says Roberts.
Still, Roberts often finds himself outmaneuvered by fleeter rivals. His own boss even wonders if a creative agency like Saatchi
should continue to manage a client's branding efforts. Perhaps the digital specialists should do it, says Maurice Levy,
chairman
and CEO of Publicis Groupe, the French giant that owns Saatchi. Levy expresses nothing but affection and admiration for
Roberts. But he warns: "It is no longer necessarily the creative agency dictating what's best for the client."
Saatchi deliberately selected an outsider when it named Roberts its CEO a decade ago. Roberts had run the international
divisions of such consumer-goods giants as P&G and PepsiCo (PEP ). He knew what marketers wanted from their creative
agencies. He was a zealot about hitting his numbers, a rare skill on Mad Ave. But no one--not even Roberts--could have
predicted how dramatically the ad industry would change.
For most of the 20th century the so-called creatives ruled the industry. They didn't worry about where or how an ad ran.
They didn't analyze market niches. They were about Big Ideas that would connect a brand, emotionally, with millions of
consumers.
Today, you might say, the Small Idea is ascendant. Ads are targeted at individuals or communities of consumers. That's
because the media universe is so fragmented--into blogs, social networks, television, magazines, and so on--that finding the
right medium is fast becoming more important than the message itself. And the people on Madison Avenue who may be best
equipped to deal with this new world are not the creative agencies but the direct marketers and media buyers, which both
won more autonomy during a 15-year industry consolidation.
THE NEW HEAVYWEIGHTS
Direct marketers invented junk mail, the 1-800 number, and the mail-in magazine insert as a way to collect information about
your buying habits and judge the effectiveness of their ads. That makes them perfect for the Web. After all, writing ads for
search engines like Google and analyzing who clicks on them isn't so different from mailing out postcards to likely prospects
and seeing who writes back.
The media buyers are no less powerful. Once consigned by the creative agencies to back-office obscurity, they also have
scads of consumer data, which they use to help clients figure out where they should spend their advertising budgets--be it on
specific TV shows, magazines, or Web sites. Now they are using their buying power to persuade broadcasters to air television
shows chock-full of product placements--a direct threat to the venerable 30-second TV spot.
Kevin Roberts isn't one to shy away from a fight. This, after all, is a man who, after being kicked out of school at 17, tried to
break into professional rugby, a full-contact sport played without pads or helmets. When the media buyers come up, his
indignation is visceral: "A media agency couldn't emotionally touch the consumer in a million years," he rails "They have no f-
--
ing idea. They don't have feelings. They're media people." Roberts' position is clear: He still believes in the power of the Big
Idea--that emotional connection to the consumer--and he sells it tirelessly.
That's how he won the J.C. Penney account. In November of 2005, the retail giant's chairman and CEO, Myron "Mike" Ullman,
saw Roberts speak at the Women's Wear Daily CEO Summit in New York. Ullman was impressed with Roberts' branding
philosophy. Before long, the two men were having secret dinners at the Dragonfly restaurant at the Hotel ZaZa in Dallas. Over
copious amounts of beer and wine, Roberts recalls, they discussed brands, understanding the consumer, and whether
Penney should ditch its longtime creative agency, DDB. Over and over, Roberts brought the conversation back to his version
of the Big Idea: Lovemarks.
Lovemarks reflects a long-held notion on Madison Avenue that the consumer is a woman who must be seduced. In his 379-
page coffee table book, Lovemarks: The Future Beyond Brands--an ornate read with a decidedly '60s vibe--Roberts explains
that a Lovemark is a brand consumers don't just trust, but love. "Think about how you make the most money," he writes. "You
make it when loyal users, heavy users, use your product all the time.... So having a long-term love affair is better than having
a
trusting relationship."
In case clients and staff missed the point, Roberts had big red hearts painted in the reception areas of Saatchi's downtown
New York offices. He also bought a shirt, which he has worn during Lovemarks speeches, embroidered with lyrics from the
Beatles' All You Need Is Love.
In truth, Lovemarks is a little bit like slapping "New and Improved!" on a familiar box of laundry detergent. After all, Mad Ave
has been claiming an emotional connection to the consumer at least since the Leo Burnett agency invented the Pillsbury
Doughboy in 1965. But Lovemarks resonated with Ullman, and on Aug. 31, 2006, Penney named Saatchi its creative agency,
an account worth over $20 million in annual revenue.
Eager to put Lovemarks to work, Mary Baglivo, who runs Saatchi's New York office, put the agency's top creative talent on the
case. Immediately they threw out DDB's old, product-focused slogan, "It's All Inside." The new slogan needed to tug at
Americans' heartstrings, and the team settled on "Every Day Matters." They crafted a series of television ads that would
romanticize everyday life. In one, a young family inhabits a slowly spinning dollhouse. Moments of their day--a snatched kiss
between husband and wife, a game of ping-pong--were set to an enchanting melody. When the ads began appearing in
March of this year, industry critics showered praise on Saatchi. "How can it be that our impression of a déclassé American
retail
institution can be altered in the space of 60 seconds?" wrote Advertising Age reviewer Bob Garfield. "[It's] thanks to one TV
commercial."
When Baglivo next met with the Penney marketing people, they told her they loved the ads. But there was just one
problem: The commercials weren't working. The retailer's analysts had concluded that, against spiking gas prices, the
campaign was doing little to compel shoppers to visit Penney's stores. "Here I am with a powerful idea," says Baglivo. "And
the
Penney guys go crazy with gas prices. It's crazy, right?"
Penney's reaction was a reminder--if one were needed--that Lovemarks could take Saatchi only so far. Yes, most clients still
believe in creating an emotional bond with consumers. But Roberts had come to the conclusion that many companies are
desperate for an über-consultant--a "brand navigator"--who, in a fragmented media universe, can help them make that
connection across multiple media.
In Roberts' formulation, the brand navigator devises an overall message, then subcontracts the work to the relevant people--
interactive shops, direct marketers, and so on. He is attracted to the concept, in part, because Saatchi would get paid based
on the performance of the entire campaign rather than on the hours spent making ads. That would help him extricate the
agency from the flagging traditional ad business. Roberts isn't the only advertising executive scrambling to reposition his
agency as a brand navigator. Big names like TBWA, BBDO, and Ogilvy & Mather are doing so, too.
SAATCHI'S NEW ROLE: "A WORK IN PROGRESS"
Three years ago, when Roberts was considering poaching Baglivo from rival agency Arnold, he asked her what she would do
with the New York office. The brand navigator concept came up right away, and Baglivo used a pop music metaphor to
explain what that would entail. The New York office was like a classic song that needed to be remixed, she explained, even if
that meant bringing in new musicians. If Saatchi was going to harmonize many types of marketing into one hit song, it needed
musicians who could play a number of different instruments. Roberts liked what he heard so much he made Baglivo CEO of
Saatchi New York, and she began recruiting Web ad makers, event planners, public relations people, direct marketers, brand
experts, and so on.
In May, 2005, Baglivo and her team visited Amerprise's chief marketing officer, Kim Sharan, in her New York office. They were
there to persuade her to hire Saatchi as the financial consultant's brand navigator. The agency had already concocted a
message for Ameriprise: "Reinventing Retirement." Saatchi vowed that it would appear everywhere from coffee cups to
employee training videos to the firm's wealth management Web site. Sharan liked what she heard, and a week later she gave
Saatchi the green light.
Sharan was expecting Saatchi to create a seamless experience across multiple media. "When I say navigate the brand," she
says, "I mean creating that experience where the consumer feels every message the company is putting out is fully integrated
and building off of one another." But she rates the new branding effort for Ameriprise "a work in progress" because it has
meant little more than making sure the stars of the 30-second spots (a red chair, the slogan "You Have Dreams. You Need a
Plan," and the actor Dennis Hopper) also appear on Ameriprise's home page. It's difficult for Saatchi, Sharan says, "because
they've grown up mainly in the world of TV, print, and radio."
It was the need to fill this gap that prompted Roberts to try and buy a digital agency. Last year he hired an investment banker
to find one. By early 2007 he had settled on Blast Radius, an 11-year-old outfit based in New York's SoHo neighborhood. Blast
Radius is best known for building Web sites for the likes of gamemaker Electronic Arts (EA ), Nike (NKE ), and Newell
Rubbermaid (NWL ) that foster enduring connections with consumers. Its site for the launch of Madden NFL, EA's monster
video game, spawned a passionate online community.
Roberts and the firm's CEO, Gurval Caer, met at Saatchi's New York office, and Roberts made an impression. "He's a great
guy,"
says Caer. "He understands that his agency and this industry have to change. He completely gets it." Caer and Roberts met
several more times. By May talks had progressed to the point that Saatchi and Publicis made a formal offer.
Caer says the bid was very competitive. But he didn't go with Saatchi. Instead, on Oct. 24, he announced he had agreed to
merge with Wunderman, one of the biggest direct-marketing agencies in the world. Roberts was publicly sanguine about the
setback. But the loss had to be deeply troubling. Wunderman has the online expertise, and that's exactly why Blast Radius
went with the direct marketer. "We saw a big chasm between us as an interactive agency vs. the more traditional agencies,"
says Caer. "With Wunderman, you had 30-plus years of customer data and insight and results. The traditional agencies were
still very much about messaging' people."
Caer says he wasn't speaking specifically about Saatchi, but the point is clear. With direct marketers and media agencies
muscling onto Saatchi's turf, it may be too late for an old-school creative shop to transform itself into a Web-era player.
Roberts' boss, Maurice Levy, is certainly hedging his bets. The Publicis chief is about to restructure his company. Like
Roberts,
he sees a future where one brand navigator manages all of a client's business. That might be Roberts. Then again, it might
not. Publicis owns several big media agencies, a large digital agency, and direct-marketing firms. "It has to be the person who
best understands the brand and the needs of that brand," Levy says. In other words, the Frenchman is content to watch
Roberts and his corporate siblings fight it out.
As Roberts girds for that battle, he's also trying to shift more of Saatchi's work away from traditional advertising--a move
many
creative agencies are making--into businesses that are growing at a decent clip. In the next few months he hopes to launch
"Saatchi & Saatchi Sustainability," which would specialize in green communications.
Already he has Saatchi & Saatchi X, a retail design consultancy he created in 2004. The agency works for retailers and for
consumer packaged goods companies, improving store layouts for the former and in-store displays and promotions for the
latter. Roberts aims to use Saatchi & Saatchi X to bring his branding philosophy, Lovemarks, to a store near you. "Unless
you're
in Whole Foods (WFMI ), it's a pretty average experience right now," he says. "And the amount of money that's spent in there
is equal to the amount of money spent on media. It's all pissed away, and nobody really likes [the business]. So I like it."
Roberts has managed to woo several clients to Saatchi X. Last August the consultancy signed up Wal-Mart Stores, a major
piece
of business. Saatchi X designed the retail giant's new store layout, as well as a new shopper-friendly electronics department,
which is rolling out now. Since then, Roberts has brought on board General Mills (GIS ) and Wendy's (WEN ) (both existing
clients), as well as Hanes and Nestlé Toll House. Refreshingly, this is a market that's growing, and Saatchi & Saatchi X's
revenues
have been up almost 20% over the last year. The question, of course, is whether the new thrust will be enough. Roberts
exudes his customary zeal. "I've inherited the most famous brand name in advertising. As the business moves into new media
and more, so will we."
'Parade' Ventures Into Branded Entertainment
Parade is moving into branded entertainment with the appointment of Debra J. Menin as vice president for that discipline.
Menin's appointment, announced this past Friday, promises more product integration and sponsored content opportunities
in the nation's largest newspaper-insert magazine.
Previously Parade's vice president and national entertainment director, Menin joined the publication in 2003 as an 18-year
advertising veteran of daily and weekly Variety, Premiere and Rolling Stone. Most recently, before joining Parade, she
worked at Viacom/MTV Networks, focusing on VH1 and CMT.
Few details were available on what shape branded entertainment will take in the pub, but common tactics included paid
"advertorials," or purchased editorial space touting a product. More subtle tactics include paid integration of products into
the
publication's original content where appropriate.
Currently, branded entertainment is still dominated almost entirely by paid integration of products and brands in television,
film and radio, with print media a distant fourth. However, marketers and publishers have shown increasing interest in
bringing the practice to print--especially newspapers, where it could help turn around long-term revenue declines. As with
television and film, branded entertainment is viewed skeptically by many editors, who fear the practice will undermine the
perceived integrity of their editorial product.
A 2006 study of television ad spending by the Association of National Advertisers found that 35% of marketers were using
branded entertainment--up from 18% the previous year.
Newspaper Services Of America Partnering With Papel Media Network To Target Hispanics
CHICAGO Newspaper Services of America (NSA), the nation's largest single buyer of newspaper advertising, said Monday it
has
formed a strategic alliance with Papel Media Network to target Hispanic consumers in print.
"Building and nurturing an ongoing relationship with the Hispanic audience is critical to the long-term success of any
advertiser
doing business in North America today," NSA CEO Dave Walker said in a statement. "This alliance with Papel Media will allow
NSA
to deliver even more new and innovative ways to engage this important consumer in print."
Eight-year-old minority-owned Papel Media works on behalf of advertisers to match appropriate demographics and audience
segments among more than 900 U.S. Hispanic newspapers, and 180 newspapers in Latin America. Papel, with offices in
Chicago, Houston, Miami, and Mexico, has run campaigns for more than 120 different advertisers.
"Advertisers will be the true winners in this alliance as both companies are now better equipped than ever before to help
clients fully capitalize on this unique consumer group" Papel Media CEO John P. Trainor said in a statement. "We are
honored
that NSA has selected Papel as their partner. We are particularly excited about combining our extensive resources,
marketplace expertise and leverage."
December 4, 2007
TOPICS TOPICS TOPICS
Stop Before You Shop
According to the BIGresearch American Pulse Survey of 4,069 respondents, 52.1% of consumers say they would rather
receive a gift card or cash for Christmas. One reason for this preference may be that consumers do not like gifts that were
chosen for them. 45.4% of those who received clothing as a gift in the past didn't like or didn't wear it. Another possible
reason is that 46.3% of those who participate in gift giving/receiving during the holidays say they hate to return gifts because
it
is a hassle.??
As Americans get in the holiday spirit this year:
• 69.4% say they would rather give than receive
• 70.9% like it when employees wish them a "Merry Christmas" while shopping
• 92.6% feel malls, stores and parks should be allowed to display the Christian Nativity Scene
Regarding mood of the consumer this year:
• 56% say they will be looking for sales more as they Holiday shop
• 59.1% will be spending less this year than in Holidays past
• 47.7% feel that compared to one year ago it is becoming harder to pay monthly bills and are living paycheck to
paycheck??
Other key findings regarding the Holiday season (of those who participate in gift giving/receiving during the Holidays):
• 82.4% say gift cards are a smart gift alternative for people they don't know well
• 10.5% have "re-gifted" gift cards received
• 22.5% have "re-gifted" gifts received
• 22.7% like to exchange gifts for things they would rather have
• 13.5% have received gift cards that they've never redeemed
• 16.1% have received gift cards that they've only partially redeemed
Victoria's Secret Makes Push For Teens, College Students
As Victoria's Secret prepares for the broadcast of its annual fashion show Tuesday, the brand has made a renewed push for
younger customers, including holding auditions for a college student to walk the runway amid its famous supermodels.
Sales at Victoria's Secret have been disappointing throughout this year, hurt by a declining number of mall visitors and
fashion
miscues at its stores. The company has planned conservatively for the holidays, given shoppers' worries about the economy.
Two weeks ago, Limited Brands Inc., which owns Victoria's Secret and Bath & Body Works, posted a 48% decline in net
income
for its fiscal third quarter, dragged down by slow sales at both brands. It also cut its forecast for the current fiscal quarter.
But one of the relative bright spots for the retailer has been its Pink line, a collection of colorful underwear, pajamas,
clothing and accessories aimed at college students but also popular with younger teens. Victoria's Secret plans to increase
the
average size of its stores by 50% over the next five years, partly to accommodate growth in Pink, which will approach $900
million in sales this year.
For this year's fashion show, filmed last month and set to appear on CBS at 10 p.m. EST Tuesday, Victoria's Secret visited
college campuses to audition students for a chance to appear in the performance. The winner, Katie Wile, attends the
University of Southern California.
"The younger customers -- between the ages of 18 and 25 -- are really an interactive society today," says Sharen Jester
Turney, chief executive of Victoria's Secret.
Ratings for the fashion show have been declining in recent years, but Victoria's Secret hopes viewers will tune in for new
twists such as a performance from the Spice Girls, who are kicking off their reunion tour.
Ms. Turney said most shoppers who buy Pink merchandise also pick up lingerie or beauty products from other parts of the
Victoria's Secret store. In a number of locations, Pink has its own entrance, and the brand has tested stand-alone Pink stores.
On the Facebook Web site, Pink is one of the most popular pages, with more than 350,000 members. The page links to the
Pink retail site, vspink.com, advertises store discounts and hosts a discussion board.
But the competition for college students is becoming more heated. In August 2006, popular teen brand American Eagle
Outfitters Inc. launched aerie, its own line of underwear and the type of comfortable clothes that retailers like to call
"dormwear." Aerie now has more than 30 stand-alone stores. Victoria's Secret says it hasn't seen an impact from the new
brand on its sales.
Limited, along with many other retailers, will release its November sales results Thursday morning, giving the first look at
how
they're performing in the early days of the holiday season. Ms. Turney declined to give details about Victoria's Secret sales
during the important "Black Friday" weekend.
Home Depot to close call centers in Chicago, Dallas, Tampa and cut 950 jobs
ATLANTA (AP) - The Home Depot Inc. is cutting 950 jobs and closing three call centers that handle orders for home
installation, a spokesman said Tuesday.
The world's largest home improvement store chain plans to shift the work from those centers to its stores, a move that will
improve customer service, spokesman Steve Holmes said. The affected employees were notified Monday, he said.
The call centers that will close Jan. 28 are in Chicago, Dallas and Tampa, Fla. Home Depot will have eight call centers left in
North America, Holmes said. There are no plans to close those centers. In March, a Home Depot call center in Addison, Texas,
closed, cutting 550 jobs, he said.
Atlanta-based Home Depot employees roughly 350,000 people and operates more than 2,227 retail stores in the United
States, Canada, Mexico and China.
The call centers give price quotes and complete orders for customers who go into stores and order flooring and other types
of home installations, Holmes said.
In September, Home Depot said it planned to close its 11 Landscape Supply stores - geared for professionals and
projectoriented
do-it-yourselfers - as part of the company's efforts to focus on its core retail business.
The stores, the first of which opened in 2002, included a greenhouse and sold products including interior plants, chemicals,
pavers and irrigation supplies. They also offered landscaping tool rental. Closing them affected about 380 employees.
Home Depot also sold its wholesale distribution business, HD Supply, to a group of private equity groups for $8.5 billion. The
sale was completed in August.
Rent-A-Center plans to close 280 stores
Move expected to boost operating income
PLANO, Texas — Rent-A-Center said Monday it plans to close 280 stores within the next 90 days, or about 8% of its total
units,
in a move that is expected to boost operating income.
The stores to be shuttered generate about $140 million in revenues for the rent-to-own retailer, but the company said it will
transfer rental purchase agreements to other stores and expects to retain most of them.
Rent-A-Center said it will take pre-tax restructuring charges of $36 million to $45 million in the current quarter, for costs
including lease terminations and fixed asset disposal. It said it also expects it will have a cash outlay of $26 million to $30.5
million over the next 12 to 18 months associated with the move.
After the restructuring, it expects its operating income will increase by $2 million to $2.5 million a month.
“We continually analyze every aspect of our business in an effort to improve operating and financial performance,” said Mark
Speese, Rent-A-Center chairman and CEO. “Accordingly, we evaluated every market in which we operate based on operating
results, competitive positioning and growth potential. As a result, we identified approximately 280 stores that we intend to
close and merge with existing Rent-A-Center stores within the next 90 days.”
Rent-A-Center acquired competitor Rent-Way just over a year ago, a move that led to a 20.9% revenue gain for the company
in the most recent quarter, ended Sept. 30. Same-store revenues in the quarter were down 1.8%, however, and net
earnings were up just 0.1%.
What Do Women Really Want?
WITH HOUSING PRICES PLUMMETING, many retail and Wall Street pundits have written off this year's holiday-shopping
season.
While their Grinch-like forecasts might mystify companies like Costco Wholesale (ticker: COST), Best Buy (BBY) that keep
giving
customers what they want, the blues are nothing new in women's apparel.
Slumping sales of clothing have hit traditional women's wear retailers such as AnnTaylor Stores (ANN) and Talbots (TLB), as
well
as major merchants like Macy's (M), Gap (GPS) and Wal-Mart Stores (WMT). Across much of the industry, apparel sales have
slid
5% to 15% this fall. The shares of many women's specialty chains similarly have fallen, with Limited Brands (LTD) off 33% this
year, to 19; Talbots down 37% to 15, and Chico's FAS (CHS) off 48% to 11.
The weather -- too good, too bad or too much -- has taken the rap for most of the industry's problems, and yes, sweaters and
overcoats didn't sell as Indian summer lingered. But this oft-used excuse masks some worrisome and decidedly un-
weatherrelated
industry trends.
Research conducted by my company, Customer Growth Partners, indicates that the softness in women's apparel results from
five secular or cyclical factors, including shifting demographic and shopping patterns, and faster-growing competitive
categories, chiefly technology. Companies such as Coach (COH), J. Crew (JCG), Nordstrom (JWN) and Kohl's (KSS), which
understand and can capitalize on these changes, are likely to prosper in coming years and see their shares recover. Retailers
such as Gap, Chico's and Limited, however, could continue to struggle unless they offer customers more value.
Most broadly, apparel suffers from the long-wave decline in spending on clothing as a percentage of personal-consumption
expenditures. In the early 1900s, government numbers indicate, apparel purchases accounted for about a fifth of household
spending. That share had fallen below 8% by 1980, owing to global manufacturing advances and long-term price deflation,
and now is barely 3.8% of the consumer dollar (see table).
Second, many traditional women's retailers, even past leaders like Chico's, seem to have lost their way in style and
sensibility.
Such stores -- and failed formats like Gap's Forth & Towne -- misread the needs and wants of women ages 35 to 55, chiefly
boomers born in the 1950s and '60s. Unlike the generation of the 1940s, which propelled Chico's ascent, these women
came of age post-Woodstock, embarked on careers before having kids, stay extremely active and are in many ways more like
their daughters than their mothers.
In the past decade, American shoppers have fled apparel-centric and department-store-anchored malls for off-mall venues,
yet a third strike against the women's wear stalwarts. Traditional malls, which have been relegated to weekend and holiday
destinations for today's multi-taskers, now account for barely 16% of retail sales, versus 38% in the mid-1990s. The shift has
been a boon, however, for off-mall Big Box and value retailers, such as Kohl's, whose busy patrons like its convenience and
time savings.
Few recent trends have hurt the women's wear market as much as the substitution of accessories for apparel, which has
accelerated since 2000 and shows few signs of abating. Sales of pricey handbags and other accessories have driven the
exceptional growth of Coach, and now account for some 43% of department-store revenue, well above the share accounted
for by women's clothing. As one famous industry saying goes, no matter what size you are, a handbag always fits.
The birth of technology as fashion and, increasingly, technology in fashion, may pose the biggest threat yet to women's
apparel, as the summer debut of Apple's (AAPL) iPhone suggests. People stood in line overnight outside Apple's Fifth
Avenue
flagship in New York to buy $499 and $599 iPhones, which the company limited to two per customer. Nobody stands in line
overnight to buy a sweater -- and no store has a two-sweater quota.
Indeed, Apple is today's most iconic and successful fashion retailer, although retail analysts don't follow it. Yet, with 1.1
million iPhones and 10.2 million iPods sold in the latest quarter, its stores are stealing share-of-wallet across apparel.
So, too, are personal-navigation players, the fastest-growing consumer-electronics sector. Since early November, Garmin's
(GRMN) Forerunner and eTrex hand-held devices, for example, routinely have sold out at Best Buy within an hour on
shipment days. How can skirt and blouse vendors compete?
But some apparel and accessories merchants seem to have what it takes this season, notwithstanding the competition, or
pundits' predictions of a disappointing Christmas. Based on our recent visits to various mall and off-mall locations, here's a
recommended shopping list for investors.
Coach: Despite management guidance of "only" 20%-plus growth this quarter, the hundreds of people standing in line at
midnight after Thanksgiving at the company's Woodbury Common outlet near New York suggest the handbag authority hasn't
lost its touch. Coach stock has fallen 17% to around 36 from an April high of 54. When the holiday numbers are in, it could
head higher.
J.Crew: Chairman Mickey Drexler got his mojo back at this youthful pacesetter, after losing it at Gap. Earnings per share are
expected to grow almost 25% in fiscal '08, ending January '09. The stock, which has fallen to 40 from 57 this year, trades for
22 times estimates of $1.82 a share.
Nordstrom: It stumbled in the warm fall weather, but Nordstrom remains a strong performer and a leader in accessories.
These
days, its shares sell for under 11 times expected fiscal '08 earnings of $3.15 a share, near the bottom of their historic range.
Kohl's: Although all outerwear sales fell into an autumn abyss, Kohl's hit a pair of home runs with Vera Wang products and
Food Network house wares, both launched in September. Analysts think Kohl's could earn $3.57 a share this year and $4.05
in '08.
True Religion Apparel (TRLG): This denim specialist, with a market value of about $412 million and annual revenue of $150
million, has succeeded in pitching its pricey jeans to both moms and daughters. The company, which has cleaned up an
accounting problem, is expanding its store base, and its shares are up 12% this year, to 17 -- a bright spot in the apparel
landscape.
Two years ago, New Orleans was under water, gasoline was above $3 and plunging consumer confidence led retail experts to
forecast "the worst holiday sales in years." My research suggested otherwise, and sales in fact rose 7%. This year, I see a
similar
pattern, with the housing hurricane subbing for Katrina. But we also see a green Christmas for retailers who "give the lady
what she wants," as legendary merchant Marshall Field said more than a century ago.
Farley: Ford marketing plan on way
DEARBORN -- Ford Motor Co.'s new chief marketing officer, Jim Farley, promised to deliver a new marketing plan within 90
days during a town hall meeting Monday with employees at the company's headquarters.
Farley -- who was hired away from rival Toyota Motor Corp. in October to lead marketing, sales and communications globally
for Ford -- told an audience of about 500 sales and marketing staff members that the company needs to be "scrappy" and
"courageous," and do a better job of telling its own story.
"We need to polish the Oval," he said, referring to Ford's iconic badge.
The hour-long presentation was broadcast to another 500 sales and marketing employees throughout the United States,
according to Ford spokesman Jim Cain.
"It was basically his first chance to introduce himself to the whole team in this country," Cain said.
Farley, who headed Toyota's Lexus division in North America and was responsible for launching the successful Scion brand,
told employees he always wanted to work at Ford. He is a Mustang enthusiast whose grandfather worked for Henry Ford in
the
early years of the company.
Widely viewed as one of Toyota's most promising rising stars in the United States, Farley will face far greater challenges at
Ford, which is still struggling to end a decade-long decline in U.S. market share.
"Jim has one of the toughest jobs in Ford right now," said analyst Jim Hall, president of 2953 Analytics in Birmingham.
While Ford has some solid new vehicles coming out over the next couple of years, Hall said it will not be until 2010 that new
big-volume products arrive in showrooms.
"Until that happens, the only tool they have is sales and marketing," he said.
Farley was asked if he was related to Chris Farley. He said the late comedian was his cousin and then showed a clip from one
of
Chris Farley's movies, "Tommy Boy," saying he had helped inspire the scene.
Shoplifting Costs U.S. Retailers $40.5 Billion According to ADT-Sponsored Survey
Holiday Shoppers to See Retailers Using More Integrated Security Technology Solutions to Limit Loses and Keep Prices
Down
BOCA RATON, Fla., Dec. 4 /PRNewswire/ -- As the holidays approach and more people are out shopping, they may notice
some of the new high tech security that retailers are using to battle theft and shoplifting. According to an annual survey
conducted by the University of Florida with a funding grant from ADT Security Services, U.S. retailers lost $40.5 billion to theft
last year. The survey measures retail shrinkage defined as a combination of employee theft, shoplifting, vendor fraud and
administrative error and found that employee and internal theft account for the largest portions of retail theft followed by
loses from shoplifting.
(Photo: http://www.newscom.com/cgi-bin/prnh/20071204/NETU045 )
"The dollar loss to retailers from theft is staggering," said Jeffrey Bean, vice president ADT retail sales and operations.
"Retailers are looking for more sophisticated and integrated security technology solutions to help limit loses, lower costs and
keep prices down."
Conducted annually since 1991, the survey included responses from 150 corporate retail chains and shows that employee
theft accounted for $19 billion in losses or 47 percent of the total. Shoplifting accounted for about $13 billion or 32 percent
of the total this year. The remainder is due to vendor fraud and/or administrative error. The dollar amount per incident of
employee theft is declining, but the dollar amount for shoplifting is rising which is commonly attributed to an increase in
Organized Retail Crime (ORC). The survey report shows that the amount of loss due to shoplifting is rapidly approaching the
total losses from all personal property crimes, according to the most recent figures by the U.S. Department of Justice --
Bureau of Justice Statistics.
Loss rates were highest in retail sectors including cards, gifts, floral and novelty items. Books and magazines, accessories
and
supermarket and grocery sectors also showed an above average rate of loss according to the survey. Jewelry, watches and
furniture reported the lowest loses.
Many retailers already use security cameras, but one of the newest continuing trends is to switch from video tapes to digital
recording in stores giving retailers far more flexibility in recording and reviewing events. Remote and live video recording of
cameras is another trend allowing retailers to record events centrally at a headquarters location and review them live or at a
later time. Point-of-Sale (POS) monitoring is also on the increase allowing retailers to collect and analyze information on every
transaction identifying trends and unusual patterns in each store.
Integrating cameras with loss prevention hardware and POS software is another growing trend allowing retailers to connect
video images to events as they happen. For instance if a cashier has a "no sale" transaction and opens the cash draw, a
camera
will record the event. Or, if someone leaves the store with an active security tag on a product, a recording of the event will
be saved for review at a later time. This gives the retailer an even clearer picture of events in a store, so actions can be taken
to correct the situation, if necessary.
"As in last year's survey, retailers expect to substantially increase the amount of technology they will be using in their
stores,"
said University of Florida criminologist Richard Hollinger, Ph.D., who has directed the National Retail Security Survey for the
last 16 years. "The types of loss prevention systems they indicate that they will be adding all involve newer, more
sophisticated technology."
To combat increases in ORC some retailers are working with centralized data bases to record incidents and study the
patterns
and behaviors of organized retail criminals. The FBI Organized Retail Crime task force maintains a data base and works with
retailers.
"There are a number of new technology tools available to help retailers operate more efficiently including intelligent cameras
and software that can also help detect criminal activity, ," said Bean. "The more retailers can limit crime and improve their
operations, the greater the benefit to shoppers in the form of lower prices and a safer shopping environment with greater
access to more items conveniently displayed in the open."
Study: America Suffering Customer-Service Meltdown
PSST, MARKETERS. MORE THAN HALF your customers hate you.
Well, that may be a little strong, but according to an upcoming report, about 62% of Americans say companies "don't care
much" about their needs. That's a big increase from 52% in 2004, says Lexi Hutto, senior consultant for Yankelovich in Chapel
Hill, N.C. And 67% say marketers care more about selling existing products than really helping the customer, an increase from
58% in 2004.
Part of the issue "is that consumers are more demanding," says Hutto, who worked on the survey, called "Consumers in
Control: Customer Service in the Age of Consumer Empowerment." "They are becoming more and more adept at using a
variety of tools--the Internet and blogs, for example. They really feel that they have the skills to get what they want, and to
some extent, they feel they have marketers over a barrel."
For instance, if they feel the quality of service they get in a store isn't good enough, 71% say they'll walk out--"even if the
store has exactly what they are looking for. And 86% say that when they get bad service, they speak up," she says.
But consumers also say most customer service is pretty lousy. About 39% of those in the poll say the level of service has
declined in the last five years, 18% say it has improved, and 43% say it's about the same. Even more telling is that more than
ever, consumers feel they know more about the product in question--whether it's a digital camera or an allegedly organic
peach--than the hapless "associate" trying to sell it to them. Hutto says 31% of people agreed with the statement "I often
know
more about the products and services being sold than the people who are selling me those products and services at retail
locations"--an increase from 27% in 2006.
So what do all these ticked-off customers, peeved at what they perceive as incompetent customer service policies, do when
they stalk off into the sunset? Some certainly shop online, Hutto says, "and most blame the company--71% say a bad
experience at one store makes them damn the whole chain. But mostly, they go out and complain and tell friends and
relatives what they think about the company."
But what consumers hate most of all is the way most businesses try to "help": When using automated phone trees, for
instance, 92% say they have tried to circumvent an automated phone tree to find a real person, futilely jabbing at the zero
and pound sign. "And 58%, when prompted, say 'agent' or 'representative'," says Hutto.
"That means the majority of people don't like using these things." These "loophole" behaviors are further evidence that
consumers feel themselves in an increasingly adversarial role with marketers and that they need to outwit the company in
order to get the information they want.
Overwhelmingly, what they want is a person with an excellent command of English. About eight in 10 consumers feel it is
important to have the ability to talk to a live company representative-27% say they would even be willing to pay for the
privilege. "And, quantifying consumer resistance to the trend of off-shoring corporate call centers to India and China, nearly
three quarters (71%) say having customer-service representatives based in the U.S. is important, with 25% willing to pay more
for this," Yankelovich says.
Yankelovich suggests that companies customize customer service, since the canned scripts so many companies use also
turn
consumers off.
Among the companies earning high scores for a customer service process that lets customers find a warm body fast are
Hertz,
Commerce Bank, Dillard's, Land's End, LL Bean, Comfort Inn, Day's Inn, Hyatt and Walt Disney World.
"And Netflix took an unusual step for a Web-based company in July 2007," Yankelovich says. "It eliminated e-mail-based
customer-service inquiries. Now all questions, complaints and suggestions go to the Oregon call center, which is open 24
hours a day."
Ford Sales Rise in November ; GM, Chrysler and overall industry numbers down
DETROIT - The worst U.S. sales slump in recent Ford Motor Co. history may finally be screeching to a halt. In November,
Ford's
sales — including its European luxury brands — totaled 182,096, 0.6 percent higher than last November's sales of 180,947
vehicles. The November tally is Ford's first sales increase since October 2006. For the rest of the industry, November was a
mixed bag. GM reported an 11 percent decline and Chrysler posted a 2 percent decline. Toyota, VW, Honda, Nissan and
Hyundai all posted gains. All told, the industry reported total sales of 1,180,269 vehicles, down 1.6 percent from November
2006. For the first 11 months of the year, the industry has sold 14,763,831 vehicles, a decline of 2.4 percent from the same
period last year.
MasterCard Travel Card Hopes To Replace Cheques, Cash
NOT HAVING TO WORRY ABOUT exchanging money or travelers checks? Priceless. At least that's what MasterCard is
hoping for
by launching a pre-paid and reloadable card that travelers can use instead of cash.
The MasterCard Travel Card will be available through Airlines Reporting Corporation, a company that works with more than
20,000 travel agencies around the country on financial settlement and data. The card, which can be loaded with up to
$9,500 on its account, will be available at the agencies, with the hopes that people will purchase them when making their
travel arrangements.
"Consumers are looking for a travel card product that is all about convenience and peace of mind," Mike Brunner,
MasterCard's VP/pre-paid sales and issuer development tells Marketing Daily.
The card will be marketed primarily through ARC's 20,000 member travel agencies, as well as through ARC's airline partners
(the company describes itself as "airline-owned") through print and collateral materials. The company has targeted three main
audiences for the cards: student travelers, families and international travelers. "As they're booking their trips, they're able to
purchase the card," Brunner says. "If they're going to multiple countries they're going to need a way to access money."
In addition to working like a credit card, the Travel Card will also work at more than a million ATMs around the world in
MasterCard's network, he says. But unlike a credit card, the Travel Card can be positioned as a way to impose a stricter
budget
on travel spending, he says.
The card will be enabled with PayPass contactless technology, which allows users to simply pass the card over an enabled
reader, rather than pass the magnetic stripe through a machine. The Pay Pass technology, which is available on other
MasterCard cards as well, is another layer of convenience for travelers, Brunner says.
Traveler's checks had long been a staple of a tourist's checklist because they offered more protection than carrying cash.
Brunner says the checks have fallen out of favor in recent years, and the company estimates the travel card market will grow
to $9 billion by 2010.
American Express, however, earlier this year discontinued its Traveler Cheque Card, suggesting that the classic traveler's
cheques would suit customer needs. "We have an incredibly loyal customer base on our paper traveler's cheques," company
spokesman Robert Sherman tells Marketing Daily. "It's deeply ingrained in the travel plans of our customers. There's an
affinity
among our customers to using something that's tried and true."
Sherman says American Express sells about $20 billion in pre-paid products every year, with a majority of those sales coming
from those checks.
More Than One-Third Of U.S. Pre-Teens Have A Mobile Phone
PRE-TEENS IN THE U.S. ARE more connected than ever before, thanks to the widespread use of mobile phones.
The Nielsen Co. released the findings of an in-depth study on the mobile media and cross-media behavior of U.S. "tweens"
(ages 8-12). The report estimates that: 35% of tweens own a mobile phone, 20% of tweens have used text messaging, and
21% of tweens have used ring & answer tones.
While text-messaging and ringtones remain the most pervasive non-voice functions on the phone, other content such as
downloaded wallpapers, music, games and Internet access also rank high among tweens. According to Nielsen, 5% of tweens
access the Internet over their phone each month. While 41% of tween mobile Internet users say they do so while commuting
or traveling (to school, for example), mobile content such as the Internet is also a social medium for this audience: 26% of
tween mobile Internet users say they access the Web while at a friend's house, and 17% say they do so at social events.
Forget toys--texting and downloading are preferred activities of the tween set, who are turning to their phones for in-home
entertainment. About 58% of tweens who download or watch TV on their phone do so at home, 64% of tweens who
download or play music on their phone do so at home, and 56% of tweens who access the Internet on their phone do so at
home.
Tweens use their mobile phones--and media in general--in very unique and important ways, says Jeff Herrmann, vice
president of Mobile Media for Nielsen Mobile.
In regard to cross-media behavior of tweens, Nielsen reports that tweens spend less time surfing the Internet than their teen
counterparts. The report finds that 48% of U.S. tweens said they spend less than one hour per day online. When they are
online, 70% of tweens use the Internet for gaming. Comparatively, 81% of U.S. teens say they spend one hour or more per
day online, with e-mail the most pervasive online activity for this age group.
The report, "Kids on the Go: Mobile Usage by U.S. Teens and Tweens," was conducted by Nielsen Mobile and BASES, two
services of Nielsen. It also provides insights on teen and tween use of specific content brands, genre preferences, overall use
of leisure time and demographic profiles. The full report will be released on Dec. 14.
Nielsen's research combines insights from survey responses of more than 5,500 teens and tweens from the BASES ePanel.
BASES has extensive experience interviewing children and follows strict guidelines, considering attention span,
comprehension and other factors of the age group. Tween interviews were paired, with an adult panelist sitting with the
child--resulting in an average participation rate of 65%. Additional data was supplied from Nielsen Mobile's "Bill Panel" of
more
than 40,000 wireless lines as well as the third-quarter results from Nielsen Mobile's 75,000-person Audience and Behavior
panel.
Microsoft Plans Blitz to Fend Off Apple, Google
Fears Rivals' Cooler, Cheaper Consumer Products
Microsoft bigs have long been fond of poking fun at competitors, like last year when Bill Gates publicly played down the
threat
of Google's word-processing program, saying it had fewer functions than even the bare-bones text editor that's part of the
Windows bundle. But in Redmond, ridicule is quickly giving way to worry.
As it feels the heat from competitors such as Apple and the aforementioned search giant, Microsoft is planning an ad
carpetbombing
to hype its consumer products beginning next year. Company executives are hearing pitches from four agencies --
including agency of record McCann Erickson and industry darling Crispin Porter & Bogusky -- for a campaign backed by a
$200-
million-to-$300-million media blast.
Microsoft isn't talking about the pitch, but agency executives briefed on the particulars say it's being pushed at a high level in
Redmond -- including by Mich Mathews, senior VP-central marketing group -- and is aimed at increasing preference for a suite
of products that are thought to be "taken for granted" by consumers and that risk losing users to the cooler alternatives
offered by Apple or the free ones developed by Google. Part of the mission will be to persuade consumers to switch out of
those rival programs by touting Microsoft's reliability, whether on a desktop, the web or a mobile device.
'Product challenge'
But why would the marketer drop so much money advertising products everyone uses every day and therefore knows
firsthand just how well they do or do not function? Even one of the briefed executives said, "This is not an advertising
problem."
Robert Passikoff, founder-president of the consultancy Brand Keys, agrees. "It's a product challenge," he said. "The
consumer
offering isn't integrated. It appears cobbled together."
Not helping matters are lackluster product launches including Microsoft's Vista operating system, which met with reviews
that
were mixed at best, notwithstanding the massive marketing spend backing it. Vista's been nagged by reports of consumers
buying it only to quickly switch back to XP. Contrast that with Apple's recent launch of Leopard, the latest installment of its
Mac operating system. "Leopard: Faster, Easier Than Vista" was the headline for Wall Street Journal columnist Walt
Mossberg's
glowing review, the sentiments of which were echoed by other tech tastemakers.
Meanwhile, Microsoft's rollout of Windows Live, the umbrella brand for its suite of largely web-based services, has been
criticized for being fragmented and poorly explained. Consumer take-up varies wildly on a service-by-service basis. For
instance, the company's e-mail and instant-messenger programs are very popular, while Microsoft has struggled against
Google
and Yahoo in the search arena. The forthcoming campaign is likely to tout the reliability of these services, equating them to
Windows and showing how they all integrate, according to one executive familiar with Microsoft's plans.
The bitter irony for Microsoft is that it's trying to use its vast media budget to buy the kind of consumer affection that Google
has earned with a marketing spend of next to nothing. Rather than advertise, Google has relied largely on smart, simple
products that organically generate word-of-mouth. Google, of course, has had its product bombs, but those typically make
less noise that Microsoft's. Plus, its core business -- revenue from search advertising -- is booming, as are some of its
webbased
applications.
Google's reach
Google Apps, which has both free and paid versions, boasts a half million small businesses as customers, and two dozen to
three dozen Fortune 500 companies are kicking its tires, said Rajen Sheth, senior product manager for Google Apps. Apps is
also marketed to educational institutions, both in the U.S., where Arizona State University is using the suite, and
internationally; 11 million Egyptian students are using the software.
"It's tough to tell overall market share, but our growth rate has been tremendous," he said. "We think this is a revolution in
how computing is done, in terms of outsourcing computing to a service provider like ours and web-based applications."
Then there's the other front in Microsoft's defense of its empire: Apple, which has been putting its media dollars behind a
comparative ad campaign aimed at Microsoft. Its first wave consisted of popular ads starring a hipster "Mac" that mocks a
nerdy,
Bill-Gates-inspired character. Recent banner ads show "PC" firing up a sign beseeching consumers, "Don't Give Up on Vista."
The marketer's design-driven cool has led to a case of "Apple envy" at Microsoft, one executive said.
On a financial basis, Apple and Google shares both have outperformed Microsoft's in recent years. Google especially has
been
a Wall Street golden boy, with a stock price approaching $700 and market capitalization of $216 billion.
It's unclear when a decision will be made in the review. Besides McCann and Crispin, Fallon and JWT are in the hunt for the
business.
Could IPhone Up Mobile-Marketing Stakes? Land Rover, Others Think So
Apple Device's Share Is Tiny, but Its Graphics, Apps Offer Brands Big Ad Possibilities
If some early returns from Land Rover and 20th Century Fox are to be believed, Apple's iPhone will raise the stakes for
marketers that go mobile.
To be sure, the iPhone, with more than 1 million sold since its launch and working only on the AT&T network, holds a just
fraction of the U.S.'s 250 million wireless subscribers. But results of iPhone-specific creative from both marketers indicate
that
the device's graphics and range of applications open up possibilities for marketers and their target audiences.
Land Rover, seeking new ways to reach its affluent target for the launch of its Range Rover Sport, ran a campaign on the
iPhone that allowed consumers to quickly connect with the iPhone-exclusive Google Maps page providing directions to the
nearest dealer or make a phone call there.
"It's the ultimate consumer touch point," said Joao Machado, online associate media director, Mediaedge:cia, which
represents Land Rover.
Big draw
The automaker's campaign has been running since late October and has registered 400,000 impressions on the iPhone, with
1,100 users punching in their ZIP codes. "That's excellent results -- that's significant," said Mariana Solano,
advertisingcommunications
manager for Land Rover North America.
Ms. Solano said Land Rover had started to use mobile marketing for branding. Her early experiences, however, led her to
realize its direct-response potential. As a result, when the time came to launch the Range Rover, it aimed to reach its
affluent, active lifestyle target consumer with a campaign for BlackBerries, Treos and iPhones. So far, the campaign has
garnered 2.5 million impressions. But the click-through rate on the iPhone was 0.3%, higher than the average of 0.22% for
the entire campaign, she said.
Twentieth Century Fox Home Entertainment tested a campaign for the release of the "Live Free or Die Hard" DVD, which
consisted of photos, trailers and other video created specifically for the iPhone. It, too, tied into the iPhone's Google- Maps
applications with directions to the nearest retailer.
Impressing youth
Duncan Plexico, executive director-digital marketing at 20th Century Fox Home Entertainment, said his iPhone campaign had
1 million impressions in three weeks.
"It's a great way to target young consumers and let them experience 'Die Hard' the way they like," Mr. Plexico said. He said
other 20th Century Fox movie titles are likely to adopt an iPhone strategy.
Although the iPhone is attractive to some marketers because of its tech-savvy and affluent users, not all brands would find it
useful, Mr. Machado said, noting that an automobile with a broader reach may not fit the iPhone demographic.
He said ads on the iPhone have better targeting and more-useful map applications, and they also look better than those
running on other phones or even on computers.
Radio Revenues Down 5% In 3Q
RADIO REVENUES FELL 5% IN the third quarter of 2007 to $5.5 billion, the Radio Advertising Bureau announced Monday. In
percentage terms, this decline is the worst quarterly slump in years. After many quarters of flat revenue or small declines of
1%, the ominous third-quarter results may mark the beginning of accelerating declines like those affecting newspaper
publishers.
As in previous quarters, the loss is due entirely to decreases in local revenue--which fell 5% to $3.7 billion in the third
quarter--and national, down 8% to $1.1 billion. These more than offset 9% growth in network radio, which ended at $293
million, and 7% growth in non-spot, ending at $395 million. Local advertising has traditionally been the "bread and butter" of
the radio business.
Although the two industries are very different, radio revenue trends in recent years resemble those of the newspaper
business earlier this decade, as it entered a period of long-term decline.
Newspaper revenues were essentially flat for several years before they began to slip--growing 1.9% in 2003, 3.9% in 2004 and
1.5% in 2005. These were followed by a 1.68% drop in 2006. The decline began mid-year in 2006, with a flat first quarter
followed by accelerating losses of 0.31%, 2.6% and 3.7% in the following three. 2007 is looking even worse, with revenue in
the first three quarters 9% to $30.5 billion.
Radio revenues seem to be following a similar long-term pattern. Revenues were essentially flat over the last several years--
up
2% in 2004, down 1% in 2005, then up 1% in 2006. But the first three quarters of 2007 may have contained the turning
point: Revenues grew 1% in the first quarter and remained flat with 0% growth in the second, before falling 5% in the third.
Journal Register CEO Gets $675k Salary
PHILADELPHIA (AP) - Newspaper publisher Journal Register Co. said its new chairman and chief executive will receive an
annual salary of $675,000 plus cash bonuses, stock options and perks, according to a regulatory filing Tuesday.
James W. Hall, 60, has a one-year employment agreement renewable annually with the Yardley-based publisher, according to
a filing with the Securities and Exchange Commission.
Hall was appointed on Nov. 1 to replace Robert Jelenic, who resigned after taking a medical leave to be treated for cancer.
Hall had been acting CEO since June and has been a director since 2003.
Journal Register, owner of 22 daily newspapers including the New Haven Register in Connecticut and 346 non-daily
publications, had sold newspapers and cut jobs during the industry's advertising downturn. It said in October it would end its
cash dividend.
Hall will get yet-to-be-determined cash bonuses this year and a performance-based bonus as high as $1.35 million in 2008. He
also was granted 250,000 stock options and will receive another 250,000 next year.
Hall's perks include a company-owned 2007 Chevrolet Envoy or comparable car, plus lodging near company headquarters
costing up to $5,500 a month, according to the SEC filing.
He also will be reimbursed for traveling to and from his home in Canada, capped at $6,000 a month or standard airfare rates.
The company will also pay reasonable travel expenses for his spouse to attend business functions.
Hall will get as much as $37,500 a year to defray tax differences between the U.S. and Canada. He also will be reimbursed up
to $12,500 a year for tax planning and preparation.
If Hall leaves the company, he may be hired as a consultant and paid $33,333 a month for the first year and $25,000 monthly
for the second year in exchange for up to 15 hours of consulting work a month.
Jelenic, who took a medical leave in June and resigned in November, was given $4.76 million in severance. Vesting of his
192,500 restricted stock units was accelerated and outstanding vested stock options will remain exercisable until November
2010 or the options' expiration, whichever is earlier.
Journal Register will pay for Jelenic's company car and country club membership until November 2010. The company also
will
sell the car to Jelenic for $1 after November 2010. Jelenic gets his company computer, printer, fax machine and similar items
for $1 each.
Jelenic keeps secretarial and information technology support until Dec. 31, 2009. He also received lifetime medical benefits.
Shares of Journal Register fell 2 cents to close at $1.98 Tuesday. The stock has lost 90 percent of its value since closing at
$19.33 on Dec. 31, 2004.
Media General Provides 2008 Guidance
RICHMOND, Va. (AP) - Media General Inc. said Tuesday it expects weakness in advertising revenue in the fourth quarter to
carry over into 2008, weighing down profit in its publishing division, but an increase in political advertising should boost
broadcast revenue next year.
The newspaper publisher and television station operator said its publishing division is experiencing continued weakness in
advertising revenue in the fourth quarter, especially in the Tampa, Fla., market. Cost savings from re-engineering initiatives
and lower newsprint costs should partially offset weak advertising sales, the company said. Media General's broadcast
division
won't be able to match last year's fourth-quarter political broadcast revenue of $34 million, but it does expect local ad time
sales to increase over 2006.
Additionally, Media General expects to shoulder about $6 million of SP Newsprint's operating loss in the fourth quarter. Media
General owns a 33 percent share in SP Newsprint, a manufacturer of recycled newsprint.
Media General expects the economic conditions weathered in 2007 in the publishing division to carry over into 2008, leading
to a decline in the segment's profit. Retail revenue is expected to increase as the result of new product initiatives, but
classified advertising is expected to decline between 1 percent and 2 percent due in part to continued softness in Tampa,
the company said.
In its broadcast division, the company expects 2008 profit to increase dramatically over 2007. Media General forecasts
political revenue of about $43 million in 2008. Additionally, the Summer Olympics are expected to generate $13 million to
$14 million in revenue on its nine NBC stations.
The interactive media division is poised to produce its first full year of profitability next year, the company said.
Speaking at an investor conference in New York, President and Chief Executive Marshall N. Morton said, "2007 has been one
of the most challenging years in the history of our industry. Media General's performance has reflected down trends in key
advertising categories and Florida's deep recession, which has affected all of our properties there."
In addition to its three metropolitan newspapers, Media General owns 22 daily community newspapers in Virginia, North
Carolina, Florida, Alabama and South Carolina, more than 150 weekly newspapers and other publications and 23
networkaffiliated
television stations.
Shares fell 95 cents, or 4.1 percent, to $22.39 in afternoon trading, after hitting a new 52-week low of $22.20 earlier in the
session. Shares have traded between $23.28 and $43.94 in the past 12 months.
Deep Job Cuts Announced at 'San Diego Union-Tribune'
The San Diego Union-Tribune is offering buyouts in an effort to cut dozens of positions amounting to about 6 percent of its
work force.
The newspaper told employees Monday that the move is a response to challenging industry conditions. It said it will consider
layoffs if enough people don't leave voluntarily.
An internal memo lists 83 targeted positions, including 43 in the newsroom. The newspaper has 1,422 employees.
Employees will get 1.25 weeks pay for every six months of employment, up to one year of pay. They have until Dec. 12 to
decide whether to apply and would leave the company by the end of this year.
Circulation has sharply declined at the Union-Tribune and at newspapers throughout the United States. The Union-Tribune is
owned by San Diego-based Copley Press, which earlier this year sold its newspapers in Illinois and Ohio to GateHouse Media.
Analyst: Private Newspaper Companies Expected to Report Declines in '08
It can't get any worse than 2007 right? At least private newspaper companies are banking on 2008 to be a better year, barring
a recession, that is. But will it be?
Deutsche Bank analyst Paul Ginocchio polled 15 executives from a variety of private newspaper companies, small and large
alike, to get their views on the upcoming year. On average, profits will most likely trail revenue thanks to rising newsprint
costs.
Ginocchio wrote that he's expecting the public companies to report much the same this week in New York.
Revenue is forecasted to decline 5% this year and drop 1.5% next year for private companies.
Next year should bring more alliances, outsourcing, and an emphasis on mobile technologies, according to the note.
Ginocchio wrote that several of the participating executives were "skeptical" of the Yahoo partnership; a few thought it would
produce benefits, while the rest are waiting it out on the sidelines.
The outsourcing of production, technology and customer service should continue.
"We see some value in the sector, but uncertainty make us cautious," according to the note. Deutsche Bank rated three
companies as buys, The Washington Post, Lee, and Tribune. DB's analysis suggests "most of the newspaper stocks are fairly
valued at the moment."
Pulling the Plug on Print
By way of previewing the annual December Global Media Conference for investors and analysts, let's skip the bad financial
performance of public newspaper companies and the cold shoulder they continue to get from Wall Street. Instead I'll pose a
question unlikely to be discussed directly at this week's three-day meeting but on a lot of minds: Is the time close by when a
newspaper company, or at least some newspapers, will discontinue print and go all-electronic?
I'm on record saying we should expect print newspapers to be around for a while -ñ five or 10 years at least, probably
considerably longer. Online advertising revenue will need years of continued double-digit growth to pull even with print.
There have been signs lately that online revenue growth is stalling and even that reading online news and display ads
together
is an oil-and-water mix. The homely print display ad or one of those inserts that falls in your lap on Sunday may simply be
more
welcome and useful to readers and hence more valuable to the advertiser.
But there is a scenario in which I could be wrong, and the transition comes sooner rather than later. Assume that print
advertising not only stays soft but declines at an even higher rate than the 5 to 10 percent recorded this year. Assume that a
group of newspaper-run online ventures -- including local search, local video, national display and shopping-specific sites --
gets a second wind. Assume that online news sites continue to improve their design and range of breaking news and
multimedia content and attract more readers (perhaps dissatisfied with paying for a scaled-down paper edition with
noticeably less content).
At that point the comparing volume and pricing of print versus online is not the only factor or the most important. Print
newspapers might still have a big base of advertising ($48 billion for the industry this year) but nowhere to go for additional
cost reductions. Print profits would then become negligible, some papers would begin experiencing losses, and there might
be little realistic prospect of a print revenue rally.
When and if that happens, management could take a deep breath then take the plunge to all-electronic. In effect, the
newspaper would be saying to its remaining print readers and advertisers: We know you like the traditional print format, but it
no longer works economically. Come along and join us online.
Going totally online eliminates the cost of paper and circulation delivery and radically reduces production cost. By my back-
ofthe
envelope calculations, based on Inland Press survey data, that might be about 35 percent of expenses. Online capacity is
not as free as some think, especially once you assign it a fair share of newsroom, building and management costs. But it is
fair
to say that at an established online operation, a large share of revenue growth drops to the bottom line. Put another way,
online profits could pull even with print profits well before the revenues are equal.
How soon? Maybe early next decade. Yesterday's-news mythology notwithstanding, the industry is no longer obscenely
profitable. At some properties, especially small and mid-sized papers, margins remain healthy. Lee Enterprises, with all its
papers except the St. Louis Post-Dispatch in the desirable weight class, recently closed its fiscal year with a pre-tax operating
margin above 20 percent. Single-digit margins, though, are not uncommon now at top papers like The Wall Street Journal and
The Washington Post. The Boston Globe dipped into negative territory last year. The San Francisco Chronicle, with a
particularly punishing cost structure, has been losing a lot of money for a lot of years.
But -- and it is a huge but -- killing the print edition only makes sense if the savings are greater than the loss of print
advertising
revenue as some choose not to follow along.
That is not close to being true in 2007, nor will it be in 2008 and 2009.
So a much more likely outcome, should the wind be blowing as described in my scenario, might be for ahead-of-the-wave
newspapers to discontinue a day or two of daily editions, starting with Tuesdays, which have supplanted Saturdays as
carrying the least advertising.
Sunday editions, which typically generate as much as half a newspaper's advertising revenue, would be the last to go. Indeed
one could hypothesize a future in which the daily print paper has died but the Sunday paper with its robust revenue stream
and popular packet of inserts continues as a viable business.
One wild card in mulling the future of print is circulation revenue. Pulling the plug on the paper product would also sacrifice a
newspaper's circulation revenue (typically about 20 percent of the total currently). There would be savings, maybe
commensurate savings, getting rid of circulation sales, billings and other paperwork.
But another alternative several big companies ñ- most prominently The New York Times ñ- are exploring is to offer the print
edition on a tablet-like device (like Kindle, recently introduced by Amazon). That would give people who like a traditional
newspaper layout a paper-free version that is also portable -- and for which they would pay a subscription fee.
That would be a truly new business model, recapturing a version of paid circulation. But that is a longer story for another day.




Wednesday, December 5, 2007
After Black Friday, U.S. shoppers take a breather
NEW YORK, Dec 5 (Reuters) - U.S. consumers took a breather from holiday shopping last week after flocking to stores for the
Thanksgiving weekend and are now awaiting more deals before jumping back into the fray, according to data released on Wednesday
by
ShopperTrak RCT.
ShopperTrak RCT, which tracks sales at more than 50,000 U.S. retail locations, said retail sales for the week ended Dec. 1 fell 4.4
percent
compared with same period a year ago, marking the largest year-over-year sales decline since March.
Total retail sales fell 12.5 percent compared with the previous week ended Nov. 24, which included the start of the Thanksgiving holiday
shopping weekend, while store traffic fell 22.3 percent, it said.
The U.S. Thanksgiving weekend is seen as the start of the holiday shopping season, when retailers offer deep discounts on select
items to
draw shoppers into their stores on "Black Friday," the day after Thanksgiving, and also on Saturday.
But after the deals fade, shoppers often take a break, and delay their spending, awaiting more sales closer to Christmas.
"With three full weekends left before Christmas many consumers might be waiting until the last minute to wrap up their holiday
spending,"
said Bill Martin, co-founder of ShopperTrak, in a statement.
On Tuesday, figures from International Council of Shopping Centers-UBS showed that retail sales at stores open at least a year, or
samestore
sales, rose 3.1 percent in the week ended Dec. 1 compared with a year earlier.
Same-store sales fell 2 percent compared with the previous week, ICSC-UBS said.
On Thursday, big retail chains including Wal-Mart Stores Inc (WMT.N: Quote, Profile, Research), Target Corp (TGT.N: Quote, Profile,
Research), Kohl's Corp (KSS.N: Quote, Profile, Research), Gap Inc (GPS.N: Quote, Profile, Research) and Costco Wholesale Corp
(COST.O:
Quote, Profile, Research) will report November sales results, providing more insight into the strength of sales during the Thanksgiving
holiday weekend
High-End Marketers Push Higher Men's Jewelry Sales
BEEN NOTICING A LITTLE MORE bling in your weekly sales meetings? A new report from Unity Marketing says that's
because
sales of men's fine jewelry is hot, doubling to $6 billion from 2004 to 2006. While that still accounts for just about 10% of the
total jewelry market, says Pam Danziger, president of Unity, "it's becoming too large a market for most companies to ignore."
Fueling the gains, she says, is "a return to more formal business attire, with men wanting to buy tie tacks and cufflinks. It's
not
all about watches anymore."
High-end marketers are leading the way. Saks Fifth Avenue, for example, is seeing a brisk business in its cufflink sales this
holiday, says Michael Macko, VP and men's fashion director. "These are not your classic jewelry customers. This is a
generation
who grew up with no ties at all, and now they're discovering all kinds of sartorial statements, like bow-ties, cardigans, and
French-cuff shirts."
And back in May, Tiffany announced it had chosen Japan as its first for-men-only store.
Danziger expects these strong sales to continue throughout 2007. In Unity Marketing's quarterly surveys of luxury purchases,
the incidence of men's jewelry purchases "rose each quarter this year to a high of 12% at the close of the third quarter 2007,
compared to a historic level of 5% purchase incidence in 2006."
What's happening, says Danziger, who is also the author of Shopping: Why We Love It and How Retailers Can Create the
Ultimate Customer Experience, is that men are becoming increasingly comfortable with the expertise they've gained buying
women's jewelry "and are now willing to use that expertise on themselves." In addition to cuff links and tie bars, says Macko,
sales of bracelets and necklaces have been strong, as have ring sales, reflecting a rise in gay marriages.
Watches continue to be in a category all by themselves. On one hand, Macko says, they continue to be the status
purchasethe
thing a man splurges on when he turns 40 or makes partner at the law firm. "For certain guys, watches are like toys," he
says. "They love them." And certainly, sales of fine and formal watches have been strong, growing 39% in the 2004-to-2006
period, Unity says.
But between consumer uncertainty about the economy and the tendency of younger consumers to rely on cell phones
rather than wristwatches, experts wonder how long watches will stay hot. "This category may start to slide as many younger
consumers reject watches as a 'status symbol'," says Unity, adding that while one third of jewelry consumers agree with the
statement, 'I generally don't wear a watch much any more, since I use my cell phone to keep time,' that number jumps to
48% of those aged 25-34, and 51% of consumers aged 18-24.
It's possible that some of those young people may enter the men's jewelry market through decidedly fringier trends, whether
it's the jumbo diamond earrings worn by professional athletes or the flashy medallions favored by musicians. Even influential
fashion designers are wearing diamond earrings, Macko says. "It's a look that's very young in sprit," he says.
And yes, when they buy gemstones, Danziger says "men prefer diamonds, just as women do." Who knows? Diamonds may
turn
out to be a boy's best friend.
Questions for … Michael Boylson
J.C. Penney Expects Christmas Sales Will Bring Cheer
With economists predicting a challenging shopping season for retailers, J.C. Penney Co. is pulling out all the stops to try to
salvage some holiday cheer.
To kick off the shopping season, J.C. Penney opened its stores at 4 a.m. the day after Thanksgiving, also known as Black
Friday. "We anticipated a very challenging Christmas," says Mike Boylson, Penney's chief marketing officer. The company
says
it posted strong sales of electronic products like GPS-systems, apparel and home accessories like throws and towels.
The housing crisis, rising gas prices and a credit crunch are all weighing on shoppers' minds, and economists say those
factors
are likely to dampen consumer spending. The National Retail Federation, a Washington-based trade group, expects holiday
spending to rise 4% to $474.5 billion this year, but that's down from an increase of 4.6% last year.
In a sign of that pressure, J.C. Penney last month lowered its earnings target for the fourth quarter. But the retailer is also
taking steps to drive new traffic into its stores. It has been running several different TV commercials as part of its Christmas
ad
campaign, and is also running ads in movie theatres, online and in print, part of a plan developed months ago. "The closer
you
get to Christmas Day, it really becomes more in the hands of the stores. When you get this close in, there's not a lot you can
do in marketing that can significantly change your fate," he says.
Below are excerpts from an interview with Mr. Boylson, who talks about how the holidays are shaping up retail-wise, J.C.
Penney's ad forecast for next year, and the impact of the writers' strike on the ad market.
Wall Street Journal: It's about two weeks into the shopping season. How is it going?
Mr. Boylson: Every indication we see is that customers are still shopping. It's more appointment shopping than discretionary
shopping. We think we'll have a good Christmas season. I think it's just going to come really late.
WSJ: How have you shifted your marketing spending this season?
Mr. Boylson: Our total spending is about the same as last year. We're still very dominant in print. But I would say the fastest
growing portion of our advertising is the digital space. Nationally, everything we've seen shows digital sales are still growing
double digits. We're on the industry trend. The most dynamic advertising we do in the company is online, because you can
post items in real time. We're spending about the same in TV.
WSJ: The TV business has been in a whirl this year, with the debate over commercial ratings and now the writer's strike.
What's
your take on the TV advertising business right now?
Mr. Boylson: I think television is still a really important way to communicate, especially your branding efforts. (But) you have
to
be targeted. You have to know who your audience is and you have to carefully pick the networks and the shows. Then you
have to be rigorous about how it performs.
WSJ: How is the writers' strike affecting J.C. Penney's ad buying strategy?
Mr. Boylson: It doesn't really change the ad buying. We keep a tight watch over the ratings. If all of a sudden the ratings start
suffering because the shows aren't new, then we go back to the networks and ask for compensation in the form of added
spots. But I don't think it's a huge deal yet.
WSJ: So no plans to pull advertising?
Mr. Boylson: No. That would be really shortsighted. You don't whipsaw your strategy every time something comes up. We
have a strategy that supports the company's long-range plan and one of those ways is to use television to reach new
customers. That's still fundamentally sound.
WSJ: Several forecasts for ad spending have come out this week for 2008 and beyond. How does your future overall spending
look?
Mr. Boylson: I think we'll stay the course. Now would not be the time to pull back on what you're spending, but you also have
to understand you can't just pile on a lot more advertising either. We're tweaking the budget, but we're not anticipating
wholesale changes. How we spend it may differ and we will probably spend more in the digital space, but in terms of overall
spending, I don't expect a material change either way.
CompUSA may get a new look
ADDISON , Tx. (Nov. 30) After opening a new format store last month, CompUSA may be changing the format of its other
stores, depending on customer demand and product interest.
According to reports, the elements found in the prototype store, located in Texas, will be incorporated into other CompUSA
locations across the United States.
The nearly 7,700 square-ft. relocation site includes an Apple shop featuring Mac computers, iPods and Apple accessories,
and
a full-length LCD TV wall.
Additional expansions include extended gaming, which includes an entire wall devoted to the Nintendo Wii, PlayStation3 and
Xbox 360 gaming platforms, plus a PC gaming setup to test equipment and play new titles.
While businesses can get their share of support with a specialized services section, all consumers can visit the store’s
redesigned IT support area.
"This new store aligns CompUSA's vision to better serve its three core customers, the technology enthusiast, educated
professional and small and medium businesses," said Gabriela Villalobos, the retailer's sales and operations evp.
CompUSA announced in April that it would narrow its focus to three core customer groups rather than try to serve a mass
audience.
The move was part of a comprehensive restructuring, initiated last February, that included an overhaul of senior
management and the closure of half its store base as the privately held chain looked to improve sales and profitability.
Furniture Brands closing 10 more stores
Units are in Texas, Arizona, California
ST. LOUIS — Furniture Brands International is closing 10 Thomasville and Lane stores in Texas, Arizona and California,
apparently part of its previously announced plan to shutter some of its company-owned stores.
Sources told Furniture/Today that five-week closing sales are ongoing at dedicated stores in the markets of Phoenix,
Houston,
San Francisco and Torrance, Calif., by Lynch Sales.
Lynch co-CEO Chris Lynch declined to comment.
Last month Furniture Brands said it was closing eight company-owned stores — four Broyhill and four Lane units — in the St.
Louis metro market. In late October, the company said it would take a fourth-quarter charge of 18 to 22 cents per share to
close an undisclosed number of company-owned stores.
In a conference call with the investment community to discuss its third-quarter earnings, Vice Chairman and CEO-designate
Ralph Scozzafava declined to say exactly how many would close, but indicated it would be around half of the 44 stores FBI
currently owned.
The company could not be reached immediately for comment.
FAO sales soar at Macy's; other retail news dimmer
The FAO Schwarz toy shop in Macy’s department store on State Street is selling toys so quickly it has had scramble to make
extra shipments, FAO CEO Ed Schmults said Wednesday.
“We are 34 percent ahead of our forecast” in sales, he said.
The FAO Schwarz shop has helped increase sales by double-digit percentages in the children’s clothing department
surrounding FAO on the 5th floor, Schmults said.
Macy’s and FAO Schwarz are discussing putting FAO toy shops in other Macy’s stores soon, but Schmults declined to
identify
the sites.
Schmults said he doesn’t want to expand too quickly or in stores that have inappropriate space, customer traffic and shopper
demographics.
“I want to make sure we can execute at a high level,” he said.
Chicago’s best-selling toys at FAO Schwarz include a plush monster designed by each child; a make-your-own bracelet, FAO
Schwarz wooden toys and Karito Kids dolls that promote cross-cultural understanding.
Retail sales down overall
FAO Schwarz is bucking the trend of a spending slowdown in the past couple weeks, according to reports released today.
Holiday shoppers shut their purses and spent at the lowest level since March for clothing, electronics, furniture and sporting
goods, according to ShopperTrak RCT, a Chicago-based research firm that tracks sales at more than 40,000 mall-based
stores.
Retail sales during the week that ended Dec. 1 fell 4.4 percent from a year ago.
From the previous week, sales were down 12.5 percent and traffic dropped 22.3 percent, reflecting the falloff of shoppers
who ran to stores for Black Friday discounts. Black Friday refers to the day after Thanksgiving when sales can push retailers’
red ink to black.
“It’s Black Friday weekend hangover,” said spokesman Aaron Martin.
ShopperTrak has forecast a 3.9 percent sales gain in November and a 3.4 percent increase in December, compared with last
year’s 5.2 percent and 4.6 percent year-over-year increases, respectively.
On the Web, online shoppers beat last year’s numbers. Online shopping, excluding travel, increased 17 percent from Nov. 1
through Dec. 2 from a year ago, to $14.15 billion, according to Internet tracking service ComScore.
The busiest day so far was Cyber Monday, the Monday after Thanksgiving when a majority of people shop using their
highspeed
Internet access at work.
Lithia Opens First No-Haggle Stores
Lithia Motors — anxious to keep a step ahead of megadealer competitors, including used-car chain CarMax — has opened its
first used-car superstore in the northeastern Colorado city of Loveland and launched a no-haggle new-vehicle pricing strategy
at 20 of its 105 U.S. dealerships.
The Colorado store is the first of Lithia's proposed national chain of no-dicker used-car outlets aimed at markets not served
by
CarMax. The second and third sites in the chain will be operational in the 2008-model year at the Texas cities of Amarillo and
Lubbock.
Not to be outdone, CarMax CEO Tom Folliard says growth is continuing at its nationwide network, with a new location set for
the Philadelphia market.
Lithia Chairman and CEO Sid DeBoer has set a 3-year time frame for turning its entire network into a no-haggle enterprise.
DeBoer says sales people at the first 20 new-vehicle stores deploying the no-haggle strategy still can throw in an aftermarket
item priced at $100 or less to close a deal.
“But, so far, up to 80% of buyers at our 20 no-haggle stores pay the set price without throw-ins,” he says.
Vehicles are re-priced at the “Lithia 20” every week, depending on factory incentives, and finance and insurance products
are included on the fixed price list. “Customers find the idea user-friendly and drive away highly satisfied with the no-
dickersticker
approach,” says DeBoer.
The 20 Lithia dealers offering set prices are in Alaska, California, Nevada, Texas and Washington. More dealerships will be
added early next year.
Based in Medford, OR, Lithia has built its network primarily in medium-size markets where its franchises do not have
samebrand
competitors. About two-thirds of Lithia's 192 franchises are Detroit 3 domestic brands, with Chrysler LLC dominant as
the provider of about 40% of Lithia's gross revenues.
Nine of Lithia's franchises were no-haggle already; three Saturn and six Scion. DeBoer says salespersons must be “tuned in”
to
not negotiating.
Auto production cuts likelier than incentives
Analysts look at possible strategy changes from '01
If the United States slips into a recession next year, it could unfold very differently in Detroit than it did in 2001.
That time, automakers offered generous incentives to buyers in the wake of 9/11, rather than let demand fall and plants go
idle. GM kicked off the no-interest loan craze with its Keep America Rolling campaign.
Incentives won't go away, but this time it appears that automakers are more likely to accept fewer sales at higher prices.
Automakers are already choosing to cut production to meet reduced demand.
To be clear: No Detroit automaker is talking recession publicly, but on Monday, GM and Ford both announced lower
production plans for the first quarter of 2008 -- the lowest since at least the recession of 1991.
Analysts such as Brian Johnson of Lehman Brothers say the automakers appear to be going to a more traditional game plan
to
deal with the possibility of tough times.
"We believe that participants in the automotive economic cycle are likely to go back to the older recession playbook,"
Johnson said in a note to investors. Automakers "may not step up with incentives in 2008 and let demand and production fall
-- while ideally using the opportunity to further reduce structural costs."
With production on the downswing, Johnson cut his ratings of the stock of three top suppliers -- American Axle, Johnson
Controls and Tenneco -- from "buy" to "hold" on Monday, and their share prices fell significantly.
As a new economic downturn appears to be on the horizon, the Detroit automakers are also dealing with the aftermaths of
how they addressed the previous one.
In 2001, the average spent on incentives for a Detroit brand car or truck was $1,873 per vehicle, according to Autodata. So
far this year, the average incentive spending is $3,482 per vehicle.
Incentives just can't go any higher, many feel.
"Incentives from domestic automakers, particularly in the truck category, are coming off a substantially higher base today
than
they were into the last economic downturn," analyst Peter Nesvold of Bear Stearns said in a note to investors.
"Not only does this leave less headroom to further raise incentives," he added, "the domestics have promised to scale back
such incentives due to the detrimental impact they appear to have had on residual values and brand perception."
In addition, Nesvold said: "The historic restructurings that Ford, GM and Chrysler have been pursuing in the last two years
arguably may mean that the automakers will now feel less urgency to bail out auto sales as they did in 2002-2004."
Promotions such as GM's Keep America Rolling zero-percent financing program after the 9/11 terrorist attacks not only
encouraged people to buy vehicles, it helped stabilize production for suppliers.
That strategy made sense then, Lehman Brothers' Johnson said, quoting GM Chief Financial Officer Fritz Henderson, because
the automaker used the incentives to boost sales of large SUVs, which offer higher profit margins than the cars and
crossovers
that are currently in high demand.
"In prior recessions, automakers generally chose to maintain price discipline and let auto sales settle to underlying demand --
making the recovery phase more profitable in terms of both volume and pricing," Johnson said in a note.
But that scenario will result in lower sales and lower production. Johnson lowered his 2008 U.S. sales forecast from 16.2
million to 15.5 million vehicles.
He also reduced his 2008 North American production estimates by 550,000 vehicles to 14.3 million, which he said is a bearish
forecast.
Johnson said he expects the economic headwinds to persist. "Home prices are due to fall through 2008. We think that's
providing a fairly substantial headwind through 2008," Johnson said in an interview. "We're less confident than some might
be
of a second-half 2008 rebound."
Ford has announced plans to make 685,000 vehicles in North America during the first three months of next year -- the
company's lowest first-quarter output in North America since 1991, when Ford made 615,000.
George Pipas, Ford's sales analysis manager, says the automaker is not planning for a recession.
It is expecting slow growth in the overall U.S. economy and declining U.S. sales over the next 6 to 9 months.
The company is trying to determine the "real consumer demand and plan production accordingly."
Ford's 7% production cut reflects its expectation that U.S. sales will decline by about 7% in the first quarter of next year.
GM, too, has announced plans to reduce its North American production, saying it will build 950,000 vehicles next quarter.
The company has quarterly production records back to 1988, and in only one first quarter was North American production
below 1 million: 1991, when GM made 989,000 cars and trucks, according to spokeswoman Pam Reese.
Coincidentally, that was the same number produced in the third quarter of 1998, when GM lost weeks of production to a
UAW strike that idled plants throughout the continent.
As part of GM's first-quarter production cuts, the automaker plans to idle truck plants in Pontiac; Oshawa, Ontario, and Ft.
Wayne, Ind., during the first two weeks of next year.
GM aims to avoid overproducing the Chevrolet Silverado and GMC Sierra and the need to raise incentives that ultimately cut
into profits, said spokesman Tom Wickham.
"If a segment such as the full-size truck segment is shrinking, it doesn't make sense to overproduce because at some point
you
will be forced to ... heavily discount," he said.
Chrysler flexibility
Chrysler, a newly private company, doesn't release its production plans, but spokesman Jason Vines said the company can
react quickly to what is expected to be a "very tough" year.
"We'll be adjusting our schedules on a weekly basis, not three months in advance. The flexibility of our plants allows us to do
that on a daily and weekly basis," Vines said.
Tom Libby, senior director of industry analysis at the Power Information Network, a subsidiary of J.D. Power and Associates,
called Detroit automakers' plans to reduce production wise.
"The only way they are going to get out of their problem with residuals is to basically take the heat in the short-term by
cutting
production and that's going to result in lower sales and some negative publicity in the short-term, but you've got to do it ... to
get the residuals up," Libby said.
But he cautions, "I don't think they are going to do away with incentives... It will just be different types of incentives by
different manufacturers depending upon their difference situations," Libby said.
"I don't think we'll see them building and building the way we have in the last few years."
Lennar unloads 8,300 residential lots
Lennar has sold nearly 8,300 home sites in Pasco, Hillsborough, Polk, Sarasota, Lee, DeSoto and Brevard counties to Metro
Development Group.
The purchase - which was completed on Friday for undisclosed terms - was part of "long-range acquisition strategies
developed" by the company, said Rob Ahrens, spokesman for Tampa-based Metro Development. The deal increases Metro's
land inventory by nearly 40 percent, and brings the company's total land holdings to 30,000 home sites.
"We have tremendous confidence in Florida and the resiliency of the state's residential real estate market," Ahrens said in a
release. "We know that current concerns about homebuilding will be resolved in the coming months, and when they are, we
plan to be a major player in providing finished home sites to builders who will need them."
The purchases include 3,905 home sites covering 1,700 acres at Epperson Ranch in Pasco County, 530 home sites on 140
acres at Waterleaf in Hillsborough County, 393 home sites on 94 acres at Leomas Landing in Polk County, and 98 home sites
on 41 acres in Sarasota County.
Lennar (NYSE: LEN) was looking to convert many of its land holdings to cash in the midst of the slowdown in the housing
market, Ahrens said.
Also Friday, Lennar partnered with Morgan Stanley Real Estate Fund II LP, an affiliate of Morgan Stanley & Co. (NYSE: MS), to
form a new corporation, MSR Holding Co., according to documents filed by Lennar with the Securities and Exchange
Commission. Lennar then sold more than 11,000 home sites from 32 communities located throughout the country to MSR for
$525 million, half of the reported net book value of $1.3 billion.
MSR was designed to "acquire, develop, manage and sell residential real estate," according to documents filed with the SEC.
It was unclear if the 8,300 home sites sold to Metro Development the same day MSR was announced were related.
"The combined expertise and resources provided by the Lennar/Morgan Stanley team will allow us to maximize the value of
this portfolio and provide a footprint to capitalize on inefficiencies in today's residential real estate market," said Stuart Miller,
president and chief executive officer of Miami-based Lennar Corp., in the filing. "This transaction provides us with increased
liquidity and flexibility at an opportune time."
Lennar had a homebuilding operating loss of $787.7 million in the third quarter, which resulted in an overall loss of $513.9
million, or $3.25 a share, on revenue of $2.3 billion, according to documents filed with the SEC. That was down from the
$206.7 million, or $1.30 a share, the company earned on revenue of $3.9 billion for the same period in 2006.
Metro Development has offices in Orlando and Jacksonville, and last year generated sales of $200 million.
Valassis and ADVO Move Forward Under Unified Valassis Name
Company to Expand Missing Children Program
LIVONIA, Mich. and WINDSOR, Conn., Dec. 5 /PRNewswire-FirstCall/ -- Valassis (NYSE:VCI) and ADVO today announced plans
to
retire the ADVO name at the end of the year and move forward as Valassis, the nation's leading marketing services provider.
Great strides have been made since the integration began nine months ago when Valassis acquired the country's largest
direct
mail marketer, based in Windsor, Connecticut.
"We are extremely pleased with the success of our integration efforts, which drove strong results in the third quarter of
2007," said Alan F. Schultz, Valassis Chairman, President and Chief Executive Officer. "The level of collaboration between
both organizations has been exemplary. I am excited to begin the new year under a unified name as the undisputed leader of
delivering value to consumers how, when and where they want. Each company has brought great practices, resources and
relationships to this integrated organization and we intend to continue to build upon that strong foundation."
Valassis is a well respected leader in the marketplace, offering unparalleled reach and scale by integrating shared mail with
home-delivered newspaper promotions in addition to a variety of other distribution methods. The company's expansive
product portfolio reaches over 100 million households each week.
In conjunction with this change, the organization has expanded its commitment to the National Center for Missing and
Exploited Children (NCMEC) in partnership with the U.S. Postal Service and will increase coverage of America's Looking For
Its
Missing Children(R) program to millions of more homes each week. This public service program to assist local and national
efforts to locate missing children through the mass distribution of pictures using its shared mail medium began at ADVO in
1985. To date, this program is responsible for the safe recovery of 147 missing children and will continue to call upon the
public to take up the cause of missing and exploited children, let their voices be heard, and make a difference as the
company's commitment to the most successful private-sector program of its kind, strengthens.
"I am equally excited to start the new year with renewed vigor for the future of this outstanding program and strong
partnership," said U.S. Postmaster General John E. Potter while visiting the company's Windsor office where he met with
Schultz; Vince Guiliano, Senior Vice President of Government Relations; and several key Valassis leaders. "I know the
company's employees are among the best in the industry, and their commitment to this program is unmatched. I welcome
expansion of the Have You Seen Me?(R) program, which will further our mission to safely recover even more children."
Riemer Walks From Yahoo After Besbeas Promoted
CONTINUING A SERIES OF HIGH-PROFILE departures at Yahoo, marketing vice president David Riemer will vacate his post at
year's end. The move comes amid a reorganization of Yahoo's Network Division, headed by Jeff Weiner and responsible for
the majority of the portal's consumer services.
Riemer's exit follows closely that of his former boss and Yahoo Chief Marketing Officer Cammie Dunaway, who left in October
to join Nintendo as executive vice president for sales and marketing. Earlier this week, Yahoo confirmed that Nick Besbeas
had been named head of marketing for the network division, reporting directly to Weiner in the wake of Dunaway's
departure.
Previously, Besbeas led one of four marketing teams within the division--direct marketing--while Riemer headed the
audience "go to market" team. Following Dunaway's exit, Riemer had been made the interim point person for the division's
marketing efforts, according to an internal e-mail from Yahoo President Sue Decker posted on the Valleywag blog in October.
It appears that Riemer's imminent departure stems from Besbeas being promoted over him.
"Nick was named head of marketing for the Yahoo Network Division and David Riemer, who oversaw a portion of Nick's role,
has decided to leave the company," said a Yahoo spokesperson. Riemer declined comment.
Along with the direct marketing and "go to market" teams, Besbeas will now also oversee the consumer innovation and
customer care teams. It is not clear at this point whether Yahoo will fill the CMO position vacated by Dunaway.
In other Yahoo management changes reported this week, Scott Moore was appointed to lead the network division's media
group, based in Santa Monica, CA. Vince Broady, meanwhile--who had overseen entertainment, including movies and games-
-had been removed from that position and is now exploring other options within the company.
The division was also streamlined from six to four groups: Front Doors (the front page and My Yahoo) and Network Services
led
by Tapan Bhat; Communications and Communities, under Brad Garlinghouse; Search, led by Vish Makhijani; and Media,
headed by Moore.
The latest reorganization is aimed at realizing Yahoo's broader strategy under co-founder new CEO Jerry Yang for returning
to
its roots as an Internet "starting point" rather than as a content creator. The company's structural changes over the last year
have led to an exodus of senior-level executives including Gregory Coleman, global sales executive vice president, ad sales
chief Wenda Millard, CTO Farzad Nazem, and Yang replacing Terry Semel as chief executive.
Google looks to ad partners beyond DoubleClick deal
NEW YORK (Reuters) - Google Inc is looking at more advertising partners outside its proposed purchase of DoubleClick Ltd
and
sees a move to a single system for selling ads across media taking up to five years, a top executive said on Tuesday.
Tim Armstrong, Google's president of advertising and commerce in North America, said the Web search leader's forays into
selling ads in print, radio and television had shown that marketers would be keen to use a joint system that let them better
manage ad inventory.
"We're intent on bringing more and more scale to the digital dashboard space," Armstrong said at a UBS media conference in
New York, referring to Web-based systems used to buy and sell ad inventory.
"There's a high level of interest and a high level of work that needs to be done," he said. "We're very very early stage on
connecting those businesses. I think this is a two-, three-, five-year product that we're going to work on."
He noted getting Google's AdWords system for auctioning search terms had taken more than two years to build into a
highlevel
product, while migrating other media platforms with a long history could take longer.
Google's plan to buy DoubleClick for $3.1 billion aims to place it firmly in the market for graphical display advertising online,
with capabilities for better serving and tracking the response to ads.
"Outside of that deal, there are also other opportunities for us to work in that space with other companies," Armstrong said.
"We're exploring the ability to basically work with multiple companies in that space."
Armstrong described the deal as a way for Google to bridge the market between advertisers who buy commercial space and
the publishers who sell that inventory.
"DoubleClick is one piece of it," he said. "We think the deal should close. We think our competitors have been able to close
their deals."
Microsoft Corp, which is becoming a bigger rival to Google for Web audiences and applications, bought ad technology
company aQuantive for $6 billion in August.
The European Commission has opened an in-depth review of the DoubleClick purchase to determine whether it would
create too dominant a force in online advertising. U.S. lawmakers have also urged closer scrutiny of the deal.
AdStar Targets Small and Medium-sized Newspapers through Reseller Agreement with Myles
Communications
Myles to offer AdStar's Web-based classified advertising services to market of smaller daily and weekly newspapers
MARINA DEL REY, Calif., Dec. 5 /PRNewswire-FirstCall/ -- Extending its Web-based ad transaction services to a new market of
small and medium-sized newspaper publishers, AdStar, Inc. (NASDAQ:ADST) today announced a reseller agreement with
Myles
Communications, operator of Mywebpal.com, a suite of online newspaper publishing tools. Under terms of the agreement,
Myles will market AdStar's Web-based classified advertising services to its more than 120 weekly and daily newspaper
customers across the country. AdStar and Myles are currently working on the first joint project with a publisher of several
weekly newspapers in New York State.
"This agreement with Myles provides us with a proven and experienced partner to target a new market of smaller newspaper
publishers," said Ron Stephens, vice president of sales for AdStar, Inc. "Myles is already working with a number of
newspapers
on establishing a high-quality and sustainable online presence. Our solution will serve as a complementary, value-added
offering that will allow these smaller newspapers to automate their classified ad sales processes and create new
revenuegenerating
opportunities."
AdStar' s Web-based Ad Sales solution allows advertisers to create, schedule and pay for their print and online classified ads
through a single, intuitive online dashboard. AdStar's technology captures the information from the advertiser and then
automatically formats the ad for the appropriate vertical market and publishing destination.
Advertisers can use AdStar's technology to create a distinct ad for print and a unique version for online publication, schedule
the ads individually, and select from a number of enhancements, including photos, e-commerce- enabling options,
preferential listings and Web identifiers. Advertisers can manage their entire ad campaigns through AdStar's online directory
tools, while publishers have quality control tools and final approval on all ads submitted through the system.
"For many small daily and weekly newspapers, an online presence is a relatively new and experimental initiative, while
classified advertising is still being managed by a single person taking orders over the phone or fax," noted Jim Myles, chief
executive officer of Myles Communications. "Small newspapers have many of same challenges and needs of large publishers,
especially when it comes to classified advertising. Thanks to the scalability and flexibility of AdStar's Web-based Ad Sales
technology, our customers and their advertisers will have access to the same tools and services as The Los Angeles Times
and
The Atlanta Journal-Constitution. Working with AdStar provides us a turn-key online classified ad transaction solution to
complement our growing suite of online publishing tools."

Scripps Provides Financial Outlook at Media Conference in New York
NEW YORK, Dec. 5 /PRNewswire-FirstCall/ -- Members of the senior management team of The E. W. Scripps Company
(NYSE:SSP) today discussed the company's business strategy and provided a general financial outlook for 2008 during an
investor conference being held this week in New York City.
Kenneth W. Lowe, president and chief executive officer, Richard A. Boehne, executive vice president and chief operating
officer, and Joseph G. NeCastro, executive vice president and chief financial officer, led the discussion, which included
comments that focused on the company's Scripps Networks, interactive and local media divisions.
The comments were made during the UBS 35th Annual Global Media and Communications Conference.
"Our portfolio has taken shape over a 130-year period as the company kept pace with evolving media technologies and the
ever-changing expectations of media consumers and advertisers," Lowe said. "By building prosperous businesses from the
ground up, combined with some strategically deliberate acquisitions, Scripps has grown to become one of the country's
leading diversified media companies, with consolidated revenues projected to reach $2.5 billion again this year."
NeCastro, in his remarks, affirmed the company's previously issued operating projections for the fourth quarter 2007 and
provided an update on progress the company has made toward completing the transaction to separate into two publicly
traded entities.
"We're well along in executing the steps we need to undertake between here and life as two separate publicly traded
companies," NeCastro said. "Last week we filed a request with the IRS for a private-letter ruling affirming the tax- free nature
of the proposed transaction, and we're full-speed ahead preparing to file the Form 10 registration statement by the end of
February. As it stands now, we're on track to complete the transaction, as anticipated, by the end of the second quarter of
next year."
The full-year 2008 outlook, broken down by business segment, is as follows:
Scripps Networks
Based on the strength of upfront advertising commitments and scheduled increases in affiliate fees, the company expects
Scripps Networks total revenue to grow between 8 and 10 percent for the year. Expenses are expected to be up a similar
amount.
Programming is expected to account for a large share of the increase in expenses as the company remains focused on
attracting new viewers to all of its networks. The company also will be investing in a number of interactive initiatives at
Scripps
Networks.
Shopzilla and uSwitch
At its Shopzilla and uSwitch subsidiaries, the company expects combined segment profit for the year to be in the $55 million
to $65 million range. The company is expecting stronger results at Shopzilla in 2008 and a return to modest profitability at
uSwitch.
Newspapers
At the company's newspapers, the local and classified advertising environments continue to be a challenge. As a result, total
revenue for newspapers managed solely by Scripps is expected to be down in the low-single digits. Total newspaper
expenses
also are expected to be down in the low- single digits.
Scripps Television Station Group
Television station group revenue is expected to be up 15 to 20 percent as a result of a significant increase in political
advertising that is expected during the 2008 election campaigns. TV station group revenue also will be favorably affected by
NBC's coverage of the Summer Olympics. TV station group expenses are expected to be up in the mid- single digits in 2008.
Rethinking the Front Page
A new approach is paying dividends at the Waco Tribune-Herald
John Morton (editor@ajr.umd.edu), a former newspaper reporter, is president of a consulting firm that analyzes newspapers
and other media properties.
In mid-2006 Michael Vivio, a veteran newspaper advertising executive, had been publisher of the Waco Tribune-Herald for
almost a year, and he was perplexed.
His Texas newspaper, like most dailies, had been hemorrhaging circulation steadily for years. It was selling about 38,000
copies on weekdays and 45,000 on Sunday, and his circulation director had just told him the Cox-owned paper was losing
$100,000 a year because of declining street sales. Later, while walking in another city, he glanced at a set of news racks, and
found himself asking, "If you had to live or die by what was sold from this news rack, what kind of paper would you make?"
That's when it hit him: The front page should be dominated by an attractive display of the most compelling story of the day,
no matter where that story took place.
After conferring with the paper's top editors, he found them willing to give it a try. Thus began a transformation of the
Tribune-Herald, an end to its circulation losses and a rethinking of just about everything else the newspaper was doing.
The change to the front page began in September 2006, but only in the edition sold on the street. The impact was
immediate. Instead of trailing year-earlier street sales by 7 percent to 8 percent, the numbers almost immediately rose by 7
percent, a startling improvement that has continued.
It soon proved unwieldy to create two editions, one for street sales with the new front-page format and the other for
homedelivery
containing the usual array of stories. So in a month the new look was applied to all copies.
Although the revamped front page did not have a dramatic effect on home-delivery volume, it did appear to reduce churn ó
the number of subscriptions canceled that require heavy promotion to replace. With the boost from street sales, total
circulation has stabilized ó an achievement that few newspapers can claim in this era of falling numbers.
Devoting the bulk of the front page to one story may smack of tabloidism to some, bringing to mind screaming headlines
about the latest blood and gore. The reality at the Tribune-Herald is vastly different. On the day I visited the paper, the top
front-page story, headlined "A Powerful Possibility," was an attractively presented combination of photographs and text that
explained how Jewett, a town of 1,000 50 miles east of Waco, had become one of four national finalists to be the site of a
state-of-the-art coal-gasification power plant.
The story contained vignettes of locals, comments from boosters and critics of the project and an illustration on the jump of
the geological formation beneath the plant showing how the process is supposed to work. In all, a solid piece of local
journalism.
Top stories on earlier days included a report on an investigation of questionable use of credit cards by local school officials;
an
examination of how the state's new fitness law for schoolchildren was playing out in the area; and an account of how three
local families performed in a two-month "energy diet" devised by the newspaper to encourage lower use of electricity,
gasoline and natural gas.
The story deemed most compelling typically takes up about three-quarters of the front page, leaving room at the bottom for
one or two other stories, which can be local, national or international, and an index to what lies inside as well as a box or two
promoting inside stories. The left column features detailed references to stories in various sections.
The Tribune-Herald had other problems besides circulation, notably an expected loss of $700,000 in advertising. Spurred by
the success of the format change, the paper began to reassess its advertising strategy as well. A new glossy niche
publication,
Dwelling, was started last February and has been bringing in up to $29,000 in editions published every other month. Last July
brought a Spanish-language weekly, Frontera (Spanish for border), to target Waco's growing Hispanic population; it's
expected
to generate at least $128,000 a year. An existing monthly magazine, Waco Today, was switched from newsprint to glossy
paper, which immediately increased advertising by more than 40 percent.
Perhaps the most concentrated effort was upgrading the newspaper's Web presence. In addition to the usual stories, the site
features slideshows and video presentations by staff photographers and freelancers of community events. "If there's a
gathering of 100 people anywhere in Waco, we have a photographer there," says Vivio.
Since the paper enhanced its Web offerings, page views have more than doubled to 10.3 million a month and unique local
visitors rose to 74,000 in September from the previous September's 44,000; online advertising revenue is running 53
percent above year-earlier numbers.
Many newspapers these days are launching new initiatives as they struggle to prosper in a challenging, fast-evolving media
landscape. Given all of the gloom and doom out there, it's refreshing to encounter the Waco Herald-Tribune's promising
forays.
Suburban Chicago 'Daily Herald' Locks In 5% Pay Cuts, Unfreezes Raises
Saying display and classified ad revenues "fallen to levels not since the severe recession of early 2000," Doug Ray, publisher
of
the Daily Herald in Arlington Hts., Ill., has told employee a 5% pay cut imposed on a temporary basis last summer will become
permanent.
At the same time, he said that pay raises that were frozen in August will go through, and will be paid retroactively.
"We had hoped for a different outcome, but we believe this is the most prudent course of action," Ray said in a memo
distributed to employees Tuesday. "Rather than allowing this issue to linger, we are announcing the pay reduction now so
that the company and you can plan for next year. This was a difficult decision, but one that hopefully will eliminate the need
for another round of layoffs and other significant cost cutting which I believe would have a more negative impact on
operations and staff."
In July, the Daily Herald, Illinois' third-largest daily, laid off employees for the first time in the Paddock family-owned paper's
history.
At that time, the paper announced the across-the-board salary reduction, and said that every employee would receive an
additional week of paid vacation to be take in the second half of 2008.
In the latest memo entitled "Operational update," Ray said that the newspaper expects the weak display and classified
advertising sales to continue into 2008.
"The budget which we will present to the Paddock (Publishing Co.) Board of Directors next week will reflect this trend in
display and classified," Ray said. "The good news in next year's revenue outlook is in the Internet and niche products
divisions.
Strong revenue growth this year will be followed by more next year, although not enough to offset the print-side losses."
Ray said the paper is developing more new products through the "Jobs To Be Done" innovation model created by Newspaper
Next. "There have been early successes, with several profitable revenue products created as a result of this problem-solving
process," Ray said.
But he added the long-term outlook "remains challenging."
"The question is when will the inflection point take place in which Internet and other revenues offset the decline in
traditional newspaper advertising categories," he said. "Until that happens, the cost basis of the company must balance with
the revenue declines."
N.Y. Times Co. Sees Higher November Revenue
New York Times Co. said Wednesday it expects revenue in November to rise 1 percent to 2 percent.
The newspaper publisher said robust results at the company's 30 Web sites and strong circulation revenue offset weak print
revenue. Classified advertising remains sluggish, the company said, particularly advertising for real estate.
Revenue shrank 1.7 percent in November 2006.
New York Times - which aside from its namesake paper publishes the International Herald Tribune, the Boston Globe and 15
other newspapers - also updated its outlook for the fourth quarter.
The company now expects depreciation and amortization costs, which reflect how assets lose value over time, in a range of
$47 million to $49 million, versus $48 million to $50 million.
For 2008, New York Times expects $130 million in cost savings, with $100 million in additional savings the following year. The
company forecast depreciation and amortization costs of $160 million to $170 million next year.
Gannett, At Key Media Conference, Hails Its Digital Strategy
Gannett Co., the largest newspaper publisher in the country and owner of USA Today, on Wednesday guided for fourthquarter
profit in range of Wall Street's expectations.
Gannett expects net income in a range of $1.26 to $1.29 per share for the quarter. Analysts polled by Thomson Financial
predict a fourth-quarter profit of $1.29 per share, with the low end of estimates at $1.20 per share and the high end at
$1.33 per share.
Dave Lougee, president of Gannett Broadcasting, said at the UBS Media and Communications Conference that the company
faced difficult comparisons to the prior year, which included significant political and Olympic spending.
Shares of Gannett rose 2 cents to $35.77 in morning trading, but earlier hit a 52-week low of $35.46. The stock has ranged
from $35.52 to $63.50 over the past year.
Gannett executives at the conference today reported on the progress of the company’s overall strategic and digital efforts.
They also reviewed the company’s 2008 outlook.
“Gannett is focused on achieving our strategic goal of becoming the digital destination for local news and information in all
our markets,” said Craig A. Dubow, chairman, president and chief executive officer of Gannett Co., Inc. “We have made
dramatic changes in our operating structure, newsrooms, mindset and culture in a short time – all designed to implement this
focused digital strategy. In all, it’s been an exciting and challenging year at Gannett, despite the impact of the economy in our
markets.”
Sue Clark-Johnson, president of the Newspaper Division, said in a statement: “We can now serve multiple advertiser-desired
audiences news and information on any platform and anytime they wish. The transformative strides we have made this year
cannot be understated in their ability to position Gannett solidly in the new media space when the inevitable real estate
turnaround occurs.”
“In its 25th anniversary year, USA Today has stayed true to its roots and the result has been another increase in its
circulation
volume,” said Craig Moon, president and publisher of USA Today.
“Our strong local news position, combined with a very favorable geographic footprint, should result in a record year of
political advertising for the company in 2008. The Summer Olympics in Beijing also will be a big opportunity for Gannett,”
said
Dave Lougee, president of Gannett Broadcasting. “In 2007, our digital businesses and online audiences grew in significant
numbers. However, the year has been challenging as we were up against significant political and Olympic spending from
2006.”




Thursday, December 6, 2007
Report CompUSA Could Shut Down All Stores
Engadget is reporting a rumor that privately held CompUSA may be making plans to shut down all 103 of its remaining stores.
The post says that an internal email circulated at Best Buy (BBY) asserting that CompUSA’s holiday revenue is half of what it
was
last year, that store-restocking shipments are not being scheduled past February and that “additional liquidators are being
called in to help manage closure of the 103 remaining stores.”
Earlier this year the company announced a restructuring plan that involved the shut down of 126 stores.
Retailers Report Mixed Sales Growth For November
Retailers, led by department stores, generally posted decent sales for November after two months of weak results as the
emergence of more seasonal temperatures and an extra week of post-Black Friday sales versus a year ago helped results.
Those missing estimates blamed economic concerns, while those posting strong sales attributed the arrival of cold weather.
Among the beneficiaries were department stores including Macy's Inc. - which had a 13% surge in same-store sales - and
Wilsons The Leather Experts Inc., which posted a 0.4% increase, the first November gain in seven years.
Conversely, Target Corp. said December sales trends need to get much better for the company to meet its quarterly profit
outlook. In addition, the company said in a recorded message it expects December sales to be down "well short" of its prior
view. In November, Target had predicted same-store sales would be down in the low single-digits.
The Thomson Financial Same Store Sales Index increased 4%, above projections for a 3.3% advance. The number came in
above expectations despite 51% of retailers missing estimates, versus 44% that beat. November's gains followed September's
1.4% increase -- a 3-year low -- and October's 1.6% advance. Excluding Wal-Mart Stores Inc., the index rose 6%, above the 5%
forecast.
Wal-Mart reported a 1.5% increase in U.S. same-store sales, with its namesake brand posting a 1% gain and Sam's Club
having a
4.3% advance excluding fuel sales. The company had projected U.S. same-store sales to be flat to up 2%, continuing its
middling performance as the retail giant's once-stellar sales gains continue to erode
Leading Wal-Mart stores again last month was groceries and pharmacy sales, as home-related goods remained soft. Black
Friday
sales were called "very solid" across the store.
Through November, Wal-Mart's same-store sales for fiscal 2008 increased 1.4% in the U.S. versus 2% a year earlier. Growth
for
all of fiscal 2007 was 2.1%, the company's weakest ever. For December, the firm projected same-store-sales growth of 1% to
3%.
According to Thomson Financial 20 of 36 retailers which have reported results thus far have missed expectations.
Discounters, excluding Wal-Mart, were forecasted to post the strongest results.
Costco Wholesale Corp. didn't disappoint, reporting a stronger-than-expected 9% rise in November same-store sales. It
recorded a 6% increase domestically, two percentage points of which was due to rising gasoline prices. Same-store sales
surged 21% internationally because of the slumping dollar; excluding that, the increase would have been 7%.
Target reported an 11% rise for November, but same-store sales increased just 1.1% adjusted for the extra holiday-shopping
days this year.
"Our sales results largely met expectations through our two-day post-Thanksgiving event, but softness in the final week of
November caused the month overall to fall short of our planned range," said Chairman and Chief Executive Bob Ulrich.
He added the late-month falloff was concentrated in seasonal items including toys and holiday trim and "these sales trends
would need to meaningfully improve in December" for Target to meet its earnings-per-share growth target for the fourth
quarter.
However, Fred's Inc. and Family Dollar Stores Inc. posted surprise drops amid weakness in discretionary spending. Fred's cut
its fiscal fourth-quarter earnings and same-store-sales outlook. Family Dollar did the same for its fiscal year that ends Aug. 30
and also lowered its earnings view for the quarter that ended Saturday.
Limited Inc. - parent of Victoria's Secret - posted a 7% drop in same-store sales last month. It cut its forecast two weeks ago
from flat sales to down by the mid-single digits on a percentage basis, citing the "challenging" retail environment.
Its results were reflective of continued weakness expected for apparel retailers. The Thomson index projected a 0.5%
decline for the segment, though a 0.9% increase was estimated excluding Gap Inc.
But Gap posted flat same-store sales, versus expectations for a 4.8% decline. A 4% decline at Old Navy's North American
stores
offset modest growth at North American Gap and Banana Republic locations and the company's international stores.
Saks Inc., the department-store segment's best performer of late as high-end sales have remained strong amid the ongoing
economic worries, said its November same-store sales soared 26%, double already-high expectations. Fellow luxury retailer
Nordstrom Inc. reported an 8.7% rise, more than doubling predictions.
Macy's 13% same-store-sales surge was in part attributed to the onset of colder weather. The company had projected results
would be "significantly" higher than its fiscal fourth-quarter outlook of same-store sales being down 2% to up 1% because of
the November calendar shift. As such, December sales are seen dropping 4% to 7%. The quarterly sales outlook was
reiterated.
J.C. Penney Co. reported a 2.6% increase for November, in line with its growth forecast of the low-single digits on a
percentage basis. It also backed its quarterly sales view.
Kohl's Corp. posted a bigger-than-expected 10% jump in same-store sales amid "very strong" sales of weather-sensitive
items
and the calendar shift. December sales are still seeing falling by the mid- to high-single digits, and the quarterly outlook was
affirmed.
Teen retailers were projected to have modest sales gains last month, but results issued late Wednesday were below
expectations for American Eagle Outfitters, Zumiez Inc. and Hot Topic Inc. However, Buckle Inc. on Thursday posted an 18%
surge, more than double analysts' estimates.
Shoppers Losing Their Appetite For High-End Toys
BASED ON THE FIRST READING of holiday sales of consumer electronics, consumers seem to be losing some of their tech
enthusiasm.
Total spending on electronics gained just 6%--to $2.2 billion--in the first week of the holiday season, compared to a gain of
12% in the same period a year ago, reports The NPD Group. And it's the first time in the six years that NPD has tracked this
point-of-sale data that dollar-sales growth has dipped below double digits.
While that's not great news, there is a silver lining for retailers, many of whom got burned by massive price-cutting on
bigscreen
TVs last year. "The biggest surprise is what isn't there," says Stephen Baker, vice president/industry analysis at NPD
Group. "We didn't see big price-cutting during the Black Friday week."
A more stable selling environment and rational pricing bodes well for store profitability. "We also saw a significant change in
the composition of what was selling-there were a lot more lower-dollar-value items than we've seen in previous years, and a
lot of accessories, and those tend to be a little more profitable," he says.
Based on data collected by NPD Group, sales of LCD TVs, GPS and notebook computers made the best showing, with the
growth rate for plasma TVs, digital cameras and MP3 players declining sharply.
"LCD TVs were the star of Black Friday this year," NPD says, with unit volume increasing by 45%, and revenue soaring 80%.
Baker sees no sign of this slowing. "We're a long way from saturation yet," he says, adding that the category continues to
revolutionize consumer expectations. "TV companies and retailers have changed the consumer's mindset, both in terms of
price and quality. People used to expect to pay $200 or $250 to replace a TV set. Now, they expect pay upwards of $700 to
upgrade."
And while average-selling prices in larger LCD TVs did decline 14% this year, they were offset by triple-digit increases in units
and dollars among the larger LCD TVs, the report says.
Sales of laptops, which had a decline of 10% in average selling price this year, were also solid, if not as strong as last year.
Sales
volume gained almost 30% and revenue rose by 17%.
GPS units are red-hot, with unit sales gaining six-fold over the same week a year ago. Revenue increased 237%, breaking the
$100 million mark. (Average selling prices declined to under $200 this year, compared to $322 last year.) Digital picture
frames also sold well.
Sales growth in the MP3 category slowed to just under 4%, which Baker attributes to saturation. Growth in the digital camera
segment was also slower, with revenues actually declining 5% from the prior year, due to dropping prices.
Baker is hesitant to make predictions, given that at any point a retailer or marketer might push the panic button and unleash a
series of price cuts that changes everything. "We just don't know what will happen 10 days from now," he says. "But we are
cautiously optimistic that while revenue growth will be below last year, the overall rationality of the market ought to make it a
little more profitable."
Sofa Express files Chapter 11
GROVEPORT, Ohio — Sofa Express Inc. filed for Chapter 11 bankruptcy protection today in the Middle District of Tennessee
in
Nashville.
Klaussner is the largest unsecured creditor in the filing and is owed $18.05 million. Spring Air is the second largest and is
owed
$334,994.
Earlier this week, officials at the Groveport, Ohio-based retailer and at manufacturer and importer Klaussner, which owns
Sofa
Express, declined to comment on whether the company would file for bankruptcy, even as it sent letters to local government
officials and store managers announcing that it planned to close its stores and its Ohio offices.
Each of the letters indicated that the retailer had attempted to “secure our financial future” but “has determined that it
must close your facility due to its financial situation, resulting in the termination of your employment.”
The retailer, doing business as Sofa Express and More, ranked 40th on this year’s Furniture/Today Top 100 ranking of U.S.
furniture stores based on estimated furniture, bedding and accessories sales of $206.9 million in 2006. Estimated total
revenues were $213.9 million.
It is believed to have 44 stores, mainly in Ohio, Tennessee, Florida and the Carolinas.
Industry companies among the largest 20 unsecured creditors of Sofa Express are owed about $19.4 million.
Along with Klaussner and Spring Air, industry companies on the unsecured creditors list include Liberty Furniture, owed
$289,865; Steve Silver, $169,857; Stein World, $139,866; Magnussen Home, $123,195; Guardian Products, $91,634;
Powell, $81,840; Dalyn Rug, $77,477; Tempo Lighting, $64,209; and Riverside Furniture, $49,474.
Gander Mountain Buys Overton's for $70 Million
ST. PAUL, Minn. (AP) - Hunting and outdoor gear retailer Gander Mountain Co. said Thursday it bought Internet and catalog
company Overton's Inc. for $70 million in cash.
Gander Mountain bought the company from Cleveland-based private equity firm Linsalata Capital Partners. The buyout price
included the repayment of Overton's existing debt, Gander Mountain said. It did not specify the amount.
Overton's had revenue of more than $90 million in 2006 and distributes more than 15 million catalogs annually. It sells water
skis, wakeboards and related water sports equipment.
Gander funded the buyout with a $24 million stock offering, a $40 million loan from Bank of America and borrowings under
the company's revolving credit facility.
The shares were sold at $5.90 apiece to GRATCO LLC, an affiliate of Gander Mountain Chairman David Pratt. They were also
sold to Holiday Stationstores Inc., an affiliate of Gander Vice President Ronald Erickson and Director Gerald Erickson.
84 Lumber closes 12 stores, none locally
The 84 Lumber Co. has closed 12 stores in nine states, but none are in the Pittsburgh area.
Spokesman Jeff Nobers said two of the closed stores, in Manchester, Tenn., and Redding, Calif., are in weak housing markets
where the company doesn't see signs of a rebound. Ninety-five percent of 84 Lumber's customers are home-building
professionals, Nobers said.
Four of the stores, two in North Carolina and one each in South Carolina and Louisiana, are being relocated, Nobers said, to
new, bigger 84 stores nearby.
The Merced, Calif. store is being converted to a plant for structural components, Nobers said.
The other five stores closed are in areas where Washington County-based 84 Lumber has multiple stores that will absorb the
business, Nobers said. Two are in Illinois, and one each is in Ohio, Maryland, and New York.
About 100 employees will be affected by the closings, Nobers said. Managers and co-managers have been offered the
opportunity to move to other stores, he said.
Paper catalogs shine in holiday season
There is a scavenger hunt going on inside Saks Fifth Avenue's holiday catalog.
To entice shoppers to flip through each of the 180 pages, the luxury retailer sprinkled dozens of snowmen throughout the
book. Some are donned in designer apparel, like a red Zac Posen handbag. The eagle-eyed shopper who correctly guesses
the total number of snowmen could win a 21-day Antarctic cruise.
Such are the lengths retailers will go to to ensure that their catalogs become inspiration rather than annoyance. As
consumers
increasingly flock to the Internet to make their purchases, retailers have had to rethink the role of catalogs. Once shopping
destinations of their own, catalogs have become as much about branding as buying and an important way for retailers to
connect with their customers inside their homes.
Though some people call catalogs a waste of paper (a sentiment that has led to a ''do-not-mail'' list for those who don't want
to get them), catalogs offer retailers an opportunity to artfully arrange merchandise with flattering lighting and attractive
models. Many shoppers like the tactile experience, dog-earring pages as part of their bedtime ritual. Putting a catalog in their
hands can mean a big competitive advantage.
''There is a hugely important difference between a print catalog and a website,'' said Rob Frankel, a branding consultant.
``The catalog comes to you. If you have a website, you have to wait for them to come.''
A generation ago, retailers relied on catalogs to help reach customers who lived beyond the radius of their stores. Catalogs
also allowed them to showcase a wide breadth of merchandise that could never fit inside one location. Shoppers had to place
orders by phone or buy a stamp and stick them in the mail.
The Internet has made all of this cheaper and easier. According to the trade organization Shop.org, Internet sales last year
jumped 29 percent, to $147 billion, representing 6 percent of all retail purchases. This year, sales are predicted to reach
$175 billion. Customers are also becoming comfortable buying a wider variety of merchandise online, particularly apparel,
according to the group's research.
Yet the catalog remains. And the holiday season is its time to shine.
But there is no longer a phone number to call and place an order. The envelope that used to come stuffed inside the catalog
for mail orders is long gone. Tom Burke, executive vice president for e-commerce, said both were phased out five years ago.
Now there is only a Web address -- point, click, shop.
''The Internet has obviously made a big difference,'' Burke said. ``The number of people who would want to mail in a check
and fill out an order form is infinitesimal these days.''
Not everyone sees the appeal of a catalog, especially if they are not interested in a particular retailer. Lia Kvatum considers
them wasteful, especially when they come from retailers she has never visited.
''I'm reminded of just what a consumer society we live in and how pointless a lot of these gifts are,'' said Kvatum, who lives in
Silver Spring, Md., and runs acommunications firm. It's just the same old stuff dressed up in garland, she said.
A new website called Catalog Choice allows people to block catalogs from certain retailers. The site is a project of the
Ecology
Center, an environmental advocacy group, along with the National Wildlife Federation and Natural Resources Defense
Council. They estimate that 19 billion catalogs are mailed to consumers each year, amounting to 3.6 million tons of paper.
''It's incredibly easy to get on a catalog mailing list,'' said April Smith, Catalog Choice project manager for the wildlife
federation. ``And most consumers find it challenging and frustrating to get off.''
CCFC Blasts McDonald's For Report Card Advertising
MCDONALD'S HAS COME UNDER FIRE for advertising on envelopes containing the report cards of elementary school
students in
a Florida county.
The Campaign for a Commercial-Free Childhood (CCFC) is demanding that McDonald's immediately stop the advertising, but
the fast-food giant will not.
"McDonald's has a long-standing and rich heritage of supporting education and academic excellence," says spokesperson
William Whitman. "This is a local program in Seminole County, Florida, that promotes academic excellence and rewards
academic achievement."
The students received report cards last week in envelopes adorned with Ronald McDonald and promising a free Happy Meal
to
students with "good grades, behavior or attendance," said the CCFC. The envelopes are intended to transport report cards to
and from home throughout the school year.
"This promotion takes in-school marketing to a new low," said Susan Linn, director of CCFC. "It bypasses parents and targets
children directly with the message that doing well in school should be rewarded by a Happy Meal."
Whitman said the initiative is supported by the School Board of Seminole County and widely supported by the local
community. "McDonald's does not advertise in schools. However, we continue to support education initiatives in the
communities we serve," he said.
The CCFC acknowledged that McDonald's has pledged to advertise only its healthier options to children under 12 but said
"the Happy Meal promotion explicitly mentions cheeseburgers, French fries, and soft drinks as options." Happy Meals
featured
on the report card can contain as many 710 calories, 28 grams of fat, or 35 grams of sugar, it said.
The company appeared to argue that the ads were targeted toward adults and not to children, saying: "McDonald's provides
parents with Happy Meal choices including Chicken McNuggets made with white meat, hamburgers, cheeseburgers, apple
dippers, apple juice and low-fat milk, so they can choose the Happy Meal that is appropriate for their child."
GM Tells Regional Dealers They Can Pick Their Own Shops
$500 Million in Billings No Longer Controlled by Detroit
DETROIT (AdAge.com) -- General Motors Corp. is revamping its regional dealer ad groups and allowing them to pick their own
creative or media agencies -- putting some $500 million in billings at risk for the incumbents.
"It's a back-to-the-future scenario," Brent Dewar, VP-field sales, service and parts for GM in North America, told Advertising
Age.
That's because the new system, explained to dealers today, is similar to how GM operated its dealer ad groups in the past,
allowing them to choose their own creative and media agencies.
Local marketing groups
GM eliminated the dealer ad groups in 1999 only to re-form them in 2000. While participation was voluntary, the local
marketing groups, or LMGs, had to use the national agencies and the automaker controlled the accounts.
Under the new system, the agencies will report to the dealer groups -- not GM -- a move that should give the retailers more
flexibility in their individual markets, Mr. Dewar said. GM's goal is more effective advertising at the local level. "We weren't as
local as we needed to be," he said.
The dealers will now have two options: Stay with the incumbents or select a new shop. Mr. Dewar said the dealer groups,
however, will have to fund any customized regional work from any new agencies themselves. But the national shops will still
provide creative in a "tool box" at no extra cost to dealer groups that decide to hire another agency.
Mr. Dewar expects LMGs in major markets to stick with the incumbents, and he predicted the new system could attract new
dealer groups, especially in mid-market towns.
Agency contracts being extended
GM is extending its agency contracts that expire at the end of the year through March to give the new local marketing
associations, as their now being called, time to do agency reviews if they want, said GM's Mark Degnan, director-local
advertising group and CRM marketing. The new system starts April 1.
Mr. Degnan said GM now has 750 dealer ad groups. The groups spent $489 million in measured U.S. media in the first nine
months of 2007, according to TNS Media Intelligence.
Among GM's shops are two from Publicis Groupe: the dedicated General Motors Planworks, Detroit, for media buying and
planning; and Leo Burnett, Detroit and Chicago, for Buick, Pontiac, GMC. Interpublic Group of Cos. has three working for GM:
Campbell-Ewald, Warren, Mich., on Chevrolet; Deutsch, Los Angeles, on Saturn; and Lowe, New York, on Saab, although
McCann Erickson, Birmingham, Mich., assumes that brand nationally Jan. 1. Independent Modernista, Boston, handles
Cadillac
and Hummer.
William Bridges, a Cadillac dealer outside Atlanta, co-chaired a study group of competitive dealer ad group practices with Mr.
Dewar earlier this year. He said funding for short-term sales programs (such as year-end sale-a-thons), will now be funded by
GM and its vehicle divisions rather than the dealer groups. Mr. Bridges said the biggest shift is that agency accountability
moves
from Detroit and its regional business offices to local dealer groups.
"This will enhance dealers' satisfaction with the process," Mr. Bridges said.
Verizon Moves Slowly On Mobile Ads, Will Expand Telco To Metro Areas
A TOP VERIZON EXECUTIVE SAID Wednesday he has doubts about consumer tolerance for advertising on mobile devices
and
the company will proceed slowly in that area--if it enters at all.
"I will tell you that this is one area that we will not be first to market," said COO Denny Strigl at an investor conference.
Strigl said if Verizon, which operates a mobile TV service as part of Verizon Wireless, opts to make a strong play in the
advertising space, he strongly favors a system where consumers have to "opt in."
"My concern is what do customers really want," he said.
Nonetheless, he said he expects competitors to move into the area more aggressively, although he has doubts about the
revenue opportunities. "Is it something that the industry will do? I'm certain that it is. ... How big a market does this create? I
don't know ... we'll just have to wait and see," he said.
Separately, Strigl said that Verizon's expanding telco TV offering--increasingly a competitor to cable operators such as
Cablevision and Comcast, and in more than 717,000 homes--will eventually move from availability in the small communities
around cities such as Boston, Philadelphia and New York and into the center cities.
"The issue isn't if we go there--we are convinced that the real question is when," he said of the FiOS offering.
Strigl said Verizon is well-equipped to surmount hurdles such as negotiations with regulators and municipalities, as well as
technical issues and roadblocks involving wiring apartment buildings.
"The gating factor for us is a lengthy process with each municipality--some longer than others and we'll get through it ...
When
we finally do turn on an island of Manhattan, I think we've got some very good upside," he said.
3 out of 4 TV Viewers Switch On and Go Straight To The "Guide"
According to a national study by Lieberman Research Worldwide, for Gemstar-TV Guide International and Comcast Spotlight,
Interactive Programming Guides (IPG's) are considered a necessity for viewing and a valuable medium for entertainment
marketers. At least eight out of ten i-Guide users (the industry's most widely-deployed IPG) agree that they always use their
IPG to find what to watch and their IPG is a necessity for their viewing experience.
The study shows that the majority of i-Guide users say:
That their IPG makes them aware of programs they didn't know about, is the best information source about TV
programs and episodes, and enhances their overall TV viewing experience
That they use their IPG when they first sit down to watch TV, when a new program begins, during commercial breaks
and when they're bored with what they're watching
One-quarter of i-Guide users report using their IPG every/or almost every time a commercial comes on.
Consumers are looking for guidance, says the report, and use the IPG as an essential planning tool:
Two-thirds of TV viewers decide what to watch after they sit down, switching on their TV sets with no specific
destination in mind
65 percent turn to their IPGs while watching programs to see what's on other channels
One-quarter lean on their IPGs to check for shows airing later in the week
85 percent of i-Guide users report turning to the IPG when a commercial comes on
50 percent of consumers who see IPG advertisements take action. Viewers are very likely to interact with ads placed on IPGs,
especially those related to TV shows or sporting events:
One-half of i-Guide users report noticing ads on their IPG at least once a week
One-half of i-Guide users noticing IPG advertisements say they have clicked on the ad, with about one-fifth clicking
on ads at least once a week
Two-fifths of i-Guide users noticing IPG ads recall seeing an ad for a specific TV program or sporting event
Almost 40 percent of those who recalled seeing a movie/event advertised, ordered it.
Richy Glassberg, senior vice president and director of ad sales, Gemstar-TV Guide, notes that "IPGs have really evolved from
a
nice ‘extra' to ‘can't live without it' status..."
Hank Oster, senior vice president and general manager of Comcast Spotlight, says "In contrast to the relatively low level of
engagement that banner ads elicit online, these results show that a high percentage of consumers notice and take action on
IPG ads."
Oster concludes that "...IPGs have come of age... they've become portals to television and a true point of purchase
positioning for advertisers."
Political Ad Spend to Soar 43%, per Survey
Political campaign spending on advertising media and marketing services is expected to soar 43 percent to an all-time high of
$4.5 billion in the 2008 election cycle, according to a just-released analysis from ad and marketing research firm PQ Media.
The Stamford, Conn.-based firm cited record fundraising, the high number of presidential candidates and "an acrimonious
political environment" as key drivers of the projected spending splurge.
Online Shoppers Seek Personalization
Rochester, N.Y. - December 6 - Online retailers are not making enough of an effort to meet the individual needs of their
customers, according to a survey by market research firm Harris Interactive.
While a majority of online shoppers (76%) have received product recommendations when shopping online, over half (62%)
said recommendations are rarely personalized to their tastes.
The survey also found that more than half of online shoppers (60%) are likely to shop with a retailer that follows up with
specific product recommendations based on their individual interests and past purchases, rather than retailers that send
generic one-size-fits-all e-mails.
Customers are also looking for personalization beyond the retailers' Web sites. According to the study, 65% of online
shoppers
would like to receive targeted information from the retailers including e-mail alerts when new products arrive or go on sale
from brands or categories they like, alerts when unavailable items they’re looking for come back into stock and product
recommendations that help them find relevant items while they are shopping.
Adbargains aims to shake up media buying
Jack Denneboom calls it the Expedia.ca of advertising - an online business that connects advertisers with media space that
could shake up traditional media buying.
Relaunched this week, Adbargains Inc. is trying to redefine how advertisers buy media space by allowing them simply to click
on a newspaper, radio or Web advertising option, check its price and order it online, said Mr. Denneboom, president of
Adbargains.
But skeptics said advertisers still like to hire a media buyer to walk them through the planning strategy and monitor the
impact
of the ads. "It seems very cookie cutter and very generic," said Corinna Matteliano, a Toronto media buyer.
Adbargains.com is something like Expedia.ca, which lets people browse travel options and make purchases online. Aimed at
advertisers that place less than $1-million of ads annually, Adbargains can save time and money, Mr. Denneboom said
"We're changing the way small- and medium-size advertisers will shop for and buy media," he said in an interview yesterday.
"The Internet is enabling this change."
Media buying is considered a crucial part of the ad process. It involves selecting the best media space for a client's ad
campaign, within the client's budget.
Some industry officials say Adbargains.com, if successful, eventually could threaten some traditional media buyers. "There
are
probably some that it might affect, but I don't really see the impact happening any time soon," said Ms. Matteliano, media
supervisor at Gaggi Media Communications Inc., which buys ad space for such clients as Black Photo Corp. Ltd. and The
Globe
and Mail.
She compared the service to automated teller machines, which, over the years, have replaced some bank jobs. "That's what
they said about [ABMs], that it was going to put bank tellers out of business. People still have their jobs ... but not as many."
Cecilia Ronderos, who runs seminars to promote retirement in Mexico, has become a convert to Ad bargains. But she needed
help initially from Mr. Denneboom and his team to make her first online purchase. The site has been operating for the past six
months in a "soft launch."
Since then, she has spent about $60,000 buying newspaper, magazine and radio ad space for her Canada2Mexico Consulting
business from Adbargains. "It really saved a lot of time, and it's all on one bill," she said. "It's very flexible."
It's not Mr. Denneboom's first crack at online media buying. In 2001, he launched Adbargains as a kind of Last Minute Club of
the ad world. The website allowed advertisers to buy discounted ad space others didn't want or need.
Now Mr. Denneboom is broadening the business beyond last-minute deals to regular ad space in newspapers, radio and on
the Web. And he is expanding beyond Canada to the United States.
So far, average purchases have exceeded $25,000, which is above the targeted $10,000, he said. Adbargains earns a
commission of less than 25 per cent of the value of the media purchase, he said.
Washington Post: We're an education company
Don't call The Washington Post Co. a newspaper. Chief executive Donald Graham told investors Wednesday it is now an
"education and media" company.
Graham, speaking at a UBS Investor conference in New York, predicted revenue at its flagship Washington Post newspaper
and
its Newsweek magazine division would continue to fall in 2008, while revenue generated by its Kaplan education division
would continue to rise, according to Bloomberg News, which covered the conference.
"In 2001, The Washington Post was properly identified as a media and education company," Bloomberg quotes Graham as
saying. "Today, it is the reverse. We are an education and media company."
Like other publishers, The Washington Post (NYSE: WPO) continues to see declining newspaper and magazine revenue from
eroding advertising sales and a continued slide in subscribers. Its Kaplan education division, which now accounts for more
than
half of the company's quarterly revenue, continues to grow, largely through acquisitions both here and abroad.
The Washington Post's revenue from newspaper operations fell 1.1 percent to $72.5 million in the third quarter, but a 22
percent jump in revenue at Kaplan offset the decline. As a result, the company's total third-quarter revenue rose 8 percent
to $1.02 billion. Kaplan generated almost $515 million of that revenue.
Red Ink Forecast For Newspapers Next Year
RETREATING SOMEWHAT FROM EARLIER OPTIMISTIC predictions, newspaper publishers and analysts now say next year
will
probably be just as tough for the troubled industry as 2007.
With shareholders staking their hopes on a turnaround in 2008, this is bad news for newspaper stocks--and may also torpedo
major deals like the planned buyout of Tribune Co. by real estate billionaire Sam Zell.
McClatchy and E.W. Scripps both issued negative revenue and earnings forecasts on Wednesday. Although McClatchy didn't
cite a specific number, it predicted a revenue decline in the single digits, which Wall Street analysts separately pegged at
5.4%.
Scripps issued a similar prediction. The company's plans to separate its newspaper and television businesses are due, at
least in
part, to poor performance on the newspaper side.
In the same vein, Media General said it expects newspaper publishing revenues to drop in 2008, although it didn't specify
how much. The Washington Post Co. also predicted that revenues will slide at the flagship newspaper.
Meanwhile, a recent survey of 15 executives at private newspaper companies by Deutsche Bank analyst Paul Ginocchio found
little good news, echoing the forward-looking statements of publicly owned companies. Overall, executives believe revenue
will slip by 1.5% in 2008, another disappointing return after a projected 5% drop in revenues this year.
Noting newspaper trends, Ken Doctor, an analyst with Outsell, Inc., said: "The decline in print advertising and print
circulation, combined, have a kind of pinball effect, where print advertising and print circulation revenues are reinforcing
each other's decline."
A survey of the last several years shows newspapers moving from essentially flat revenues in 2006 to negative growth in
2007,
Doctor went on--and the 2008 forecasts confirm the trend. "It's a tipping point in the industry's history, where it is moving
into an area of negative growth for the first time. You can't put too good a shine on that."
The one bright spot for newspaper publishers--online revenue--isn't nearly as bright as it should be, Doctor adds. "While
substantial, it's insufficient to make up for the print and circulation revenue declines. The problem for the industry is that it
hasn't grown out of its legacy print business quickly enough. It needed to move from print to digital much more quickly.
"Less than 10% of revenues are digital," he says, "and that is a tremendous burden on the industry." For comparison's sake,
Doctor says that in the information industry in general (including health, education, and financial information publishers, all
tracked by Outsell), 40% of revenues now come from digital operations.
The dire 2008 forecasts are especially ominous for the Tribune Co.'s planned sale to real-estate billionaire Sam Zell, which
calls for the company to assume a large amount of debt. "As things are now, they barely have enough money to service the
debt that they're going to be taking on through this deal," Doctor noted.
"The problem is as we look at 2008, the further decline that we expect in newspaper company revenues means the Tribune
Co. will have little resort other than cutting expenses even more." Unfortunately, "now that means cutting personnel,
including executives and newsroom staff."
Tribune appeals FCC ruling denying cross-ownership waivers
CHICAGO (AP) - Tribune Co. has gone to court as expected to appeal the federal action that cleared the way for its $8.2
billion buyout but denied its request for indefinite waivers of rules against owning newspaper and broadcast properties in the
same market.
The media conglomerate disclosed Thursday that it filed the appeal Monday with the U.S. Court of Appeals for the District of
Columbia circuit.
The legal action had been expected since the Nov. 30 ruling by the Federal Communications Commission.
The FCC's rejection of Tribune's request for indefinite waivers of cross-ownership rules affects numerous markets where the
company owns both newspapers and broadcast stations. By challenging the order, the company gets an automatic extension
of current waivers lasting for at least two years and up to six months after the legal case ends.
Tribune's holdings include the Los Angeles Times, the Chicago Tribune and seven other daily newspapers along with 23 TV
stations and the Chicago Cubs baseball team.
The company on Thursday also signaled that it remains on track to close the Sam Zell-led buyout by the end of this year. That
sent its stock to a six-month high.
Tribune said it plans to use $500 million in available cash to reduce the amount it needs to borrow to close the transaction. It
said that will enable it to reduce borrowings under the original $2.1 billion bridge loan commitment on the deal to $1.6
billion.
Tribune is going private under a buyout being led by Zell, the real estate magnate and investor who will become the
company's chairman and have a leading stake. The company will formally be owned by an employee stock ownership plan.
Tribune Trims Loan For Going-Private Deal
Tribune Co. said Thursday that it will use as much as $500 million in cash on hand to reduce the bridge loan it is taking out for
its going-private transaction.
Tribune said that will reduce its original $2.1 billion bridge loan commitment to $1.6 billion.
The bridge loan is part of a two-step process to take the company private through a $8.2 billion leveraged buyout engineered
by real estate magnate Sam Zell. Tribune will be owned by an employee stock ownership plan (ESOP) when the deal
concludes.
Tribune reiterated Thursday that it expects the deal to conclude before the end of the year.
How Solvent Is Tribune Co.?
Deal Journal has covered literally hundreds of mergers and acquisitions. We can’t recall one that was publicly contingent on
the receipt of a solvency opinion. There is one now. Sam Zell’s planned buyout of Tribune Co.
The requirement gives us some pause on the same day that Tribune’s shares are up nearly $2.25 a share to $31.92, inching
ever closer to the $34-a-share takeover price offered in Zell’s exotic employee-stock ownership takeover plan.
Solvency opinions are typically used in highly-levered financial transactions, to test — surprise — a company’s ongoing
solvency. They are designed as a legal protection for board members against the concept of “fraudulent conveyance.” This is
a term most often used in bankruptcy court, in situations where assets are cash or are disbursed in a way that is deemed
ultimately unfair to creditors.
These opinions are notoriously easy to obtain, and people close to the deal say they expect Tribune to past the test without
problem. Still, the fact that it exists is instructive on the nature of the deal.
When the original solvency opinion was granted May 9, company advisers named Valuation Research Corp. estimated that
Tribune’s fiscal 2008 earnings before interest, taxes, depreciation and amortization would be $1.42 billion, according to SEC
filings.
Current fiscal 2008 analyst estimates — about seven months later — show a mean projection of $1.076 billion, according to
Factset. That is 24% lower than for the original solvency opinion.
Tribune has improved its cash position beyond its original projections, says one person familiar with the deal. That should
well
make up for any shortcomings in the near term.
Still, it is worth remembering just how thin Tribune’s operating cushion is as it embarks on its journey with Zell.
Former Star Tribune Publisher Fights Removal
ST. PAUL (AP) -- About two months after being banished from the Star Tribune, former publisher Par Ridder is fighting the
court order that bars him from working at the newspaper.
The Star Tribune and Ridder filed papers with the Minnesota Court of Appeals in recent days seeking to overturn a decision
preventing him from leading the state's largest newspaper until September 2008.
Ramsey County District Court Judge David Higgs ruled this September that Ridder caused "irreparable harm" when he
defected from the rival St. Paul Pioneer Press. His old newspaper accused him of taking trade secrets with him.
Another executive who sought to follow Ridder to the Star Tribune, advertising manager Jennifer Parratt, also filed an appeal
of Higg's ruling barring her from joining the Minneapolis paper until a non-compete clause in her Pioneer Press contract
expires.
Notice of the appeals were filed last Friday and this Monday. The appeals also challenge a ruling that the Star Tribune must
pay
the Pioneer Press' attorney fees and expert costs in the case.
Phone and e-mail messages left with attorneys on both sides of the case were not immediately returned Thursday.
Ridder left as publisher of the Pioneer Press in March, ending a family relationship with the paper that dated to 1927. His
decision to join the Star Tribune was a bigger shock.
The Pioneer Press sued. Among other things, it claimed Ridder copied budgets, advertiser rates and other files from his
Pioneer Press computer.
In its filing, the Star Tribune disputes that Ridder's leap to the crosstown paper harmed his old employer.
"The evidence showed that Mr. Ridder had never accessed any information that could be used to injure the Pioneer Press,
and that all of the information Mr. Ridder had taken had since been quarantined and was no longer accessible to Mr. Ridder or
to anyone at the Star Tribune," Robert Weinstine, a lawyer for the Star Tribune's parent company, wrote in court papers filed
Monday.
Ridder's own appeal, filed by attorney David Turner, argued that Ridder shouldn't have been removed until after a full trial
was held.
No date for an Appeals Court hearing has been set in the case.
The Star Tribune is owned by Avista Capital Partners LP, while MediaNews Group Inc. now owns the Pioneer Press, which
used
to be part of the defunct Knight Ridder Inc. chain.




Friday, December 7, 2007
TOPICS TOPICS TOPICS
CompUSA Acquired by Gordon Brothers Group Affiliate; Stores to Close
- Retail Store Operations Will Wind-Down, Offering Consumers Attractive Holiday Bargains on Computer and Electronics
Products - Select Stores to be Sold; With Option to Retain CompUSA Brand Name - Successful Divisions CompUSA TechPro
and
CompUSA.com to be Sold - Creditors, Landlords Assured Proper Treatment
DALLAS, Dec. 7 /PRNewswire/ -- CompUSA today announced that it has been acquired by an affiliate of Gordon Brothers
Group, LLC, a global advisory, restructuring and investment firm specializing in retail, consumer products, real estate and
industrial sectors. Terms of the transaction were not disclosed.
Gordon Brothers Group will initiate an orderly wind-down of CompUSA's retail store operations and is engaged in
discussions
with various parties regarding the sale of certain assets. CompUSA's 103 retail stores will remain open and staffed during the
holiday season, and will offer consumers attractive bargains on computer and electronic products as part of store closing
sales.
Active discussions are under way to sell select stores in key markets as well as the company's highly-regarded technical
services
business, CompUSA TechPro, and its productive Internet sales operation, CompUSA.com. CompUSA TechPro and
CompUSA.com will be operated by the company as going concerns until any sale transactions are closed.
CompUSA will be run by Bill Weinstein, a Principal at Gordon Brothers Group, acting as Interim President, and by Stephen
Gray, Managing Partner at restructuring firm CRG Partners, who will serve as Chief Restructuring Officer. Current CEO
Roman
Ross will continue to serve the company in an executive advisory capacity during the transition period.
"An orderly and expedited wind-down and asset sale process is the best option for CompUSA and its creditors at this
juncture," said Weinstein. "We are focused on assuring that CompUSA's creditors, landlords and other key constituents are
treated properly during this process. We are working hard to achieve the maximum recovery possible for the company's
constituents while also minimizing unnecessary expenses. We will actively communicate with the various parties and their
advisors starting today, and in the days and weeks ahead."
Gordon Brothers Group brings to the table a unique set of skills and experience in the marketing and sale of consumer goods
and the management of a portfolio of retail stores. The firm assisted CompUSA with the prior sale of under-performing stores.
"We worked long and hard with Gordon Brothers Group to achieve a business solution that maximizes CompUSA's assets,"
said
Roman Ross. "Gordon Brothers Group has a breadth of knowledge and expertise in this area and we take great confidence in
their capabilities."
DJM Realty, a Gordon Brothers Group company that specializes in real estate disposition and valuations, will assist in
assessing
the leases for CompUSA's store locations.
Gordon Brothers Group, through its affiliate Specialty Equity, LLC, is working with two experienced advisors who are
representing creditors - Lawrence Gottlieb of Cooley Godward Kronish LLP for unsecured creditors and Jim Carr of Kelley
Drye
& Warren LLP for landlords. These advisors can be contacted directly by CompUSA's constituents.
Wal-Mart to pull in more customers with sales
BENTONVILLE , Ark. (Dec. 7) Wal-Mart has announced it will be running another "Black Friday"-style price event, unveiling
new
"Secret In-Store Specials" on Walmart.com.
With savings up to 30% on electronics and other items, Wal-Mart also brings the popular Webkinz toys to its stores
nationwide
for this event.
Since Nov. 2, Wal-Mart has offered three rounds of "Secret In-Store Specials," revealing on its Web site groups of items with
incredible values for Christmas shoppers.
Millions of customers have signed up for e-mail and text message alerts through Walmart.com to learn of these specials as
soon
as they are unveiled.
"Shoppers are searching the internet for the best deals. Integrating our Web site into store price events, reaches millions of
shoppers the way they want to be reached, so they can plan ahead and save even more," said John Fleming, Wal-Mart chief
merchandising officer. "As promised, this holiday season we are offering incredible prices on the gifts people want to give."
Consultancy Says Toyota Best Customer Retainer
J.D. POWER REPORTS TOYOTA RETAINS its customers better than any other automaker. The company's 2007 Customer
Retention Study measures the percentage of new-vehicle buyers and lessees who replace a previously purchased new
vehicle with another from the same nameplate.
For the second year in a row, Toyota leads with over 64% of customers staying with the nameplate. Also, as in 2006, Lexus is
second, and Honda is third. The 2007 Customer Retention Study is based on responses from 169,017 new-vehicle buyers
and lessees, of which 101,860 replaced a vehicle that was previously acquired new.
Neal Oddes, director of product research and analysis at J.D. Power and Associates, said Toyota's high retention rates come
even as sales are down. "Toyota maintains its high retention rates by providing high-quality vehicles and service to its
existing
customers, which in turn generates favorable word-of-mouth recommendations that attract new customers."
The firm says industry-wide average retention rates have remained at 49% since 2003, with big gainers Suzuki, which
improves
by 19% and Mazda, up 9% since 2003.
J.D. Power says Suzuki's five-year gain in customer retention is the largest since the study's inception in 2003. Increased
cargo
capacity and higher resale value as the main reasons for Suzuki's improvement, per the firm.
Mazda's improvements to the styling and quality of its product line have helped to elevate their retention rates. In particular,
the study finds that better safety features, fuel economy and seating arrangements have led to Mazda's five-year gain.
"The improvements that Suzuki and Mazda have made in vehicle appeal and quality have paid off in steady increases in their
customer retention rates during the past five years, indicating that they have also been successful in changing customer
perceptions of their vehicles," he says.
"Typically, when a brand introduces improvements to its product line, it takes some time for customer perceptions to
improve accordingly, particularly if there are negative perceptions to overcome."
Customer retention may become even more important to automakers in the coming years, as new-vehicle sales between
2007 and 2014 are expected to increase by only 8%, or about 1.2 million units.
"Competition for a dwindling number of new-vehicle buyers will likely intensify in the next seven years, meaning that brands
will need to retain more of their existing customers in order to increase, or even maintain, market share," said Oddes. "In
addition, it is approximately four times more costly to attain a new customer than it is to retain an existing one, so in the face
of a very competitive new-vehicle market, a strong focus on customer retention becomes particularly important."
Employers add 94,000 jobs in November
WASHINGTON (Reuters) - Employers added 94,000 jobs in November, the government said on Friday in a report underlining a
slowdown in job creation in recent months that raises chances for a modest cut in interest rates next week.
The Labor Department said the national unemployment rate was unchanged at 4.7 percent in November, but it substantially
revised its estimates for job growth in the two prior months to show a less vigorous pace of hiring.
The department revised its estimate for October job creation to 170,000 instead of 166,000 it reported a month ago but
slashed its estimate for September new jobs to 44,000 from 96,000 -- a net decrease of 48,000 over the two months.
That made the revised September job-creation figure the weakest monthly gain in more than 3-1/2 years, since 31,000 jobs
were added in February 2004, department officials said.
Nonetheless, the November new jobs total came in slightly ahead of forecasts by Wall Street economists for 90,000 jobs.
"Not too hot, not too cold," said Hank Smith, chief investment officer for equity management with Haverford Investment in
Radnor, Pa.
"This assures a rate cut for next week," Smith added, but it may be aimed less at stimulating economic activity and more at
breathing confidence into battered credit markets.
Stock futures rose after the jobs report was published and the dollar initially gained against other major currencies, reflecting
relief that the closely watched report did not signal a sharp falloff in U.S. economic activity. The dollar later shed its gains.
U.S. government bond prices declined as investors bet the continued job gains reduced the odds for a larger cut in officinal
interest rates.
Federal Reserve policy-makers are widely expected to cut interest rates by at least a quarter percentage point when they
meet next Tuesday and some analysts speculate the U.S. central bank might trim rates a more aggressive half percentage
point.
The jobs report showed a loss of 33,000 jobs in goods-producing industries during November while 127,000 jobs were
created in service-providing businesses. Manufacturing industries continued to shed employees, cutting 11,000 jobs last
month on top of the 15,000 that were dropped in October.
The average workweek was unchanged at 33.8 hours and overtime hours were steady in both October and November at 4.1
hours.
Monster's Employment Index Logs First-Ever November Decline
The Monster Employment Index reveals that online recruitment experienced a drop across the board in November, Monster
Worldwide (MNST: sentiment, chart, options) reported today. The index slumped 5 points in November, falling from
October's reading of 188 to its new perch at 183. October's reading represented the index's highest level since May, while
November's reading actually represents an 8-point, year-over-year gain. However, it's the first time the index has declined in
the month of November since its inception in April 2004.
Breaking down the figures, only utilities and public administration out of 20 total industries toted up higher online job
demand during the recently concluded month. Checking in on the 23 job categories tracked by the index, only law and social
services racked up an increase in demand. Geographically speaking, 3 of Monster's 28 markets experienced a gain in job
demand – Orlando, Tampa, and Pittsburgh – while the most notable declines occurred in Cincinnati, San Diego, and Portland,
Oregon.
In related news, the Labor Department reported this morning that jobless claims fell during the past week, though the 4-
week moving average of initial unemployment claims rose. Naturally, an increase in unemployment should be a boon for
MNST – unless employers are hesitant to hire on new staff amid the current environment of economic uncertainty. At last
check, MNST was down by 2%.
Imax's Digital Push Gets Big Boost From AMC
Imax Corp.'s digital-projection system, scheduled to launch next year, has received its biggest endorsement yet in a deal with
AMC Entertainment Inc. to install 100 Imax giant-screen theaters by 2010.
All the theaters will be joint ventures, in which AMC puts up the cost of converting an existing multiplex auditorium, Imax
supplies the projection system, and the two share revenues from the films. The pact has a seven-year term, which can be
extended three years at AMC's option. It's the largest theater deal Imax has ever signed, blowing past its previous record of 10
theaters several years ago.
"It's a game-changer for Imax from several perspectives," Richard Gelfond, co-chief executive of Imax, in an interview. "Imax
has been a great consumer proposition for almost 40 years, but we've struggled at times to find a footprint to create the
optimal business model. And I think a combination of our digital transition and our JV model turn Imax not only into a great
consumer experience, but a really strong business proposition."
Shares of Imax surged $2.84, or 61%, to $7.48 on the Nasdaq Stock Market, lifting its market capitalization to nearly $300
million.
The deal will double the number of Imax commercial theaters in North America, but it's even more meaningful in terms of
expansion into multiplexes. Imax is in just 63 multiplexes today, with more in backlog. Although Imax will cover a lot more
territory with the added 100 theaters for AMC, he said its product will still be in just half of the potential 400 zones on the
continent.
"So the question is, what kind of activity does the combination of digital, joint ventures, and this deal spur in addition to AMC,
and I think over the next several months we'll find out the answer," he said, adding that additional locations with AMC have
been discussed.
He said Hollywood studios are also excited, as doubling the number of commercial screens should double the average gross
box office from the films, which has been about $25 million since it began digitally remastering films five years ago.
Imax signed its first deal with AMC in 2005 for five of Imax's film systems, of which only four were installed. "They had
decided
they were going to be in our business in a big way or not in our business, and when the results were going well, rather than
bother with one, [AMC] wanted to explore a much bigger deal," Mr. Gelfond said.
The two sides had been in negotiations for about six months, Mr. Gelfond said. During that time, Imax has been using a
theater at an AMC multiplex near Toronto as a laboratory to test its new digital system and show it off to studios and
exhibitors.
On a conference call, Imax said it sees the deal providing $30 million to $35 million a year in incremental EBITDA once all 100
theaters are deployed. The first 50 are expected to be installed by April 2009 and the balance by September 2010.
"Simply put, this deal would not have happened without the development of Imax's digital system, slated for launch in mid-
2008. The elements of print cost elimination, flexibility in film programming, and lower installation costs were crucial factors
in AMC's decision," Imax co-Chief Executive Bradley Wechsler told analysts.
He added that the rapid expansion of the Imax network should result in higher box-office numbers for the studios and make
Imax a more important part of "mainstream film distribution," thus ensuring long-term film supply. Recently, Imax signed a
four-film deal with DreamWorks Animation SKG Inc., which includes the release of its first three 3D films, including "Shrek
Goes
Fourth" in 2010.
Although Imax will absorb the cost of each system, which at $500,000 each totals $50 million, it sees the maximum cash
drawdown being about $18 million, as the quick pace of the rollout will allow it to generate cash from deployed systems in
the earlier stages of installation to help fund later-stage installations.
In a note to clients, Eric Wold, analyst at Merriman Curhan Ford, said the deal with AMC represents the "the most important
endorsement of the Imax technology and potential" since the firm's founding 40 years ago. He said the JV business model,
put forth about a year ago by management, helps minimize upfront capital by customers at the expense of revenue sharing
over the contract term, and this reduced cost is attracting major operators like AMC, and Regal Entertainment Group, which
did a three-theater deal earlier this year.
"We now believe that the move to roll out digital and push more joint-venture deals could reaccelerate theater growth and
profitability - especially so with the validation provided by this announcement with AMC," Mr. Wold wrote.
Media Companies Need To Provide Better Wireless Content More Cheaply
TO OVERCOME SLUGGISH DEMAND FOR mobile content, media companies need to provide a better mix of wireless content
more cheaply, according to a new study.
With just 16% of U.S. subscribers browsing the mobile Web, media players need to utilize a variety of formats including text
alerts, video clips and small applications to engage mobile users, according to a JupiterResearch report on mobile content.
The main reasons users so far have not delved into mobile media are a lack of interest (73%) and the high cost (47%).
Messaging remains the dominant non-voice mobile activity. About one-third of subscribers surveyed had used either text or
picture messaging once in the last six months.
But newer types of services such as video--which has exploded on the wired Internet--had only a 1% adoption rate. In
response to what would motivate consumers to use Web-based services more, a total of 51% cited either lower monthly fees
for certain applications or lower fees for monthly data plans.
To reduce the cost barrier, Jupiter recommends that companies adopt a cable TV-like model offering both free and premium
content (at $1 to $3 per download). That strategy opens the door to selling advertising to lower or eliminate end-user costs.
The demise of mobile services such as ESPN Mobile and Amp'd have shown that consumers aren't willing to pay a lot extra
for
premium content packages.
Carriers and content providers also need to offer easier access to things like news and video through mini applications such
as
widgets, which require fewer clicks than typical WAP sites. On top of that, media companies should make more of their assets
more widely available on cell phones. "A mix of formats makes for content strategy because not all consumers have the same
interests in games, for instance, or video and they face various hurdles for adoption," according to the report.
That includes creating specialized mobile apps tied to popular programs, such as Disney developing a mobile based app on
its
hit TV show Hannah Montana. Jupiter also recommends text alerts as a simple and efficient way to deliver content that builds
brand loyalty. Despite its slow uptake so far, video should be a priority as well. "Even though the masses haven't rushed to
mobile video, media companies want to be out front on this--since greater use is coming, albeit slowly," said Neil Strother, the
Jupiter wireless analyst who authored the report.
And since media companies are already posting clips online, "why not make them available and optimized as well to mobile
browsers?" asked Strother.
'Sacramento Bee' To Outsource Ad Work To India
The Sacramento Bee is outsourcing some of its advertising production work to India.
The newspaper plans to eliminate half its artist jobs by next summer and give the business to Express KCS, a San Jose
company
with offices in New Delhi and nearby Gurgaon.
Ed Canale, the Bee's vice president of business development, said the company has already done similar work for The Fresno
Bee. Both papers are owned by Sacramento-based McClatchy Co., the third-largest newspaper publisher in the country by
circulation.
In August, McClatchy outsourced circulation customer service to an Illinois company that also operates out of the
Philippines.
Ten years in prison for ex-mogul Conrad Black?
CHICAGO (Reuters) - Conrad Black, once one of the world's most powerful press barons but now a convicted felon, will likely
be sentenced on Monday to no more than 10 years in prison, legal analysts said.
Defense lawyers and prosecutors have sparred over a possible sentence since the Canadian-born British peer was found
guilty
in July of one count of obstructing justice and three counts of defrauding shareholders of former publishing giant Hollinger
International Inc.
Once the overseer of Hollinger's far-flung newspaper empire that spanned from Jerusalem to Vancouver before much of its
holdings were sold off, Black was acquitted on nine other charges, including racketeering conspiracy. Three fellow former
Hollinger executives were found guilty of fraud and will be sentenced on Monday in U.S. District Court here.
Black is planning to appeal.
The company is a fraction of its former size and has been renamed Sun-Times Media Group Inc.
Judge Amy St. Eve, who presided over the 15-week jury trial, has wide leeway in determining sentences.
The government has asked St. Eve to sentence Black, 63, to between 16 and 24 years in prison, based on the prosecution's
view the fraud scheme netted more than $31 million.
They objected to a probation report prepared for the judge that says the fraud amounted to $6.1 million -- which would
recommend a sentence for Black of fewer than 10 years.
Securities fraud lawyer Andrew Stoltman said the obstruction count could be a "wild card" that the judge could use to send
Black away for up to 15 years, rather than the four to seven years he expected. Under federal sentencing rules, Black must
serve 85 percent of his sentence.
Prosecutors argued other aspects of the crime -- its sophistication, its leadership by Black and its violation of securities laws
--
should stiffen the penalties. They also asked that Black and two co-conspirators forfeit $17 million.
"My impression was that the probationary report was a bit of an early Christmas present for the defendants," said Hugh
Totten,
a securities lawyer who has followed the case closely. "If the judge triangulates between the three of them I expect she ends
up with a lesser sentence" on the low end of his predicted seven- to 10-year range.
"When you look at this case, it started out as a $500 million 'kleptocracy' and it ended up a $6 million fraud, according to the
probation department. It has been oversold, and the government's arguments are a continuation of that," Totten added.
Black has remained free on $21 million bond although restricted by the judge since his conviction to his Palm Beach, Florida,
estate or Chicago. It appeared unlikely the judge, who dismissed Black's request for a new trial, will extend his bond for the
months-long appeal.
"I do not expect him to be frog-marched out in chains," Totten said. "She'll set a surrender date, probably for after the
holidays."
In media interviews Black has continued to protest his innocence and blames "corporate governance zealots" for his plight.
Black's lawyers argued that he receive a comparable sentence to the 29 months Judge St. Eve is expected to approve a week
later for Black's former partner David Radler, who pleaded guilty and testified to Black's involvement.
Legal experts said the case, the bulk of which involved slipping tax-free payments to executives past Hollinger's high-profile
board of directors, does not resound as did earlier U.S. corporate swindles involving Enron Corp, Tyco International Ltd and
home products maven Martha Stewart.
"This case as a sort of bookend of the Enron era. It's really a footnote in history as the last breath of the Enron prosecutions,"
Totten said. "It has none of Enron's scope, it has none of the Tyco debauchery and it has none of the blatant activity that you
had with Martha Stewart."




Monday, December 10, 2007
TOPICS TOPICS TOPICS
What's Black & White And Spread All Over?
ONE OF THE BEST WAYS of generating word-of-mouth may be via the press. That's the conclusion of a new Millward Brown
study being released today by the National Newspaper Network and the Newspaper Association of America. The study, based
on online interviews of 1,501 adults conducted in September and October, found that readers of online newspapers are
more likely to be so-called "influencers" - people who spread buzz and shape the opinions of others about various issues,
including branded products and services.
The study comes as Madison Avenue is trying to understand the role the Internet plays in spreading buzz about brands, and
how to best trigger and influence those conversations. According to the newspaper Web site influencer study, readers of
newspaper sites are 52% more likely to be categorized as influencers - based on Mediamark Research Inc.'s definition of the
consumer segment - than non-newspaper Web site readers.
The study found that, on average, adults who use newspaper Web sites influence 18 people weekly, 38% more than Web
users who do not use a newspaper Web site.
The findings are also significant, because the study shows that readers of newspaper Web sites also tend ot be "early
adopters"
of new products and technologies, and because advertising on newspaper Web sites are deemed "more credible" than ads on
other online sources perceived as influencing word-of-mouth, including social networks, search engines and "special
interest"
sites.
"People don't trust their peers," says Jason Klein, president-CEO of the NNN. "They may be interested in what they have to
say on social networks and peer-to-peer sites, but people tend to think a newspaper ad is more credible, whether they see it
in print or online."
The increasing role of editorial content on the Internet in spreading word-of-mouth, was highlighted last week by Martin
Sorrell, chairman-CEO of the WPP Group, the world's largest buyer of media, during a presentation at the UBS media
conference in New York. "It's given public relations a totally different meaning," Sorrell said of the impact the rising role
social
networks has had on WPP's public relations and public affairs operations have had as corporate and brand marketers seek to
influence their conversations. "Social networks and the growth of social networking has made editorial publicity more
important than it has ever been," he said.
Today could be big day for e-merchants
There's just something about the second Monday in December.
For the past five years or so, shopping at both eBay (Nasdaq: EBAY) andShop.com spiked during the second week of the last
month, outstripping even Cyber Monday, the much-heralded first Monday after Thanksgiving.
Cyber Monday remains a retail monster. At one point, the Web hosted 4.6 million visitors per minute this past Cyber Monday,
and the day ended with an estimated $700 million in sales, according to the National Retail Federation.
But e-merchants are making it easier to shop later. Shop.com reports 72 percent of its merchants are offering next-day
shipping.
And some shoppers will avoid a mall at all costs.
Harris Poll numbers collected for Yahoo! (Nasdaq: YHOO) report one-third of online adult shoppers said they would rather do
laundry than go holiday shopping in the mall.
It's the little things that irritate: Another Harris survey reports one in eight men are stressed out by piped-in holiday music.
Technology will let Macy's customize stores in detail
Macy's Inc., which has for years been tailoring its stores to meet individual market tastes, is preparing to roll out new
technologies that will help it even better fine-tune its merchandise as it strives to win shoppers and improve store sales.
The program, called My Macy's, comes at a critical time. It has been about a year since the retailer transformed roughly 400
May Co. stores into Macy's nameplates, and it is still trying to nail the whims of some of these shoppers, such as
Clevelanders,
who before were foreign to the chain.
Macy's said the goosing up is a natural, companywide extension of its ongoing merchandising efforts. But some analysts see
My
Macy's as a bid to win over former May customers, some of whom have been slow to come around to the Macy's brand, either
because of styles or price points.
"What they're trying to do is really customize each store. That's something they've always done. Now they're trying to take a
page out of their core playbook and apply it to their converted stores," said Jeff Stein, an analyst covering Macy's for
KeyBanc
Capital Markets in Cleveland.
Macy's said the program is not limited to former May stores. And true enough, it does go beyond putting Pittsburgh jerseys in
the Scranton, Pa., store. Rather, the technologies, which Macy's has spent years researching and is jealously protecting, will
detail the demand for specific sizes, colors and fabrics. It should enable Macy's to customize its more than 800 stores faster
than before and not just city by city, but store by store.
Blackberries and embroidery
This strategy in general is not new - Macy's has for years tried to outfit its stores to meet specific market demands. But the
newer program takes store customization to a higher level of detail, with greater precision and speed, said Macy's spokesman
Jim Sluzewski.
"As it gets more sophisticated, we'll be able to have sizes tailored per store; preferences for kinds of materials, weights,
embroidery," he said. "As time goes by, we're getting more and more skilled at doing that."
Macy's has been developing the systems over the past two years and will roll them out over the next year. In some cases,
whole series of technology tools and software are being developed.
Sluzewski wouldn't provide details - Macy's wants to protect its intellectual capital. But Sam Gragg, an associate vice
president
at Teradata, an international data analysis firm, shared what others do.
J.C. Penney, for instance, uses a Teradata software program that can forecast how many turtlenecks, towels and necklaces
are needed, on a store-by-store level, 50 weeks in advance. All of Penney's store purchasing information is managed and
integrated from a centralized data warehouse.
"It will actually show you what your expected sales performance is for each item at each store," Gragg said.
Other customizing trends are more personalized. Some high-end chains, for instance, encourage sales associates to run their
own small campaigns, perhaps with direct mail, to keep abreast of shopper activity. Such efforts are made even easier with
wireless devices, like BlackBerries, that are plugged into the company's centralized database.
Still learning
Macy's operates its own data warehousing and technology division in Atlanta, and it is no stranger to these advancements,
such
as handheld devices to track a store's shoe inventory, for example. This division also introduced the popular price-scanning
wands at Macy's stores, which shoppers use to verify prices on sale items.
Still, one merchandising expert said that Macy's made a merchandising mistake last year by assuming that former May
shoppers
would quickly embrace its higher-end labels. Many have not, partly because it also had discontinued the coupons for which
May was known. As a result, Macy's for much of the past year logged disappointing sales at its May stores. Revenue has been
improving over the past few months, Macy's said.
"Up until this season, Macy's has been very reluctant to listen to all of the data they have been collecting at all of the May
doors," said Dan Hess, CEO of Merchant Forecast in New York and a former director of marketing at Macy's (before the May
merger). Hess said management just figured that shoppers, at least in some markets, would simply embrace its higher-end
brands.
Macy's has since made some changes and has begun offering more moderate styles, he said. With the newer technologies, it
can simply keep on top of market desires, whether in New York or Oklahoma City.
"They're getting better and better at customizing each location," Hess said. "They're better than most."
Sears enters confidentiality pact with Restoration Hardware
Sears Holdings Corp. has agreed to enter into a confidentiality agreement with Restoration Hardware Inc., a California home
furnishings chain that Sears has offered to buy or $6.75 per share.
The Dec. 7 agreement, disclosed in a filing with the U.S. Securities and Exchange Commission Monday, allows for Sears to
complete due diligence on a possible transaction with Restoration Hardware, which operates locations in Wauwatosa and
Pleasant Prairie. Sears Holdings (NASDAQ: SHLD) is the Hoffman Estates, Ill.-based operator of Sears and Kmart stores.
Restoration Hardware had previously said it would provide the information if Sears signed the same confidentiality and
standstill agreement agreed to by other suitors.
Sears Holdings' bid tops an accepted offer from Catterton Partners, a private equity firm with a definitive agreement to buy
Restoration Hardware for $6.70 per share. Restoration Hardware is reserving the right to review competing proposals through
Thursday.
Separately, Restoration Hardware reported a net loss of $15.2 million for the third quarter, compared with a loss of $5.7
million in the same quarter last year. Sales for the quarter ended Nov. 3 were $173.7 million, up from sales of $157.1 million
a year ago in the same period.
Gary Friedman, president and chief executive officer, said revenue did not achieve management expectations as weakening
consumer spending and traffic continued to affect third-quarter business, particularly for high-ticket items.
Corte Madera, Calif.-based Restoration Hardware (NASDAQ: RSTO) operates more than 100 locations in the United States and
Canada, including a retail store at Mayfair Mall in Wauwatosa and a furniture outlet at Prime Outlets in Pleasant Prairie.
CVS to change advertising
CVS Corp. and its pharmacies have agreed with the Florida attorney general's office to modify their advertising practices and
other aspects of the Extra Care Rewards program.
After receiving complaints from consumers, investigators with the attorney general's economic crimes division determined
that certain provisions of CVS' Extra Care Rewards program might be considered confusing and misleading, a release from
the
attorney general's office said. Consumers complained that they could not access their account balance for accumulated
savings and that advertised prices were not always available at checkout, the release said.
CVS Pharmacy, part of CVS Caremark (NYSE: CVS), cooperated with the state's investigation and agreed to clearly advertise
the
conditions and limitations of any offer, including, but not limited to, membership requirements, program terms, mail-in
rebates, instant rebates, specific items to be purchased or quantity of items to be purchased, the release said. The company
also agreed to make a $30,000 contribution to the Florida Seniors vs. Crime program, which gives senior citizens a venue to
report fraud or potential scams.
Woonsocket, R.I.-based CVS operates 6,246 CVS Pharmacy stores in 40 states and Washington, D.C. The agreement covers
all
of the company's more than 600 Florida stores.
The Direct Marketing Association (The DMA) Releases "Direct Marketing Consumer Response
Study"
Key findings of the study are:
Overall engagement with direct marketing channels by consumers proved to be fairly high. 79.6% percent of our
sample of consumers indicated having made at least one purchase in response to direct marketing communications
in the prior 12 months in any channel. The average frequency of purchase by our panelists over a 12-month period
was calculated to equal one direct marketing purchase approximately every 16.4 days.
One-third (33.8%) of our consumers recorded a direct marketing purchase made during their assigned 48-hour diary
period, with an average expenditure per purchaser of $253.97. Adjusted for the entire sample, this meant our
consumer group reported spending $80.73 each on average, and making .65 of a purchase each on a per capita
basis.
Among reasons cited for making a purchase, attractive price topped the list, at 24.7%, surpassing customer loyalty
(16.3%), uniqueness (11.1%), and promotional incentives (10.4%), among the four most cited reasons for buying.
“Not the right time” was cited most often for the reason why a given transaction was declined, at just over 24%.
Timing edged out lack of relevance (23.6%) and significantly exceeded reasons of consumer satiation (13%) and
price (6%). In only 1.8% of cases did consumers cite concerns about privacy or the misuse of personal data as the
reason for discarding a promotion they noticed or received.
82.4% of respondents used the Internet in the past 30 days, and so may be classified as Internet-enabled. One can
drill-down underneath this total, however, to discover which demographic groups constitute the 56.4% of
respondents who used the Internet over the past 30 days to follow current events/news, and contrast them with
the demographic groups that used the Internet to make a purchase (43.2% of all respondents).
64.6% of respondents use email. Of these, 20.2% use their work account for personal shopping. 19.2% also report
receiving over 30 commercial emails over a 2-day period.
Of all direct mail advertising pieces received over the 2-day diary period, the most common type was a regular letter
– over 35%. Following this, 17.5 % were flyers, 14.6% brochures, 13.1% large envelopes, 10.4% postcards, 5.6%
coupon packs, and 0.9% free CDs/DVDs.
While consumers responding to print ads were likely to respond at similar rates when they had heard of an
organization (49% for magazines vs. 48% for newspapers), magazine readers showed a greater willingness than
newspaper readers to make a purchase from a company with which they were unfamiliar (22.2% for magazines,
compared with 8.3% for newspapers).
Paramount and Jaguar Are Charter Subscribers As MSN Mobile Intros Display Ads
MSN MOBILE WILL BEGIN RUNNING display ads throughout the mobile portal, and named Paramount Pictures and Jaguar as
the
charter advertisers on the site beginning today, Dec. 10.
The display ads will include banner and text placements that will appear on the MSN Mobile home page and its five channels--
sports, news, entertainment, weather and money. The mobile ads will not include video formats, and will be sold on a CPM
(or cost-per-impression) basis.
The move follows similar efforts by rival Web portals such as Yahoo, AOL and Google, which have already offered display
advertising on their own mobile sites.
"For mobile services we have been very focused on delivering a great customer experience and wanted to wait until we felt
that our services were ready," said a Microsoft spokesperson in relation to its launch of display advertising on MSN Mobile.
Like its online competitors, Microsoft has been taking more aggressive steps in the last year to build up its mobile business.
In
May, the software giant acquired ScreenTonic, a European mobile advertising company, whose technology is helping to
power the new ad mobile ad system. Microsoft's push into mobile advertising was also fueled by its May acquisition of digital
advertising firm aQuantive for $6 billion.
"This reflects how everyone is now taking mobile seriously and see it as a big opportunity and want to start serving mobile
ads,"
said Greg Sterling, founding principal at Sterling Market Intelligence and senior analyst at Opus Research. Opus predicts that
mobile advertising in Europe and North America will surpass $5 billion in 2012, up from about $107 million at the end of
2007.
Display advertising on cell phones to date has been slow to gain traction because most U.S. subscribers still use their
phones
primarily to talk rather than to surf the Web or access content. But recent findings by mobile research firm M:Metrics suggest
that Fortune 100 marketers are beginning to migrate to mobile screens.
The largest share of mobile advertising so far has come from media companies promoting Web sites, TV shows, movies and
books, according to M:Metrics. Ad categories such as autos, financial services, and travel--already prevalent online--are now
going mobile too.
The Microsoft spokesperson said that while its mobile ad effort is starting with two launch advertisers, the company expects
to
add many more advertisers over time. In addition to display advertising, MSN Mobile will also offer new downloadable
content,
including the ability to buy movie tickets, ringtones and wallpapers, and a new astrology channel.
NBC Rings Up Holiday Refunds
NEW YORK NBC has quietly begun reimbursing advertisers for fourth-quarter prime-time ratings shortfalls, averaging about
$500,000 per advertiser, according to media buyers, marking the first time in years a network has taken such a step to
compensate marketers for ratings deficiencies.
Buyers said NBC is offering cash back to advertisers looking to get ads on the air before Christmas. Marketers cannot get
make
goods, as the network has none to give. In fact, no broadcast net has much ad inventory left between now and yearend—
except for, perhaps, a handful of units the week between Christmas and New Year's, and that doesn't do much for
advertisers chasing holiday shoppers.
NBC isn't the only net in make-good trouble. The CW has been out of sale for several weeks now, and while the network is
not giving refunds, it has issued make goods for the last month. CBS, ABC and Fox also are doling out make goods, primarily
for
first quarter. None of the networks would comment.
The nets have blamed ratings softness on the conversion of the upfront sales metric this season from live program ratings to
commercial ratings plus three-day DVR viewing (C3). But media agencies contend broadcast prime-time ratings are down
significantly even when DVR viewing is added in.
They also contend that the nets created the problem by carrying over make goods from last season, and by overselling
scatter
inventory at hefty prices rather than holding back more for make goods. "They got greedy, and now they are paying the
price," said one buyer.
The nets' problems emerged even before the Writers Guild strike. The walkout has yet to affect programming, as the nets had
enough first-run shows to get them through the November sweeps, and repeats and replacement programming will not begin
in earnest until January.
Among the Big Four networks, NBC has the most serious ad shortfall, as its prime-time ratings are down most dramatically.
Meanwhile, none of its new series this season have caught on with viewers. Compounding buyers' angst about NBC: the net's
plan to add more reality shows. Celebrity Apprentice premieres on Jan. 3, and American Gladiators launches Jan. 6. NBC last
week announced a deal with BermanBraun, helmed by former network executives Gail Berman (Fox) and Lloyd Braun (ABC),
to produce nonscripted programming.
"We're trying to understand NBC's recent moves," said Laura Caraccioli-Davis, evp, Starcom Entertainment. "We are
concerned
that it might be thinking about adopting a programming strategy like some of its sister cable networks. American Gladiators
and
even some of the shows in development, like Knight Rider, are remakes, being dusted off rather than coming up with new
creations.
"NBC used to be the upscale, quality network," she added. "We have come to expect quality, iconic programming. Maybe
they are searching for the reality hit they don't have, their own American Idol. But too much reality just doesn't play well with
advertisers."
Vince Manze, president, NBC program planning, countered that the net would air more scripted shows in the first quarter
than it did a year earlier, so the perception that NBC is moving more heavily into reality is wrong. "We will have about 85
hours
of original, scripted, first-run programming in the first quarter," Manze said, citing the return of dramas Law & Order, Law &
Order: Criminal Intent (which previously aired on NBC's sister cable net USA) and Medium. In February, NBC will premiere
midseason drama Lipstick Jungle. It also has first-run episodes of Law & Order: SVU, ER, Chuck, Friday Night Lights, Las
Vegas,
Scrubs and My Name Is Earl yet to air.
"Most of our originals will be up against the other networks' repeats, particularly if the writers' strike continues into January,"
he said. "Our plan is to use reality to fill in for scripted shows that may not do so well in repeat."
He added, "We are going to keep putting original reality programming on the air until we come up with our own American
Idol."
Steve Sternberg, evp, audience analysis at Magna Global, said he saw no problem with NBC airing a reality block on Saturday
or
even during the week if the production values were high or if it replaced other reality programming.
However, "if it replaces midweek scripted hours, it could have a negative impact" on ratings and audience quality, he said.
Reality programs featuring high production values, including Fox's American Idol, CBS' Survivor and Amazing Race, and
ABC's
Dancing With the Stars and Extreme Home Makeover, draw sizable audiences each week. Still, one network exec charged that
audiences for those shows are "borrowed" viewers. "A majority of those viewers come in for that show and then leave," the
exec said. "That's why there is usually a huge drop-off in audience for the lead-out show, while scripted shows usually flow
into one another better."
Said Ed Gentner, svp, group director at MediaVest: "No one [advertiser or agency] wants to see too much reality
programming
on TV. But broadcast television has changed, and reality is part of today's landscape."
NBC, he added, "still has a decent amount of scripted shows on the air, and the network still has value to advertisers. It just
can't compare to where it once was. But all networks go through changes."
Gentner pointed to how far ABC has come. "A few years ago, they were in fourth place," he said. "Now they're battling for the
top."
Survey Reveals Communicators Are Out of Sync with the Way Consumers Use Media
Consumers Rely Most on Personal Experiences and Experts When Making Decisions
NEW YORK, Dec. 10 /PRNewswire/ -- The way communicators dispense information is out of sync with the way consumers
use
media, according to Media, Myths & Realities, a comprehensive survey of media usage among consumers and
communications
professionals conducted by global public relations firm Ketchum and the University of Southern California Annenberg
Strategic Public Relations Center. Advice from family and friends is the No. 1 source that consumers turn to when making a
variety of decisions - ranging from purchasing consumer electronics to planning a vacation - and advice from an expert rates
highest when making medical decisions and purchases based on a product's environmental impact. Despite the strong
evidence that friends, family and experts play a key role in influencing decisions, only 24 percent of communicators report
having a word-of-mouth program in place.
Another indication of this communication gap is the differing reliance on company Web sites. Communicators rank their
companies' own Web sites as the most effective way to share corporate news or issue a response to a crisis, but consumers
rank company Web sites sixth and seventh among places they turn to for corporate news and crisis response, respectively.
In its second year, the Media Myths & Realities survey examines the use of more than 40 media channels, ranging from
newspapers to social networking sites. This year's survey was expanded to include the fast-growing BRIC countries - Brazil,
Russia, India and China. The theme "public of one" emerged from this year's findings to represent the way communicators
should view today's consumer audience. With digital media giving rise to increasing media choice, fragmentation and
personal
empowerment, the term "mass market" is being outmoded. As a result, it is imperative that communicators view their
audience as distinct groupings of individuals.
"This year's findings magnify the point of last year's benchmark survey, which showed that communications professionals
need
to vigorously reassess their communication priorities to meet consumers' needs in this multimedia channel world," said
Nicholas Scibetta, Ketchum senior vice president and global director, Global Media Network.
"The survey results also show that today, more than ever, each consumer can search out the specific information he or she is
seeking while tuning out the media sources that aren't personally relevant or meaningful," Scibetta added. "Communicators
must focus on speaking to individuals, not just broadcasting to the masses, when getting their messages across to this new
'public of one.'"
Other Key Findings:
* Consumers in emerging markets may be setting the pace for media use. "This year's survey deflated a major myth that the
2006 survey didn't explore: the notion that emerging markets are less media-savvy than the U.S.," said Jerry Swerling,
founder and director of the USC Annenberg Strategic Public Relations Center. "Consumers in the BRIC countries are
techsavvy,
they are accessing more mobile media and they deem media outlets to be more credible than do their U.S.
counterparts. As more corporations operate globally, communicators must be aware of these differences." Furthermore,
overall media consumption in the BRIC countries is heavier than in the U.S., and BRIC consumers generally rate media
sources
higher in credibility than do U.S. consumers. For instance, in the U.S., 65 percent of consumers report using major television
network news, compared to 85 percent in Brazil, 79 percent in Russia, 72 percent in India and 60 percent in China.
Meanwhile, only Russian consumers rank major network news lower in credibility than U.S. consumers. On a scale of 0 to 10,
major network news ranks 7.6 in Brazil, 7.6 in India and 7.4 in China. It ranks 6.7 and 6.2 in the U.S. and Russia, respectively.
* U.S. consumers are more skeptical of nearly all media outlets. Another key finding underscores the fact that while U.S.
consumers are using more media sources than ever before, they are less likely than they were a year ago to take the
information they receive at face value. Consumers rated all media sources, with the exception of cable network news, as
being less credible than in the 2006 survey. While local television news was seen as most credible, it dropped from 7.4 last
year to 6.9 on a scale of 0 to 10. Celebrity endorsements ranked last, at 3.7, down from 4.7 last year. Cable network news
ranked 6.8, compared to 6.4 in 2006.
Media preferences are more personalized than ever. The study reveals that 22 percent of U.S. consumers use social
networking sites, up from 17 percent in 2006, and 19 percent of consumers use blogs, up from 13 percent. Among
consumers over the age of 55, use of blogs and social networking sites more than doubled. At the same time, use of
most other media outlets slipped from a year earlier. Search engines continue to be a gateway to consumer choice
in information, with 60 percent of U.S. consumers using them to find and select the news and other information
percent of the population who initiate changes in their community or society through a variety of activities - with 35
percent using both social networking sites and blogs and 72 percent using search engines.
Takeaways for Communicators
Treat audiences as groupings of individuals rather than faceless masses. Rather than rely on the reputation of a
media outlet to carry your message, relate to the public by creating content that is relevant, authentic, and
engaging, and motivates consumers to share information with like-minded people. The opportunity for
communications professionals is to help provide context, rather than sheer content, and give consumers more of
what they are seeking. Quantity of media impressions should not be the sole focus of a campaign - media should be
used as a vehicle for reaching stakeholders in a way that is meaningful or useful.
Put word-of-mouth and search-engine-optimization strategies in place or miss out on tremendous potential for
audience reach and sales. In addition to advice from family and friends being the No. 1 source that U.S. consumers
turn to when making select decisions, search engines (such as Google, Yahoo, Cade, Yandex, Baidu, etc.) rank No.
1 or 2 among all media channels in overall usage for BRIC countries and No. 3 in the U.S. among influencers.
Be wary of the communication flavor of the month. Be sure to stay on top of the latest research and avoid
becoming reliant on any single communication technique regardless of how new or exciting it may seem. For
example, usage of podcasts is registering in the single digit range with the exception of the 18-24 age group, which
grew from 8 percent to 13 percent.
A company's own Web site should not be the primary choice when communicating to stakeholders. While a
company Web site provides communicators with a high degree of control over their message, consumers often turn
elsewhere for information.
Radio Will Weather Storm, Analysts Say
NUMBERS AREN'T THE WHOLE STORY. Several years of weak results--including a 5% drop in revenues in the third quarter of
this year--don't necessarily mean that radio is trapped in a long-term slump, according to industry analysts at SNL Kagan.
While it will take another year or so to bottom out, in the long run Kagan is optimistic about radio's prospects in its study
"Radio Stations Deals & Finance."
Yet the short-term outlook is admittedly negative, the Kagan study concedes--projecting a 1.5% decrease in core radio
revenues in 2007 compared to last year. Kagan blames competition from the Internet and increasing use of just-in-time ad
booking services, which help drive down prices for radio inventory.
But Kagan, citing the radio industry's strong fundamentals, sees a recovery beginning in 2008.
After the business stabilizes, the study projects that revenues will grow at an average annual rate of 3.2%, reaching a total of
$28.7 billion in 2016. In addition to substantial free cash flow and profit margins that are still quite large, Kagan also points to
Internet revenues as a key driver of future growth. Radio operators say Internet ads--which contribute 3% to 5% of current
revenues--will contribute 7% in 2008, and hopefully 15% by 2016.
Cox Auto Trader Forms New Business Unit: Cox AutoTrader/AutoMart
With AutoTrader.com and Cox AutoTrader/AutoMart, Cox Auto Trader now provides a total solution for car buyers and sellers
ATLANTA, Dec. 10 /PRNewswire/ -- Cox Auto Trader announced the creation of a new combined print and online publishing
unit: Cox AutoTrader/AutoMart, which produces classified automotive advertising for dealers and private sellers. This unit is
comprised of AutoTrader, AutoMart, AutoExtra and AutoMercado magazines, as well as other automotive classified titles. Cox
AutoTrader/AutoMart also includes AutoMart.com and AutoExtra.com web sites. AutoTrader.com continues to operate as a
separate business unit under the Cox Auto Trader umbrella and is unaffected by these changes.
The formation of the new Cox AutoTrader/AutoMart business unit will allow its parent company, Cox Auto Trader, to leverage
internal resources more effectively, while offering customers the best of both free and paid automotive advertising in print
publications and online.
Joe George, a 17-year Cox Enterprises veteran who has most recently served as vice president of business development and
strategy for Cox Auto Trader, will be president of Cox AutoTrader/AutoMart and will report to Sandy Schwartz, president of
Cox Auto Trader.
"Joe has a proven track record of success. Having served in executive leadership roles for Manheim, AutoTrader.com and
Cox
Auto Trader, he is well suited to lead this effort. I'm excited for Joe and for our businesses," said Schwartz. "Our new
structure puts us in position to better serve our customers by creating a streamlined and more effective organization, which
enables us to be the best print and online organization in this competitive environment."
All functional areas including sales, internet, finance, IT, marketing and human resources will report to George. As he locates
opportunities for synergy within the new business unit, George will also work to identify potential partnerships and business
alliances with sister company AutoTrader.com, as well as across all of Cox Enterprises' subsidiaries.
"I am excited about the opportunity to reorient the businesses to meet the demands of a changing environment," said
George. "Our new organizational structure will grant us increased collaboration and prepare us to take advantage of future
opportunities in the marketplace."
The formation of this combined unit marks a new way of doing business for AutoTrader Publishing and AutoMart who
traditionally operated with a more decentralized approach. Bringing these businesses together as a joint print and online
publishing unit allows Cox AutoTrader/AutoMart to offer a more complete automotive advertising, buying and selling solution
for dealers, private sellers, car buyers and researchers.
The Boston Globe's new top executive says more changes are inevitable
The outward challenges P. Steven Ainsley faces as new publisher of the Boston Globe are daunting.
Slippage in circulation and ad revenue are attacking the basic business model of daily newspapers. With each passing
quarter,
papers have less resources to use in their fight against online news sources that in many cases are seeing their resources
grow.
But for Ainsley, an executive with a pleasant disposition and an approachable manner, the challenges within the imposing
Globe complex on Morrissey Boulevard in Dorchester also are substantial.
New England's biggest newspaper has suffered major morale problems since the avuncular Taylor family sold the operation
to
the New York Times Co. in 1993. And even if they're relatively insulated from the financial pressures on the paper, the
Globe's journalists like counterparts across the country see their jobs changing rapidly. The rewrite desk of years ago has
returned, for instance, only this time the fast-tapping reporters manning it are banging out stories for the Web.
Take it all together, and it's easy to see why Ainsley has his hands full. He acknowledged many of the challenges in a recent
interview, while also adding a considerable measure of optimism.
"For all the hand wringing that people in my business do internally, as well as people out in the community who say that
newspapers are a tired medium and that they're no longer viable -- the Monday after the World Series we sold somewhere
between 225,000 and 230,000 additional copies of the Globe," said Ainsley, 54. "It's intriguing to me that even with all these
challenges -- and they're real and I'm not minimizing them -- but when there's a major event, that first cut at history is still
regarded to be the newspaper."
Last year when the Globe came calling Ainsley was president and CEO of the Times' Regional Newspaper Group, running a
cluster of newspapers out of Tampa, Fla. He contemplated the move up North for a few days before he accepted. In
September he replaced Richard Gilman, who had been publisher since 1999.
While he might not outline it this way, Ainsley appears to have adopted a three-pronged strategy: cut costs, smooth
employee relations and find new streams of revenue. Of course some of those tend to work against each other in any
organization. Cutting costs usually means eliminating jobs -- hardly a way to win friends among the rank-and-file. And
seeking
new sources of revenue is a recipe for a turf battle.
As for cost-cutting, Ainsley said, "The previous management team, and the team that's still here, I think has done
extraordinary things in terms of finding efficiencies, but I knew we were going to have to find more and we have."
In March, 24 newsroom staffers left the Globe through a buyout program. Although Ainsley always looks for efficiencies, no
buyout programs are in the works currently.
"It wasn't a huge, huge reduction but every reduction matters," said Ainsley. "It's horrible ... But if you don't do these things
when you believe you need to do them and you wait or you dally, it's only worse."
Ainsley acknowledged that the employees left behind were uncertain of the future and to counteract that he held many
small and large meetings throughout the building.
"I think we've weathered that pretty well," said Ainsley. "I couldn't be more pleased with the news product we put out."
To address the morale problem, Ainsley meets regularly with employees. He usually fields his own phone calls from
employees and readers.
"I'd like to think the focus, as much as possible, is on accessibility and transparency," said Ainsley. "In challenging times it is
important for employees throughout the organization to understand how my mind works, what my goals for the organization
are and the role I believe they each play in attaining those goals."
Ainsley also gathered employees early on to help find new revenue.
He formed a team of employees from every department called the "iGroup" to brainstorm about new products, or ways to
improve existing ones. Both Fashion Boston and Lola, two new, free monthly fashion publications targeting women, came out
of those strategy sessions and are aimed at luring small, luxury retailers that have flocked to places like The Natick Collection
as
advertisers. "We're going after an entirely new business set," said Ainsley.
In November, the Globe rolled out a redesign of Boston.com, which gets around 14 million unique visitors every month. New
features, such as enabling readers to add comments to stories online, will be rolled out in the first quarter. The new site is
meant to be more navigable and less disjointed, with more white space. Boston.com ranks sixth in readership of all
newspaper Web sites. "Like all newspaper Web sites, the trick is, when are we going to be able to accrue the kind of revenue
from the Web site that we do from the newspaper. That's going to be a while," said Ainsley.
Ainsley imagines that time will likely be less than five years away, and may come when technology catches up and a portable,
electronic version of the newspaper becomes commonplace.
"But we're a ways from that. The challenge is going to be over the next several years being able to invest in our Web sites at a
level that enables us to be prepared," said Ainsley.
Ainsley's moves at the paper have not gone unnoticed by the competition.
"I have a lot of respect for him. He's hit the ground running," said Boston Herald publisher Patrick J. Purcell. "He's tried a lot
of
things, he's been creative. It takes a fair amount of intestinal fortitude to be publisher of a major metro these days. He's trying
a lot of things that could potentially improve the bottom line. He's trying new things with the fashion supplement and the
commercial printing deal with the (Quincy Patriot Ledger) -- those are examples of a different mind-set that prior
management had no interest in, so he has to get high marks for that."
Some of the comments from within the Globe are less laudatory.
The Globe's largest union, the Boston Newspaper Guild, became upset in March when the paper outsourced about 50
workers to India.
"While Steve Ainsley has been a vast improvement in some respects from the Richard Gilman era, now more than ever
newspaper publishers need to embrace their Newspaper Guild employees and respect the experience they bring to their
news and media outlets," said Daniel Totten, president of the Boston Newspaper Guild, in an e-mail. "There has been no
improvements or positive change by the New York Times/Globe towards the Boston Newspaper Guild this past year in terms
of
reach out efforts by the Times/Globe to foster a more positive, creative and collaborative relationship."
Legendary Globe sports writer Dan Shaughnessy, a longtime veteran of the paper, said, "There's an indication that [Ainsley]
goes out of his way to stay in touch with our department and let [us know] he appreciates the job we do. And that means a lot
to the people in our department and I think he values that. Richard was a friend of mine ... but I certainly believe there's
more of an effort to reach out and connect with the editorial people, and to most people in our building."
People outside the Globe also are noticing Ainsley's new style.
"He's a listener, he's unpretentious, he's very smart and a very quick study but without being egotistical," said Steve Crosby,
dean of the McCormack Graduate School at the University of Massachusetts-Boston. Crosby has worked with Ainsley on
diversity programs at UMass. "An alternative way would be to slash and burn on the cost side, and beat up on your
circulation
people and sales people and to put the fear of God in them. My impression is, [Steve] really leads by consensus and
thoughtfulness."
Although it's been a task convincing Bostonians that the Globe does not rest firmly under the thumb of its parent company,
Ainsley continues to try.
"The extent to which the New York Times company exerts influence over the Globe -- to call it minimal is exaggerating. It's
almost nonexistent (on the journalistic side)," said Ainsley.
Ainsley attributes the Globe's most recent circulation drop to the paper's decision late last year to dramatically reduce the
paper's discounting programs, often offered to readers canceling subscriptions. The Herald has also had to make many of the
same changes the Globe has, and Ainsley says that he'd like to see both papers continue on as viable businesses into the
future.
"Pat and I have broken bread together -- he's a good newspaper man," said Ainsley. "I do expect [The Boston Herald] will be
around for some time to come and, importantly, I hope this is the case. The little bit that I have been able to observe about
the Herald and its management over the course of my first year tells me that they, particularly Pat, are sharp, experienced
and accomplished newspaper people. Boston deserves two daily newspapers and I trust it will have two well beyond the
foreseeable future."
Ainsley lives in Wellesley with his wife. They have two daughters, aged 20 and 24. In his spare time Ainsley likes to run, read
and swim. He's also active in several charities including the Greater Boston Food Bank and the United Way.
USA Today to Offer Lifestyle Magazine
MCLEAN, Va. (AP) - USA Today, a newspaper published by Gannett Co., said Monday it will offer a lifestyle magazine inside
its
pages four times a year starting in March.
Open Air, a 68-page glossy targeting wealthy readers, will feature stories on topics including outdoor activities, nutrition and
travel.
The magazine, which is a joint project between USA Today and USA Weekend employees, will be led by Marcia Bullard,
president of USA Weekend magazine. Jack Curry, executive editor of USA Weekend, will serve as interim editor.
Open Air's first issue will run in the newspaper's March 7 edition, with future issues in the May 2, Sept. 5 and Nov. 7 editions.
USA Today is the highest circulation newspaper in the United States. Gannett publishes 90 daily newspapers and owns nearly
1,000 non-daily publications, according to CapitalIQ.
Black Is Sentenced to 6 1/2 Years in Prison
CHICAGO, Dec. 10 — Conrad M. Black, the flamboyant former press baron, will spend more than six years behind bars for
fleecing shareholders of Hollinger International out of millions of dollars, a judge decided today.
After hearing from both sides in the case, Judge Amy J. St. Eve of Federal Distict Court here sentenced Mr. Black to 78
months in prison, likely to be at a federal prison camp at Elgin Air Force Base in Florida. Mr. Black was allowed to stay out on
bail until March 3 and did not address reporters as he left the courtroom flanked by his wife, the columnist Barbara Amiel, and
headed to a bank of elevators.
Still, Mr. Black made out reasonably well, as prosecutors had been saying the sentence could be as much as 24 to 30 years.
“Mr. Black, you have violated your duty to Hollinger International and its shareholders,” Judge Eve said to Mr. Black. “I
frankly
cannot understand how someone of your stature could engage in the conduct you did.”
In July, nearly four years after the saga began, Mr. Black was convicted on four charges — three fraud charges stemming
from
taking $6 million in improper noncompete fees and an obstruction of justice charge for removing boxes of documents out of
his Toronto office, an infraction that was caught on videotape.
Mr. Black’s downfall began in November 2003 when the board found that he and other executives had improperly taken
about $32 million in payments. The jury, however, found that Mr. Black improperly netted $6.1 million, a figure he must
now forfeit. Much of the case was centered on noncompete payments from selling newspapers that should have gone to
shareholders but instead lined the pockets of Mr. Black and several other executives, who were scheduled to be sentenced
later in the afternoon.
That packed courtroom was mainly filled with journalists, especially those from Canada, Mr. Black’s native home, and Britain,
where he once owned The Daily Telegraph and is a member of the House of Lords. Reporters began lining up outside the
courtroom about 7 a.m. for proceedings that did nt begin until three hours later. The sentencing hearing lasted for nearly




Tuesday, December 11, 2007
TOPICS TOPICS TOPICS
Retailers Look to Pick Up Pace on Christmas Weekend
It's lull time for retailers.
Traffic has been down for more than a week as the holiday season's uncertainties and pressures mount and the briskness of
the Black Friday weekend fades to a memory.
But business should bounce back by Saturday and surge again Dec. 22 to 25. Retailers have a full weekend and extra day of
shopping before Christmas, which falls on a Tuesday, though since the start of December, some are lamenting the season's
slow progress.
"The tenor of the business hasn't picked up the way we hoped it would," David Jaffe, chairman and chief executive of Dress
Barn Inc., said Monday. "We've seen weaker traffic than last year. The consumer is focused on deals and getting the best
bargains. Maybe that customer has focused more on consumer electronics or other home goods. It seems the misses'
customer is not shopping to the same extent that she was last year."
"It's almost like you get two bell curves between Thanksgiving and Christmas," observed Tim Olson, president of the
management division of Urban Retail Properties, the Chicago-based development and property manager.
Between the surge in shopper traffic on Black Friday weekend and the one anticipated just before Christmas, "everyone has
just stopped shopping for awhile," Olson said. "But the good news is retailers will hit the top of the bell curve on the Dec. 22
and 23 weekend," he added.
"I see a lot of inventory on the floors, with sale prices continuing. People are a little disappointed by the lull. There might be
another attempt to jump-start traffic even more," predicted Arnold Aronson, managing director of retail strategies at Kurt
Salmon Associates. Aronson characterized this season's crop of retail promotions as more aggressive than last year's "in
terms of
extra hours and incentives, though price promoting is in the same range."
Dress Barn's Jaffe said his company has additional promotional posters for store windows and merchandise deals ready to
go to
lure more shoppers. The company operates the Dress Barn chain, which targets misses' customers, and Maurices, for
juniors,
which is seeing better trends.
High-end and better-priced retailers, and those concentrated in the Northeast, seem to be faring the best. "Business last
week was definitely better than the week before," said Jane Elfers, president and ceo of Lord & Taylor. "We are pleased with
the results of the month, but there is lot of time left between now and the end of December. It's a long road."
At apparel retailers, luxury goods, cashmere, outerwear and cold-weather accessories, gift cards, dresses, contemporary
sportswear, handbags, jewelry and shoes, have done well this season, helped by tourism, particularly at big flagships in
gateway cities. So have price promotions and extended shopping hours. Overall, though, the hot gifts remain more in
electronics than apparel, including flat-screen TVs, GPS devices and the Wii game system.
ComScore Inc. said e-commerce spending from Nov. 1 to Dec. 7 rose to $18 billion, marking an 18 percent gain versus the
same days last year. On Thursday, online sales hit $803 million, up 28 percent, which ComScore said was the heaviest online
spending day in history. ComScore chairman Gian Fulgoni said in a statement, "It was a terrific kick-start to December, but we
expect the upcoming week [beginning Dec. 10] to be the heaviest online spending week of the holiday season as the
procrastinators and late-season deal-seekers come out in earnest." In fact, Dec. 10 and 11 are expected to be the two busiest
shopping days of the year on the Web.
However, retailers have generally been disappointed about most sportswear departments.
Some executives reported Monday that last week was better than expected, considering the dire Wall Street forecasts that
flooded the media in November.
"We were very satisfied with the week," said Michael Gould, chairman and ceo of Bloomingdale's. "I felt good about our
business," which he said was paced by luxury products, center core accessories, home goods, men's wear and gift cards.
Barbara Corrigan, senior marketing manager for The 900 Shops, on North Michigan Avenue in Chicago, said, "Our traffic was
definitely up this weekend. You could definitely tell by the number of shopping bags. People weren't just out looking. They
were shopping."
Jewelry, luxury apparel, cashmere and electronics were among the best-selling categories. She said the line to greet Santa
was up 20 percent from last year. Stores at The 900 Shops, which is managed by Urban Retail, that cited robust business
included Gucci, MaxMara, J, Crew and Scandia Down. "We really didn't have a lull," Corrigan said. The center is anchored by
Bloomingdale's and has 70 specialty shops, including Lalique, Banana Republic and Mark Shale.
Almost half, or 48.8 percent, of American consumers shopped last weekend, down from 59 percent last year, according to a
national survey of 800 consumers on Saturday and Sunday by America's Research Group. The survey indicates that
consumers
are waiting for bigger discounts the weekend before Christmas to finish shopping. "The consumers, as always, have the
upper
hand because they make the purchasing decisions, and retailers will have to work harder to entice them to buy," C. Britt
Beemer, founder and chairman of ARG, said in a statement.
The poll also indicates that consumers are split over whether they are seeing more (34.1 percent) or less (31.4 percent) big
discounts this Christmas, but this was the highest level of "seeing less discounts" in recent years.
Rick Leto Resigns as Mervyns Chief Executive
Rick Leto resigned Monday afternoon as chief executive officer of Mervyns, the Hayward, Calif.-based promotionally priced
department store chain.
Leto made the announcement to his staff at 5 p.m. PST Monday and expects to exit the company by the end of the week.
Charles Kurth, currently senior vice president and chief financial officer, is expected to be named interim ceo until Leto's
permanent replacement is named.
"I have decided to leave Mervyns," Leto told DNR, WWD’s brother publication, in a telephone interview.
He stressed that when he joined the chain in December 2004, he only agreed to stay on until the end of 2007: "I made a
three-year commitment and I thought I might stay a fourth year, but it's time for me to move on."
Leto said that he has accomplished "everything that I told them I would and so it's time to find someone else to move the
company forward. It's a nice time to exit."
He said that he is planning to "take the winter off, go to Florida and spend time with my kids and wife, who I haven't seen very
much of lately."
Of his professional plans for the future, Leto said, "I have some things going but I'm not ready to say anything more specific
now."
A veteran of Macy’s and Galyan’s, Leto spent eight years with Kohl’s prior to joining Mervyns in 2004, when it was acquired
from Target Corp. by an investment consortium led by Sun Capital Partners Inc., Cerberus Capital Management LP and
Lubert-
Adler/Klaff and Partners LP for $1.2 billion in cash.
Mervyns operates 177 stores in eight states. Since Leto joined, it’s closed over 80 underperforming stores, overhauled its
systems and revamped the merchandising to be more relevant to a moderate-income customer. Leto said in an interview last
week that business since back-to-school has been challenging and he was expecting a tough first half of 2008.
More Clicks at the Bricks
How retail stores are scrambling to catch up with shoppers empowered by the Web
A couple of years ago, Erik B. Nordstrom, store president for his family's retailing empire, noticed something disturbing.
Customers were no longer wowed when his staff offered to call other stores and find that out-of-stock size 6 black cocktail
dress. Instead, "they looked at us like we were crazy," he says. "'Why don't you just go on your computer and find it?' they'd
ask." Suddenly, the department store's vaunted reputation for customer service, nurtured for more than a century, looked
dangerously dated. And as far as Erik Nordstrom was concerned, the Web was to blame.
The Internet hasn't destroyed brick-and-mortar retailing, as many once feared. But has it ever changed consumer behavior.
Across the U.S., stores are playing catch-up with shoppers habituated not only to the speed and convenience of purchasing
online but also to the control it gives them. The Web provides shopping when you like, where you like, with access to gobs of
research—from a product's attributes to where it's cheapest. No real-world store can replicate all that.
But increasingly retailers are trying to give customers more control over the shopping experience. That often means bringing
Web-style technology into the store. AMR Research estimates retailers will spend $766 million this year, up 14% from 2006,
on things like cash registers that locate inventory. Bloom supermarkets, which are owned by Food Lion, have poured money
into a sophisticated system that allows shoppers to pick up a scanner and grocery bag at the front of the store, keep track of
the bill as they shop, download the scanner at the self-service checkout, and pay. Voilà—the weekly food run with fewer
hassles, in Internet time. Retailers know, of course, that gadgetry will take them only so far. So they're trying to replicate the
best things about the Web but in a more personal way. That's why Best Buy (BBY) is retraining its sales employees so they
know more about their products than their Google-happy customers.
Whatever the approach—high tech or low—retailers know it's crunch time. Services are popping up that allow consumers to
use their smartphones to learn what other retailers are charging for a given item, which means competing on price is no
longer enough. Meanwhile, industry watchers are citing declining foot traffic as evidence that shopping, the other great
American pastime, may be losing ground to Web-based entertainment. "Five years from now," asks Barnes & Noble
(BKS)Chairman Leonard Riggio, "to what extent will people see buying a gift at retail as essential?"
FORGET FEDEX
Over the past few years, most big retailers have built thriving online stores. And increasingly they're using them to coax
shoppers to their brick-and-mortar outlets. Many now allow online shoppers to pick up purchases at their local store. It's a
smart move. Impatient consumers need not wait for the FedEx (FDX) guy. More important, getting people to show up gives
retailers an opportunity to sell them more stuff.
Circuit City Stores (CC) has been particularly aggressive on this front. The electronics retailer promises that online purchases
will be available for pickup in 24 minutes. If the item isn't ready, shoppers get a $24 gift card. Circuit City reports that 50% of
its online orders are now picked up in stores. And staff make a point of pushing accessories: Do you want a carrying case for
that camera, sir? Ben Tan, a computer programmer from Brooklyn, N.Y., recently ordered a $40 Sony (SNE) AM/FM radio
online for his wife. "She wanted it sooner than later," he says. So he went to the store. In the spring, a similar program at Wal-
Mart (WMT) drove a 20% increase in the number of customers who spent an extra $60 during pickup.
Today's consumer doesn't always have the patience for traipsing around a store looking for the perfect cashmere scarf or
obscure French novel. So Barnes & Noble and other retailers are installing kiosks that allow people to search inventory,
locate
merchandise, and order out-of-stock items. Consumers also want to know about special sales and trunk shows, and retailers
have become increasingly adept at figuring out who is most likely to show up and alerting them by e-mail. Veteran Nordstrom
personal shopper Nader Shafii now keeps 5,000 customers in a database and routinely blasts come-ons to 500 of them. Shafii
says he's selling 37% more merchandise as a result. Now Nordstrom is experimenting with text-messaging the cell phones of
younger customers.
Few retailers are attempting to give customers more control than grocer Bloom. Visitors to shopbloom.com can key in a
shopping list and get a printout of the aisles they need to hit. That can be risky, because when shoppers know what they want
and where to find it, they may be less likely to buy on impulse. Echoing the Internet's user-generated craze, Bloom also lets
people "build your own six-pack" of imported brews. Throwing away decades of habit and convention hasn't been easy, says
Bloom marketing director Robin Johnson: "It's a paradigm shift."
Tuesday, December 11, 2007 Page 4
Another retailing convert is Melissa Balas, who helps oversee customer service at a Best Buy store in Durham, N.C. For
years,
Balas's employer didn't put as much emphasis on getting its sales staff acquainted with what it was selling. That won't fly
anymore. Few products are more zealously researched online than digital gadgets; numerous sites are dedicated to that very
purpose. Balas says her people were having a hard time keeping up with increasingly savvy customers.
In October, Best Buy overhauled its entire sales force. Now 30% of store staff have been redeployed from specific
departments to roam the entire floor. They're supposed to know the whole store and how gadgets work together: which
printer to choose for a certain laptop, the best memory card for a digital camera, how a gaming platform works with a given
TV. To get her employees up to speed, Balas has them meet with manufacturers' reps for a rundown of their products,
attend storewide and department training programs, and, when customers are scarce, play with the products. Reps are in the
store as often as every other week giving demonstrations and group instructions on features and improvements. "I would say
we are always training," says Balas.
As retailers battle to stay one step ahead of their increasingly impatient and informed customers, many are dabbling in
Weblike
experiments. Who would have imagined that Bloomingdale's (M) would find a way of bringing social networking into the
store? Earlier this year, design firm IconNicholson ran a three-day test at Bloomingdale's featuring the designer Nanette
Lepore. Shoppers participating in the test tried on outfits in front of an interactive mirror that connected them with friends
via the Web. Thanks to a camera in the ceiling, their pals could see the outfit they were trying on, instant-message their
thoughts, and suggest alternatives from Lepore's inventory, all of which popped up on the mirror for the shopper to read.
The technology also markets matching accessories and provides a store map showing where shoppers can find them.
MOB SHOPPING
Nordstrom, meanwhile, has been testing perfume kiosks at 20 Southern California stores. With a few touches of the screen, a
customer can find out which celebrities favor a certain perfume, the high and low notes of their favorite scent, and such
details as the artist who designed the bottle. Creator Jan Moran, an author and consultant to fragrance companies, compares
fragrance fans to wine aficionados. But Erik Nordstrom says he hasn't seen much impact on sales and suspects the kiosks
can't
compete with his staff's vaunted customer service. "Our focus is less about the latest supercool technology," says
Nordstrom,
"and more about the customer interaction."
Still, retailers will keep experimenting because the next generation of technology will turn consumers into even bigger
control freaks. Already, shoppers can use their cell phones to access a Web-generated list of nearby stores selling a certain
product. Dial frucall.com, enter a product code, and you can get immediate info on the lowest price available online. In
China, Web sites amass large numbers of customers interested in a certain product and then bargain with retailers on their
behalf. It's called "mob shopping"—a perfect metaphor for how the Web has empowered the consumer and left retailers
scrambling in their wake.
Wal-Mart releases sustainability update report
Company reviews efforts to build a more sustainable business
BENTONVILLE, Ark. — Wal-Mart Stores has released a comprehensive report on its sustainability efforts, outlining initiatives
to
improve the environment, health care and diversity.
The report from the world’s largest retailer discusses sustainability initiatives and defines the challenges and goals ahead.
Wal-
Mart ranks No. 1 on Furniture/Today’s list of Top 25 furniture retailers, with annual U.S. sales of furniture and bedding in
2006 of $2.1 billion.
"This report lays out where we have come from in the last two years and how we have become a bettercompany and a better
business," said Lee Scott, president and CEO of Wal-Mart Stores. "We are proud of the good progress we are making in a
number of areas, and we understand that we still have more work to do. For the future of our business and of the world, we
remain committed to becoming a more sustainable company."
In a recent speech, "Twenty-First Century Leadership," Scott committed Wal-Mart to three large sustainability goals: to be
supplied 100% by renewable energy, to create zero waste and to sell products that sustain resources and the environment.
The report examines the progress Wal-Mart has made toward those commitments and details how the company has worked
to
integrate sustainable practices into its supply chain, the products it sells, the lives of its associates and the communities
where
it operates and sources.
The companywide emphasis on sustainability is called "Sustainability 360."
"A lot of the attention around our sustainability efforts has focused on the environment, which is not unexpected,” said
Scott. “But our work to become a better company is about more than what we're doing with the environment. Sustainability
at Wal-Mart also has broad economic and social components, including health care, economic opportunity and the quality of
life of the people who make the products we sell. Ultimately, these are interwoven, and we are committed to making
progress in each of these areas."
Tuesday, December 11, 2007 Page 5
He said Wal-Mart’s progress since 2005 includes making improvements in its benefits programs, increasing diversity in its
workforce across all demographic groups, enhancing charitable contributions from its foundation, and offering more
sustainable products to its customers.
Wal-Mart said it will continue to monitor its progress and provide status updates on its Web site.
Safeway Declines Comment on Small-Format Reports
PLEASANTON, Calif. — Safeway here said yesterday it is always looking for "good, solid real estate opportunities, and we
recognize there are always a variety of shopping experiences that customers are looking for." However, a spokeswoman told
SN the chain would not comment on reports it is seeking real estate in Northern California to accommodate a 20,000-
squarefoot
store format. "We don't discuss possible real estate acquisitions until we are ready to announce something," she said.
Published reports said Safeway is interested in finding sites for five stores of 20,000 square feet each in the San Jose area —
possibly to experiment with a small-format store before Tesco begins expanding its 10,000-square-foot Fresh & Easy
Neighborhood Markets in the Bay Area. Reports said Safeway has hired Cornish & Carey Commercial, a Santa Clara, Calif.-
based
real estate brokerage with an office here, to find small-store locations. Officials at Cornish & Carey could not be reached for
comment. Steve Burd, Safeway chairman, president and chief executive officer, said in September his company was ready to
open smaller-format stores if necessary. "If the small-store format works," he said, "we think we could do that, and probably
do it more effectively [than Tesco] simply bcause we're a well-known brand in the market." Burd said Safeway would wait till
the Tesco stores opened — the first ones opened in early November — "so before year's end we'll know exactly what they're
offering and how we'll respond."
Aldi Retains PR Firm, Sets Expansion
BATAVIA, Ill. — Aldi here has retained MWW Group to lead a public relations effort as it steps up its expansion of discount
stores into new markets, MWW said Monday. Aldi intends to accelerate its store expansion from around 20 to 30 stores a year
to around 100 per year, with plans to enter Rhode Island and Florida for the first time in 2008 and to expand into Texas in
2009, Tina-Marie Adams, general manager and senior vice president of MWW, Chicago, told SN. The hard-discount grocery
chain currently operates 900 stores in 27 states from Kansas to the East Coast.
Store Sites Gain In Customer Respect Index
BRICK-AND-MORTAR RETAILERS--ONCE THE LAGGARDS IN online sales--are winning more and more respect from
consumers,
according to the latest ranking of the Customer Respect Group, an Ipswich, Mass.-based company that evaluates Web site
performance.
While Overstock.com came in with the highest score--a 7.4 out of 10 ranking--Lowe's came in second, Kmart No. 4, and Sears
No. 5, and retailers dominated the Top 25. "That's something we wouldn't have seen even two years ago," says Terry
Golesworthy, president of Customer Respect Group. "These companies were often at the bottom of the list."
Overall, the index hit 6.1 on a 10-point scale, a slight improvement from 2006. The biggest change in the last year, he says, is
that more and more Web sites are using real-time customer service tools such as pop-up windows and click-to-call features,
"which lets sites help customers with what they're doing right now." Previously, many of the large Web sites offered
consumers only a chance to e-mail questions--"a process that usually takes 24 hours and often results in an abandoned
shopping cart," he says.
"And features like 'store pick-up' are great because they remove one more level of discomfort--now a consumer can be
confident that a Web purchase will be here in time for Christmas because he can pick it up himself," he says. "That's another
way to respect the customer, to say: 'We're tying to find as many ways as possible to make you comfortable shopping at this
site'."
But there is still a glaring gap between the way consumers experience a brand online and in-store, and consumers continue
to
be distrustful of the differences they see in price, benefits and services.
"On Black Friday, we saw a lot of frustrated consumers, because there were in-store deals that were better than what they
could find online. And the same was true on Cyber Monday--consumers read about great prices on the Web, but then
couldn't find them in stores. And as more consumers do online research before shopping, the more of a problem that
disconnect becomes," he says.
Another shift, he says, is that while retailers tend to invest the most in making Web sites easier for consumers to use,
banking
and insurance companies are also making progress--but still have a way to go to win customer trust. "There is a big gap
between people who will research a mortgage or insurance rates on the Web, and then actually buy it. Because these sites
Tuesday, December 11, 2007 Page 6
have found that so many customers will research rates and then disappear, they've become more innovative in adding
clickto-
call pop-ups to their sites, as well," he says.
Finally, he says the most trusted sites are those that are going out of their way to reassure people's privacy concerns. "Right
now, people are very concerned about identity theft, and they don't want to get tons of junk e-mails from other
companies," Golesworthy says. "The sites that are doing well in this index are those that are making a big point of explaining
to
customers that their privacy will be respected, and that their data won't be sold to other companies."
Fort Lauderdale cruise line to be sold
Apollo Management has agreed to buy Regent Seven Seas Cruises from Carlson Cos. for an undisclosed amount, the
companies said Monday.
Minneapolis-based Carlson and Apollo Management expect the deal to close in the first quarter. They said the cruise
company
will stay in its Fort Lauderdale headquarters and remain an independent brand under the leadership of President Mark
Conroy.
While the terms of the purchase were not announced, financial Web site CFO.com broke the deal in November and reported
the price at $1 billion.
This is not Apollo's first foray into cruising. It already owns Oceania Cruises and a 50 percent stake in NCL Corp., the parent
of
Norwegian Cruise Line, both based in Miami. Regent Seven Seas and Oceania will be placed under the ownership and
management of Prestige Cruise Holdings.
Carlson will retain ownership of the master Regent brand and the worldwide operations of Regent Hotels & Resorts.
Regent Seven Seas began in 1992 with two ships and has since expanded to four. The sale may mean more expansion.
"We look forward to continued success and the use of the new financial resources available to accelerate our future growth,"
Conroy said in a news release.
Retail Holiday E-Commerce Spending Hits $4.6 Billion During Week Ending December 9, Nears
$19 Billion for the Season
Heaviest Online Spending Occurs Between 10-11 AM and 1-2 PM
RESTON, Va., Dec. 11 /PRNewswire-FirstCall/ -- comScore, Inc. (NASDAQ:SCOR) , a leader in measuring the digital world,
today
released an update of holiday season e-commerce spending for the first 39 days (November 1 - December 9) of the
November - December 2007 holiday season. Nearly $19 billion has been spent online during the season-to-date, marking an
18-percent gain versus the corresponding days last year. Thursday, December 6 recorded $803 million in online sales, up 28
percent versus year ago, making it the heaviest online spending day in history.
2007 Holiday Season To Date vs. Corresponding Days* in 2006
Non-Travel (Retail) Spending
Excludes Auctions and Large Corporate Purchases
Total U.S. - Home/Work/University Locations
Source: comScore, Inc.
Billions ($) Pct
Holiday Season to Date 2006 2007 Change
November 1 - December 9 $15.94 $18.79 18%
Week Ending December 9 $3.86 $4.64 20%
Thanksgiving Day (November 22) $0.21 $0.27 29%
"Black Friday" (November 23) $0.43 $0.53 22%
"Cyber Monday" (November 26) $0.61 $0.73 21%
Heaviest Spending Day to Date
Thursday, December 6 $0.63 $0.80 28%
* Corresponding Shopping Days, Not Calendar Days
"This past week was very strong for online retailers as consumers spent more than $4.6 billion online, up 20 percent versus
year ago, making it the heaviest week of the holiday season to date," said comScore Chairman Gian Fulgoni. "Consumers
Tuesday, December 11, 2007 Page 7
seemingly restrained their early November holiday spending in the hopes of catching some attractive late-season deals, so
we
expect that the current week will outperform the past week as the heaviest of the season."
Some additional findings during the most recent week:
-- Consumer electronics experienced a strong week of online sales, up 43 percent versus year ago, outpacing its 23-percent
growth rate during the season-to-date.
-- Event tickets also had a particularly strong week, gaining 70 percent versus the corresponding period last year.
-- Apparel outperformed its season-to-date growth rate of 16 percent with a 22-percent gain during the most recent week.
-- Toy sales saw just a 3-percent growth rate during the past week, lowering its growth for the season to date to 14 percent.
Online Retail Spending Peaks Mid-Day
During this year's holiday season, online spending has peaked during the middle of the day, driven by the heavy influence of
shopping from work, with work buying accounting for 45 percent of all e-commerce dollars spent this holiday season. More
than half of all online dollars were spent between the hours of 9:00 AM - 3:00 PM, with the heaviest spending (26.9 percent)
occurring during the 12:00 PM - 3:00 PM time segment. Nearly 10 percent of online spending occurred between 10:00 AM -
11:00 AM and 1:00 PM - 2:00 PM, making them the peak individual hour segments during the day.
AT&T sees 30 million homes with its cable TV product by 2010
Ma Bell has come to play ball - hard ball.
AT&T has yet to start selling U-verse, its cable-television product, in South Florida. But the telecommunications giant started
butting heads with Comcast back in July by marketing bundled telephone, wireless and Internet services, John Stankey,
AT&T's president for telecom operations, said during an investors' conference held in New York this morning.
"We must compete at the local level," Stankey said. "Each market is different from the next." The company sees video as a
$35 billion market nationwide and wants to grow that by 7 percent each year. "We're aggressively attacking this market,"
Stankey said. "As we win with U-verse, we win the home." The phone giant has already started spending $750 million to beef
up its broadband network in Florida to prepare bring cable TV into homes, which is can now do on a statewide basis because
of a law passed in May.
Nationwide, AT&T plans to install U-verse to 10,000 customers a week through the end of the year - quadrupling that figure
to more than 40,000 customers by the fourth quarter of 2008, Stankey said.
AT&T is predicting U-verse will have 30 million customers by 2010.
"This is a once-in-a-decade emerging opportunity, just like wireless emerged in the ë80s and broadband emerged in the
ë90s." Randall Stephenson, chairman and chief executive of San Antonio-based AT&T, said he's confident the company will
be successful in competing with the likes of Comcast Cable and Time Warner because of its success in starting up a cell
phone
business and high-speed Internet business from scratch.
"We think this is a really big opportunity for AT&T," Stephenson said.
Meanwhile, the company raised its dividend 12.7 percent and announced a share buyback. The company said it will buy back
400 million shares, which represent about 7 percent of the company's stock, at a cost of $15.16 billion. AT&T said it expects
to complete the repurchase by the end of 2009.
The TV Ad Zone
Imagine, if you will, a time when broadcast networks end up quietly hoping that sales figures for their own advertisers drop.
Sound like something out of The Twilight Zone? That scenario, far-fetched as it may be, is one possible outcome if the
writers' strike drags on for months.
Advertisers and networks are weighing options if the strike lowers audience levels to the point where pre-sold guarantees
can't be met. The answer could be a mix of make-goods and even refunds. And the result could be a litmus test for the
premiums network television generates going forward.
Last spring, advertisers spent more than $9 billion in the network upfront, but when the fall came around, the big networks
didn't hold up their end of the bargain. And that was before the strike.
Viewership was down, and not just in the apples-to-oranges comparisons to last season. Audiences were below what
advertisers had been guaranteed, even taking into account the expected drop due to the new C3 commercial ratings.
Unless the strike is settled quickly, we now face a first quarter devoid of many of the networks' biggest scripted guns. With
audiences then expected to dip even more without new episodes of CSI, House and Grey's Anatomy, the advertisers will be
getting that much less for their money.
Tuesday, December 11, 2007 Page 8
By mid-January, we will start to see how much viewership for the strike-driven schedules is dropping off. That's when things
may get dicey. “Mid-January is when it really could start to hit the fan,” one ad buyer told me.
The networks will have to work hard to keep ad dollars by trying to deliver eyeballs in other ways. They may use make-goods
on their own air, but there is only so much room for that, especially as more inventory was sold in this year's upfront.
They may use make-goods on their cable networks, though that is obviously more of an option for an NBC and its diverse
cable portfolio than for a CBS.
Beyond that, the networks will have to get creative, perhaps through online or credits for next season. “The networks will be
squirming,” says another ad buyer. “There will be long nights coming up with concepts to give advertisers alternatives.”
If the strike drags on late into the season, and the networks are unable to deliver viewers when advertisers need them, the
brands may want—and get—some money back, say both network and ad executives. That's when we should train an eye on a
brand's sales figures. If you believe in the direct correlation between advertising and sales, network TV's advertising mettle
will be tested right around then.
And what happens if a brand ends up with significantly fewer network television eyeballs than it had expected, but its sales
figures don't take much of a beating? That would actually add trauma to an already nightmarish season for the networks. The
situation is tenuous enough with viewers in the balance. And the strike is starting to threaten next season's development
cycle (though as I recently pointed out, that is probably a good thing for this broken business model).
Network television has always been the biggest and easiest buy, but with a historic lack of true audience accountability, it has
never been the most efficient. It proves the old axiom, “I know half of my advertising is wasted, I just don't know which half.”
But if a drop in eyeballs doesn't hurt a brand's bottom line, ad executives might revolt and feel justified in questioning the
premiums for network buys.
True, there are plenty of “ifs” in this scenario. And it's not going to happen tomorrow. But it's exactly what the networks
can't have happen.
Imagine that, indeed: Networks privately rooting for advertisers to struggle along with them. Perhaps that's not such a Rod
Serling-inspired idea after all.
TNS Media Intelligence Releases Advertising Spending the First Nine Months of 2007.
According to the report, total measured advertising expenditures in the first nine months of 2007 inched upwards by 0.2
percent to $108.2 billion as compared to the prior year period. Total measured spending during the third quarter of 2007
was up 1.3 percent versus 2006, reversing declines from the first half of the year. Highlights of the report include:
Measured Ad Spending By Media: Internet display advertising continued to lead the market, increasing 17.2 percent
to $8.4 billion in expenditures. Consumer magazines posted a 6.4 percent gain to $17.3 billion on flat ad page
volume. Cable TV spending was up 4.7 percent to $12.7 billion and Outdoor advanced by 4.4 percent to $3.0
billion. Broadcast TV media continued to experience weakness in the third quarter and turned in nine month
spending declines even as the volume of ad time sold increased slightly. Spot TV expenditures tumbled 6.8 percent
to $11.2 billion. Network TV was down 3.0 percent to $16.2 billion despite an increase in ad time. Syndication TV
fell 4.6 percent to $3.0 billion. Ad expenditures in Newspaper and Radio media remained soft during the third
quarter. For the year-to-date period, marketers lowered their Local Newspaper spending by 5.1 percent to $16.6
billion with a commensurate reduction in ad space. Radio expenditures slipped 1.8 percent, to a total of $8.0
billion.
Share of Measured Spending By Media: Internet display advertising gained 1.1 share points and finished the period
at 7.7 percent of total expenditures. Magazines accounted for 20.2 percent of measured spending, up from 19.3
percent a year ago. The offsetting share declines came from Newspapers (down 1.0 share point to 17.8 percent)
and Local TV (down 0.8 share points to 11.2 percent).
Measured Ad Spending by Advertiser: During the first nine months of 2007, the top 10 advertisers spent a
combined total of $13.3 billion in measured media, a reduction of 2.3 percent from last year. The pace of
spending for this select group picked up in the third quarter, advancing by 3.1 percent. Procter & Gamble
maintained its position as the largest advertiser with $2,466.5 million in spending, up 1.3 percent from last year.
General Motors had the largest reduction among the top ten as its expenditures fell 18.0 percent to $1,425.8
billion. AT&T expenditures were off 5.1 percent to $1,663.4 million. Higher spending behind core wireless
businesses helped lift the total outlays at Verizon Communications (up 5.8 percent, to $1,514.1 million) and Sprint
Nextel (up 12.4 percent, to $997.8 million).
Tuesday, December 11, 2007 Page 9
Measured Ad Spending by Category: The top 10 advertising categories in the first nine months of 2007 spent $54.3
billion, up 0.6 percent from a year ago. Financial Services maintained its top position with $6.7 billion in
expenditures, up 5.5 percent for the nine month period. Direct Response had the largest percentage gain, up 15.1
percent to $5.4 billion. Personal Care Products gained 8.3 percent, paced by aggressive spending hikes from
several top advertisers. Total spending within the Telecommunications category fell 4.0 percent to $6.6 billion,
dragged down by Vonage Holdings and the AOL division of Time Warner. The ongoing slump in automotive sales still
extends to advertising budgets as well. Non-Domestic Auto dropped 6.1 percent to $5.9 billion and Domestic Auto
shrunk 9.1 percent to $5.1 billion. Automotive advertising has now declined for nine consecutive quarters.
Branded Entertainment: In the third quarter of 2007, an average hour of monitored prime time network
programming contained eight minutes, 16 seconds (8:16) of in-show Brand Appearances and 15:15 of network
commercial messages. The combined total of 23:31 of marketing content represents 39 percent of a prime-time
hour. Unscripted reality programming had an average of 9:41 per hour of Brand Appearances as compared to just
4:24 per hour for scripted programs such as sitcoms and dramas. Late night network talk shows had even higher
levels, averaging 15:31 per hour. The combined load of Brand Appearances and network ad messages in these late
night shows reached 30:34 per hour, or 51 percent of total content time.
Cars.Com Opens Its Listings To Yahoo Autos Site Today
CHICAGO Cars.com, the online automobile sales site owned by five newspaper chains, began putting its listings on Yahoo
Auto
Tuesday, marking the first time new car listings will be available on the Yahoo site.
With the partnership, Yahoo gets access to the dealer and auto manufacturer listings that have helped make Cars.com the
largest auto destination on the Web.
With the launch, Yahoo Auto users will have access to 2.4 million Cars.com vehicle listings of new, used, certified pre-owned,
and private-party sellers nationwide.
"By teaming up with Cars.com, we are marrying our best-in-class user search experience with their strong dealer and auto
manufacturer relationships and access to new and used car listings," Michael Yang, vice president and general manager,
Yahoo
Autos, said in a statement.
Cars.com and Yahoo said dealers would benefit from advertising exposure on Yahoo, because 87% of its audience is
unduplicated from Cars.com, according to a comScore Media Metrix study last August.
"As we look to provide our advertisers with the broadest reach and access to the most qualified buyers, Yahoo Autos is the
clear partner of choice as the fastest growing site for in-market vehicle shoppers," Cars.com President Mitch Golub said in a
statement. "In addition to an unduplicated audience, Yahoo Autos complements Cars.com in its commitment to deliver
serious shoppers to our vast network of dealers. In fact, nearly 73% of Yahoo Autos shoppers intend to purchase, a number in
keeping with the 75% of Cars.com shoppers who intend to buy."
Cars.com, launched in June 1998, is a division of Classified Ventures, which is owned by Belo; Gannett Co. Inc.; The
McClatchy Company; Tribune Co.; and The Washington Post Company.
“2007 Newspaper National Network Website Influencer Study” Released
The Newspaper National Network (NNN) reports that Newspaper Website Users are 52% more likely to be “Influencers,” based
on the MRI definition, as compared with Newspaper Website Non-Users. The study was conducted by Millward Brown on
behalf of NNN in September/October 2007 via a web based interview of 1501 Adults 18+ who are web users. The panel
included readers of both print and online newspapers (Crossovers), newspaper online readers (Newspaper Website Users)
and
online users not reading newspapers online (Newspaper Website Non-Users). Highlights include:
Adults who use Newspaper Websites and read printed newspapers influence 18 people, on average, weekly 38%
more than the web user who does not use a newspaper website (13 people average per week). Immediate family,
friends and co-workers are core beneficiaries within their influence circle.
Tuesday, December 11, 2007 Page 10
Newspaper Website Users are also more likely to be asked their opinion in all product categories measured in the
study; this difference was most pronounced in the categories of Investments (+63%), Fashion (+69%) and Sports
(+38%). In addition, Newspaper Website Users are more confident than other non-newspaper website users that
their advice is taken by others, especially by business colleagues (+64%) and common interest groups (+45%).
Adults who use Newspaper Websites and read printed newspapers are 82% more likely to be early adopters of new
products and the latest technology as compared to Newspaper Website Non-Users.
Newspaper Website Users are more apt to believe their newspaper websites have credible advertising as compared
with users of other non-newspaper websites
J. Patrick Doyle to Succeed Mike Sexton as Publisher of the Anchorage Daily News
SACRAMENTO, Calif., Dec. 10 /PRNewswire-FirstCall/ -- The McClatchy Company (NYSE:MNI) today named veteran
newspaper
executive J. Patrick Doyle as president and publisher of the Anchorage Daily News, where he will replace retiring publisher
Mike Sexton. Doyle is currently president and publisher of The Palladium-Item of Richmond, Ind., owned by the Gannett Co.,
Inc.
"All of us at McClatchy want to thank Mike for eight years of strong and successful leadership in Anchorage and to wish him
the
very best in his retirement," said Gary Pruitt, McClatchy's chairman and chief executive officer. "As we do so, we are thrilled
to
be able to simultaneously welcome Pat Doyle to the company. Pat is an experienced and proven newspaper executive with a
30-year record of success in our industry. His talent and experience make him a great fit to lead the Anchorage Daily News
going forward."
Doyle, 55, joined Gannett in 2001 as president and publisher of The Palladium-Item. He previously worked as group
publisher for the Conley Publishing Group in Hartford, Wis. Before joining the Conley Publishing Group in 1997, Doyle spent
17 years with Thomson Newspapers, Inc. in a variety of executive roles, including vice president and group publisher with
oversight of four daily and five non-daily newspapers in central and southeastern Wisconsin.
Doyle was born and raised in Owatonna, Minn. He earned two associate arts degrees in graphic arts and marketing from
South
Central College in Minnesota. He began his newspaper career in 1976 working in advertising sales for his hometown paper,
the Owatonna People's Press.
"Alaska is a great place to be in the news business, and Pat has always been the kind of leader who makes the most of great
opportunities," said Bob Weil, vice president, operations, at McClatchy. "This is one of those great occasions where the right
person and the right job come together, and we look forward to watching the daily news reach new levels of excellence."
Since he arrived at The Palladium-Item seven years ago, Doyle has been heavily involved in the community. He serves on the
boards of the Boys & Girls Clubs of Wayne County, Main Street Richmond-Wayne County and the Richmond Economic
Growth
Group. He is a member of the Board of Advisors for Indiana University East.
Doyle and his wife, Linda, have two adult children, Katie, 26, and Jeffrey, 23.
Sexton, 58, retires after a 38-year career in the newspaper industry. Sexton grew up in Fort Leavenworth, Kan., and will
return to the Midwest to be closer to family and longtime friends.
"These are challenging times for our industry but our journalistic mission hasn't changed," Sexton said, "and I'm confident
about the Daily News' continuing success under McClatchy ownership."
Among the highlights of his tenure, Sexton cited expanding the newspaper's online business and web presence and
positioning the newspaper -- Alaska's largest -- for its future as "a hybrid news and information company."
Herald Tribune, Reuters Create Co-Biz Section
THE INTERNATIONAL HERALD TRIBUNE WILL transform its financial section online and in print beginning Jan. 7 by teaming
with
Reuters. The daily business section of IHT.com and the print editions--which will be renamed Business with Reuters--will
publish news from both organizations. There will also be a new co-branded Web site.
Chicago Sun-Times shareholder K Capital calls for value-adding actions
WASHINGTON (Dow Jones/AP) - The second-largest shareholder of Sun-Times Media Group Inc. criticized the company's
performance in a letter Tuesday and called for operational changes at the publisher of the Chicago Sun-Times newspaper.
Tuesday, December 11, 2007 Page 11
K Capital Partners LLC, which owns 9.8 percent of the Sun-Times Media Group, said it has been extremely disappointed with
the performance of the company over the past year, according to the letter disclosed in a filing with the Securities and
Exchange Commission.
K Capital urged the company to develop a detailed 2008 operating plan with clear targets and release the key points of this
plan to investors by Jan. 15, via a press release and a conference call.
K Capital suggested that Sun-Times should compensate executives and directors entirely in equity compensation and the
level of such compensation for 2008 should not exceed the level for 2007.
K Capital also urged Sun-Times to immediately finish its previous share repurchase program "to take advantage of the
extreme
undervaluation of the current stock price."
Shares of Sun-Times Media fell 5 cents, or 4.3 percent, to close at $1.10 Tuesday.
The stock has declined roughly 77 percent this year.
SUN TIMES KIPNIS ESCAPES PRISON TIME
'Least culpable' gets probation only
Always overshadowed during their fraud trial by their larger-than-life co-defendant Conrad Black, three other former top
executives accused of plundering the parent company of the Chicago Sun-Times in the end received sentences that were a
shadow of the 78 months of jail time imposed on Lord Black of Crossharbour.
One defendant, Mark Kipnis, the general counsel for the company formerly known as Hollinger International, received no jail
time at all.
In documents filed before Monday's sentencing of Kipnis, former Hollinger executive vice president Peter Atkinson, and the
company's former CFO, John "Jack" Boultbee, federal prosecutors had asked for prison sentences between 7 and 10 years.
Kipnis, 60, was convicted in July of three counts of fraud in the appropriation of phony non-compete fees from the sale of
some community papers by Hollinger's American Publishing Co. subsidiary. Prosecutors said while Kipnis, alone among the
four co-defendants, did not receive any non-compete payments, he was equally guilty because he created the paperwork
that hid the improper fees from investors and the Securities and Exchange Commission.
But U.S. District Court Judge Amy J. St. Eve later dropped one of those counts, and, on Monday, she declared Kipnis "clearly
the least culpable in the scheme."
Kipnis, the only U.S. citizen accused in the Hollinger scandal, was sentenced to five years of probation. He will be subject to
six months of electronic home monitoring, and will be required to perform 275 hours of community service.
Unlike his three co-defendants, Kipnis will not be required to pay restitution. The others are sharing in the restitution or
forfeiture, with Black assessed $6.1 million, the amount the jury determined was improperly taken by the four.
Peter Atkinson, 60, the number two target of federal prosecutors, also caught a break Monday from St. Eve, who sentenced
him to 24 months in prison.
The sentence, which includes a fine of $3,000 and three years probation, was far less than the federal guidelines for his
conviction on three counts of fraud.
St. Eve noted that almost immediately after Atkinson discovered that the non-compete fees and other disputed payments
had not been approved by Hollinger's board, he repaid the money on Hollinger's terms and cooperated with two internal
investigations -- even as a federal grand jury was investigating the looting of the company now known as Sun-Times Media
Group.
"This is conduct we want to encourage," St. Eve said.
Tuesday, December 11, 2007 Page 12
Atkinson's sentence is even less prison time than the 29 months Black's former lieutenant and Sun-Times Publisher F. David
Radler is expected to receive when he is sentenced next month. Radler cooperated with federal prosecutors, pleading guilty
to a single count of fraud in exchange for turning star witness against Black and the others.
"Compared to what you took, David Radler took much more," St. Eve told the drawn and stooped Atkinson as he stood before
the bench.
Before sentencing, Atkinson portrayed himself as a broken man whose "greatest punishment" is seeing his daughter "dazed
and destroyed" by the accusations against and conviction of her father.
Since the scandal emerged in 2003, Atkinson said his life has been one of "crushing anxieties" and "sleepless nights."
"I've lost my career and my reputation," he told St. Eve.
The judge said she believed Atkinson had learned his lesson, and would not be a danger to the public.
"I think you said it best, this has been a downward spiral for you," she said. "I'm not sure why someone as successful with
your
reputation ended up a convicted felon in the United States, facing prison time.'
Former Hollinger CFO Jack Boultbee, 64, was sentenced to 27 months in prison and three years probation. He was also
ordered to pay $152,000 in restitution.
Wednesday, December 12, 2007
TOPICS TOPICS TOPICS
Mortgage applications hit highest level in 2 years
NEW YORK (Reuters) - Mortgage applications rose last week to the highest level since July 2005 despite a jump in borrowing
costs, an industry group said on Wednesday.
The Mortgage Bankers Association's index of mortgage applications rose by a seasonally adjusted 2.5 percent to 811.8 in the
week ended December 7, boosted by demand for both purchases and refinancing loans.
The trade group's index continues to be skewed by borrowers filing numerous applications in the hopes of getting one
approved, analysts contend.
Lenders are much more stringent in extending credit after being stung by loans that had been doled out when practices were
much looser. Last week the MBA reported record foreclosures as well as a record pace of loans entering the foreclosure
process in the third quarter.
"Buyers out there are scared about their mortgage applications being turned down, and anecdotes show they are actually
applying for more mortgages with more companies," Steve Wyatt, a professor of finance at the Farmer School of Business at
Miami University said on Tuesday prior to the release of the MBA report.
"Higher applications are not necessarily as indicative of demand as they might have been before," and have not been
translating to higher sales, he said.
Borrowing costs on 30-year fixed-rate mortgages averaged 6.07 percent excluding fees, up 25 basis points, nearly reversing
the drop seen in the prior week.
Loan rates have run higher, however, for much of the year, peaking at 6.65 percent in early July, according to the MBA.
The trade group also said its purchase index rose 1.7 percent to 472.0 and a refinancing gauge climbed 4.3 percent to
2,879.8 on a seasonally adjusted basis.
The Federal Reserve's quarter-percentage-point cut in benchmark U.S. rates on Tuesday will do little to directly stimulate the
housing market, Wyatt said.
"Rates cuts can indirectly help the banking system weather the credit problems," he said. "But it has not yet resulted and
won't any time soon result in an increase in demand for housing because we've taken so many potential buyers out of the
market with the increase in lending standards."
Macy's makeover
CEO Terry Lundgren talks to Fortune about the department store giant's troubled buyout of May, speculation of widespread
store closings and plans to bolster sales.
(Fortune) -- It was considered a retailing masterstroke - the $11 billion acquisition of the May Department Store Company by
Federated Department Stores to form what is now known as Macy's. The 2005 merger created the first national department
store chain and gave Macy's unprecedented clout with suppliers. Macy's Chief Executive Terry Lundgren, considered the
merger's architect, was initially lauded as a visionary. Then the trouble started.
Shoppers groused about a decision to replace former May stores, names such as Filene's, Foley's and Marshall Field's, which
were beloved in their communities, with the largely unknown Macy's brand. A reduction in the level of promotions - those 20
percent off coupons that have become a fixture in department store retailing - further angered deal-hungry customers. Sales
stagnated and Macy's stock took a hit. Shares are down 15 percent since the takeover closed.
Wednesday, December 12, 2007 Page 2
Macy's has since made some adjustments to its strategy in the hopes of winning back shoppers that fled to rivals such as
J.C.
Penney (Charts, Fortune 500) and Kohl's (Charts, Fortune 500). Lundgren talked to Fortune about the acquisition, the
mistakes and the future for Macy's, including the all-important holiday shopping season.
Fortune: What is the biggest lesson you learned from the acquisition of the May Company?
Lundgren: We thought by reducing the number of coupons we'd be giving our customers more everyday value. What we
learned is that many customers had become accustomed to shopping with coupons. In retrospect, I would have phased out
the coupons more gradually, rather than try to change customers' buying habits overnight.
Q: Following the merger, you closed dozens of overlapping stores. Now some analysts are talking about the possibility for
further store closures. Can you comment?
A: We always go through the normal process of pruning our real estate portfolio, but there are no plans for a wide-scale
closure of stores.
Q: What's your view of this holiday shopping season? Does it seem more promotional than past years?
A: Every holiday season is highly promotional. I don't think this year is any worse than prior years.
Q: What do you consider your greatest accomplishment of the past year?
A: Our home business, which had been a weak spot, has turned around. We didn't have enough differentiated product. The
product we were selling you could get at a lot of stores. But with the addition of Martha Stewart and some other lines,
business has picked up. That's especially true in terms of big-ticket items. I've got furniture and mattress suppliers telling me
that our business is outperforming the industry.
Q: What has been your biggest disappointment?
A: Our same-store sales have not been strong and that has been very disappointing. Our complete focus is on getting our
sales
to move in the right direction. Despite the economy, consumers will still spend. The goal is to get them to spend more with us
versus our competitors. What we are trying to do is win market share.
Q: How do you do that?
A: By making Macy's known as the place to go for brands.
Q: You recently signed a deal to be the exclusive retailer of Tommy Hilfiger merchandise. Are you looking for more deals like
that and would you be interested in buying a brand outright?
A: I would be interested in buying a brand, but it can't be just a name. It needs to have good management and design talent
and also have the potential to expand into other categories. As for more exclusives, if I can find more ideas like Martha
Stewart and Tommy Hilfiger, I'd sign them in a minute.
Former Federated CEO nonexecutive chairman at Deb Shops
The former CEO of Federated Department Stores, Allen Questrom, has been named nonexecutive chairman at clothing
retailer Deb Shops Inc.
Questrom served as CEO of Cincinnati-based Federated, which has since changed its name to Macy's Inc. (NYSE: M) from
1990
to 1997. He also served as CEO for J.C. Penney (NYSE: JCP), Neiman Marcus, and Barneys New York (OTCBB: BNNY).
The announcement was made Tuesday by Prospect Capital Corp. (NASDAQ: PSEC), which has invested in the takeover of the
formerly public Deb Shops this year by the Lee Equity Partners private equity firm. The Philadelphia-based chain operates
337 stores, focusing on clothing for regular and plus-sized teenage girls.
Questrom is a senior adviser to New York-based Lee Equity.
How Merchants Mimic the Web
Retailers are learning from their online brethren
The Internet hasn't destroyed brick-and-mortar retailing, as many once feared. But has it ever changed consumer behavior.
PLAYBOOK
Giving Shoppers More Control
Wednesday, December 12, 2007 Page 3
Bloom supermarkets redesigned stores to fit the needs of timepressed customers by installing handheld scanners, IBM-made
recipe kiosks, and self-checkout.
Speeding Up Delivery
Circuit City online shoppers can order an item on the Web and pick it up 24 minutes later at their local store. Order a book
from a Barnes & Noble store kiosk, and barnesandnoble.com can get it to you in one to two days.
Providing More Information
Recreational Equipment launched online customer reviews to mimic the expertise of its store staff. Customers use them so
much, the online reviews will be added to store signs.
Upping Service
Nordstrom salespeople can now keep electronic records of top customers, e-mail them about upcoming sales and events,
and
conduct inventory research online instead of by phone.
Amenities Enliven Auto Dealerships
West Palm Beach, Fla. -- Customers at the gleaming new $40 million Lexus of Palm Beach can browse for cars or wait for an
oil
change while noshing on biscotti at an Italian-themed cafe, surfing the Web at a computer station with free Internet access,
taking a load off in a massage chair and ogling a 500-gallon aquarium. The Fort Lauderdale-based company is betting that
customers looking for an upscale car like a Lexus will be drawn to luxuries usually found in expensive hotels or restaurants,
such as marble floors, flat panel TVs in waiting areas, and valet parking. While the dealership is unique for South Florida, it's
not alone nationally in offering perks. Herb Chambers Lexus in the Boston area has wireless Internet and a children's
playroom, while Fletcher Jones Mercedes Benz in Newport Beach, Calif., provides an airport shuttle and free car wash, even
for customers who aren't having a vehicle serviced. Edward Yruma, a JP Morgan analyst, said many auto manufacturers have
been seeking facility upgrades. He said AutoNation has not incurred much risk with such an expensive dealership, partly
because the luxury car segment has not been as significantly affected as others, and also because the West Palm Beach area
is
wealthier than most. "Based on our research, although the facility can impact customer satisfaction, the interpersonal
dealings
between the customer and the staff trump everything," [said Chris Denove, a vice president for J.D. Power and Associates.]
Ford To Launch Widgets For Sync On AOL
AS PART OF ITS CAMPAIGN touting the Sync telematics and in-vehicle entertainment technology, Ford will launch ads on
AOL
next week. Actually, they aren't ads per se, but--in the argot of Web developers--widgets. Widgets are virtual windows that
can hold live content, videos, stats, what have you, and that can be moved from place to place.
Ford's Sync-touting widget will launch on AOL but can be "grabbed" and moved to one's personal pages and to social
networking sites like MySpace, and Facebook.
Peter Kim, president of Pasadena, Calif.-based Interpolls, developer of the program which it is licensing to AOL, says the
widgets, launched earlier this year with client Warner Brothers, serve up advertising and can be distributed virally. So even
though the ad-like widgets launch on AOL, unlike traditional Web ads they can be "grabbed" and embedded on other sites by
users.
Kim says consumers will want to do that because the widgets offer a rich-media experience, including a free song download.
The music and youth focus are central to Ford's efforts to pitch Sync to Ford Focus buyers.
Ford, which has focused its Sync marketing efforts on music partners, has just launched a campaign using R&B artist Chris
Brown as a centerpiece. The effort includes online, TV and radio ads, promotional activities and a tour.
The tie-in includes title sponsorship of a Chris Brown tour, the Up Close & Personal Holiday Exclusive Tour Powered by Sync,
which launched last week in Cincinnati. There is also a Web site, syncwithchrisbrown.com, with interviews with Brown's
posse.
Ford earlier this year launched a similar campaign aimed at the Hispanic market and featuring 12-time Latin Grammy award
winner Juanes.
"It's viral, it's more of an enhancement to rich media ad formats," says Kim. "Consumers can grab it, place it on their page
and
show other users the product. Rich media provides multiple goals and objectives through a single execution."
The partnership with Chris Brown includes radio and TV ads. The radio ads have already kicked off in select markets and the
television ads will premiere in January, per Ford.
Wednesday, December 12, 2007 Page 4
The Web site has clips from Funkmaster Flex' "Car Wars" TV show, footage of Chris Brown, and other content. Ford says the
program with Brown will include a national sweepstakes dangling a grand prize of a fully loaded 2008 Ford Focus customized
by Flex.
Ford goal: Unleashing its goodwill
New quality center helps spread the word about improvements
After just a month on the job at Ford Motor Co., Jim Farley knows what his most important task will be as group vice
president
of marketing and communications: unlocking the goodwill that consumers already feel around the world for the 104-year-old
auto company.
"You just have to turn the key," he told the Free Press during a Tuesday interview at Ford's new-model quality center at the
historic Rouge Complex.
The new Ford quality center is a testing and training site for the 2009 F-150 pickup, which will be unveiled at the Detroit
auto show in January. The center is in the renovated, historic Dearborn Glass Plant, which was designed by Albert Kahn and
built in 1922. The factory, small by today's standards, became a symbol of industrial innovation for its use of natural light.
Farley, who recently defected to Ford from Toyota Motor Corp., where he was a top sales executive, said consumers want
Ford to succeed.
Invoking the memory of his grandfather, who was one of Ford's first workers at the Rouge foundry and later a Lincoln dealer,
Farley expounded on the emotional attachment that so many people -- including him -- have in the company.
"People believe in this company," he said. "They want us to do better."
Ford is still trying to come back from a record $12.6-billion loss in 2006. Through September, the automaker is in the black,
with net income of $88 million. But Ford is still struggling to stabilize and improve its sales with everyday American
consumers.
Through November, Ford's sales were down 12% compared with a year ago.
For now, Farley said he's still crafting his marketing plan for enticing consumers back to Ford. But he said Ford's new
messaging would be "humble and authentic," and he kept circling back to several key points:
• Quality. "Our quality progress is real, and I can't wait to tell that story," he said, noting Ford's recent quality
recognition by independent, third-party evaluators, like Consumer Reports. Ford, he noted, is "as strong or
stronger than Toyota on a quality front."
• Ford's populist persona. Farley talked about Ford's ability to bring vehicles and technology to the masses, often
using the word "democratized."
"Ford works best because it's a populist brand," he said.
• "The new Ford." Farley described a new energy in the company that is "hungry, focused and lean." He also talked
repeatedly about being "blown away" by the competence and skill in the product development team. With a stable
of new products coming, like the Ford Flex, he said Ford will be able to update its public image.
Finally, in reflecting on his decision to leave the successful Toyota for the more troubled Ford, Farley said he couldn't be
more motivated to help Ford succeed, calling this period "a special time" in Ford's history.
It's also a special time for him, personally, he noted. "It's the most alive I've felt in a long time."
Study: More Americans Go Online For Entertainment
THE TV STRIKE IS CHANGING some Americans' viewing habits. A poll by the Wi-Fi Alliance and Kelton Research found that
50%
of those surveyed have either gone online for entertainment or plan to do so. Respondents say they now get 31% of their
entertainment online: video games, music, watching movies or short videos. The poll, fielded Nov. 19-27, surveyed 586 U.S.
Wi-Fi users ages 18-55. The sampling variation in this survey is plus or minus 4.1 percentage points.
D.C. Gets Slick New Outdoor Ads
WASHINGTON, D.C. HAS TRADITIONALLY HAD less outdoor signage than New York and Los Angeles, but all that is
changing--at
least in part of the nation's capital.
Wednesday, December 12, 2007 Page 5
Gallery Place, a 715,000-square-foot shopping, entertainment and residential complex in northwest D.C., recently became
home to LED billboards with an audio component at several busy intersections. The inaugural advertisers are Coca-Cola and
AT&T.
According to calculations using pedestrian and automobile traffic counts through the area, the LED signage should be able to
create almost 40 million impressions a year. The area around the intersection of 7th Street and several cross-streets,
including
H Street and I Street, sees over 2 million vehicular trips and roughly 1 million pedestrian trips a month. It's not clear how
many
of these exposures are repeat viewings by a single individual.
Gallery Place and downtown D.C. in general have boomed in recent years, with a flurry of new residential and retail
developments driving an increase in pedestrian and vehicular traffic. Adjacent to Chinatown and the Verizon Center Arena,
Gallery Place sits atop a mass transit hub and allows pedestrian access to the Smithsonian Museums and the Washington
Mall.
AT&T Moves To Upgrade Dial-Up Customers To Broadband
AT&T SUBSCRIBERS WON'T SEE FLASHY marketing and ad campaigns to promote a flat-fee service for the dial-up Internet
access the San Antonio, Texas, carrier plans to initiate by the end of this year. In fact, the company would just as soon sweep
the announcement to double the flat monthly fee under the rug.
As broadband services have become available at attractive prices, consumers are increasingly making the move from dial-up.
To remain competitive, AT&T will update its pricing for new dial-up orders to $22.95 per month. The pricing--competitive
with Verizon and others-- will provide unlimited dial-up service without a term commitment, according to an AT&T
spokesperson.
"The small percentage of remaining AT&T dial-up customers will see an adjustment to their current price plan, though many
may instead choose AT&T's broadband services beginning at just $10 per month, an option available to many dial-up
customers within the company's traditional 22-state service footprint," she says. "A satellite-based broadband service is also
available to customers who live beyond the company's traditional service area."
New services--such as satellite-based broadband through AT&T's partnership with WildBlue, or 3G laptop cards for
customers
who live within 3G markets--provide other options. Services are marketed and made available through AT&T's Web site, direct
mailing pieces, and call centers.
About 17% of U.S. households still rely on dial-up to access the Internet, compared with 48% that use broadband, according
to Sally Cohen, a consumer telecom analyst at Forrester Research. It is interesting to note, she says, that 32% of U.S.
households still don't have Internet access at all.
"AT&T has been doing some interesting things with pricing, as part of the merger agreement with BellSouth, but to be blunt,
they are not focused on the dial-up consumer," Cohen says. "I'm not suggesting AT&T will lose subscribers, because there
are
a number of things that tie consumers to services."
Forrester Research calls those things "consumer inertia"--avoiding the hassle of changing providers, transferring
information,
signing up for services, and creating a new relationship.
Perhaps it is pure perception, but analysts think raising dial-up rates sends a message that AT&T no longer wants to support
subscribers. "They're aware raising prices will likely drive some customers away, but hope it leads more to broadband
services," says Jan Dawson, VP at Ovum. "AT&T wants broadband to become the anchor for bundled services, such as voice,
television and wireless, and dial-up doesn't fit into that picture."
Increasing quarterly profits mean that AT&T must raise average revenue per user by up- and cross-selling services. So, the
carrier launched bundled and promotional services in the past year in an effort to make broadband truly affordable. Pricing
starts at between $15 and $20 for slower speeds, and ranges between $50 and $70 for faster speeds.
Analysts say that rather than call attention to the increase in dial-up prices, AT&T has focused marketing efforts on moving
subscribers to broadband, and then adopting bundled packages that might include cellular and U-verse services. In an ideal
scenario, the carrier would cover all residential services--for example, AT&T's Television, Broadband and Wireless Services, a
three-screen initiative pushing video programs to multiple devices, from TVs to computer screens and cellular phones.
Dawson says satellite provides another option, but those living on the north side of an apartment building might have more
difficulty receiving a signal, because "to get satellite service you typically need a view of the southern sky."
AOL Creates Platform-A Marketing Solutions
GETTING ONE STEP CLOSER TO a truly unified ad sales force, AOL is creating a new business entity named Platform-A
Marketing Solutions. Tailored to the largest marketers and ad agencies, the new unit combines the sales muscle of AOL and
Tacoda.
Wednesday, December 12, 2007 Page 6
Kathy Kayse has been chosen to head the new entity, while Mark Ellis and Matt Arkin have been named to lead its regional
divisions. Ellis will lead the sales teams in Atlanta, Boston, Detroit, New York and Virginia, while Arkin will assume
responsibility
for the Platform-A Marketing Solutions teams in Los Angeles, San Francisco, Dallas and Chicago.
Platform-A Marketing Solutions will work closely with Advertising.com, the AOL unit that matches buyers of online
advertising
to thousands of Web sites with extra ad space to sell. AOL established Platform-A in September to encompass its various ad
networks, and named Curt Viebranz, former CEO of Tacoda and a one-time Time Inc. executive, to lead it.
"We're positioning Platform-A to enable top advertisers and agencies to more easily harness the full power of digital media,"
said Viebranz in a statement.
Platform A will encompass Ad.com, the direct-response network AOL acquired in 2004; Tacoda, the behavioral ad network it
recently bought for $275 million; the video ad network named Lightningcast; Third Screen Media, a mobile ad network, and
AdTech AG, an international online ad-serving company based in Frankfurt, Germany.
The reorganization comes amid criticism that AOL has so far failed to meet some media buyers' expectations, and less than
two months after parent company Time Warner released slower ad growth numbers for AOL--news that sent its stock price
down 3%.
Selling advertisers both performance-based and branding programs, AOL plans to eventually have a single data platform that
would give it the ability to target ads across its different network businesses.
AOL is not alone in its focus on ad networks as a way to fend off a slowing ad market overall. Yahoo, Microsoft, and even
holding company WPP Group have invested in ad networks over the past year.
BusinessWeek Joins LinkedIn
LINKEDIN, A SOCIAL-NETWORK TARGETING BUSINESS professionals, is living up to its name. It's opening its "back end" to
Web
publishers that want to bring the network's functions to their sites. The first publisher to get the LinkedIn invitation,
BusinessWeek, wants to use its networking function to make BW's Web site a place where business types can connect and
maybe even make deals--in other words, a place to do business, rather than just read about it.
In one feature, LinkedIn will create links in the text of BusinessWeek editorial content for the proper names of businesses and
people. By mousing over the links, the reader can determine how they are connected to the individual or entity in question,
including how many of their own contacts are connected.
As part of the strategy, LinkedIn has created a new platform called Intelligent Applications that allows software developers to
create links between LinkedIn and their own Web sites. LinkedIn has also embarked on a partnership with Google and
MySpace with the long-term goal of creating standard software tools that will allow all social networks to seamlessly share
content.
The BusinessWeek deal also benefits LinkedIn, leveraging the pub's popularity to spread awareness of LinkedIn to its
substantial online audience. While smaller than competitors like Facebook and the gargantuan MySpace, LinkedIn has been
growing at a fast clip. Five million new members have joined in the fourth quarter of 2007 alone, according to the company.
Over the last year, BusinessWeek has aggressively pursued an interactive Web strategy relying on user-generated and
professional content to create comprehensive "guides" to the business world. In May, the publication announced it is
partnering with Capital IQ, a division of Standard & Poor's, to launch a Company Insight Center hosted on the magazine's
Web
site. The new online content area will triple the size of the BusinessWeek site. Information and analysis will cover companies,
industries, markets and leaders.
Scripps Networks launches online real estate service
KNOXVILLE, Tenn. (AP) - The owners of Home & Garden Television have been showing viewers how to fix up their homes for
years. Now they're going to help sell them through a new online real estate listing service.
FrontDoor.com, which currently lists more than 1 million homes for sale, is the first Web site created by Knoxville-based
Scripps Networks that's not directly related to one of its cable TV brands or acquisitions, including HGTV.
The site features expert advice, news, tips, neighborhood snapshots and the latest property listings, said Vikki Neil, vice
president of real estate for Scripps Networks Interactive.
"For someone who wants to get in the business or who wants to buy or sell a home, it's hard to give someone the complete
package without giving them the homes to look at," Neil said. "We know its a slow time in the market, yet ratings for our real
estate shows are great."
Wednesday, December 12, 2007 Page 7
The site provides real estate and home finance tools and calculators. It also has more than 300 videos from the Scripps
Networks' library as well as an original Web series created exclusively for FrontDoor.
Scripps Networks plans to expand the site by offering localized, in-depth information on specific neighborhoods including
real-life stories and experiences.
While FrontDoor is a standalone brand, the site is closely tied to Scripps Networks other brands. Scripps Networks, the
largest
division of Cincinnati-based corporate parent E.W. Scripps Co., also owns the Food Network, DIY-Do It Yourself Network, Fine
Living and Great American Country and their Internet counterparts.
"FrontDoor closes the loop for the millions of home enthusiasts who know and trust HGTV as a valued resource, while also
supporting the business strategy of strengthening our footprint in the home space online as well as on-air," Scripps Networks
President John Lansing said in a statement.
Tribune Revenues Down 3.3% in November
Publishing Revenues Decline 3.5%; Broadcasting and Entertainment Revenues Down 2.6%
CHICAGO, Dec. 12 /PRNewswire-FirstCall/ -- Tribune Company (NYSE:TRB) today reported its summary of revenues and
newspaper advertising volume for period 11, ended Nov. 25, 2007. Consolidated revenues for the period were $413
million, down 3.3 percent from last year's $428 million. Consolidated operating expenses were 5.0 percent lower than
period 11 last year.
Publishing revenues in November were $309 million compared with $321 million last year, down 3.5 percent. Advertising
revenues decreased 4.9 percent to $244 million, compared with $257 million in November 2006. Advertising revenues
benefited from the shift in the Thanksgiving holiday week from period 12 in 2006 to period 11 this year.
Retail advertising revenues increased 7.3 percent with the largest increases in the specialty merchandise,
department stores, apparel/fashion and electronics categories. Preprint revenues, which are principally included in
retail, were up 18.5 percent for the period.
National advertising revenues increased 1.9 percent, with the largest increases in the movies, auto, financial and
telecom/wireless categories, partially offset by a decrease in the transportation category.
Classified advertising revenues decreased 26.2 percent. Real estate fell 39.8 percent with the most significant
declines in Chicago, the Florida markets and Los Angeles. Help wanted declined 28.4 percent and automotive
decreased 7.6 percent. Interactive revenues, which are primarily included in classified, were $21 million, up 7.8
percent, due to growth in most categories.
Circulation revenues were down 4.6 percent due to single-copy declines and continued selective discounting in home
delivery.
Publishing operating expenses in November were down 5.2 percent primarily due to lower newsprint and ink, compensation,
promotion and other cash expenses.
Broadcasting and entertainment group revenues in November were $104 million, down 2.6 percent, due to decreases in
television group revenue, partially offset by increases in radio/entertainment revenues. Television revenues fell 4.8 percent
due to the absence of political advertising, partially offset by strength in several categories including retail, corporate, health,
food/packaged goods, telecom and restaurant/fast food.
Broadcasting and entertainment group operating expenses in November declined by 2.7 percent primarily due to lower
compensation and other cash expenses.
Consolidated equity income was $11 million in November, up from $8 million in the prior year period.
Tribune expects to complete its disposition of the Chicago Cubs, Wrigley Field and related real estate, and its interest in
Comcast SportsNet Chicago in the first half of 2008. It plans to use the proceeds to repay existing debt.
As stated previously, the company also expects its going-private transaction to close before the end of Tribune's 2007 fiscal
year following satisfaction of the remaining closing conditions, including the receipt of a solvency opinion and completion of
the committed financing.
Publishing Group of America Purchased by Bain Capital Ventures and Shamrock Capital Growth
Fund
Wednesday, December 12, 2007 Page 8
Private equity deal caps a phenomenal growth story in media and focuses on unique growth opportunities, beginning with
2008 launch of Spry, a 9-million circulation health monthly distributed by newspapers.
NEW YORK, Dec. 12 /PRNewswire/ -- Bain Capital Ventures and Shamrock Capital Growth Fund today completed the purchase
of Publishing Group of America (PGA). The deal opens a new chapter in the phenomenal growth of PGA, which has bucked
the magazine industry trend by turning newspapers into a pipeline for innovation in magazines, digital media and branded
content.
"We're buying a jewel in the media business," said Paul Zurlo, Venture Partner at Bain Capital Ventures. "The growth is
available in magazines, digital and branded products, and we intend to push the throttle to take advantage of them all."
"PGA is a pioneer, and it can be a powerhouse," said Robert Perille, Managing Director at Shamrock Capital Growth Fund.
"PGA
capitalizes on the underappreciated power of the hyper-local newspaper pipeline by complementing local news with special
interest magazine content."
At a time when conventionally distributed magazines have struggled against declining newsstand sales, cost-pressures in
subscription sales, and toughening advertiser demands, PGA has grown rapidly. Its flagship magazine, American Profile,
launched in 2000 as a weekly for small-town community newspapers, earned Launch of the Year honors, and has since grown
to 9 million circulation. Relish, the first newspaper-distributed monthly, launched in February 2006 with 6.8 million
circulation through largely suburban market newspapers -- becoming the largest ad-supported food magazine overnight --
earned Launch of the Year honors, and upped circulation to 9 million in 2007.
In January, Relish increases to 12 million circulation, while American Profile increases to 9.8 million. Then, in September, a
new health magazine, Spry, makes its debut in a projected 9 million households.
What's more, magazines are only the launching pads for PGA brands. Already, the company has sold more than 200,000
books
drawn from magazine content, started a record label tied to the flagship ("American Profile Presents"), and syndicates
content to newspaper web-sites as well.
"Our new owners will have extensive background in media and entertainment. Even with a great track record to date, we
expect to accelerate growth from here," said Dick Porter, CEO of PGA. "We are just getting started."
About Publishing Group of America
Franklin, TN-based Publishing Group of America publishes American Profile, Relish and Texas Profile magazines. American
Profile debuted in April 2000 as the second largest publishing launch in U.S. history; it is distributed through more than 1,400
newspapers with a combined circulation of over 8 million. Relish debuted in February 2006 as the largest
advertisingsupported
food magazine, with a circulation of 6.8 million via newspapers, and has grown to 9 million effective January 2007.
Texas Profile debuted in September 2006 with a circulation of 625,000 via newspapers. The company publishes a series of
cookbooks ("Hometown Recipes"), a custom publishing business, and operates Hometown Content, a syndicated news
service
for print and web, and Hometown Promotions, an integrated marketing service.
Tribune says sale of Cubs, Wrigley, to close in first half of '08
Media conglomerate Tribune Co. said Wednesday it anticipates closing on the sale of the Chicago Cubs baseball team as well
as
its stake in Comcast SportsNet Chicago during the first half of next year.
The Cubs sale was a condition that needed to be met in order for Tribune to be taken private in an $8.2 billion buyout led by
real estate magnate Sam Zell.
Tribune said it also expects to complete the sale of the Cubs' Wrigley Field and related property during the same period.
Tribune put the Cubs and Wrigley up for sale in April, with the company's 25 percent interest in Comcast SportsNet Chicago
included in the package. The company has moved slowly in soliciting formal bids, but among the leading potential buyers is a
group of investors headed by John Canning, chairman of private equity firm Madison Dearborn Partners LLC and a longtime
friend and business partner of baseball commissioner Bud Selig.
Analysts have said the Cubs could fetch as much as $1 billion if packaged with Wrigley.
Tribune does not have the final say on who will become the Cubs' next owner because Major League Baseball team owners
must sign off on the deal.
Tribune said it plans to use funds from the sale to help repay debt.
Wednesday, December 12, 2007 Page 9
The media company also maintained its previously announced forecast for its buyout to be completed prior to the end of
fiscal 2007. It made the remarks in a monthly update on its revenue, which dipped 3.3 percent in November as classified ad
sales continued to weigh on the nation's second-largest newspaper publisher because of significant real estate declines.
Last week, Tribune said it plans to use $500 million in cash on hand to lower the amount it needs to borrow to close the
buyout by year's end. The company crossed the last apparent obstacle toward completing the deal a week earlier when the
Federal Communications Commission gave its approval.
Aside from the Cubs, Tribune's other properties include the Chicago Tribune, the Los Angeles Times, seven other daily
newspapers and 23 television stations.




Thursday, December 13, 2007
TOPICS TOPICS TOPICS
Newspaper Downturn More Cyclical Than Secular; 8.9 Percent of '08 Revs Digital: Analyst
Credit Suisse analyst John Klim has produced a very long, detailed report on the newspaper industry, arguing that things
aren't as bad they seem. His boldest point is that the industry downturn is more cyclical than secular, having more to do with
economic factors, like real estate softness, than anything inherent to the industry. This is in sharp contrast to many other
assessments, which see the industry stuck in a long-term secular decline. The report doesn't dismiss the changing nature of
the business or the threat from digital media, but Klim believes newspaper companies are well positioned to take advantage
of these trends.
Some highlights:
-- Cyclical/Secular: Cyclical factors have accounted for roughly two thirds of the industry's ad revenue slide, seen quite
sharply
this past quarter, according to Klim. Declines in areas such as national, retail and real estate advertising were almost entirely
due to cyclical forces, though the decline in help wanted ads had more to do with secular trends. These trends are expected
to continue through the end of 2008 and could reverse themselves if/when the housing economy comes back.
-- Digital opportunities: Klim isn't naive about the need for newspapers to adapt: "Newspapers must ultimately transform
themselves from lumbering dinosaurs into nimble, multiplatform information providers capable of reaching customers in
print, online, or by mobile download." Areas that newspapers need to exploit include online video, particularly as it relates to
breaking news, timeliness, interactivity, the end of distribution barriers (i.e. any newspaper can have a global audience), and
hyperlocalism. Newspapers also need to put an emphasis on accuracy and reliability if they're to compete with the
proliferation of blogs and other alternative news sources. All told, digital is expected to account for 8.9 percent of total sales
in 2008, up from 7.1 percent so far this year. Going forward, digital growth is anticipated in the 15-20 percent range, on
account of audience growth, improved ad targeting and the use of video.
-- Bottom line: Over the past five years, newspaper stocks have fallen by an average 46 percent. During the same time frame
profits have remained fairly flat. So either the market is ahead of the curve or it;'s overly pessimistic. Klim argues the latter
and predicts total revenues to grow again in 2009. Among the companies best positioned, he contends: the New York Times,
(NYSE: NYT - News) where digital is expected to account for 12.8 percent of revenue in 2008. Other companies, such as
McClatchy (NYSE: MNI - News) and Belo, (NYSE: BLC - News) aren't in dire straits, but need outside factors (mainly real
estate)
to turn around before they can grow again.
Newspapers posted solid gains today following the report. Winners included Belo, up 1.8 percent, NYTCO, up 1.6 percent
and Media General (NYSE: MEG - News) up 1.3 percent.
CompUSA's Holiday Closing Sales: Bad News for Best Buy and Circuit City
It is one thing to have competition no one goes to, it is another to have people then rush to it when they give things away. In
announcing the closing, CompUSA announced it will be offering "attractive bargains on computer and electronic products as
part of store closing sales and its 103 retail stores will remain open through the holidays. This may put a dent in both Best
Buy
(BBY) and Circuit City's (CC) holidays.
Earlier this year CompUSA closed over half of their U.S. retail stores in a bid to streamline operations and bolster margins at
top-performing stores. Guess it did not work.


Thursday, December 13, 2007 Page 2
Long term this will benefit all electronics retailers like the one mentioned above and even Wal-Mart (WMT) and Sears Holdings
(SHLD). For this holiday season though, it is not good news.
In order to rid itself of inventory, undoubtedly CompUSA will be selling merchandise below cost. It is a move unlikely to be
replicated by other retailers and this will affect sales during the next 4 weeks in the 103 markets that have the CompUSA
locations.
Will it break the holiday season for other retailers? No. It does have the definite possibility of making a good one average or
an
average one poor though. If anything good comes of it, we may get a pullback in one of the names as folks overreact to the
news and get a nice entry price for shares (except Circuit City).
Retailers find ways to deal with economy
NEW YORK (AP) — At Jeff Cassels' jewelry store, falling real estate values and rising gold prices are more than news
headlines —
they are contributors to an uncertain holiday season. At Joanie McDonald's clothing store, however, a weakening dollar is
turning into a boon.
This season finds independent retailers across the country dealing with a new set of economic challenges even as they still
contend with growing competition from big-box retailers like Wal-Mart Stores Inc. and Borders Inc. That means merchants are
being pressed more than ever to capitalize on what sets them apart from the rest of the retail universe — merchandise that's
unique and well-suited to a store's clientele, and customer service that's beyond the ordinary.
Customers of Kid Country Toys, two specialty toy stores in Charleston, W.Va., can dispense with the screwdrivers and
bandages usually needed to put tricycles and other toys together. Owner Jerry Strick said his staff will assemble purchases
free
of charge. Toys can be gift wrapped as well.
Strick, who's been in business 35 years, uses services that Wal-Mart and Toys "R" Us Inc. don't provide to draw customers to
his
store. And he stocks brands that the big chains don't buy but that his customers want.
He's upbeat about this season, partly because business is up slightly from 2006, but also because he's learned over the years
not to sweat it. So he doesn't believe layoffs in the area and recalls of some toys made in China will have a big impact on his
business.
"I used to worry about the sales, and it's not worth it," Strick said. "The population in Charleston has gone down, the
competition has gone up, and we still hold our own, so I really don't worry."
But Cassels, who owns GB Heron in Salisbury, Md., is worried about the season, having watched real estate problems grow
and
his sales decline.
"I don't expect good things," Cassels said. "We were down about 14 percent headed into the Christmas season."
Cassels said that with customers paying more for necessities like gas and food and worried about home values, "I'm pretty
much last on the line" of spending priorities — especially since the price of gold has shot higher in recent months, crossing
$800 an ounce for the first time since 1980.
"The only thing I am doing well is selling engagement rings — people are still in love," he said.
But selling custom-designed jewelry helps business, because that GB Heron apart from other retailers. To lower his costs,
Cassels recently bought equipment that helps create the jewelry faster.
Cassels, who's in his 19th year in business, says he never knows until Christmas Eve how the season has fared. It's a hard
wait:
He does 25 percent of his annual business between Thanksgiving and Dec. 25.
The depressed real estate market in Nevada has hurt Jody Branson's gift shop, Fresh Ideas, in Gardnerville, located near the
state capital, Carson City. Sales are down about 10 percent from last year.
"There's a lot of real estate agents and homebuyers who would come in, but they don't have the money to spend with
(housing) slowing down," Branson said.
But she said, "I'm not letting it get me down — I can't complain at 10 percent, where there's another store that's closing"
nearby. Moreover, Branson said she's built a reputation with customers: "People know what we have and people always come
back."
Sometimes a negative for the economy, such as a weak dollar, can help retailers.
Joanie McDonald, who owns Jennifer Reale Design, an upscale women's fashion boutique in Delray Beach, Fla., hears from
other retailers that business is slow and hopes are dim for the holidays. At her store, however, "business is good and I'm
expecting a very strong season."
McDonald said her success is coming from the foreign tourists who have been streaming into Florida to take advantage of
currency rates as well as the sun and sand.
"I had a group of women in my store today that spent $500," McDonald said. "I'm very impressed with the number of
foreigners we get in and the money they're spending."
Thursday, December 13, 2007 Page 3
There are Borders and Barnes & Noble Inc. stores in Austin, Texas, but Steve Bercu, CEO of BookPeople, a huge store in the
capital's downtown area, has few if any concerns.
"We've had our best season in store history each of the last seven years and I'm expecting this year to be another really
pretty
good year," Bercu said.
BookPeople differentiates itself from the chains in several ways. It offers a big selection of gifts alongside its massive book
inventory; Bercu estimates gifts account for 30 percent of revenues. It also has developed its own offbeat culture —
BookPeople is a proponent of a tongue-in-cheek movement called Keep Austin Weird — and uses it as a marketing tool.
"We have a looser view of things," Bercu said.
BookPeople also holds programs that go beyond the typical author signings. It holds literary day camps for children of
different ages, hoping to create a new generation of customers.
Being different has also helped keep Plum, a Harrisburg, Pa., women's clothing store in business for 40 years, and owner
Isaac
Mishkin expects that to help him through a sales slowdown that has also afflicted other retailers in the area.
"Our year was fine until two months ago and then had what I'd say is a 10 percent decline," said Mishkin, adding that sales
look
like they're picking up now.
What has worked for him is to stock clothes that are different from competitors', especially the national apparel chains.
Mishkin's clothes are moderate to upscale, and he'll buy merchandise, including some suits that can run $800 to $900, with
groups of his customers in mind; by knowing what they're looking for, he buys clothes he knows he can sell.
He's expecting sales to bump higher as the season progresses, but the difficult environment will likely shave his sales and
margins somewhat.
"When it's all said and done, we'll probably end up a couple percent in sales and down a couple percent in profit," he said.
Office Depot shares plummet on sluggish profit, sales outlook
DELRAY BEACH — Projections of a weak fourth quarter are slamming shares of Office Depot Inc. today.
Shares (NYSE: ODP) of the Delray Beach-based office supply retailer dropped by more than 14 percent to a new intra-day low
of $14.68.Office Depot, the No. 2 office supply chain, last traded under $15 in October 2004.
Earlier today, the company cautioned that housing market fallout in Florida and California, which last quarter made up 28
percent of North American revenue, is eroding profit and revenue.
Office Depot can also reap cash from certain vendors after selling a certain number of that vendor's goods. Once the
agreedupon
sales threshold is met, the vendor antes up bulk rebates for items already sold. Tighter inventories, though - another
product of sluggish sales - mean fewer bulk rebates.
The company now estimates that end-of-year revenue from programs with its suppliers will drop by about $70 million
compared with fourth quarter 2006.
Third-quarter profit fell 9 percent to $117.5 million, or 43 cents a share, as sales and earnings declined at its North American
stores.
Bank Of America Launches Spanish Service
BANK OF AMERICA HAS EXPANDED its online service to include many features in Spanish, making online banking and
financial
management more accessible to U.S. Hispanic families. Customers now have the option to view account information, transfer
funds between accounts, receive alerts and locate ATMs and banking centers en Español.
A recent Bank of America survey found that 49% of Hispanics said they would benefit from a financial makeover, and of
these,
almost half said they need the most help with managing money (47%) and a third with tracking expenses (32%).
Toyota Exec Says US Sales to Grow in '08
WASHINGTON (AP) - Toyota Motor Corp. expects its vehicle sales in the United States to grow by about 3 percent in 2008 on
the strength of more than a dozen new or updated vehicles, a top company executive said Wednesday.
Jim Lentz, president of Toyota's U.S. sales arm, told reporters that U.S. sales were expected to be about 2.61 million units in
2007. That's 2.8 percent higher than Toyota's 2.54 million units sold in 2006. He said he expected similar gains in 2008.
"We haven't finalized our numbers for 2008 yet, but it feels more like in a range of this year's increase as opposed to the
increases that we've seen from say 2004 to 2006, where we were up almost 10 percent a year," Lentz said.
Thursday, December 13, 2007 Page 4
Lentz predicted that the auto industry's total U.S. sales would fall from 16.5 million in 2006 to 16.1 million in 2007 and
remain flat at that level in 2008.
Toyota was rapidly gaining sales in that period as it entered new segments, such as large pickups. But with offerings in every
segment now, the automaker's growth had been expected to slow.
Lentz said Toyota will be releasing new versions of the Toyota Corolla and Matrix compact vehicles, the Lexus LX 570 sport
utility vehicle and the Lexus IS F sports sedan, along with about a dozen other vehicles to be announced soon.
Toyota expects to end 2007 with sales of about 250,000 hybrids in the U.S., accounting for about 11 percent of the
company's sales. Lentz said sales of the Prius hybrid grew 70 percent through the end of November.
A sales rate of 2.6 million vehicles still puts Toyota well behind General Motors Corp., the No. 1 automaker by U.S. sales. GM
sold 3.5 million vehicles in the U.S. in the first 11 months of this year. But the boost could help Toyota in its race to become
the largest automaker by worldwide sales, a title now held by GM.
Lentz downplayed the significance of the vaulted position.
"It's not a goal. You won't see banners and posters in our office saying we want to be No. 1 because it's really not important
to
the customer that we're No. 1," he said.
Toyota also is looking to overtake Ford Motor Co. as the No. 2 automaker by U.S. sales. Toyota sold nearly 49,000 more
vehicles than Ford in the first 11 months of this year.
Lentz said he expects most segments to remain fairly flat with some growth in subcompacts and the small to midsize sport
utility segment.
"I think the sense is the first half of the year is going to be probably below that number and the second half of the year we see
some recovery that will probably be above that number," he said, referring to the company's projections of U.S. sales of
about 16.1 million vehicles in 2008.
Lentz said earlier in the year, company officials thought U.S. consumers might buy 16.7 million vehicles in 2007. But a
combination of rising fuel costs, fallout from the shaky housing market, challenges over subprime mortgages and the move
by
domestic automakers to reduce their fleet sales contributed to a reduction in overall sales, he said. Many auto industry
analysts now are predicting U.S. sales of just more than 16 million for 2007, down from 16.5 million in 2006.
Problems with the subprime loan market and housing woes have affected Toyota's sales in Florida, California, Las Vegas and
Phoenix. Lentz said 25 percent of the company's sales are in Florida and California.
Lufthansa plans to buy 19 percent stake in JetBlue
NEW YORK (Reuters) - German airline Deutsche Lufthansa AG (LHAG.DE: Quote, Profile, Research) said on Thursday that it
plans to acquire a 19 percent stake in U.S. low-cost carrier JetBlue Airways Corp (JBLU.O: Quote, Profile, Research) for about
$300 million.
Lufthansa said it plans to seek operational cooperation with JetBlue following the acquisition of the stake, which requires
approval from U.S. regulators.
Under the deal, Lufthansa plans to buy 42 million new shares from JetBlue for $7.27 each. It will also nominate a director to
JetBlue's board.
Judge Dismisses FTC Case Against Realtor Group
An administrative law judge in Washington dismissed a complaint by the Federal Trade Commission staff alleging that an
organization owned by Realtors in the Detroit area unlawfully discriminated against discount real-estate brokers.
The decision, announced by the FTC, is likely to embolden the National Association of Realtors to resist pressure on
competition issues from federal regulators. The NAR is the biggest trade group representing real estate brokers and agents.
Thursday, December 13, 2007 Page 5
The FTC case was filed in October 2006 against Realcomp II Ltd., Farmington Hills, Mich., which operates a multiple-listing
service, or MLS, covering southeastern Michigan. An MLS, typically owned by brokers or local Realtor organizations,
maintains a
data base on homes available for sale and enforces rules for its users. Real estate brokers need to belong to a MLS to get the
information they need on listings. An MLS provides more detail than do Web sites like Realtor.com that are open to the
public.
The FTC challenged Realcomp rules that block certain types of listings of homes for sale from being displayed on
Realtor.com
and other Web sites often used by consumers to search for homes. The listings affected, known as "exclusive agency"
listings,
often are used by discount brokers charging flat fees rather than a percentage of the sales price.
The FTC argued that restrictions on such listings thwart consumers who want to save money by using limited-service
brokers.
Exclusive-agency listing contracts stipulate that if a seller finds a buyer without the help of the listing broker, the seller pays
no
commission.
Realcomp argued that it has the right to favor listings designed to promote transactions that generate commissions for real
estate brokers, who own Realcomp through their membership in local Realtor groups.
The judge, Stephen J. McGuire, ruled that the FTC's lawyers hadn't proved that the Realcomp policies "unreasonably
restrained or substantially lessened" competition. Discount services remain widely available in southeastern Michigan, he
found.
The FTC staff will appeal the decision to the five FTC commissioners, who could overrule the administrative judge, said
Patrick Roach, a deputy assistant director of the FTC.
Jeff Kermath, owner of AmeriSell Realty, a discount broker based in Saline, Mich., said Realcomp policies cause him to
charge
"slightly higher fees" for services that some consumers don't need or want.
The FTC earlier reached so-called consent agreements with eight other MLS operators, which chose to make policy changes
to settle their cases rather than fighting the agency in court. The Realcomp decision probably will encourage other MLS
operators to fight back. The NAR helped pay for Realcomp's legal costs.
In 2005, the U.S. Justice Department filed a suit alleging that the NAR's national policy on Internet displays of listings data --
which allows brokers to block their listings from being displayed on other brokers' Web sites -- "restrains competition" from
firms that rely mainly on Web sites to engage with their customers. The Realtors deny that charge and continue to fight the
suit.
Live from the Email Summit: Quiznos Serves Hot Loyalty-Building Programs
PARK CITY, UTAH -- TALK about an extensive menu: Quiznos seems to have tried every online loyalty-building channel
possible. Listening to Correy Honza, director of Internet marketing, run through these efforts, one salutes the company's
innovation quotient.
Fun is clearly a key element of the effort's success. Quiznos has 1 million-plus online loyalty program members, mostly built
through coupon and sweeps offers. It had an open rate of 52% in 2006. (The quick-service restaurant industry as a whole has
an open rate of between 30% and 40%).
Some recent program highlights:
Partnership with New Line Cinema on a sweeps page last year. Entrants trying to win the holiday gift basket, which
included movie passes, could opt into the loyalty database for ongoing rewards opportunities. Open rate: 61%;
click-through, 40% (typical QSR industry click-through is 10%); 15% conversion (including 4% new loyalty sign-ups).
A mobile campaign in which prospects/customers in three types of markets (suburban, rural, college) who visited Q's
stores saw a promotion hyping "Text for your instant offer!" Those who downloaded the offers could redeem them
at the cashiers. They received a thank-you email and offered the loyalty opt-in to receive ongoing offers/rewards.
Four weeks later, Q sent a bounce-back messsage and asked for feedback on the promotion. Those who responded
got a $5 gift certificate.
This campaign generated a stupendous 83% open rate, 34% click-through, 19% mobile conversion, 23% bounceback
redemption rate. Of those who answered the survey, 83% said they'd like to receive one mobile offer per
month.
Off-deck, on-demand coupon effort through CallFire in the Seattle market drew a higher open and redemption
rate than any other QSR in that market, with a 20% coupon view and 12% redemption.
Gaming is also in the mix. Quiznos teamed with Microsoft to be the exclusive sponsor of the XBox 360 Pac-Man
World Championship, a great way to increase its worldwide visibility. Gamers who played Pac-Man's latest version on
their XBoxes and were top scorers were sent to New York for the tournament. Quiznos supported the launch with
Thursday, December 13, 2007 Page 6
online advertising and a $500 gift certificate giveaway, and encouraged consumers to sign up for the loyalty rewards
program. Quiznos benefited from great press coverage of the program, signage and sampling at the tournament.
When it wanted to launch milkshakes in the chain, Quiznos had a Web site created: howmuchcanyoutake.com.
Users tried to drink a shake more quickly than the shake being "consumed" by the computer on screen, without
getting "brain freeze." It was promoted through blogs and email (loyalty and rented names). The campaign was a big
hit, although shakes didn't pan out as a Quiznos item.
An Adventure Sweeps with New Line and other partners that harnessed the power of the refer-a-friend component
of email. Loyalty program members who encouraged friends to enter the sweeps received one additional entry for
themselves for every friend who entered. Results: 29,000 new names. Cost: $1,500.
User-generated video: A Quiznos versus Subway campaign expanded Q's footprint. In an "Ad Challenge," consumers
were urged to film their own commercials (iFilm partnered on the production end). VH1's Best Week Ever show
showed one user-generated Quiznos vs. Subway commercial each week, and critiqued it. Quiznos received 130
entries, and the videos still live online.
Online content: Quiznos recently began supplying online content in between coupons/offers. The "Chef-Inspired
Minute" consists of podcasts by a chef who helps consumers produce high-end meals in minutes.
Cable TV industry wants FCC order stayed
The cable television industry on Tuesday told federal regulators it would go to court if they didn't stay an order that would
invalidate existing exclusive contracts between cable operators and apartment buildings.
The Federal Communications Commission in late October unanimously approved a rule banning exclusive deals -- including
existing arrangements -- between cable companies, such as Comcast Corp. and Time Warner Cable Inc., and multi-unit
dwellings.
The FCC said the move would open competition up to other video providers and eventually lower prices.
However, the National Cable & Telecommunications Association said it is unlawful for the government to invalidate existing
contracts, which provide apartment residents with better pricing and service.
The association, which wants the FCC to stay only the part of the order that bans existing deals, says if no decision is made
by
Dec.21, it will go to the U.S. Court of Appeals for the stay.
FCC Chairman Kevin Martin had previously said the ban could help lower cable rates for the millions of apartment-dwelling
subscribers, in particularly minorities who disproportionately live in multi-unit dwellings.
An FCC spokeswoman did not comment on the matter.
Judge's harsh words about Radler may have him spooked, experts say
- Harsh words for David Radler from the judge in Conrad Black's fraud sentencing have moved the star prosecution witness
to
reinforce his image in hopes of keeping the lenient sentence agreed to in his plea bargain.
Radler's lawyers have submitted dozens of letters in his support to Judge Amy St. Eve since Monday when Black - Radler's
former business partner - was sentenced to six and a half years in prison for fraud and obstruction of justice.
In the filing, the lawyers characterized Radler as a "kind, decent and generous... deeply religious man... who devotes himself
to his family and cares for his community, friends and employees, in contrast to his public persona of a tough
businessperson."
Radler, 65, was Black's right-hand man at Hollinger International. He agreed to testify against Black and three other former
executives in exchange for a 29-month sentence and a $250,000 fine.
His plea agreement must be approved on Monday by St. Eve, who gave Black a much lower sentence than the up to 35 years
prosecutors had wanted in part because Radler was "at least equally culpable as Mr. Black."
At Black's sentencing, she also dismissed a government request to consider Black the ringleader of the fraud scheme, saying
that "the evidence at trial demonstrates his co-defendant Radler was calling just as many shots in directing, in many
instances,
where the money was going."
"The judge made some comments on Monday about Radler and how she thought it would be unfair to Black if his sentence
was dramatically disproportionate to Radler's," said Andrew Stoltmann, a Chicago securities lawyer who has been following
the
case.
"I will almost guarantee you that (this week's court) filing with respect to Radler was predicated in part off of Judge Amy St.
Eve's comments on Monday, and both Radler and his lawyers are spooked that the judge may disregard the recommendation
form the prosecutors and recommend a much harsher sentence."
Radler's lawyers are asking St. Eve to impose the recommended sentence, citing "Radler's extensive co-operation with the
government and acceptance of responsibility," as well as the millions he paid back in restitution and fines.
Thursday, December 13, 2007 Page 7
"It is obvious to anybody who knows him that he is a devoted family man and that his co-operation with the U.S. government
has caused him and his family public scorn," Catherine Keri, a former colleague, wrote in one of the letters.
"I know that David carries that weight on his shoulders and it must be very heavy, yet he conducts himself with grace."
Yitzchak Wineberg, a Rabbi at one Vancouver synagogue, said Radler also "cares deeply for his aged mother who is in a
nursing
home on the east coast" of the United States, who "will never see her son again."
One can "hear the pain in (Radler's) voice as he describe(s) the anguish" of being unable to care for his infirm mother," said
friend Daniel Nack.
While experts agree increasing a sentence agreed to in exchange for testimony would send the wrong message and deter
others from coming forward in future cases, the judge has the last word.
Rick Powers, assistant dean of management at the University of Toronto, dismissed speculation Radler's sentence could be
increased as "bluffing on both sides" and said that "the overriding principle here is that (Radler) did cut a deal."
"It would certainly be sending the wrong message to the prosecution and setting a very unclear precedent for future cases,"
Powers said.
"It's not just his testimony where he contributed, but he showed them where to look."
But, he added, while the judge is unlikely to increase the sentence: "I don't think Radler can expect it to be reduced."
Black's lead defence lawyer Eddie Greenspan attacked Radler throughout the trial, calling him a liar, a thief and a coward who
made up testimony to save his "sweetheart deal" with prosecutors.
During his time on the witness stand, Radler's statements were peppered with inconsistencies, outbursts and deflection,
leading prosecutors themselves to play down his testimony in closing arguments.
At one point, lead prosecutor Eric Sussman became so frustrated with Radler's cagey responses that he blurted out: "You're
killing me here!"
"I don't think there's any question that Judge Amy St. Eve really dislikes and despises Radler," Stoltmann said.
"If the judge feels Radler was dishonest, disingenuous, possibly perjured himself on the stand, she can completely disregard
the prosecutors' recommendation and sentence him to a much harsher sentence."
Shreveport, LA daily to go Berliner in press deal
The Times in Shreveport, La., will convert to Berliner as the paper gets a reconditioned press in a $15 million project to be
completed in 2010. The paper is installing a 1991-vintage WIFAG OF 790 press obtained from reseller Graphic Web Systems,
according to Peter Zanmiller, publisher. Zanmiller said he and Gannett Co. Inc. production executives have been working with
GWS for the past six months to find a press to replace The Times’ 46-year-old letterpress.
“Economics play into this,” Zanmiller said about the decision to buy a reconditioned rather than a new press. “We feel as if
we got a great deal and we are going to get the biggest bang for our buck.”
Netherlands-based GWS specializes in finding and reconditioning presses for resale. The press The Times is buying is
currently
in operation at a printer in Switzerland. It will go off-edition next summer and then shipped to Shreveport in May 2009.
The shafted press will be configured as four towers and two folders. The Times will convert from its current 54-inch-wide,
22.75-inch high broadsheet format to an 18.5-inch by 11-inch wide Berliner upon commissioning. The paper will construct a
new press hall, attached to a current newsprint warehouse, to house the press. Dario Designs Inc. is overseeing the project.
Newspapers & Technology will have more information about The Times’ press in the January 2008 issue.




Saturday, December 15, 2007
TOPICS TOPICS TOPICS
Sears Submits Draft Merger Agreement
NEW YORK (AP) - Sears Holdings Corp. reported Friday that it has submitted a draft acquisition agreement to the furniture
retailer Restoration Hardware Inc. that offers to pay its stockholders $6.75 per share in cash through a tender offer.
The draft agreement, which was submitted Wednesday, was disclosed in a Securities and Exchange Commission filing on
Friday.
After receiving the draft agreement, Restoration Hardware's special committee declared Sears Holdings an "excluded party"
under its prior acquisition deal with Catterton Partners, which allows negotiations to move forward. The private-equity firm
offered Restoration Hardware $6.70 per share on Nov. 8.
Sears, which already owns 13.7 percent of Restoration, had made a tentative offer of $6.75 per share for Restoration
Hardware on Nov. 23.
Last week, Restoration Hardware and Sears agreed to a confidentiality pact that gives Sears access to nonpublic information
about the retailer. According to Friday's filing, Sears plans to evaluate the company and the desirability of the acquisition
under the terms of the confidentiality deal.
In morning trading, Restoration Hardware shares dropped 16 cents, or 2.3 percent, to $6.80. The stock has traded between
$2.56 and $8.88 during the past 52 weeks. Sears shares fell $3.3, or 3 percent, to $106.04. During the past 52 weeks, the
stock has traded between $98.25 and $195.18.
Macy's is buying holiday shoppers in the New York metropolitan area extra time.
Beginning 7 a.m. Friday, Dec. 21, seven Macy's stores, including the Herald Square flagship, will be open 24 hours daily until
6
p.m. on Christmas Eve. The other six stores are: Kings Plaza in Brooklyn, Cross County shopping center in Yonkers, the
Staten
Island mall on Staten Island, Roosevelt Field on Long Island, Newport Center in Jersey City and the Willowbrook mall in
Wayne,
N.J.
In addition, Macy's at Queens Center mall on Queens Boulevard will begin operating around the clock starting 7 a.m.
Thursday.
Amid macroeconomic challenges and a highly promotional holiday season for retailers, Christine Augustine, retail analyst at
Bear Stearns, differed from some competitors and consultants who suggested that the move announced Thursday was
intended to offset weak holiday sales. .
"It's 'so far, so good' for Macy's,'' she said. "November was very strong. The outlook for comps in December is down, but
that's
as planned. So far, Macy's is tracking as planned for the quarter as far as sales. Macy's, in my opinion, has done a much
better
Saturday, December 15, 2007 Page 2
job of controlling their inventory and protecting their margins. Their competitors are a lot more desperate and doing a lot
more couponing."
If the retailer "were [operating 24-7] at all of it 850 stores, I would be more concerned they were worried about the season,''
Augustine said. "But you know this is also New York — the city that never sleeps. So why not stay open 24 hours?"
Macy's countered speculation that the policy was motivated by disappointing sales. "This is not a last-minute decision," said
Elina Kazan, a Macy's East spokeswoman. "Something like this you just can't pull together at the last minute." The eight
stores
designated for round-the-clock shopping are all "extremely high-traffic" units, she added.
As for being hard on employees, Kazan said many associates volunteered to work the overnight shift.
Last year, Macy's in Queens Center operated round-the-clock a few days before Christmas. "That was a test for us,'' Kazan
said.
"It was a success. We decided to expand upon it.
"My sense is that Macy’s had this plan on the shelf as a contingency for a long time.??"
— Isaac Lagnado, Tactical Retail Solutions
"There is a lot that goes into going 24 hours,'' she continued. "It's not only about the staffing. It's about getting merchandise
on the floor, housekeeping, rearranging schedules, making sure cash registers are functioning."
And for customers, "Who wouldn't want the extra time to shop, so you can feel less rushed, less harried,'' Kazan said. "This
gives consumers the opportunity to shop at their convenience."
A former department store executive familiar with Macy's observed: "One could say that Macy's is providing a customer
convenience and that there is a need for it. In New York, there are a lot of people working different shifts," including hospital
and city workers. "In this economy, people are working two jobs a day, so to get extra time to shop is a benefit. I don't think
this is desperation [by Macy's], but there is no doubt they would not be doing this if the business was fabulous. They are
looking for every angle to get a plus to the business," most of which he expects will come from main floor categories,
including cosmetics, men's, handbags and jewelry. They tend to pick up as Christmas nears, said the former executive, who
asked not to be identified, adding, "This is not a bad move, as long as you don't force sales associates to do it."
Isaac Lagnado, president of Tactical Retail Solutions, said Macy's, as one of the larger mall tenants with stores typically in the
250,000- to 350,000-square-foot range, has "dominant operations" that can readily adopt to extraordinary hours. The Herald
Square flagship is already a 24-hour operation in terms of receiving, restocking the selling floors, housekeeping, security and
other functions.
"I think there is anxiety, and my sense is that Macy's had this plan on the shelf as a contingency for a long time," Lagnado
said.
At Wal-Mart, operating 24 hours is a year-round fact for a majority of the 2,435 Supercenters and 979 other Wal-Mart stores.
Some don't because of local ordinances.
"For a place like Wal-Mart, having a skeletal sales staff into the graveyard shift, as a percentage of the total operating budget,
is
quite small," Lagnado said. "The heating, air-conditioning, lights, maintenance crews and computer systems that run POS
and
inventory systems are on regardless. The incremental costs of adding sales staff are so small that basically any incremental
sales
can be a boon to the bottom line.
"Macy's stores are not the same as a typical Wal-Mart Superstore, but enough of the plant is the same,'' he said. "There's a
good rationale about incremental revenue versus the incremental cost."
Lagnado also said operating 24 hours is a way to level the playing field against Internet competition. He characterized Macy's
as
being at the forefront of the department store industry in terms of distribution centers and stockrooms. "They're quite good
at leading the pack in operations."
The extended hours will affect the competition immediately, Lagnado predicted. "Everybody from J.C. Penney [which also
has a store in the Queens Center] to other traditional department stores will have to adjust. It's like price cutting. When a
department store chooses to take a very visible markdown on a very visible line, the competition really has to match it. Macy's
new hours will be widely advertised. It's a very, very muscular move that the competition has to react to probably by this
weekend."
Saturday, December 15, 2007 Page 3
Costco Maintains Store Growth Pace
ISSAQUAH, WA-Costco Wholesale Corp. plans another 30 new stores for the 2008 fiscal year, the same number of new
locations opened in fiscal 2007, the chain's management said Thursday in reporting higher sales and profits for the first
quarter of the 2008 fiscal year. Company officials discussed the financial results in a conference call Thursday regarding
results
for the first quarter ended Nov. 25.
The new Costco stores opened in fiscal 2007 represented an increase of about 6.5% in unit growth and slightly more than
6.5% in square footage growth, accoriding to Richard Galanti, Costco's CFO. Galanti explained that the square footage growth
was slightly larger because Costco's new stores and its relocations tend to be larger than the existing stores.
Costco's net sales for the first quarter of fiscal 2008 increased 12% to nearly $15.5 billion from approximately $13.9 billion
during the first quarter of fiscal 2007. On a comparable store basis, net sales increased 8%.
Galanti said that the US comparable sales figures included the effect of recent gasoline price inflation, with the average sales
price per gallon of gasoline up 21% year-over-year for the first quarter. Excluding gasoline price inflation, US comparable
sales
in the first quarter would have been 4%. In addition, significantly stronger foreign exchange rates, particularly in Canada and
the UK, boosted the first quarter's international comparable sales results.
In addition to the gasoline price inflation and other factors, the comparable store sales increases reflected a combination of
an increase in the average transaction size at the company's stores as well as a higher number of transactions, Galanti said.
Net income for the first quarter increased 11% to $262 million, or 59 cents per diluted share, from $237 million, or 51 cents
per diluted share, during the first quarter of fiscal 2007.
Costco operates 529 warehouses, including 389 in the US and Puerto Rico, 75 in Canada, 19 in the UK, five in Korea, five in
Taiwan, six in Japan and 30 in Mexico.
Jos A. Bank Aims for at Least 600 units
HAMPSTEAD, MD-JoS. A. Bank Clothiers will open more and smaller stores in order to establish better relationships with its
customers, executives said at the company’s third-quarter conference call. Plans call for opening 50 stores annually for the
near future to achieve a goal of “at least” 600 stores nationwide, said Robert N. Wildrick, CEO and executive chairman.
By fiscal year-end, the company will have opened approximately 50 stores, ending with between 425 and 450 units. “We
prefer to open more stores, instead of larger stores far from the customer,” Wildrick said. “This allows us to know our
customers and have a relationship with them.”
In addition, diversifying the store base will reduce the impact of any poor real estate decisions, and cut back on customer
driving. “Core” markets, such as Chicago, Boston, Philadelphia and Los Angeles, will remain key to the expansion.
Sales for the quarter were $131.3 million, up from $119.5 million in the same quarter of the previous year. Comp-store sales
rose 3.1%. Earnings for the quarter were $7.1 million, up from $5.5 million in the year-ago quarter.
The locally based men's apparel retailer operates 415 stores in 42 states and the District of Columbia.
Safeway Outlines Growth Vehicles
Pleasanton, Calif. - December 14 - Safeway said on Thursday that it will introduce three new growth vehicles to drive 2008
earnings: experimenting with a new store format, monetizing two of its exclusive product lines and leveraging its health care
knowledge, according to a report on supermarketnews.com.
Speaking at an investors conference, Steve Burd, chairman, president and CEO, did not specify what the new format would
be, but called it “an experiment, not a launch.” Previous published reports said the chain was seeking sites for stores of
20,000 sq. ft. each in the San Jose area in Northern California. Some analysts speculated the smaller footprint represented
Safeway’s response to Tesco’s Fresh & Easy format.
Burd said Safeway also plans to offer its O Organics and Eating Right product lines to other outlets. The third growth initiative
would harness knowledge Safeway has accumulated over several years to reduce health care costs by encouraging people to
alter individual behavior.
Burd said two of the three new vehicles should make money in 2008, “and they could contribute as much as 10% to 12% of
earnings per share over five years.”
Saturday, December 15, 2007 Page 4
Sears' Lampert ups AutoNation stake
Investor Edward Lampert has raised his stake in AutoNation again, bringing it up to 31 percent, a Thursday Securities and
Exchange filing showed.
Lampert's hedge fund, ESL Investments, and related parties currently own 58.8 million shares in the Fort Lauderdale-based
auto retailer, up from 55.3 million shares reported on Nov. 27.
Lampert, AutoNation's (NYSE: AN) largest investor, has steadily increased his stake in the company since the beginning of
November.
Lampert is chairman of Sears Co. He was a director on AutoNation's board from January 2002 until May 2007. Bill Crowley,
ESL's president and chief operating officer, is still on the board. ESL has owned shares of AutoNation since 2000.
Shares closed down 43 cents to $15.20. The 52-week high was $23.19 on Feb. 7. The 52-week low was $15.42 on Nov. 20.
Dealerships Increasing Sophistication In The Digital World
MOST AUTO MARKET OBSERVERS WHO are following the ad money see it rushing online like traffic through the Lincoln
Tunnel. But what has dropped under the radar is the role those dollars are playing at the local level, with the increasing
sophistication of dealerships.
Princeton, N.J.-based media research firm Kelsey Group, whose Marketplaces program focuses on local-market tactics, says
dealers are finding their place in the digital world.
The study, "Automotive and the Internet: A Category in Transition" predicts automotive advertising worldwide will stay at
around $40 billion through 2011. Kelsey also sees online ad spend growing--from 5% of total this year to 13% by 2011, with
traditional classified advertising decreasing from 14% to 10%, and newspapers' auto advertising sinking from 17% to 14%.
Peter Krasilovsky, Marketplaces program director for The Kelsey Group, tells Marketing Daily that the automotive, real estate
and travel categories have experienced the greatest shift in marketing dollars to the Web compared to other verticals. "For
the auto industry, the Internet represents an ongoing battle between third-party sites, OEM [original equipment
manufacturers] sites and dealers," he says. But he adds that national and local marketers are finding which tactics are most
effective. "It isn't winner-take-all."
Dealers, for instance--most of whom now have Internet sales staff--have become more sophisticated about putting inventory
online, direct marketing to tout service, and using their own Web sites as marketing tools.
Meanwhile, consumers who are dedicated to specific brands are more likely to go to automaker OEM sites than to third-party
sites, per Krasilovsky. "I think there is a realization that OEMs are not going to dominate the market, that dealers want their
voice in the market. There is a realization that some people will go to the manufacturers' sites, and then there's a person who
wants to shop different vehicles, and there are people who want to be part of the car universe and not just when they are
buying a car."
He says that dealers are adding appointment-making capabilities to Web sites at the local level--and increasingly doing e-mail
offers with coupons for services, even newsletters. "That's become more commonplace. Dealers are also using the Web to
generate used car sales."
Dealers Spending More on Web Advertising, Marketing
COSTA MESA, Calif. — Results of the fifth annual Jupiter Research & NADAguides.com Auto Dealership Executive Survey
were
released Wednesday.
The study is designed to examine Internet operations for various dealerships. One of the companies' discoveries was that, of
the dealers surveyed, 43 percent said they spent more than $30,000 in 2006 on online advertising and marketing.
That figure marked a 14-percent incline since 2003, officials indicated. A major part of that spending, they added, was on
third-party Web sites and online classifieds.
Breaking it down further, 28 percent of dealers reported that they spent $50,000 or more on online advertising and
marketing, while 14 percent spent between $30,001 and $50,000.
"The Internet continues to gain momentum among auto dealers as a higher percentage than ever before are adopting online
advertising tactics, and many are increasing their online advertising budgets," stated Belis Aksoy, JupiterResearch's
automotive
analyst, referring to the report called U.S. Online Automotive Dealer Advertising Executive Survey 2007.
Saturday, December 15, 2007 Page 5
"Online marketers that provide their dealer customers with leads that become sales will be in the best position to capture an
increased amount of these dealers' online advertising budgets," Aksov continued.
Additionally, the study pointed out, dealers who had more success converting online leads to sales were more apt to use the
same online advertising to convert e-mail leads (at 74 percent) and phone leads (72 percent) than those who didn't have as
much success with online leads (51 and 54 percent, respectively.)
Also, dealers were more likely (65 percent) to use their own dealership Web site for consumers instead of a
manufacturersponsored
Web site (19 percent).
"These results demonstrate the fact that today's automotive retailers understand the importance of the Internet in their daily
business operations," explained Lenny Sims, vice president of operations at NADAguides.com.
"Not only have car dealers embraced the Internet, they're using it to expand their advertising and marketing efforts by
reaching out to car buyers via their own Web site operations, in addition to soliciting the help of third-party lead providers
such as NADAguides.com to help them sell more cars," Sims added.
To complete the study, the companies polled 106 dealerships throughout the country regarding their online operations,
specifically Internet-generated sales, advertising and marketing allocation.
Single- and multiple-franchise dealerships were surveyed and average 2006 sales between them came out at 1,700 new
vehicles and 1,700 used vehicles per dealership, officials indicated.
Mobile Ads: Not So Fast
Mobile advertising revenues aren't growing as fast as expected, and that could spell trouble for a bunch of venture-funded
startups
Ads on cell phones have long been hailed as the next big thing. But flipping through industry forecasts, Didier Kuhn says, "I
don't believe the figures I am seeing." And he doesn't mean that in a rah-rah kind of way.
Kuhn, CEO of a mobile advertising company acquired by Microsoft (MSFT) in May, views most analyst predictions as way too
rosy. Gartner (IT) expects $11 billion in global revenue from ads on mobile devices by 2011, up from less than $1 billion a
year now. Strategy Analytics sees an even bigger $14.4 billion revenue pie by then, accounting for a fifth of all online ad
spending. These forecasts are "incredibly steep," says Kuhn, relieved that his company, ScreenTonic, has Microsoft to watch
its back as the market develops. "It will take slightly more time for the industry to grow."
WIRELESS CARRIERS: NOT SO EAGER
Mike Baker, vice-president in change of Nokia's (NOK) ad business, also sees a longer wait, suggesting it will take at least five
years for the industry to surpass $10 billion in annual revenue. "The near-term visibility is cloudy," he says.
Realistically, no matter how often you see people checking e-mail on a BlackBerry or surfing the Web on an iPhone, the vast
majority of consumers are just beginning to use their phones for functions, other than calling, that are conducive to ads.
Today, only some 16% of U.S. wireless users access the Web on those devices at least once a month, according to
JupiterResearch. It doesn't help that the U.S. economy is being buffeted by the mortgage crisis and housing slump.
Wireless carriers, meanwhile, have been slow to embrace ads, fearful their customers will be driven away (BusinessWeek,
11/26/07) by floods of text-message spam or banners and pop-ups crowding such a tiny screen. As a result, only 10% of
nearly
2,000 Americans surveyed by Jupiter earlier this year said they'd ever received a text message from a business. "Advertisers
are just now testing and learning," says Baker. That testing could take a while: After all, it took advertisers 10 years to dive
with
both feet into a medium called the Internet.
VENTURE CAPITAL SPREE
But despite the likely delay in a mobile ad boom, investors have been pouring millions of venture capital into this nascent
business: Last month, a startup named Amobee drew funding from mobile carriers Vodafone (VOD) and Telefonica. Also in
November, Draper Fisher Jurvetson invested $2 million in mGinger, and Millennial Media raised $15 million from a group led
by Charles River Ventures.
This rush likely was instigated in part by a series of acquisitions in the sector. In September, Nokia bought Enpocket, a
provider
of a mobile ad platform. In May, Time Warner's (TWX) AOL unit purchased Third Screen Media, a mobile ad broker. That same
month, Microsoft acquired ScreenTonic. Financial terms of these deals were not disclosed.
STARTUP SQUEEZE
Problem is, many of the big players, such as Nokia and Microsoft, have already placed their bets, so the funding and takeover
spree may turn scarce for scores of other small mobile ad startups. "The technology in most of the startups isn't very
Saturday, December 15, 2007 Page 6
different," says Baker. "I don't think there's a lot of extra value" in more purchases for Nokia. Most of the startups enable
advertisers to contact users via SMS and multimedia messages. Many promise to insert ads into mobile music, video
services,
and mobile games.
That said, there are potential acquirers out there. Google (GOOG) still doesn't have the technology to serve SMS and
multimedia ads onto mobile phones. "We'll continue to invest," says Dilip Venkatachari, a product management director at
Google. So may traditional ad agencies and media companies that haven't yet developed a mobile play. But Nokia's Baker
says
many of these companies are choosing to develop the capabilities internally rather than through acquisitions.
Any unaffiliated startups will face an uphill battle competing with handset makers and the Internet giants that have already
jumped into the mobile advertising market. Yahoo! (YHOO), which boasts 500 million users of its online services, is now
showing mobile display ads in 16 countries, working with huge carriers such as Vodafone. "For us, this is a very strategic
area
for the company, where we invest a lot of people and dollars," says Gary Roshak, Yahoo's vice-president for mobile
advertisers
and publishers.
With the market not growing as quickly as expected, "it causes a problem for the many startups because they'll need to make
their cash last longer," says Baker. As such, industry insiders predict that many of them may be snapped on the cheap in a
year
or two.
A GOOGLE BOOST?
Many of the startups reject this glum outlook, pointing to new opportunities such as Verizon Wireless' plan to open its
network to more devices and services as a potential kickstart for the mobile ad business. It took CellySpace.com about 1?
years to get U.S. wireless carriers to allow its subscribers to receive text messages bearing coupons and ringtones created
with
the Web site's do-it-yourself software for small businesses. If wireless networks become more open, such approvals may take
less time, says Rich Eicher, president of Skycore, the company that launched CellySpace on Dec. 4.
Another possible boost may be the emergence of touch-screen devices like the iPhone, which make it easier to click on an
ad, as well as phones based on Google's Android (BusinessWeek.com, 09/06/07), a new wireless software platform designed
to enable easier and cheaper development of mobile applications. "Clearly, more openness is going to open up more
opportunities," says Paul Palmieri, CEO of Millennial Media, which delivers mobile ads for Ford (F) and Procter & Gamble
(PG).
It's too early, though, to say whether networks and phones will become open enough to facilitate a mobile ad boom any time
soon. "Right now, what we are really in is the foundation stage, trying to determine how to move into mobile advertising,"
says Phil Holden, a director of online services at Microsoft.
Chicago Sun-Times plans to cut '08 costs by $50 million, eliminate jobs
CHICAGO (AP) - Sun-Times Media Group Inc., owner of the Chicago Sun-Times and dozens of smaller area newspapers, said
Friday it will reduce operating costs by $50 million (euro34.46 million) in 2008 and make more layoffs in the face of a
"terrible" market for print advertising.
The company, under pressure from shareholders to return to profitability and boost its collapsed stock price, said its board of
directors endorsed management's latest cutback plan Thursday. A year of restructuring moves under Chief Executive Cyrus
Freidheim have yet to pay off; Sun-Times Media lost $192 million (euro132.33 million) in the third quarter on a 7 percent
decline in revenue.
The latest plan includes $10 million (euro6.89 million) in anticipated savings from its recent distribution agreement with the
Chicago Tribune and the consolidation last month of two suburban papers - the Daily Southtown and the Star - into the Tinley
Park, Illinois-based Southtown Star.
Freidheim told the staff in a memo that it will be "by far the biggest cost-reduction effort in our company's history," including
a reduction in staff, further outsourcing of selected activities and reformatting of the company's products.
The company has failed to achieve one of the most important goals of its nearly year-old turnaround plan: to slow and
eventually stabilize the decline in advertising revenue, Freidheim said.
"The market for print advertising has been terrible," Freidheim said. "Simply put, we have to accept that the print advertising
market may never again reach the levels of the past. Consequently, we must scale our organization to meet that reality."
The board's adoption of the plan came two days after the company's largest shareholder, K Capital Partners, voiced its
dissatisfaction with the continued decline, urging it in a letter to develop a new strategy and to inform investors of the key
points by Jan. 15.
Saturday, December 15, 2007 Page 7
Boston-based K Capital, which owns a 9.8 percent stake, also said the company should compensate executives and directors
entirely in stock and limit 2008 compensation.
The company, while not mentioning the demand, took steps in that direction. It said Freidheim and other executives have
agreed to take a portion of their 2008 compensation in shares of Sun-Times Media Group Class A common stock and board
members have agreed to receive 100 percent of their 2008 annual retainer fees in stock.
"Management needs to set an example and demonstrate the confidence it has in the future of Sun-Times Media Group,"
Freidheim said in a news release.
In 2006, when the company lost $56.7 million (euro39.08 million), former CEO Gordon Paris received $3.7 million
(euro2.55 million) in compensation and Freidheim, who succeeded him 13 months ago, got $1.2 million (euro830,000).
Murdoch Celebrates Dow Jones Takeover -- With Two-Page 'NYT' Ad
NEW YORK The News Corp. purchase of Dow Jones, including the Wall Street Journal, became official on Thursday with the
shareholders' vote, and today the Rupert Murdoch-led company celebrated in a two-page spread in a key rival, The New York
Times.
The ad is a kind of timeline under the heading, "Defying conventional wisdom for six decades." The copy starts, "Time and
again, they said it couldn't be done. Time and again, we did it....If we'd listened to conventional wisdom and hadn't stirred
things up, we wouldn't be where we are today...."
The timeline opens in 1954 as Murdoch "rescues" an afternoon daily in Adelaide, Australia. It quotes without attribution the
comment, theoretically at that time, "He'll be broke in a year." In fact, for the nearly two dozen landmarks, the quotes are
not attributed, but that's not the point.
It then traces Murdoch's purchase of other papers and TV stations in Australia, with similar naysaying proven wrong, leading
to
the takeover of the New York Post in 1976 -- the comment in that case simply reprints the classic hed, "Headless body in
topless bar."
From there comes the purchase of a movie studio and launching the FOX TV network ("Nobody can bust the big three") and
so on, right through MySpace and then the crowning late-2007 critique, "The Wall Street Journal will never be the same,"
with this cheeky retort: "And that's a promise."
Monday, December 17, 2007
TOPICS TOPICS TOPICS
Retailers Face an Ominous Holiday Signs
Retailers look to final holiday shopping days to meet sales goals after unimpressive weekend
NEW YORK (AP) - Despite generous discounting and expanded shopping hours earlier in the season, many U.S. stores are
finding themselves in the same predicament as in recent years: waiting for those last-minute shoppers in the final days before
Christmas who seem to be procrastinating even more than a year ago.
Based on early reports from analysts and malls, sales results were generally unimpressive this past weekend, as shoppers
were
held back by a snow storm that spread a mix of sleet, freezing rain and snow from the Great Lakes states to New England.
Consumers, fretting about economic worries, were also delaying their shopping even more this year, knowing there is a full
weekend before Christmas, when the bargains will be even better.
Meanwhile, for online retailers, which finished their busiest days last week, their fate appears to be already sealed: holiday
sales did not live up to industry's hopes as lower-income shoppers pulled back on spending amid a housing slump.
ComScore
Inc. reported on Sunday that online sales from Nov. 1 through Dec. 14 rose 18 percent, below the 26 percent growth rate
seen in the year-ago period and below the 20 percent projection for the season.
"This holiday season at this point has been disappointing, whether they're brick and mortar, catalog or online," said C. Britt
Beemer, chairman of America's Research Group, based in Charleston, South Carolina. "Shoppers are more frugal and
costconscious
because they have less money to spend." As for Saturday and Sunday, he said, "This weekend was busy, but it
wasn't huge."
Bill Martin, co-founder of ShopperTrak RCT Corp., was more upbeat, noting that the fate of the holiday season depends on
the final stretch, predicting business in the final days will be "huge." According to ShopperTrak, five of the remaining days
left
until Christmas account for the biggest sales days of the season.
Shoppers at malls over the weekend seemed to be taking their time.
"I think there's better deals now," said Mike Weigel of Shoreview, Minnesota. He just started holiday shopping and was on the
hunt for a plasma TV while at the Mall of America in Bloomington, Minnesota, on Friday afternoon.
"I always like to wait until the panic rush," said Michelle Williams of Kingwood, Texas, who was at the Woodlands Mall near
Houston. She had just started Friday night. "I want to get it all done this week," he added.
After a strong Thanksgiving weekend, the official start of the holiday shopping season, business has slowed even more than
normal, resulting in mixed November results for retailers and uneven business so far in December. There's been a shopping
frenzy surrounding such hard-to-find items as Nintendo Co.'s Wii and UGG Australian sheepskin boots, and anything from
Walt
Disney Co.'s Hanna Montana and "High School Musical" franchises have been hugely popular. But, generally, there seems to
be a lack of enthusiasm for holiday buying this season.
Monday, December 17, 2007 Page 2
"I am trying to get almost everybody done in one shot, type of thing, because I am pretty busy with school and work and stuff.
So I'm basically tired," said Melissa Browne-Smith, who was at Stonestown Mall in San Francisco on Saturday night.
U.S. stores were stepping up discounts and were set to expand their hours in the final days before Christmas. Toys "R" Us
had a
two-day sale Friday and Saturday, opening from 7 a.m to midnight; the largest U.S. specialty toy seller is slated to stay open
until midnight every day until Christmas Eve. Macy's Inc., which was offering deep discounts on clothing and jewelry, plans to
pull all-nighters at several of its stores in the final days before Christmas.
Plenty of retailers are getting anxious, offering last-minute enticements to spur sales. Toy seller FAO Schwarz added a free
shipping and 25 percent discount offer on all goods ordered at fao.com through Tuesday. Others resorted to even more
desperate means. On Saturday, a sales clerk outside a midtown Manhattan location of Lane Bryant, a large-size clothing
chain,
blasted "40 percent discounts" using a bull horn.
Store executives say consumers are even more savvy about buying this season, doing a lot of their homework before they
grab deals. This year, the economy, particularly the housing crisis, has hurt shoppers' spending.
"I got laid off from my job in the mortgage industry," said Janina Kosloski of Orange County, California, who was visiting
relatives in Minnesota. "Right now, I'm basically scared of losing my house."
That has forced her to cut her holiday spending by half as she scours for bargains. She noted that she recently bought
"Sopranos" DVDs at deepdiscount.com, at a price much cheaper than other outlets.
FAO Schwarz CEO Ed Schmults said it was too early to tell how shoppers responded to his store's last-minute free shipping
offer but added, "We are still looking at next weekend to be a big weekend."
He noted that this past weekend, the toy retailer, which operates stores in Manhattan and Las Vegas and a shop at Macy's in
Chicago, had solid sales on the Internet but weaker sales in Las Vegas and New York, though business was strong at its
Macy's
outpost.
Toys "R" Us Chairman and CEO Jerry Storch said business was "satisfactory" this past weekend, and he is clearly seeing
"steady
increases in business." Only a handful of its stores had to close early because of the winter storm, he said.
Karen MacDonald, spokeswoman at Taubman Inc., which operates 24 malls in 11 states, said that based on a spot-check of
malls, stores reported business that ranged from unchanged to an increase of low single digits for the past week compared
with the same period a year ago. For the weekend, business was up low to mid single digits versus a year ago. Among the hot
sellers are UGG boots and gift cards, she said.
Macy's Woos Night Owls 24/3
IN AN EFFORT TO GOOSE holiday sales, Macy's will keep seven of its New York-area stores open 'round the clock, beginning
Friday, reports Women's Wear Daily.
An eighth store, at Queens Center Mall, will open 24 hours beginning Thursday. The stores will close at 6 p.m. on Christmas
Eve.
WWD reports that a Macy's spokesperson denies the move stems from desperation. "This is not a last-minute decision," she
says. "Something of this magnitude you can't pull together at the last minute."
Kohl's Web sales running strong
Kohl's Department Stores' expansion of its online retailing is off to a strong start.
E-commerce sales have increased 43.4 percent, to $143.8 million, through the first three quarters of 2007 for the
Menomonee Falls-based retailer, according to its 10-Q financial report filed Dec. 7. E-commerce sales were $42.5 million for
the third quarter compared with $40 million for the third quarter of last year, up 6.3 percent. In comparison, same-store
sales were down 2.6 percent.
"Kohls.com has experienced significant growth," said Kohl's spokeswoman Vicki Shamion.
Monday, December 17, 2007 Page 3
Kohl's launched its updated Web site in late August, but encountered some glitches that limited consumer access the first
few
days.
The company nearly doubled the size of its fulfillment center in Monroe, Ohio, to handle increased online sales.
David Cumberland, an analyst for Robert W. Baird & Co. Inc. in Chicago, said Kohl's online sales remain small, at only 1.3
percent of total revenue, but it's "strategically important" for the retailer to connect with consumers via the Web. The
company is using the Web site to drive customers to stores and to serve shoppers of specific lines such as "Simply Vera" by
Vera
Wang, he said.
Another buyer steps up for Value City
The clock is ticking for Value City Department Stores.
Retail Ventures Inc. said Monday that it entered into a non-binding agreement of interest with an unnamed party for the sale
of the remaining 89 off-price department stores it owns. The two parties have 25 days to conduct due diligence and come to
an agreement.
Retail Ventures declined further comment.
It has been a year since Retail Ventures (NYSE:RVI) began exploring options for the 113-unit chain, including a potential sale.
The Columbus-based retailer announced Oct. 3 that it was selling 24 stores to Burlington, N.J.-based Burlington Coat Factory
Warehouse Corp. for an undisclosed sum.
Two of the company's three Columbus stores - 3251 Westerville Road on the city's north side and 6055 E. Main St. on the
east side - are in that sale. They are scheduled to stay open through March 2008, at which point the conversion to Burlington
Coat Factory, which has 384 discount department stores in 44 states, will take place.
Retail Ventures retained ownership of its west side store at 3400 North Boulevard. Columbus stores are branded as
Schottenstein's Department Stores.
Sales at Value City in the quarter ended Nov. 3 were $298 million, down from $341 million in third quarter 2006. Same-store
sales, for locations open at least one year, were down 13.4 percent in the quarter, compared with a 1.4 percent increase in
third quarter 2006.
Toys 'R' Us helps out last-minute shoppers
WAYNE , N.J. (Dec. 17) Toys "R" Us today announced a number of initiatives to help last-minute shoppers find the perfect
holiday gifts.
In order to accomodate holiday shoppers this week, the company said it will be extending its store hours through Christmas
Eve, remaining open until midnight on the days before Dec. 24. Toys "R" Us also ensured customers that new shipments of
popular holiday toys will be arriving daily.
Online Toys "R" Us is offering free shipping until Dec. 18 and second-day and overnight shipping, allowing shoppers to
make purchases as late as noon on Dec. 21.
"Each year, we see more customers start their holiday shopping closer to Christmas, and this season we're seeing this trend
more than ever. With Christmas falling on a Tuesday, the most ardent procrastinators have an entire extra weekend to shop
before the big day and they are going to take advantage of it," said Ron Boire, president of Toys "R" Us, North America.
"As The toy authority, Toys "R" Us prides itself on ensuring our customers can find the toys they want in-stock throughout
the
final days leading up to Christmas. Our toy-trained staff stands ready to help customers successfully cross-off all items on
their
Christmas gift list during this final rush."
TALBOTS TAPS COHEN FOR CHIEF MERCHANDISING OFFICER
Talbots has named Basha Cohen as executive vice president and chief merchandising officer for the brand.
In her new role, Cohen, 47, will oversee product development and manage merchandise for Talbots working from the
company’s Hingham, MA, headquarters. She replaces Hal Bosworth, who retired in July.
The post takes effect today.
Previously, Cohen was executive vice president of design and merchandising at the Kellwood Co., where she helped launch a
new business division—Dockers Women’s. Before that, she worked as senior vice president of women’s product
development
at J. Crew.
Monday, December 17, 2007 Page 4
Talbots also named Michael Smaldone as its chief creative officer, a new company position.
In his job, Smaldone, 43, will oversee the direction of the Talbots brand image. He most recently worked as senior vice
president of design at Ann Taylor.
The new hires are part of the company’s strategy to strengthen, reposition and reinvigorate the brand, Talbots said.
Ikea to focus on stores, not e-commerce
But will continue online sales in U.S.
NEW YORK — A memo circulated to Ikea employees in Sweden signals a change in retail strategy for the vertically integrated
global furniture giant.
According to the memo, which came from Anders Dahlvig, Ikea’s CEO and president, the Swedish company will focus on the
in-store experience as “the only sales channel,” putting a halt on “further investments to develop the Home Shopping or
Online sales channel(s).”
Mona A. Liss, a spokesperson for Ikea U.S. and a member of the company’s U.S. corporate public relations staff, confirmed
the
authenticity of the memo but said there are no plans to discontinue e-commerce in the United States.
“The global message (in the memo) is about the direction of the company to focus on the in-store shopping experience,”
Liss said in an e-mail.
The shift coincides with openings of huge new stores in Belfast, Northern Ireland; Coventry, England; Malaga, Spain;
Moscow;
and central and south Florida.
According to the memo from Dahlvig dated Dec. 7, the focus on in-store efforts is the result of a decision from Ikea’s board, a
decision based on the belief that Ikea “can give customers the best offer and the lowest price by making the range available
only through Ikea stores.”
The verbiage referring to exclusivity suggests a discontinuance of e-commerce. Reinforcing this interpretation is the
statement from Dahlvig that Ikea’s Web site will continue to be developed as “an important communication channel to
recruit, inspire and prepare customers for their visit to the Ikea store.”
Liss emphasized, however, that no decision to cease e-commerce in the United States had been made.
Dahlvig, who has been Ikea Group CEO since 1999, also cited the high costs associated with e-commerce as the reason for
the
change in direction. The large investment costs represent a commitment the company is “not prepared to make,” he wrote.
In June, Ikea rolled out a new Web site design in 24 countries, a design that emphasized social shopping functions. At the
time, Allan Lidforsen, Ikea’s online group manager, said, “It is a great challenge to translate the Ikea brand values and visual
identity to the Internet.”
The shift in emphasis also could be a response to what have been problems with stores in the United Kingdom. Ikea has had
to
respond to overcrowding and customer complaints in the United Kingdom, as well as the negative publicity these problems
have created.
The company introduced e-commerce in the United Kingdom in May, and in Germany, Denmark and Sweden before that.
The first e-commerce presence for the company was in 2000 in Sweden.
In the United States, Ikea offers online approximately a third of the products made available in its superstores.
Earlier this year, Liss acknowledged to the New York Times some difficulty with e-commerce.
“We do have some challenges with our process of placing online orders,” she told the newspaper, saying the company
planned to improve the checkout process.
WaMu closes 10 South Florida loan offices
Washington Mutual said it has closed 10 home loan centers and eliminated 110 jobs in its seven-county South Florida region,
which includes Miami-Dade, Broward and Palm Beach.
Nova Barnett, a spokeswoman for Seattle-based Washington Mutual (NYSE: WM), told the Business Journal that the bank
began closing those offices on Dec. 11 and will complete the process by the end of the year. Washington Mutual, known as
WaMu, did not give addresses of offices it is closing.
The company is keeping 10 home loan centers in its South Florida market, Barnett said. Offices in Lake Worth, Coral Gables,
Boca Raton, Aventura, Miami Lakes, Pinecrest and Weston are among those that remain open.
Washington Mutual, the country's largest savings bank with $330 billion in assets, uses home loan centers to make
residential
mortgages.
Monday, December 17, 2007 Page 5
On Dec. 10, WaMu said it would close 190 of its 336 home loan centers and eliminate about 2,600 jobs in its multi-state
system.
WaMu did not announce any closings of its branches, which take deposits and make mortgages and other loans.
"We do not have any announcements to make regarding future [branch] closings at this time," Barnett said.
WaMu had 125 branches and $8.8 billion in deposits in the three-county South Florida market on June 30, 2007, according
to the FDIC. That placed it third in South Florida in both categories, behind Charlotte, N.C.-based rivals Wachovia (NYSE: WB)
and Bank of America (NYSE: BAC).
WaMu said it is closing home loan centers in response to the slumping housing and credit markets. The company said it
plans to
shift more of its mortgage lending business to its branches.
WaMu is among banks that have reported lower earnings amid the mortgage slowdown, while also taking write-downs on
subprime loans and other mortgages.
On Dec. 10, WaMu said it expects its loan loss provisions for this year's fourth quarter will be between $1.5 billion and $1.6
billion, about twice the level of its net charge-offs for the quarter. The company said it expects higher loan loss provisions
would continue through the end of 2008.
GM adds incentives
General Motors Corp., in the midst of a year-end sale, is adding incentives on large pickups and some SUVs, the company
said
on Friday. Discounts include $1,000 bonus cash for 2008 models of regular cab Chevrolet Silverado and GMC Sierra pickup
trucks and the Chevrolet Suburban, GMC Yukon XL and Denali XL. Buyers also will get $1,000 cash toward the purchase of a
Pontiac Torrent SUV or Chevrolet Equinox SUV. Gas-powered heavy-duty pickups will get a $1,500 discount; diesel pickups
will get $2,500.
Auto show packs punch
Its economic impact is bigger than the Super Bowl and MLB All-Star game combined and it happens every year in Detroit. The
North American International Auto Show is expected to pump about $500 million into the local economy, said David Sowerby,
portfolio manager at Loomis Sayles & Co. By contrast, Super Bowl XL, played in Detroit in 2006, and the 2005 Major League
All-Star game brought a -- generously estimated -- $300 million combined to the region. The 2008 auto show will feature
more than 50 new models.
Automakers Will Steer More Spend From TV and Print Toward Digital
Analysts: Overall Outlays Will Be Flat or Down in '08 as Sales Slip Below 16 Million
DETROIT (AdAge.com) -- Next year could be a banner year for auto advertising -- online.
Beleaguered U.S. automakers are in for another rough road in 2008, with Detroit worst hit. Unit sales are expected to fall
below 16 million, and researchers are predicting ad spending will be flat to down.
To move that metal, experts believe the industry will continue to put a lot more emphasis on digital and out-of-home.
Network TV dollars also are predicted to migrate to spot as regional dealer associations take a firmer grip on spending.
Advertising researcher Kelsey Group projects that annual ad global spending by automakers, their dealers and auto services
such as muffler shops will hold steady at $40 billion through 2011. The report predicted that online global auto ad spending
will grow to 13% in 2011 from 5% in 2007, with traditional newspaper classifieds' share shrinking to 10% from 14% and
newspaper display ads to 14% from 17% during the same period.
Kelsey Group estimates automakers' 2008 U.S. ad spending will be flat or down slightly. CEO Neal Polachek said carmakers
will
shift more dollars online and to out-of-home, with declines in TV, magazines, newspapers and direct mail.
Continuing TV decline
That is a continuation of a shift. Automakers, including their local dealers, have increased internet spending fourfold since
2002, according to TNS Media Intelligence -- to $739 million last year from $175 million five years ago -- and that undercounts
outlays since search isn't included. TV and cable spending rose too but at a much slower rate, climbing to $10.1 billion last
year from $9.1 billion in 2002, according to TNS, and magazines grew marginally.
Monday, December 17, 2007 Page 6
General Motors Corp., which will allow regional dealer groups to pick their own creative or media agencies April 1, is steering
them to the internet. The marketer's data show the net is the first medium chosen by consumers when car shopping, Brent
Dewar, VP-field sales, service and parts for GM in North America, told Advertising Age. He said GM is trying to persuade
dealer
groups "to shift their focus to digital vs. spot TV."
Hyundai Motor America doubled its online ad spending for 2008 vs. 2007, Joel Ewanick, VP-marketing, told Ad Age. The
automaker also is pushing for a return to spot TV in a big way. He said a bigger bump in spot TV is for regional dealer ad
groups,
while Hyundai will have a smaller increase for national TV.
Hyundai, which disbanded those regional-dealer ad groups in 2007, is reforming them and will quadruple its contributions to
them next year, urging the groups to go back to TV, Mr. Ewanick said. Nationally, the automaker will also bump up its TV ad
spending but not as much, he said, declining to give any specifics. "We have to get noticed," he said.
'Not really that bad'
Bob Schnorbus, chief economist at J.D. Power & Associates, predicted Americans next year will buy between 15.7 million and
15.8 million new vehicles with a continued move to smaller, fuel-efficient models. "We've been averaging 16.9 million units a
year over the first part of this decade, so dropping below 16 million is not really that bad a year," he said.
To stem the tide, Susan Jacobs, president of auto consultant Jacobs & Associates, expects automakers to put a lot of their
efforts toward keeping their existing buyers. That, she said, will require more product advertising than brand advertising. "In a
down market, it's better to channel your marketing efforts on retaining your owners instead of on advertising to conquest
new ones," she said. So car companies will focus on customer relationship management and owner-loyalty programs, she
added.
What buyers shouldn't expect is better price deals. Jessica Caldwell, an analyst with auto-info site Edmunds.com, predicted
the car companies' incentives will stay flat in '08, although the industry average could rise a few hundred dollars from 2007's
average of $2,300 a vehicle. "It's not going to be thousands of dollars more."
Not everyone is pessimistic about Detroit's chances next year. Troy Clarke, president of GM in North America, told Ad Age he
believes 2008 will start slowly for the auto industry, like 2007 did, but gain momentum as the months pass. He said the auto
giant's full distribution of models launched in 2007, including the Cadillac CTS and Chevrolet Malibu sedans, will help boost
GM. "I'm optimistic," Mr. Clarke said.
AT&T Scores Touchdown With Aggressive Campaign
AT&T STEPPED INTO AN AGGRESSIVE advertising campaign Sunday, running full-page ads in 20 daily newspapers around
the
country to let consumers know they can get NFL Network as part of the carrier's most popular programming packages on
Uverse
or Homezone.
Most cable customers must either pay more for sports access to football games or go without. Cable companies offer the NFL
Network in more expensive packages, but AT&T provides it in its standard package.
In white letters on a bright orange background, the ad that ran in Dallas, Los Angeles and among many other markets boldly
states "AT&T Advanced TV shows NFL Network. Charter doesn't." The name of the cable company changes to reflect the
market.
The ad appeals to the football fan's love of the game. "Will the Patriots go undefeated? Will the Giants be the spoiler? Either
way, it's a chance to watch history in the making. That is, if you have NFL Network. It's one more reason you need AT&T
Advanced TV." The ad suggests consumers visit their nearest AT&T store to get connected.
The new ad campaign attempts to communicate the differences between AT&T's services and those of cable companies like
Time Warner, Charter and Suddenlink, according to Brad Mays, AT&T spokesman. "AT&T offers better control and richer
highdefinition
content," he tells Marketing Daily.
Adding to the new print ads designed by BBDO Worldwide, AT&T also began airing a TV spot dubbed "Intervention" earlier
this
month in several markets.
Football fanatic Carl Benninger, operational manager at Torrance, Calif.-based American Polystyrene, had U-Verse installed
two weeks ago at his home in Orange Country, Calif. "I'm surprised at the clarity of the picture," he says. "I only pay $94 per
month for the first six months, and that includes U-verse and Internet access."
Monday, December 17, 2007 Page 7
Benninger says staying with Dish Network would have cost him $107 for the service and another $10 to $15 per month for the
NFL Network.
The National Football League has been at odds with cable companies for not carrying some games and requiring consumers
to
pay extra to catch the action. The NFL wants cable companies to include the NFL Network in their basic packages, but cable
companies like Time Warner say it will cost them too much to air the content without charging a fee.
Clear Channel, others raise ratings concerns over Arbitron system
In July, the Business Journal reported that San Antonio-based media giant Clear Channel Communications Inc. had entered
into a $160.6 million multi-year pact with Arbitron Inc. for its Portable People Meter (PPM) audience measurement services.
Now the ratings company says it is delaying the expansion of that service while a Clear Channel spokesperson says the
company
will continue to keep the door open for an alternative ratings system. In addition, at least one national organization is calling
on federal lawmakers to take a look at Arbitron and some of its practices.
Arbitron says it will delay the commercialization of its PPM radio ratings service in nine of its initial U.S. markets. The roll-out
will be set back by as long as nine months in some of those markets, including New York and Los Angeles.
The company intends to delay the commercialization of its PPM service in Dallas, San Francisco and San Jose by at least
three
months.
Says Arbitron Chairman and CEO Steve Morris: "We remain confident in the audience estimates that the (PPM) service is
producing. However ... feedback from our customers, the Media Rating Council and other constituencies has led us to
conclude that the radio industry would be better served if we were to delay further commercialization of the PPM in order to
address their issues."
Civil rights crisis
One of those issues, according to James Winston, executive director of and general counsel for the National Association of
Black Owned Broadcasters Inc., is a misrepresentation of minority listenership.
Winston, who argues that Arbitron's PPM system is a "sinister threat" to the fiscal health of minority owned broadcast
stations,
has testified before a House subcommittee on Telecommunications and the Internet.
In that testimony Winston says "initial results from the PPM system have shown drastic declines in the audiences" for
stations
serving African Americans and Hispanics. Winston says he wants federal lawmakers to ask Arbitron why there is "such a
large
discrepancy" between the ratings results for radio stations serving African American and Hispanic audiences under the
company's older diary measurement system compared to its newer PPM methodology.
Furthermore, Winston has warned federal lawmakers that such "defective ratings information being spread by Arbitron is
more than a business crisis for African American and Hispanic station owners."
"It is," he says, "a civil rights crisis for all of America."
Asked about Winston's testimony, Arbitron Senior Vice President Thom Mocarsky tells the Business Journal: "Arbitron is
committed to transparency. We welcome any opportunity to demonstrate the value PPM brings to the radio industry and to
highlight our commitment to inclusive and representative samples among all key groups."
Houston-based Border Media Partners founder Tom Castro has predicted that it will not be long before the Alamo City
becomes a top 25 media market. Such an accomplishment, he says, will represent a "very historic" moment for San Antonio.
Equally important, Castro has noted, is San Antonio's strong diversity, in large part because of its large Hispanic population.
He
says that is one of the reasons he considers San Antonio "the face of America."
Castro's company owns eight San Antonio radio stations. At least a half-dozen of them target a primarily minority listening
audience. "Arbitron has yet to prove that PPM can accurately and fairly capture radio listening by Hispanic and African
American consumers," Castro contends. "Until it does, Arbitron should not roll out PPM. "
Still looking
Arbitron describes PPM as a system utilizing a passive audience measurement device roughly the size of a small cell phone
to
track consumer exposure to media and entertainment.
This summer, Clear Channel followed the lead of a number of other large broadcast companies and signed on for Arbitron's
PPM service. In doing so, Clear Channel has agreed to utilize those PPM services as they become available in 46 of the
nation's
top 50 markets.
That agreement with Arbitron runs through 2011.
Clear Channel is Arbitron's largest radio ratings subscriber. The company, according to Arbitron, represented approximately
19 percent of its revenue in 2006.
But a Clear Channel spokesperson suggested after the deal was struck that the broadcast company's search for a new
audience
measurement system may not have ended with the Arbitron PPM agreement.
That same spokesperson reiterates now that Clear Channel's position has not changed, noting: "Radio advertising is a $20
billion market. Confidence in accurate, reliable and timely audience numbers is a must-have for any media market of this
size."
Monday, December 17, 2007 Page 8
Says Winston, "If Arbitron is allowed to move forward issuing flawed reports on African American and Hispanic audiences, it
will
result in huge financial losses for the radio stations serving those audiences and might even force some stations out of
business." He adds, "Without stations serving them, the African American and Hispanic communities will become even more
isolated and ignored by mainstream media than they are already."
Price Trumps Everything For Online Shoppers
WITH UNCERTAINTIES ABOUT THE ECONOMY creeping into more and more holiday purchase decisions, a new survey of
online
shoppers finds that price trumps all.
"Because newer online retailers can focus on market share and revenues and not profitability, they are an emerging threat for
brick-and-mortar retailers," said Jason Meugniot, Guidance president and CEO. "Endless.com., for example, can give
customers $5 for the privilege of shipping to them overnight. That makes it tough for a brick-and-mortar retailer, which may
be generating less than 10% of growth online, to compete."
When the same respondents were asked to select their second-most important factor, 41% chose free shipping, and 24%
named price. A much smaller number--just 8%--mentioned special promotions or coupons as the most important factor, 7%
cited features such as recommendations or product reviews, and 4% said speed/efficiency of checkout is most important.
And that in-store pickup and return option, so highly touted by many retailers? Just 1% said that this is most important to
them.
While it's no surprise that the economy is driving such bargain-hunting, there were some surprises--including who's buying
and
who's not, said Meugniot.
Nearly 19% of the total sample said that they don't buy anything online (22% of men and 16% of women.) That's significant,
since all the 1,000-plus poll participants are online. Those most likely to rank price as No. 1 are from the highest income
brackets: 53% of those earning $50,000 to $75,000 named price as the top factor, compared to just 37% of those earning
less than $25,000. Those in the South (46.5%) place greater emphasis on price than those in other regions.
Eggheads seem to go for free shipping. Nearly 26% of those with graduate degrees ranked free shipping first, compared with
14% of those with high school or less education.
While price may currently be top-of-mind with many shoppers, and retailers should certainly be mindful of the demand for
lower prices and free shipping, "increasingly, it's becoming clear that consumers want multi-channels--a store experience, an
online experience, and maybe a catalog experience," Meugniot said. "Retailers need to offer consumers as many ways as
possible to understand and experience their products" in a compelling manner, he added.
Tribune litigation endangers media ownership rule, says regulator
WASHINGTON (AP) - The Federal Communications Commission is expected to approve Tuesday a proposal by Chairman
Kevin
Martin that will allow broadcasters in the nation's 20 largest media markets to also own a newspaper - overturning a 32-
yearold
rule.
Martin calls his plan a "relatively minor loosening" of the rule. He probably also has enough support on the five-member
commission to do away with the ban entirely.
In the long run, that's what could happen thanks to the exceedingly complex FCC order released a few weeks ago that
approved the $8.2 billion buyout of Chicago-based media conglomerate Tribune Co. The FCC in essence invited Tribune to
file suit against the agency and challenge the rule.
Michael Copps, the senior Democrat on the five-member commission, has accused Martin of enlisting Tribune as "an
accomplice" to do away with the long-standing ban altogether.
A spokeswoman for Martin denies the accusation.
Regardless, the public dustup over Tribune Co. and the larger issue of media ownership provides a glimpse into how the
important and some say occasionally dysfunctional federal agency operates.
The cross-ownership ban was approved by the FCC in 1975 to serve "the twin goals of diversity of viewpoints and economic
competition." The FCC at the time noted that "it is unrealistic to expect true diversity from a commonly owned
stationnewspaper
combination."
Monday, December 17, 2007 Page 9
Opponents of the ban say in the past decade there has been an explosion of news outlets thanks to cable television and the
Internet and that such restrictions are no longer necessary. Ban supporters say there may be new outlets, but there has been
no corresponding increase in news gatherers and producers, especially at the local level.
Political pressure on Martin to delay the vote has been intense. On Monday, 25 senators sent him a letter threatening that if
he goes ahead with the vote, they will move legislation to revoke the rule and nullify the ruling.
Tribune Co., publisher of the Chicago Tribune, began broadcasting in the city on WGN-AM radio in 1924 and WGN-TV in 1948.
The company was exempt from the cross-ownership rule.
In 1997 it bought WSFL-TV in the Miami/Fort Lauderdale market, an area where it already owned a newspaper. In 2000, it
bought Times-Mirror Inc., and with it the Los Angeles Times, Newsday in New York and the Hartford Courant. Tribune owned
television stations in all three of those markets.
Tribune was gambling the FCC would eliminate the cross-ownership ban before the company would have to renew its station
licenses. In July 2003, the FCC approved a broad "cross-media" ownership rule that would allow a single company to own a
broadcast station and a newspaper in 170 markets, from New York City down to much smaller locales.
But that rule was rejected and sent back to the FCC in 2004 by a federal appeals court in Philadelphia.
The court agreed with the FCC's determination that a blanket ban on newspaper-broadcast cross-ownership was "no longer in
the public interest." But it added that this did not mean that "no regulation is necessary."
Since then, the commission has been working on crafting a new set of ownership rules that will satisfy the court.
Last April, a revenue-losing Tribune agreed to be taken private in a transaction led by real estate entrepreneur Sam Zell.
Tribune needed the FCC to approve the transfer of the company's broadcast licenses to the new owners. It also asked the
agency to allow the new owners to keep the stations in the cross-owned cities - including Chicago - until the FCC passed a
new
rule on media ownership.
Martin scheduled a vote for Dec. 18 on a new rule that would allow newspaper-broadcast combinations in the 20 largest
markets in certain circumstances.
While that appeared to be good news for Tribune, the company said the vote would actually come too late for the
transaction to close by year-end, which was necessary for tax purposes and to get the required financing.
On Nov. 30, the FCC approved the license transfer in an order Democratic Commissioner Jonathan Adelstein described as "a
feat of rare regulatory contortionism."
The order approved the license transfers and granted a permanent exemption from the cross-ownership rule in Chicago. But
it denied waivers in Tribune's four other cross-owned markets. It went on to say that if Tribune were to sue over the denial of
the waivers, it would not have to comply with ownership rules for two years or until six months after the litigation ends,
whichever was longer.
Had the agency simply granted Tribune's request for waivers, the company could have closed on its deal and stayed out of
court.
On Dec. 3, the company filed suit in a federal appeals court in Washington, D.C., challenging the denial of its waivers and
arguing that the FCC's cross-ownership rule was unconstitutional.
Copps contends that the lawsuit gives the D.C. court an opportunity to eliminate any cross-ownership restriction, including
the rule commissioners are expected to approve Tuesday.
If the FCC approves Martin's rule and the appeals court in Philadelphia gives it the OK, the Tribune suit "would likely go
away,"
said a senior FCC official who spoke on condition of anonymity because of the pending litigation.
Monday, December 17, 2007 Page 10
But that outcome is uncertain.
"If the commission goes forward on Dec. 18 and votes relief, do we stay in court or not?" asked Shaun Sheehan, Tribune's
Washington lobbyist, during a C-SPAN appearance. "That's a question perhaps we decide for a later date." If Tribune
continues to press the suit, a favorable ruling "very well could" invalidate all restrictions on broadcast-newspaper ownership,
he said.
Ex-Sun Times Publisher Gets 29 Months in Prison
CHICAGO (AP) -- F. David Radler, former publisher of the Chicago Sun-Times and No. 2 man in the once-powerful Hollinger
International newspaper empire, was sentenced Monday to 29 months in prison for his role in stealing millions of dollars from
Hollinger shareholders.
''I'm sorry for what I've done,'' said Radler, 65, who had pleaded guilty to fraud and testified against his longtime business
partner and head of Hollinger, Conrad Black, in return for a lenient sentence.
Radler, who already has paid millions in restitution, also was fined $250,000.
Black was sentenced last week to 6 1/2 years in prison for swindling Hollinger shareholders out of $6 million. Although
prosecutors had sought a much harsher sentence for Black, U.S. District Judge Amy J. St. Eve said Black's sentence should
be
closer to that of Radler, calling them ''equally culpable.''
St. Eve on Monday told Radler he had breached his duty, noting he ''took a lot of money from Hollinger International at great
expense to the company and the shareholders.'' But the judge also acknowledged his cooperation with prosecutors.
''You certainly have tried to right your wrongs,'' she told Radler, who must begin serving his sentence Feb. 25. St. Eve said
she would recommend a Pennsylvania prison.
Radler's attorney, Anton Valukas, said the sentencing brings relief for his client.
''This is the first day of the rest of his life,'' Valukas said after the hearing.
Black and Radler built Hollinger from scratch, starting with a tiny, money-losing, English language paper in French-speaking
Canada, the Sherbrooke Record. In time, the company became an international colossus.
Black, Radler and three co-defendants were charged with siphoning money out of the company through payments made by
buyers of Hollinger International community papers in return for promises not to compete with the new owners. Prosecutors
said such payments should go to shareholders.
Radler pleaded guilty and made his deal with prosecutors while Black and his other co-defendants, Canadian executives
Peter
Atkinson and Jack Boultbee and Chicago attorney Mark Kipnis, demanded a jury trial.
They originally were charged with swindling shareholders out of an estimated $60 million.
In the end, Black was acquitted of nine of the counts against him, including racketeering, and convicted of siphoning off $6
million through bonuses disguised as such ''non-compete'' payments. Black also was convicted of obstruction of justice for
removing documents from his offices.
His co-defendants also were sentenced last week.
Atkinson was sentenced to two years and fined $3,000. Boultbee was sentenced to 27 months, ordered to pay $152,500
restitution and fined $500. Kipnis was placed on probation for five years with six months of house arrest. He was also ordered
to perform 275 hours of community service. The three men were also ordered to share in the forfeiture.
Chicago Tribune ups newsstand price 50%
Like most Americans newspapers, the Chicago Tribune has been reducing the space for news in its print edition. But unlike
most papers, it plans to charge more for less.
The Tribune, flagship newspaper of Tribune Co., said today it will increase the newsstand price to 75 cents from 50 cents.
The increase will apply to the Monday through Saturday editions.
It comes as billionaire Sam Zell completes an $8.2 billion buyout of the company. Zell, struggling with declining revenue from
advertising and circulation, structured a buyout built on nearly $8 billion in new debt for the company.
The price hike will take effect Dec. 31, Tribune said. It said the increase is the first in more than 15 years and will partially
offset higher costs.
The price of the Sunday Tribune will remain at $1.79, the company said. It said home delivery subscription rates will rise
“slightly” in 2008.
The Sun-Times, which relies more heavily than the Tribune on newsstand sales, charges 50 cents a day Monday through
Saturday and $1.50 on Sunday.
Roy Heatherly Appointed President/Publisher of 'Jackson (Tenn.) Sun'
Roy Heatherly has been appointed president and publisher of the Jackson (Tenn.) Sun, effective Jan. 7. Heatherly most
recently served as advertising director of The News-Star in Monroe, La. He succeeds Ed Graves, who has been appointed
senior vice president/Newspaper Relations for USA Weekend.




Monday, December 24, 2007
TOPICS TOPICS TOPICS
Discounting key to boosting holiday sales this year
NEW YORK (Reuters) - U.S. retailers offering the widest discounts were the winners of this year's holiday shopping season,
as
budget-conscious consumers scrounged for deals in a challenging sales environment, according to a national survey
released
on Sunday.
Consumers were hungry for discounts this year as they grappled with rising food and fuel costs, the U.S. housing crisis, and
worries about whether the American economy is careening towards a recession.
"I have never seen consumers more cautious, more bargain driven, more savings obsessed than I have this year," Britt
Beemer, founder and chairman of American Research Group, told Reuters.
Aggressive discounting paid off for the period's stalwarts -- Costco Wholesale Corp (COST.O: Quote, Profile, Research), J.C.
Penney Co Inc (JCP.N: Quote, Profile, Research), Wal-Mart Stores Inc (WMT.N: Quote, Profile, Research) and Barnes & Noble
Inc (BKS.N: Quote, Profile, Research), consumer marketing firm America's Research Group said.
Retailers who failed to discount -- such as Macy's Inc (M.N: Quote, Profile, Research), Circuit City Stores Inc (CC.N: Quote,
Profile, Research) and Borders Group Inc (BGP.N: Quote, Profile, Research) -- were the season's worst performers, the survey
found.
"Penney's was super-aggressive. They were advertising 40 to 50, 60 percent off all season and Macy's didn't do it," Britt said.
Barnes & Noble's discount program -- which offers members who pay a $25 fee as much as 40 percent off on hardcover
bestselling
books -- managed to entice enough shoppers to effectively drive "a dagger through the heart" of rival bookseller
Borders, Beemer said.
Borders counters with Borders Bucks, which gives members a $5 coupon every time they spend $150.
American shoppers "went out and bought every deal they could," he added. "When there were no deals, there weren't many
buyers."
EARLIER DISCOUNTS
Earlier in the season, many retailers slashed inventories and advertised holiday discounts sooner than in prior years in a bid
to
jump-start holiday shopping.
But the deals faded as the season progressed, Beemer said, as retailers largely placed greater emphasis on protecting their
bottom lines.
Many consumers, meanwhile, deferred their holiday shopping with the hope that prices would eventually come down.
"They were expecting to see bigger discounts. They didn't see them," Beemer said.
Getting shoppers into stores for the final days of the season is crucial for retailers. According to ShopperTrak, Dec 21-24 last
year accounted for 13.6 percent of all holiday sales.
In a normal year, 85 percent of consumers would be done with their holiday shopping by the final weekend before
Christmas.
According to the survey, this year's figure is 71 percent.
And despite that decline, store traffic is relatively healthy, but shoppers simply aren't finding the deals they crave, Beemer
said.
"Shopping levels were decent, but buying levels were lousy," Beemer said. "People were in stores, but they weren't
necessarily buying anything ... There weren't many people carrying multiple bags."
Monday, December 24, 2007 Page 2
Kmart Is Testing Customized National TV Ads
THE RETAILER THAT MADE BLUE-LIGHT specials synonymous with savings is trialing technology that can customize
nationally
run television ads "on the fly." The holiday spots are running on Viacom's MTV Network. Technology from Visible World
makes
it possible.
Kmart's parent company Sears holding has drawn on expertise from both DraftFCB and MPG to support the project. The trials
will run through the holidays on MTV Network's TV Land and Nick at Nite.
Technology from New York-based firm Visible World, known as IntelliSpot, automates the trafficking function, allowing Kmart
to make near-instant programming decisions before ads air.
The technique is intended to target consumers more closely, depending on demographics and time of day. "The products
that Kmart might want to sell to parents rushing out the door in the morning will not be the same as those in the afternoon
that target kids," says Tara Walpert, Visible World president.
For advertisers seeking to serve-up more relevant ads to consumers, the Visible World intelliSpot platform makes it efficient
to change ad content on-the-fly so that the advertisements automatically updates. For media companies, the technology can
increase the value of ad inventory by making it possible to deliver more relevant impressions for marketers and brands.
Walpert says Visual World's technology has its roots in local programming, and now plans to expand across national
networks.
Today, more than 10 national networks have access to intelliSpot.
The technology has the capability to change portions of the TV spot almost instantly. It works similarly to an online video
mash-up, or Microsoft's word processing mail-merge feature. Rather than build one 60-second television commercial, the
spot breaks down into two 30-seconds or four 15-seconds, for example. Based on business rules requested by Kmart,
IntelliSpot creates a mash-up by merging several segments of the commercial to assemble a complete one-minute spot.
Kmart's holiday ads feature Mr. BlueLight, who represents the company's everyday low-pricing model. The computeranimated
character shares gift-giving ideas with multiple people through the television spots, highlighting a variety of holiday
treats for personal use and home products. Weekly promotions such as "20% off on apparel" "or buy one, get one free" run
during the last 10 minutes of the TV ads.
"That's the part we're able to easily interchange," says Kristen Wipple, a Sears spokesperson. "We're testing the ability to
interchange the last 10 seconds of the TV ad. We don't have a lot of data back at this time; we should within the next month."
Visual World's technology, which appears to have given traditional television ads similar nimble features found in Web-based
advertising, has attracted investments from Comcast Interactive Capital, Reuters Venture Capital, Time Warner, Viacom and
WPP Group.
Will Santa Save The Toy Industry's Fourth Quarter?
WITH ALL RETAILERS GIVING ONE last red-and-green push in the final days leading up to Christmas, the noises coming from
the
toy department are especially Hail Mary-esque.
Both Toys R Us and KB Toys are pushing their "Bill me later" features and money-off online shipping; KB Toys' home page is
screaming: "HUGE clearance sale--up to 60% off." Department stores are sounding a little desperate, too: Sears is offering a
"Buy one, get one 50% off" on all in-store toy sales, while JCPenney is offering discounts between 30% and 60% on its toys.
Part of the problem, observers say, is the lack of a "hot" toy. And if there was ever a year when stores could use a little Tickle
Me Elmo or Cabbage Patch Kid magic, this is it. Massive consumer recalls have dominated the headlines, causing parents to
fret
over the safety of imported toys and shun some of the best-established brand names.
"There are several factors impacting the toy industry right now," says Anita Frazier, industry toy analyst for NPD Group,
"including general economic malaise and "hot" competing categories (e.g., video games), as well as recall skittishness and
the
lack of any one particular hot toy."
But, she says, consumers are out there shopping--and they aren't about to deprive their kids of toys this year. "There might
not be one item that is at the level that the TMX Elmo was last year." On a recent shopping trip, she found that "several styles
of Webkinz had sold out," she says, as had Robosapiens, Roborapters, and even a Nerf Dart Tag Game.
But so far, it's still too early to say how toy sales will play out. While the recalls began in the summer, toy companies live and
die by fourth-quarter numbers. "Year-to-date through October, the toy industry is actually flat versus a year ago," Frazier
says,
"so any of this hasn't yet shown up in the sales data."
William Ackman Increases Target Stake
NEW YORK (AP) - Activist hedge fund manager William Ackman has slightly increased his interest in discount retailer Target
Corp. to just under 10 percent, according to a Securities and Exchange Commission filing Monday.
Monday, December 24, 2007 Page 3
Ackman's hedge fund, Pershing Square Capital Management LP, reported owning about 82.8 million shares of the
Minneapolis, Minn.-based retailer.
Ackman first reported taking a 9.6 percent stake in mid-July. At the time, the investor said he planned to discuss strategies to
improve Target's stock price with its management team. Since then, Target has said it might sell some credit card debt and
adjust the pace of its share repurchases.
In the past, Ackman has successfully pushed for real estate sales or other actions at fast food chains McDonald's Corp. and
Wendy's International Inc.
Wanted: Retail managers
Long hours, lots of stress don't appeal to many college grads
ANNAPOLIS, Md. ó Allyson Koteski is so unfailingly cheerful, she fits right in with the colorful, battery-powered toys filling the
Toys R Us store she manages here.
The store manager darts from customer to customer, checking stock for what's on their kids' and grandkids' holiday lists.
Along
the way, she clears out carts, deals with personnel issues and straightens shelves just like Tickle Me Elmo might ó if he were
operating at warp speed. And even as the busiest season in a stressful year for toys draws to a close, she insists she has a
great
job.
"The busier I am, the more I enjoy it," says Koteski. "Stress is different for each person,"
The retail industry needs more Koteskis. When it comes to careers, less than a third of college graduates think retailing has a
good reputation, says the National Retail Federation. With fewer young people willing to consider entry-level retail jobs,
there's a dearth of qualified and experienced retail executives, says NRF President Tracy Mullin.
Yet few jobs in the retail industry are as critical to a company's success as the store manager. They must keep employees
motivated and happy enough to show up, treat customers well ó and sell, sell, sell.
The people who work to attract and keep good retail managers acknowledge it's a special kind of person who can put up with
the long hours, high turnover and inventory issues that come with the territory.
"A day in the life of a retail manager would be a nightmare job for a lot of people," says Kathy Mance, vice president of the
NRF Foundation, which helps retailers train and recruit employees and managers.
If you like people, as Koteski, 35, clearly does, store management can have its rewards. Though Koteski and Toys R Us won't
discuss pay, salaries for managers at department stores and big-box retailers can be $200,000 or more, says Dan Butler,
NRF's
vice president of retail operations and a former department store manager. However, the median salary for specialty retailers
hovers around $42,000, according to a study by Mercer. Company discounts can range from 20% to 50%, and some brands
offer clothing allowances to managers as a bonus.
Still, for many, the career is more like what former retail manager Norm Feuti, who now pens a syndicated cartoon called
Retail, remembers.
"You don't really have any control over what goes on. You put the displays where they (corporate executives) want them.
You carry the products they want. They set the prices. And the computer systems reorder your merchandise," says Feuti,
who worked in retail management until 2002. "But when it comes to sales, you get none of the credit and all of the blame."
That's a perception retailers want to change. "The retail industry has done a pretty rotten job of positioning our companies as
great places to start a career," says Mullin. College graduates "don't see our jobs as particularly fulfilling because most of
their
first experiences with us were in high school or college as part-time associates."
Students find banking, technology and other fields more promising because there's more "growth potential, a better
work/life balance and a clear career path," Mullin says. Still, she notes that Barnes & Noble successfully stresses
entrepreneurship to its recruits, emphasizing that its managers determine up to 80% of a store's inventory. Gap pitches
retailing as "creative and fast-paced." And Saks Fifth Avenue holds a career day to get elementary students "excited about
the
retail industry before they set their sights on becoming astronauts and actors," she says.
For Koteski, who is single, the retail life suited her from the time she began working at a Mr. Donut shop in high school. She
also worked as a seasonal associate at Toys R Us during college.
"I liked the variety and being busy," she says. "I truly enjoyed it."
Koteski was hired as an assistant manager at Toys R Us in her native Pittsburgh after graduating from Hiram College in Ohio
in
1994. She was promoted to store manager in Altoona, Pa., and reassigned to Annapolis last spring. The store here is one of
the bigger in the chain, with about 35,000 square feet, several thousand toys, electronics, children's clothing items and
other products, 115 employees and three assistant managers.
Working a variety of day and night shifts suits her just fine, Koteski says. On a recent week, her day shifts were 6 a.m. to 3
p.m. and an evening shift was 1 to 11 p.m. She likes to sleep in and do errands on the days when she starts in the afternoon.
Monday, December 24, 2007 Page 4
Even though her shifts are typically 10 hours, during this season it hasn't been unusual for her to work 12 hours, given the
restocking necessary to keep up with sales and recalls.
Of the holiday season, which included lines that stretched to the back of the store early on the day after Thanksgiving,
Koteski says, "You just need to keep it all in perspective, have an organized plan and be flexible." Part of the plan: "You pick
up stuff as you go, so at the end of the night, you don't have 20 carts that need to go back."
There isn't a job in the store she hasn't done or wouldn't do, and working with the often-young staff is one of the highlights,
she says.
Some, but hardly all, former managers agree.
•"I loved being a manager. In fact, I miss it some today," says Angela Nevers, who managed one of the now-defunct Foxmoor
stores in Indiana until 1989. "My favorite part about managing was working with young people. For many, it was their first job.
I loved teaching, mentoring and coaching them."
Still, Nevers, who now works for a company that sells to retailers, found dealing with shoplifters and a "poor work ethic"
among
employees stressful. "I would have to stay and work 12-hour shifts when my employees didn't come to work," says Nevers.
"Once I started a family, it was more difficult to give up my holidays, too."
•Heather Dillard, 28, says she enjoyed her job as a convenience store manager "at times." "The downside was that I was
salaried ó getting paid at 48 hours a week ó and I was actually working anywhere from 55 to 70 hours," says Dillard, now an
insurance broker in Georgia.
Dillard says she left retailing last year because she didn't feel challenged or appreciated and rarely had time for her family and
friends. "The final straw," she says, was when she was diagnosed with the flu and her district manager thought she should
still
report for work despite doctor's orders that she rest for at least three days.
•Katey Morse was recruited to be an assistant manager for Ann Taylor Loft in 2003 while she was working as a Coach store
assistant manager in Grand Rapids, Mich. Soon after getting the job, Morse says, she and other store managers were
"abandoned by our district manager when he received a promotion."
"We were basically left to fend for ourselves while we struggled with dealing with learning their systems and how to run the
business the Ann Taylor way," says Morse.
The experience and the stress turned her off to retail management altogether. She now works as a personal banker for
Chase. Morse, who is pregnant with her first child, says she knew the hours in retail management wouldn't be conducive to
raising a family. Besides, she says, "The compensation is pathetic when you figure out how many hours you were expected to
work."
Koteski has no complaints, at least that she's sharing, this holiday season.
After she gets off work at 3 p.m. today, Koteski will board a 55-minute flight to Pittsburgh to celebrate Christmas with her
parents, two brothers, sister and their significant others. She'll fly back Christmas evening so she can be at work at 5 a.m.
Wednesday to help restock shelves and get the store ready for the return rush.
"My whole family is really close, and they pretty much understand what happens in the fourth quarter," she says.
What Makes Tesco, Kroger More Than Just Rivals?
Britain's largest retailer, Tesco PLC, opened its first stores in the U.S. last month, but Americans have already gotten a taste
of
the Tesco shopping experience without realizing it in an unlikely place: Kroger Co.
That is because a small company that runs Kroger's loyalty-card program in the U.S., Dunnhumby Ltd., is owned by Tesco
and
runs that chain's frequent-shopper program in Britain. Dunnhumby deciphers data from customer purchases and uses it to
change merchandise selection and target promotions at individual shoppers.
For grocery stores like Kroger, which are getting squeezed by upscale food retailers such as Whole Foods Market Inc. on one
end and discounters like Wal-Mart Stores Inc. on the other, fine-tuning their offerings to shoppers' needs can provide an
important edge. Long suffering, Kroger has posted 10 quarters of identical supermarket sales increases, excluding fuel, of
more than 3%. The retailer says its new detailed customer knowledge is part of the reason.
"Our partnership with Dunnhumby is one of our key competitive advantages," says Rodney McMullen, vice chairman of
Kroger,
one of the largest grocery retailers in the U.S. with 2,491 stores and annual sales of $66 billion and a net profit of $1.1 billion
in its last financial year. "In our competitive industry, remaining relevant to our customers is critical."
When Dunnhumby started working with Kroger in 2002, Tesco didn't have firm plans for entering the U.S. Last month, Tesco
began opening the first 20 of 50 Fresh & Easy Neighborhood Markets planned by March for Southern California, Las Vegas
and
Phoenix. An additional 72 are planned by the end of 2008. The British retailer, which operates some 3,200 stores in 12
countries, says its arrival in the U.S. won't hurt Dunnhumby's venture with Kroger -- or its own business. Both Tesco and
Dunnhumby say the data company keeps its different clients separate. Dunnhumby also works for U.S. retailers such as
Home
Depot Inc., Best Buy Co. and Staples Inc.
"Dunnhumby works with a variety of retail customers and of course it's absolutely essential that they have effective 'Chinese
walls' within the business, not unlike investment banking relationships," says Tesco spokesman Trevor Datson.
Monday, December 24, 2007 Page 5
Tesco's foray into the U.S. is headed by Tim Mason, the executive who developed its U.K. Clubcard program. Because its U.S.
stores are so new, Tesco doesn't yet have a store card in the U.S. and plans to decide on a frequent-shopper program once its
stores are established, the retailer says.
Tesco says it is considering a national roll-out of Fresh & Easy beyond the Western U.S. The stores are smaller than typical
supermarkets and sell store-brand food -- like the more upscale chain Trader Joe's, except that Tesco wants to sell at even
lower prices. TNS Retail Forward, a unit of British market research firm Taylor Nelson Sofres PLC, estimates that Fresh &
Easy
could have 500 stores and $4 billion in sales by 2011. By 2015, TNS says, Fresh & Easy could be one of the 10 biggest
supermarket retailers in the U.S.
Analyzing customer data has become the hallmark of Tesco's torrid growth in the U.K., where it now controls nearly one-third
of the grocery market. Tesco owns a majority stake in Dunnhumby; Dunnhumby Chairman Clive Humby, who founded the
London-based company in 1989 with his wife, Edwina Dunn, still owns a minority stake.
For Kroger, its data-driven strategy puts the retailer at the vanguard of U.S. store operators, which are beginning to make
more use of information collected when shoppers' store cards are swiped at the checkout, recording their purchases. While
some 85% of U.S. grocery stores have card programs, most use them only as a way to offer loyal shoppers discounts,
according
to industry research firm AMR Research Inc., in Boston. Some 42 million U.S. households have a Kroger loyalty card, which
make up one of the largest retail customer databases in the U.S.
Store cashiers swipe the customers' cards at the checkout and give them an immediate discount on their bill. In addition, the
cardholders receive in the mail coupons for products they have already purchased and for those that the computer thinks
they might like.
When Dunnhumby began working for Kroger, its research found Americans worried more about privacy protection than
Britons. To calm shopper concerns, Dunnhumby adjusted its approach. Applicants for a Kroger card provide little
information;
the application form calls for only their name, address and a preference for mail in English or Spanish. In Britain, by contrast,
Tesco shoppers also provide information on their age, household size and dietary needs, such as vegetarian, kosher or halal.
The chief executive officer of Dunnhumby USA, Simon Hay, says the company protects shoppers' contact details and buying
records. Its analysts don't create profiles of individuals, but use individual buying records to make patterns and group
shoppers into segments. Those categories such as "budget-conscious" or "family-focused" help Kroger to design its stores
and
mail coupons for products customers have already bought and, based on others in the segment, might buy in the future.
"The challenge is balancing customer intimacy with customer privacy," says Robert Garf, vice president and general manager
of
retail strategy with AMR Research.
The new number crunching is bringing big changes to Kroger. In the past, the grocery chain ran price promotions on its
bestselling
products. But data showed that this meant discounts for a wide mass of middle-income shoppers who would buy the
products even at full price. Now Kroger cuts prices on store brands and other value items bought by its most price-sensitive
customers.
"As a retailer, you can never compete with Wal-Mart because you're not as big and don't have the buying power to match
their low prices," says Dunnhumby's Mr. Hay. "But if you can't compete on everything, you've got to compete on something.
The question is, what should that something be?"
Often, the data reveal surprising results: Kroger's store in the affluent Cincinnati neighborhood of Hyde Park also draws
shoppers from lower-income areas across the highway. When Kroger remodeled the store in 2005, it added a Starbucks cafe
and a fresh cheese counter for upscale customers, but it also lowered prices on value items, low-price products for the
costconscious
segment.
As a result of Dunnhumby's data mining, Kroger introduced three-quarter-gallon milk containers in its stores. For two-person
households doing their weekly shopping, research indicated, half a gallon was too little and a whole one too much. Coffee,
previously arranged on shelves by brand and origin, is now divided into caffeinated and decaf sections because research
showed that shoppers look for that distinction first.
The retailer is also stocking smaller, harder-to-find brands because it now sees the loyalty they can engender with customers.
Alpen breakfast cereal, for instance, sells less than mainstream cereal brands but an analysis of lifetime total store spending
of
Alpen buyers showed that they were health-conscious shoppers prone to spend on nutritious fare, and to fill their carts with
other high-margin products at Kroger.
Why the Perfume Business Is Beginning to Stink
Too Many New Fragrances And Stagnating Sales Lead Some Brands to Go Upscale
PARIS -- After years of gorging on celebrity scents and fashion-house fragrances, consumers are turning up their noses at
designer perfumes.
"The offer is so enormous, you get lost going into a perfume shop," says Daniela Andrier, a perfume-maker at Swiss
fragrance
company Givaudan SA. "It's like eating off a plate with too much food and you lose your appetite."
Monday, December 24, 2007 Page 6
Over the past few years, exclusive fashion brands such as Prada, Gucci and Hermès have been churning out new fragrances
as
a way to ensnare consumers who can't afford their $5,000 bags, but will splurge on a $100 bottle of "eau de toilette."
Celebrities such as Jennifer Lopez and Celine Dion have also unveiled eponymous fragrance lines.
More than 200 new so-called prestige perfumes -- those sold in department stores and cosmetics shops, rather than lowerend
drugstores or supermarkets -- were unveiled in the U.S. alone in 2006, according to the last available figures from market
research firm NPD Group.
Yet despite the entries, sales of these high-end perfumes, which make up 60% of the overall fragrance market, have been
slowing. Total revenue rose 3% to $18 billion globally in 2006, according to research firm Euromonitor, and is expected to
grow even less in 2007. By comparison, the overall luxury goods sector has grown by about 12% this year.
Some perfume launches have proven to be big flops. Last year, YSL Beauté, the beauty division of fashion and retail
conglomerate PPR SA that makes perfume for fashion house Yves Saint Laurent, pulled a scent, Nu, from the market five
years after it was introduced. It also stopped selling a recent men's fragrance, M7, in the U.S. after sales stalled. A spokesman
says other new YSL perfumes, such as Cinéma, have performed better.
The reason is olfactory overkill. To lure consumers, perfume brands have mounted huge advertising and distribution
campaigns, selling perfumes in their own boutiques as well as in department stores and airport duty-free shops world-wide.
They have also kept prices low; while high-end leather bags and sunglasses have steadily risen in price, most designer
perfumes still cost less than $100.
"All the new perfumes resemble each other too much," says Bouchra Sentissi, 47 years old, who was recently browsing
Sephora's aisles in Paris in a heavy fur coat. "They just change their packaging, but everything smells the same inside."
Ms. Sentissi, who has been loyal to Chanel No. 5 for many years, was looking for holiday gifts.
"Too fruity," she winced, pointing to shelves stocked with new launches from Dior, Cacharel and Gucci.
Besides turning off consumers, the plethora of perfumes has also hit bottom lines. With so much competition, many
companies spend as much as $50 million to promote a major new scent. That's equivalent to an entire year of sales for most
perfume brands, making it increasingly difficult to recover the costs.
"Perfume with longevity and huge profits has dissipated," says Wendy Liebmann, president of New York-based consultancy
WSL Strategic Retail.
Some fashion brands have been trying a new strategy to make perfume an upscale purchase again.
Hermès International SA recently unveiled a new line of exclusive perfumes called Hermessence. The French fashion house's
scents, such as a new lavender-and-licorice-smelling Brin de Réglisse, cost $190, or nearly twice the fashion house's major
perfume lines such as Kelly Calèche.
The collection, which is only available in limited Hermès boutiques, is packaged in luxurious bottles and in travel-size vials
that
cost $135 apiece. There's even a $590 version of the perfume that is sold in a personalized leather cuff.
In April of this year, fashion designer Tom Ford unveiled Private Blend, a line of 12 scents -- evoking aromas such as tobacco,
gardenia and cedar -- sold at trendy department stores such as Harvey Nichols in London and La Rinascente in Milan.
Italian fashion house Prada SpA was the first to tap into consumers' discontent in 2003. Designer Miuccia Prada dropped in
on
Ms. Andrier's lab at Givaudan outside Paris to discuss the idea of an exclusive floral scent.
Ms. Andrier got to work on a perfume comprised mainly of natural oils, rather than the synthetic ingredients that make up
most fragrances on the market. Ms. Andrier's Iris, Carnation, Ambery Leather and Orange Blossom scents were introduced in
Prada's boutiques, at $150 each. Like Mr. Ford's new perfumes and Hermessence, Prada's Exclusive Scents line is unisex.
So far, the new ultra-exclusive perfumes aren't reaping bouquets of profits, partly because they're so expensive to make.
For example, Chanel SA's new Les Exclusifs line uses greater proportions of pricey ingredients such as iris extract, which
takes
seven years to develop.
But, at $175 for a 200-milliliter bottle, Les Exclusif perfumes sell for the same price per ounce as Chanel No. 5, whose recipe
isn't as costly to make though it's one of the most expensive fragrances on the market.
Giorgio Armani SpA's most expensive scent, Privé, which costs $185 a bottle, uses raw ingredients -- such as bergamot,
neroli
and vetiver -- that are up to 10 times more expensive than those used for other Armani perfumes. The bottle, which is made
out of African kotibe wood and caps made to look like jade and moonstone, is costly to manufacture as well.
Yet the scent remains unprofitable three years after its launch. French cosmetics company L'Oréal SA, which makes the
perfume, says it's sticking to the scent because it hopes the cachet around it will stoke interest in Armani's more mass-
market
fragrances.
Working on Privé was like "a laboratory of ideas," says L'Oréal international brand manager Patricia Turck Paquelier. "How
can
we invent the next Chanel No. 5 that will last 100 years?"
KickSkirt finds its niche in targeting messages to women
Monday, December 24, 2007 Page 7
Advertising veteran Mary Dean has founded marketing agency KickSkirt in the belief that the best way to a woman's
pocketbook is through savvy advertising that's executed by women.
And if it takes kicking some sense into advertisers' heads to make them see it her way, then she's up for the challenge.
"Women control 80 to 90 percent of every consumer purchase decision made -- $7 trillion dollars' worth of spending," Dean
says. "There's a huge opportunity."
In its first six months in business, Dean's startup has attracted about $200,000 in billings, some of which stems from big-
name
national clients.
KickSkirt, a full-service advertising and marketing firm, is helping New Balance name a new running shoe for women, and it's
working with financial security company Genworth Financial on a women's initiative. The agency is also working with
Austinbased
CD3 on a soon-to-be-launched weight-loss product targeting women.
With some national advertisers making efforts to reach female consumers, and the increasing number of women-owned
businesses and executives, Dean believes the timing is right for an agency that caters to women.
To position KickSkirt in that niche, Dean has put together a team of high-level female advertising and marketing executives
that she enlists on an as-needed basis, including: Teresa Elliott, who began her career at Weiden + Kennedy; Klaudia
Flanigin,
a strategic brand director who spent five years at GSD&M Idea City working as a leader on the Wal-Mart account; and Sharon
Miller, a brand strategist who has worked for Converse, Gap Inc. and Whole Foods Market Inc.
"These are women who have had experience in running multimillion-dollar accounts," Dean says.
Dean's own credentials include spending five years as vice president and creative director of Publicis USA, where she led
business for Curves, a franchise of women-only fitness centers.
A number of traditional agencies have women-focused marketing research or advertising divisions, but Dean believes that
her
all-female team gives her an edge over traditional agencies
"Women are different. What appeals to us is different," Dean says. "The way we make decisions is different. Our sense of
humor is different.
"I just felt that people creating advertising that appeals to women should be women. It makes sense," she adds.
As obvious a strategy as marketing to women may seem, many companies aren't putting as many of their advertising dollars
toward tailoring their messages to the gender as one might think.
"The C-suites, or corner offices, are slow to embrace change, even when there are such compelling figures behind it," Dean
says.
Carol Thompson, president of public relations and ad firm The Thompson Group, believes that, at the very least, advertisers
will find the idea of a women-focused agency intriguing.
"If they are not thinking about advertising to women, they should be," Thompson says.
Dean has set her sights on growing clients nationally and locally. In Austin, an estimated 38 percent of all privately held firms
are women-owned and run, she says.
"What this should alert people to is that these businesswomen will need loans. Hello, banking industry -- pay attention to
them. These are women who are going to want to invest. Hello, financial services industry. Start talking to me in the right
way," Dean says.
Over Half of Connected TV Viewers Also Watch on Alternative Devices
According to the recent release of The ChoiceStream 2007 Survey of Viewer Trends in TV and Online Video, 55% of
connected consumers who watch TV watch some type of video on devices other than their TV sets, including their
computers, mobile phones and digital media players (e.g., iPod). Not surprisingly, video-watching on these alternative
devices is more popular among younger consumers (66%) than older ones (36%).
Key findings from 824 U.S. resident adult Internet users, 52% female and 48% male, who made at least one online
purchase within the past 6 months, include these selections:
65% watch professionally-produced TV programming, including network- and cableproduced shows, news and
sports. This exceeds the 39% of consumers watching user-generated video by 67%.
36% of consumers surveyed use the computer to watch TV programming, with 43% of 18-24 year olds using it to
watch TV programming and just 21% of 50+ year olds using it.
Of those consumers who watch TV programs on their computers, 33% report watching at least four hours per week.
20% of consumers expect to watch more TV programs on alternative devices over the next six months. For 55% of
those consumers the increase will come at the expense of watching TV programming on their sets.
When searching for video content to watch on a computer, mobile device or media player, 62% of consumers
indicate that it takes at least a few minutes to find something interesting to watch. Overall, 34% of consumers are
frustrated with the time it takes to discover video online and on mobile devices.
Monday, December 24, 2007 Page 8
Browsing Web sites is the most popular method for finding video to watch on a computer, mobile device or media
player.
72% of consumers indicate that it takes at least a few minutes to find something to watch on their TV sets and 34%
believe that is too long.
By far, consumers find the on-screen guide the most useful tool for finding programming to watch on their TV sets.
And, more than half of consumers (53%) express interest in having a personalized on-screen guide that's tailored to
their particular tastes and interests to help them find programming.
43% of consumers claim that they would watch more VOD and PPV if they could find more that they liked (easily),
up 19% from 2006.
The survey finds that 23% of consumers watch TV commercials when they watch recorded programs.
The most popular reasons cited for why consumers watch commercials are that they are educational (36%) and
entertaining (34%)
42% of consumers claim to be willing to watch more commercials in exchange for a lower subscription fee.
Scripps executive expects growth
CINCINNATI (AP) - A restructured E.W. Scripps Co. will emerge in 2008, one that its designated chief executive says can grow.
"Long term, what you want to do is be a player in more markets," Rich Boehne, currently Scripps' chief operating officer, said
in an AP interview. Scripps recently announced plans to split into two companies, with current CEO Kenneth Lowe to head
the new Scripps Networks Interactive.
E.W. Scripps, to be headed by Boehne, will include newspapers in 17 U.S. markets and 10 broadcast television stations. While
the new company gets newer, growing businesses such as the Food Network and HGTV, Boehne said he is bullish on the
future for local news on TV and newspapers and particularly in their online components.
"The growth opportunities are probably more immediate on the cable network side, but the wonderful change and chaos
and lack of clarity in local media suggests that there's opportunity," Boehne said.
"When I'm in the newsrooms, what I preach constantly is in today's environment, it's much less about who, what, when and
where. It's about why and what's next," he said. "In an environment where you do have a multitude of voices, the
opportunity to bring context and color and perspective is I think our real role."
He didn't rule out acquiring more newspapers, but said the economics are tricky and that Scripps will be cautious.
"At this point, it might matter less whether you enter through newspaper or you enter through TV," he said. Where you end
up 20 years from now may be somewhere on the Internet platform or a little bit of both."
Besides The Post newspapers closing in its Cincinnati home on Dec. 31, Scripps also this year announced it would close the
Albuquerque Tribune if there is no buyer. The president of a public relations firm in the New Mexico city has said he's in a
partnership seeking to buy the newspaper. Scripps two years ago closed The Birmingham (Ala.) Post-Herald.
"I have seen the changes in the business up real close," said Boehne, 51, a former Post reporter whose first summer job was
selling Post subscriptions over the telephone at age 15.
When the split was announced, Scripps' stock shot up more than 8 percent, and analysts have generally approved the plan,
expected to be carried out in June. There has been sporadic speculation over the past year that Scripps would shed the
newspaper business the Scripps family has been in since 1878.
"That's very unlikely. The family has shown to date no interest in getting out of the legacy business," Boehne said. "They like
the business a lot and they're built on a heritage of public service.
"They've been around 130 years," he said. "Apparently they've made a few good calls."
Monday, December 24, 2007 Page 9
Zell bets some chips on Vegas' Greenspun
When Sam Zell, chairman and chief executive of the newly private Tribune Co., unveiled his board for the media concern last
week, there was one wild card -- and it came from Las Vegas.
Brian Greenspun? Editor and president of the Las Vegas Sun? Really?
Even Greenspun himself said Friday he was stunned when Zell, a casual acquaintance with whom he's never before done
business, asked if he was interested in becoming a Tribune director.
"I never wanted to ask him why because I didn't want him to challenge himself and then withdraw the offer," said Greenspun,
61, who heads his family company, which, besides the Sun and niche publications, is invested in Internet ventures, real
estate, television and even casinos. "It's not a traditional looking or acting board, and I guess I'm the epitome of that. I mean,
who would reach down to Las Vegas and put a guy like me on the board?"
It may not be a traditional board, but Zell has cherry-picked an eclectic mix short on diversity but long on the ability to sense
and seize opportunities.
Zell has enlisted Hollywood agency power broker Jeff Berg, Citizens Communications' Chairwoman Maggie Wilderotter,
venture capitalist Frank Wood, and Zell associate Bill Pate. Northern Trust Chairman Bill Osborn and former Kraft Foods Inc.
co-CEO Betsy Holden, meanwhile, are held over from the old Tribune Co. board.
"This is not a board where we have to have people on it that are going to impress Wall Street," Zell said at a news conference.
"They tend to be non-conventional thinkers."
Until Zell's predecessor at Tribune, broadcasting executive Dennis FitzSimons, became head of the company, the 160-yearold
media outfit always had been headed by a publisher. FitzSimons' rise within the last five years signaled a critical shift of the
media landscape that's still evolving.
In praising Greenspun and his family, Zell noted that they have had "a long history and a long reverence for the newspaper
business," but just as significant is how Greenspun has adapted his old media empire for the realities of a new media age.
What surely caught the attention of Zell's team is the way the Greenspun Corp. developed innovative ways to wring profit
from the Internet properties, such as picking up commissions on Las Vegas flight, hotel and entertainment bookings made
through its Vegas.com site.
Greenspun also has forged cost-efficient strategic advertising alliances for his upscale niche magazines with others regional
titles around the country.
Then, there's how Greenspun reinvented his struggling paper in the last couple years as a supplement to its rival and
jointoperating-
agreement partner, the Las Vegas Review-Journal.
The Sun focuses on investigative stories, in-depth enterprise reporting and features while leaving the bread-and-butter news
to the bigger paper. The Sun also increased its circulation 700 percent through the arrangement.
"We may be what newspapers become tomorrow. We may not be," Greenspun said. "But the idea that we're trying it, maybe
in Sam's mind, that's the kind of openness to ideas [he thinks], 'I need that around me.' "
Greenspun's family has acquired a piece of Zell's initial $315 million stake in Tribune. No one will say how large the family's
investment is, including Greenspun.
"A lot of people can't get past the idea that every decision is about dollars and cents," he said. "This is about how to make
this
democracy better and I honestly believe in newspapers, or news organizations I would call them. I believe in them. ... And if I
learned anything from my father, it's never worry about money. You do the right thing and the money will follow."
Greenspun's late father, Hank, bought the Sun in 1950 shortly after it was launched by striking pressmen from the Review-
Journal. The elder Greenspun used the Sun to take on everybody from the FBI and Howard Hughes to Sen. Joseph McCarthy.
Monday, December 24, 2007 Page 10
Brian Greenspun believes his father would have jumped at Zell's invitation to be on Tribune's board even faster than he did.
"I cannot tell you how it happened that I wound up on [Zell's] radar," Greenspun said. "The only thing I can guess is that he
saw
the things we're doing in Las Vegas and said, 'I want that kind of thinking around me.' "
In Full-Page Ad, 'Sun-Times' Boss Freidheim 'Welcomes' Sam Zell To Chicago Competition
In a full page ad in Sunday's Chicago Sun-Times, Sun-Times Media Group Chairman and CEO Cyrus F. Freidheim Jr.
"welcomed" new Tribune Co. chief Sam Zell to the newspaper industry with reminders about the bare-knuckled history of the
city's newspaper wars, and gentle warning that the tabloid will remain a competitor.
"Welcome to the newspaper business -- after 60-plus years of experience, we endorse your idea that money can be made,"
Freidheim wrote, noting that the Chicago Sun was launched by retailer Marshall Field III "as a counterweight to Co. Robert
McCormick's rather unique views of the world."
"We applaud your view that newspapers are not dead," Freidheim wrote. "You're right. And the Chicago Sun-Times is
providing that to 875,000 readers in the city of Chicago alone every week -- the biggest readership (actually larger than yours,
Sam) in the city."
The ad appears as Sun-Times Media Group is preparing to lop $50 million from its operating costs by June, the biggest
reduction in its history and one that is expected to cause layoffs in big numbers.
"We agree newspapers are going to have to change rapidly to better address how our customers get the news," Freidheim
wrote. "We are on that path already and delighted that you will be there doing what you can with the Tribune Company."
In a P.S. to the "Dear Sam" letter, Freidheim wrote: "We would have taken this ad in your paper, but your rates are too high."




Wednesday, December 26, 2007
TOPICS TOPICS TOPICS
U.S. retailers holiday sales up 3.6 percent
NEW YORK (Reuters) - U.S. specialty apparel retailers saw sales rise 3.6 percent in holiday shopping, at the lower-end of
expectations, according to data released on Tuesday by SpendingPulse.
The figures, from the retail data service of MasterCard Advisors, offer a glimpse at the strength of the 2007 holiday shopping
season, which was expected to grow at the slowest rate in five years, as U.S. consumers face a housing slump, a credit
crunch
and higher prices for food and fuel.
"It's more at the lower end of the expected range but more or less in line with the reduced expectations coming into the
holiday season," Michael McNamara, vice president of Research and Analysis for MasterCard Advisors, said.
SpendingPulse, a report released by MasterCard, had projected spending to rise 3.5 percent to 4.0 percent over last year's
holiday season.
Economists and policy makers have been closely monitoring the U.S. consumer, a sector increasingly seen as the savior that
could keep the U.S. economy from slipping into a recession. Some analysts expect U.S. gross domestic product (GDP) to
weaken in the fourth quarter and show either no expansion or up just by 1 percent.
"If you were looking for this holiday season to kick-start a new acceleration of growth, you'll probably be disappointed,"
McNamara said.
SpendingPulse said sales at U.S. specialty apparel chains, which include Gap Inc, Aeropostale Inc and Urban Outfitters Inc,
rose
1.4 percent over last year, a slight improvement from the anemic 0.5 percent seen at mid-season.
The results measure the crucial shopping period from the Friday after Thanksgiving through midnight December 24. They are
adjusted for the 32 days included in this year's period compared with the 31 days in 2006.
Women's clothing sales fell 2.4 percent, but showed that sales made up some ground having been down 5.7 percent at
midseason.
On the other hand, sales of men's clothing rose 2.3 percent but had been up by 4.5 percent at mid-season.
McNamara said that so far, there is no compelling evidence that retailers cut prices more than they did last year.
Consumer electronics, which includes popular gift items such as Apple Inc iPods, laptop computers, flat-screen televisions,
and also appliances rose 2.7 percent.
SpendingPulse tracks sales activity in the MasterCard Inc payments network and couples it with estimates for all other
payment
forms.
US retailers roll out longer hours, deeper discounts to lure shoppers
NEW YORK (AP) - America's retailers opened earlier than ever on the day after Christmas on Wednesday and slashed prices
with hopes of salvaging a holiday season that is falling short of already modest expectations.
Merchants are trying to lure post-Christmas bargain hunters and gift-card splurgers that could provide a much needed boost
during this crucial period. Gift card sales, which have been growing in recent years, are not recorded until shoppers redeem
them. Still, investors are growing more pessimistic about this shopping season, sending most retailers' stocks down
Wednesday. Macy's Inc.'s shares fell more than 4.5 percent in afternoon.
Wednesday, December 26, 2007 Page 2
"My son gave me gift cards for clothes, and I get up with the birds, so I figured I'd get the most with my money," said Susan
Depetris, who was loading pants and sweaters into a cart at Kohl's in Medford, Massachusetts. She did not plan on looking
for
gifts for anyone else. She had just one person on her mind while she shopped - herself.
"I was the first one in the door, so it was nice," said Shirley Vilhauer, of Bismarck, North Dakota, who was shopping at a local
Kohl's and spent less than $25 (euro17.36) on ski pants for her grandson and a baby gift for her niece's young son.
The International Council of Shopping Centers said Wednesday that same-store sales, or sales at stores opened at least a
year
during the November-December period, appear to be coming in just below already slim projections for a 2.5 percent gain,
though it said that a post-Christmas buying bump could erase that shortfall. That contrasts to a more upbeat assessment
from
its chief economist Michael P. Niemira, following the weekend's spending surge, who predicted that holiday sales could at
least meet forecasts.
Target Corp. warned late Monday that its same-store sales might decline for December, while a broad gauge of consumer
spending released by Mastercard Advisors, a division of the credit card company, which includes estimates for spending by
check and cash, reported on Tuesday an increase of 3.6 percent from Thanksgiving to Christmas. That compared with a 6.6
percent gain in the year-ago period. The 2007 holiday figure is at the low end of its 3.5 percent to 4.5 percent range.
Excluding gasoline and auto sales, that figure was 2.4 percent.
"The ingredients were not there for a blockbuster season," said Michael McNamara, vice president, research and analysis of
MasterCard Advisors. "And retailers in many respects got the most out of the season that they could based on the
environment."
Despite a strong start to the season, shoppers held out for deals through most of December amid a challenging economy.
Higher gasoline prices, an escalating credit crisis and a housing slump made shoppers cautious, which has manifested itself
in
weakening sales growth throughout the year, McNamara said.
To spur business, stores rolled out discounts early and aggressively, raising concern about profits during this crucial period.
The holiday season accounts for up to 30 percent of annual stores sales. For toy sellers, holiday business accounts for as
much
as 50 percent.
Retailers' woes can be good new for shoppers, who are being bombarded with even more generous discounts in the after-
Christmas period. Toys "R" Us Inc., which threw open its doors at 8 a.m. on Wednesday, two hours earlier than last year,
offered 40 percent price cuts on all MP3 and iPod accessories. Macy's Inc. marked down cashmere sweaters anywhere from
50 percent to 75 percent off, while Saks Fifth Avenue cut prices on fur coats by 40 percent to 60 percent.
The post-Christmas season has become more important with the increasing popularity of gift cards. According to the National
Retail Federation, consumers were expected to spend a total of $26.3 billion (euro18.27 billion) in gift cards this holiday
season, up 42 percent from $18.5 billion in 2005.
ShopperTrak RCT Corp. said that the week after Christmas accounts for about 16 percent of total holiday sales.
"This is going to be a more important chunk of business than most people realize," said Scott Krugman, a spokesman at NRF.
Post-Christmas bounty: $60 billion
Santa wasn't so nice to retailers this year. But stores could now haul in $60 billion over the next 7 days.
NEW YORK (CNNMoney.com) -- Retailers shouldn't write off the 2007 holiday shopping season just yet. Consumers are set to
bag $60 billion worth of merchandise over the next seven days, experts say.
Much of that spending - nearly half, according to one estimate - is expected to come when consumers cash in gift cards.
Michael McNamara, vice president of research and analysis for MasterCard Advisors, expects that retailers will ring up as
much as
17 percent of their December sales in the last week of the month.
That translates to about $60 billion in holiday-related purchases or roughly 12.6 percent of $474.5 billion that the National
Retail Federation expects consumers will spend on holiday-related shopping.
"Over the last five years, the post-Christmas week has become much more important because of gift card redemptions," said
McNamara.
Wednesday, December 26, 2007 Page 3
MasterCard Advisors did not break out how much of the $60 billion will be spent using gift cards. A survey conducted by the
retail federation in November estimated that gift card-related sales this holiday season could reach $26.3 billion.
Marshal Cohen, chief retail analyst with NPD Group, estimates that more than 60 percent of holiday shoppers bought gift
cards.
Gift cards are especially critical this year because the retail federation expects holiday sales in November and December to
grow 4 percent over last year - or their slowest pace of growth since 2002.
Some early tallies this week from ShopperTrak and MasterCard Advisors said final holiday sales came in short of the retail
federation's forecast at 3.6 percent growth. The weaker-than-expected results rattled investors Wednesday, leading to a
broad-based selloff in retail stocks.
But stores could make up for some of the shortfall this week.
The International Council of Shopping Centers, citing results of its survey of 1,018 consumers this month, said that one-infive
consumers planned to go shopping the day after Christmas.
"Gift cards have transformed the holiday-shopping landscape and they have extended holiday shopping well past Christmas
Day," said Michael Niemira, ICSC chief economist .
"December 26 begins that new phase of the holiday shopping season," he said.
Since merchants only log gift card sales when the cards are actually redeemed, not when they are sold, several chains
initiated
post-holiday clearance sales on Wednesday to entice gift card holders back in their stores or on their Web sites.
Wal-Mart (WMT, Fortune 500), the world's largest retailer, set clearance sales on clothing, toys, electronics and home and
kitchen products. Macy's (M, Fortune 500) slashed prices by 50 to 65 percent this week. At J.C. Penney (JCP, Fortune 500),
shoppers are being offered 50 to 70 percent discounts this week.
Despite Losses, Circuit City to Grow Concept
RICHMOND, VA-Circuit City Stores will continue to expand domestically, but more slowly, executives said at the company’s
third-quarter conference call. After opening 61 to 63 new and relocated superstores in fiscal 2008, plans call for some 50 to
60 new and relocated stores, all in the heavily interactive City format, in fiscal 2009. Earlier plans had called for 75 to 100
stores in fiscal 2009.
“We have a growing store base and competition that continues to open new stores,” said Bruce H. Besanko, EVP and CFO.
“We are continuing to grow to remain competitive.”
Most existing stores have positive cash flows, so there will be few closures. All of the new stores will average about 20,000 sf,
reflecting the move away from appliances. Seven “City” concepts already are open. About 80% of 2008 stores will be
incremental units, with 20% being relocations. As the existing store base continues to age, that proportion will shift to
relocations.
“Today people want the convenience of shopping online and picking up at the store,” as well as testing items in the store,
Besanko said. “These seven stores are the first full manifestations of our learnings in our stores.”
The growth comes despite a disappointing quarter. Net sales decreased 3.1% from the previous year to just shy of $3 billion.
Consolidated comparable store sales dropped 5.6%. The chain posted a net loss from continuing operations of $208 million,
compared to a net loss of $19.9 million the previous year.
Circuit City operates 668 Superstores and 13 other locations in the US, and 789 stores and dealer outlets in Canada. Six are
“The City,” the company’s next generation format.
Walgreen On the Road to 13,000 Units
DEERFIELD, IL-Walgreen Co. plans to open 550 stores in its current fiscal year and started its expansion by rolling out 169
units
during the first quarter. Management is shooting for a long-term total of 13,000 locations across the country, and the
company is nearly half way there, with 6,139 in its current portfolio.
Contrary to reports, new stores are not lagging in sales due to high construction and labor costs, said William Rudolphsen,
the
company’s chief financial officer, during Walgreen’s Q1 conference call. The stores that opened last year had average sales of
just under $2.1 million, higher than any first-year totals since 2002. “The productivity of new stores has not diminished over
the last five years,” Rudolphsen said.
Geographically, Walgreen is making a push in the Northeast and California. The company is also expanding its in-store Take
Care health clinics. Those are currently in 119 units, and management is shooting for that to increase to 400 by the end of
next year.
Total same-store sales during the quarter, which ended Nov. 30, rose 5.4% year over year. Front-end sales in units increased
4.6%, while pharmacies posted a 5.9% gain. The number of comparable-prescriptions filled in stores rose 3.7%.
Wednesday, December 26, 2007 Page 4
Total sales rose 10.4%, hitting a record $14 billion, while net earnings increased 5.5%, to $456 million.
Romney's big ad buys don't pre-empt foes
So far, he's getting little bang for buck
The return on investment probably would not have impressed Mitt Romney in his former life as a cold-eyed venture capitalist.
As of Dec. 16, the Romney campaign had spent $16 million on television advertising -- more than the two leading Democratic
candidates combined, according to data compiled by TNS Media Intelligence Campaign Media Analysis Group.
Yet the former Massachusetts governor is struggling in national polls against Mike Huckabee and Rudy Giuliani, who had
spent
$600,000 and $2.3 million respectively, according to the same data.
What does that money get you? As of mid-November, with nearly two months to go before the first votes are cast, Romney
had aired nearly 17,000 TV commercials, according to the Nielsen Co. More than 7,400 of them aired in Iowa alone.
Conventional wisdom counts a well-funded television advertising offensive among the most potent weapons in a campaign.
TV commercials, after all, are where most of the money goes in major political campaigns.
But particularly in the GOP primary campaign, the big spender's ads aren't yet showing much bang for the buck.
Part of the explanation is the highly fluid GOP presidential contest and the unusually varied strategies the candidates have
pursued to adapt their campaigns to the highly compressed primary calendar, said Evan Tracey, chief operating officer of
TNS
Media Intelligence.
And Romney's big early advertising buys and willingness to dip into his personal fortune to fund his campaign probably
made
his opponents especially wary of releasing money for TV ads early, for fear that they would be unable to answer if Romney
opened his wallet for a last-minute blitz, Tracey said.
"To some extent, it froze the other well-funded candidates on the Republican side," Tracey said. "You don't want to run out
of money at the end, when the ads are perceived to be the most important."
The Internet also is emerging as an important component of campaign media strategies, though still not as significant as TV
advertising. In many cases, campaigns are producing video ads for the Internet or seeking broader audiences for their
television ads by e-mailing them to supporters or posting them on sites like YouTube.
Giuliani, whose campaign comes closest to Romney's in funding strength, has been husbanding his resources for a strategy
that
concentrates on later, delegate-rich states such as Florida and then New York, California and Illinois -- all dominated by media
markets with high advertising costs. Those are the states where Giuliani believes Republicans are most open to a social
moderate like himself.
Still, the former New York mayor's slow start in television advertising could be contributing to his recent slip in polls.
Huckabee light on TV exposure
Huckabee went most of 2007 with few financial resources and concentrated on gaining a boost from the Iowa caucuses by
cultivating support among Christian evangelicals, a constituency not as easily reached by television advertising.
"Huckabee is really a phenomenon as Republicans search for a real Republican and the religious voters search for a
candidate
who is supportive of their social values and consistently so. You add in the fact that he's a rock musician and very articulate
and witty," said Bill Carrick, a Democratic media strategist.
Romney has built his campaign around a conventional strategy of building national momentum through strong showings in
the
three early Republican contests -- Iowa, New Hampshire and South Carolina.
He started his campaign with the disadvantage of a minimal national profile while facing such well-recognized rivals as
Giuliani,
famous nationwide for leading New York City during the Sept. 11 attacks; Sen. John McCain (R-Ariz.), a prominent politician
Wednesday, December 26, 2007 Page 5
with a compelling life story already known to voters in early-voting states through his 2000 presidential campaign; and Fred
Thompson, a former senator and actor who was a regular on the network TV show "Law & Order."
Though Romney already had some following in New Hampshire from his tenure as governor of neighboring Massachusetts,
he
rose in the polls there and particularly in Iowa and South Carolina after he launched an early and robust ad campaign ahead
of
his opponents.
"He was an asterisk at the start of the campaign, and now he's a front-runner. So you can't quarrel too much with what they've
done with advertising," Carrick said.
Arguably, the most effective use of TV advertising in presidential primary campaigns is for just such an introductory role,
allowing candidates to present themselves to voters on their own terms, with a message unfettered by the news media's
independent analysis.
On the Democratic side, Sen. Barack Obama has spent heavily on commercials that have done just that, beginning television
ads before the other major candidates to present his life story and frame his campaign themes. He had spent $8 million as of
Dec. 16 on TV ads, more than any other Democrat.
While Obama started the campaign with intense media buzz generated by his charismatic personality and the groundbreaking
nature of his candidacy, he was not a familiar figure who had established strong impressions with voters in the same way that
rival Sen. Hillary Clinton had over many years in the public arena.
"At this point, the Obama campaign has been very disciplined about what they're trying to do -- the change message, turn the
page," Carrick said. "They've used their advertising consistently to reinforce their message."
Though Clinton started as the best-known presidential candidate and the leading Democrat in the polls, she also has spent
heavily on ads, $6.4 million as of Dec. 16.
John Edwards, who has attracted significantly less campaign money than the two Democratic front-runners and faces state-
bystate
spending constraints because he accepted public financing, has advertised far less, spending $3.5 million as of Dec. 16.
Like Huckabee, he has chosen to concentrate resources on Iowa, hoping a strong showing there can provide a breakthrough
for his campaign. In that state, he benefits from a following he cultivated in his 2004 campaign there. While Edwards trails in
national polls, he is running a close race in Iowa.
'Pretty intense hit pieces'
The final stretch before the Iowa caucuses and New Hampshire primaries could produce the most complex advertising
environment, as outside interest groups, which have already been hitting voters with a variety of messages, ramp up their
advertising.
"You'll probably see some pretty intense hit pieces in the last week or so," Tracey said. "That's when they're most effective --
either because a candidate can't fully answer them or it's at least enough to throw the candidate off stride."
Likewise, with their backs against the wall, the candidates will face tough choices.
"The mythology is people in Iowa don't like negative ads," Carrick said. "But some people may not be able to win unless they
go negative."
Toyota plans to sell 9.85 million vehicles in '08, threating GM's position as No. 1 automaker
NAGOYA, Japan (AP) - Toyota plans to sell 9.85 million vehicles worldwide in 2008, the company said Tuesday, setting an
ambitious target despite worries about a slowing U.S. car market, as it tries to become the world's top automaker.
Toyota also said it plans to produce 9.95 million vehicles worldwide next year, up 5 percent from this year - the same as the
projected annual percentage jump for Toyota's global sales.
Wednesday, December 26, 2007 Page 6
Its recent growth has put Toyota Motor Corp. on track to beat U.S.-based General Motors to become the world's largest
automaker by sales. GM has said it estimates this year's sales to total 9.3 million vehicles, against Toyota's estimate of 9.36
million sales.
Toyota's growth been based in large part on the popularity of models such as the Camry sedan, Corolla subcompact and the
Prius gas-electric hybrid.
Soaring gas prices have dramatically boosted the appeal of smaller fuel-efficient models that are Toyota's main strength.
General Motors has been fiercely fighting back, boosting its overseas business and could still keep the top industry spot,
which
it has held for 76 years.
GM has not given a forecast for the number of vehicles it expects to produce or sell in 2008. The Detroit automaker has the
industry record for annual global vehicle sales, with the 9.55 million vehicles sold by GM in 1978.
Toyota executives acknowledged Tuesday worries about the U.S. market, which has been hit by the subprime mortgage crisis
and soaring oil prices. But they nonetheless projected increasing U.S. sales by 1 percent to 2.64 million vehicles.
They were also bullish about prospects for emerging markets such as China, Russia and South America, while being
conservative expectations for Europe, at a 2 percent increase to 1.27 million vehicles, and seeing sales in Japan remain flat at
1.6 million next year.
But Koji Endo, auto analyst with Credit Suisse in Tokyo, said next year will likely prove a challenge even for Toyota, as U.S.
economic woes weigh on sales and profits.
But he said the overall optimism for sales growth was "reasonable," given Toyota's recent performance.
"These are targets Toyota is giving, not forecasts, and so they are reasonable," he said.
After the first nine months of this year, Toyota was - at 7.05 million vehicles sold worldwide - trailing GM's sales of 7.06 million
vehicles for the same period. The final tally for this year's numbers won't be out until January next year.
GM's spokesman in Tokyo, Michihiro Yamamori, declined to comment, citing company policy to refrain from commenting on
its rivals' targets.
Toyota also said it was preparing to start mass producing lithium-ion batteries for low-emission vehicles.
Cutting the Stack of Catalogs
Catalog Choice aims to help consumers opt out, but not all retailers are heeding the requests to get lost
The catalog remains one of the best ways to reach consumers during the holiday season. So when an activist Web site called
Catalog Choice contacted the likes of L.L. Bean, Williams-Sonoma (WSM), and Harry & David and asked them to take
thousands
of people off their mailing lists, the retailers knew they had a public-relations problem.
How did they respond? Some—mostly outdoorsy brands like L.L. Bean and Lands' End (SHLD)—made soothing noises.
Others
blew off the Web site (and subsequently, the people declining their catalogs), and have done nothing with the names. Still,
despite being less than three months old, Catalog Choice has managed to spook an industry. Consider the Nov. 29 e-mail
from
the Direct Marketing Assn. Bearing the subject line "JUST SAY NO," it warned retailers that Catalog Choice's "priority is to
eliminate catalogs as a marketing medium. It is not in your interest to further their efforts!"
Catalog Choice isn't a new idea. But it has generated interest by doing a few things differently from its predecessors. It's free.
And it lets you decline specific catalogs rather than all of them. Plus, it is operated by big green groups: the National Wildlife
Federation, the Natural Resources Defense Council, and the Berkeley (Calif.)-based Ecology Center. The site's stated goal is
to reduce the number of unwanted catalogs. Since its Oct. 9 launch, Catalog Choice says it has signed up 300,000-plus
people, each of whom declined to receive an average of 12 titles.
The environmentalists are putting retailers on the spot at a delicate time. In the last year, "Do Not Mail" initiatives have been
proposed in 15 states. Similar to the federal "Do Not Call" legislation, which bans telemarketers from calling phone numbers
on a special opt-out list, the bills have made little progress so far. But the movement appears to be picking up, and bad press
from a group like Catalog Choice could tip consumer sentiment.
Wednesday, December 26, 2007 Page 7
So on Dec. 17, the DMA held a "catalog summit" at its New York offices to discuss how to fight back. "Activist groups are out
there collecting names for petitions and beating the drum," DMA President John A. Greco Jr. told attendees. "We would
advise you not to encourage them in any way."
At the meeting, Greco introduced an upgrade to the DMA's own opt-out service, which he recommended his members use
exclusively. Like Catalog Choice, the DMA's Mail Preference Service will now let consumers pick which catalogs they do not
want to receive by title. But it will require users to submit a credit-card number to verify their identity, and it will cost $1 (the
DMA says it will soon remove the fee). It also will have an "opt-in" for consumers to add their names to catalogs' house lists.
The hope, says Greco, is to show that direct marketers can regulate themselves.
POST-HOLIDAY PRESSURE
How much influence is Catalog Choice having on retailers' behavior? Hard to say—most wouldn't talk about it. Victoria's
Secret
Direct (LTD) and J. Crew Group (JCG) declined to comment, and Harry & David spokesman Bill Ihle said the retailer was too
busy making sure "all of Santa's orders come through" to discuss the issue.
L.L. Bean says it has removed some of the names on Catalog Choice's list, but is still evaluating it for accuracy. The company
wouldn't say how many names it had removed or how long the evaluation would take. Williams-Sonoma, which also
distributes
the Pottery Barn (WSM) catalog, says it "is still figuring out the right thing to do for our customers" and has only analyzed
samples of Catalog Choice's list.
The activists behind the site intend to hold retailers' feet to the fire long after the holiday frenzy. "We depend on the good
faith of the merchants to honor these [do-not-mail] requests," says Chuck Teller, Catalog Choice's chief. "If they don't, we'll
tell our members who is not honoring them."
Amazon calls '07 holiday season 'best ever'
Amazon.com Inc. said the 2007 holiday season was its best ever in its 13-year history, with Dec. 10 its busiest day, when
customers ordered 5.4 million items.
On its busiest day, officials at the Seattle online retailer (NASDAQ: AMZN) said its shipment network shipped 3.9 million units.
Amazon said the hot-selling Wii video game, which is distributed by Nintendo of America of Redmond, was selling at about 17
per second on the site, when the game was in stock.
The company also noted it shipped to more than 200 countries and was able to make Christmas Day deliveries from as late as
Dec. 23 for its Amazon Prime members.
Miami worst in nation as U.S. housing prices drop 6.7%
U.S. home prices fell in October for the 10th consecutive month, posting their largest monthly drop since early 1991, a
widely watched index showed on Wednesday.
The record 6.7 percent drop in the Standard & Poor's/Case-Shiller home price index also marked the 23rd consecutive
month prices either grew more slowly or declined.
``No matter how you look at these data, it is obvious that the current state of the single-family housing market remains grim,''
said Robert Shiller, who helped create the index, in a statement.
The previous record decline was 6.3 percent, recorded in April 1991. The S&P/Case-Shiller home price index tracks prices of
existing single-family homes in 10 metropolitan areas compared to a year earlier. The index is considered a strong measure of
home prices because it examines price changes of the same property over time, instead of calculating a median price of
homes sold during the month.
The broader Case-Shiller index of 20 metropolitan areas fell 6.1 percent. Among the 20 metropolitan areas used in the
broader index, 11 posted record monthly declines and all 20 declined in October compared to September.
Miami posted the largest decline among those 20 markets. Home prices in the Miami metropolitan area fell 12.4 percent in
October compared to the same month last year, surpassing Tampa, Fla., as the worst-performing city. Tampa posted a
yearover-
year loss of 11.8 percent.
Besides those two cities, Detroit, Las Vegas, Phoenix and San Diego also posted double-digit year-over-year declines.
Wednesday, December 26, 2007 Page 8
Atlanta and Dallas, which had previously posted price appreciation, fell in October. Prices fell 0.7 percent in Atlanta and 0.1
percent in Dallas compared to a year earlier.
Only three areas _ Charlotte, N.C., Portland, Ore. and Seattle _ posted year-over-year home price appreciation in October.
Charlotte posted the largest gains at 4.3 percent.
Bob Morgan, president of the Charlotte Chamber of Commerce, said the area's economy continues to create jobs at record
levels. While the numbers are preliminary, more than 14,000 jobs were created in the Charlotte area in 2007, he said,
compared with more than 12,000 jobs in 2006.
The job growth is coming from a ``pretty healthy'' variety of sectors, including the financial industry, Morgan said. Charlotte is
home to two of the nation's four largest banks, Bank of America Corp. and Wachovia Corp.
Carole Brake, the sales manager at Bissell Hayes Realtors SouthPark Office in Charlotte, said prices are still up despite an
increase in inventory.
``Sellers are not in a mode to reduce their prices. They want a fair market price for their home,'' Brake said.
9 Out of 10 Emails Delivered To Large Companies In November Were Spam: Report
NEARLY 9 OUT OF 10 email messages delivered to large enterprises in November were spam, according to the latest stats
from
Proofpoint. The Sunnyvale, Calif.-based data security company released its Proofpoint Spam Index and found that while
overall spam levels dropped slightly (from 89% in October to 88% in November), large companies were still receiving an
extremely high volume of spam--with an upsurge in attachment-based spam of almost every kind.
The majority of attachment spam came in the form of images--as image-based spam made up nearly 10% of all unsolicited
emails delivered to enterprises in November, up 24% from the previous month. About 5% of all spam came in the form of
Microsoft Word (.doc) attachments, a 65% increase over from October. Meanwhile, PDF spam increased by more than 100%
from month-over-month, though these kinds of attachments only made up about 2% of enterprise spam overall. MP3 spam
was the only category that declined in November, as spammers sent nearly a third less audio file attachments with their
messages--representing just 0.04% of total spam volume.
To provide an industry-wide baseline for monitoring rises or declines in spam, the Proofpoint Spam Index aggregates data
from the company's email security products in use at enterprises across verticals (including higher education and
government
agencies).
Comcast's Struggle Underscores Cable Sector's Woes
Comcast is more vulnerable to a bad economy because it is so big, especially compared to regional companies like
Cablevision.
NEW YORK The cable sector has long been considered a safe haven for entertainment and media investors.
Nonetheless, few questioned industry giant Comcast when it lowered its 2007 financial guidance this month, arguing that a
sluggish U.S. economy has been a factor dragging down its business performance in the second half.
So, has the "safe haven" adage run its course or is Comcast overstating the economic impact on its financials?
So far, Wall Street is somewhat divided on the issue. Many argue that Comcast has become so big that it is exposed to the
U.S.
economy, while other cable operators remain shielded from it. Others argue that the real threat to Comcast's business
momentum is heightened competitive pressure, and the economy simply serves as an excuse.
"They are so big that they are a proxy for the economy," Kaufman Bros. analyst Todd Mitchell said about Comcast.
He cited the troubled housing market as a key challenge: Fewer houses means a reduction in customers, and so does fewer
people maintaining second homes. Overall, people have less discretionary cash as they struggle to pay mortgages and other
key bills, and that cuts into their ability to pay for cable connections, he said.
Wednesday, December 26, 2007 Page 9
So, Comcast is more vulnerable to a bad economy because it is so big, especially compared to regional companies like
Cablevision Systems, which focuses on the New York area, Mitchell said.
Comcast co-CFO Michael Angelakis recently made the same argument at an investor conference. "When we see a little bit of a
rise in both churn and bad debt, that indicates there's an economic issue," he said.
Media analyst and investor Hal Vogel suggested other cable firms have also felt the impact of macro-economic issues. "It
used
to be, people would rather starve than give up cable. But not anymore," he said. "If you can't make your mortgage payment
or rent payment, you're not able to make the cable payment."
But others think even the country's largest cable firm Comcast remains pretty much immune to economic pressures as most
consumers will spend money on home entertainment rather than on traveling, going out and related activities.
"While many investors may blame Comcast's shortfall this year on the economy, we believe the vast majority of the
reductions
are due to competition," especially from telecommunications companies, such as Verizon and AT&T, Pali Research analyst
Richard Greenfield said. "Comcast simply did not expect the level of competitive marketing spend that has occurred this
year."
Corporate bond research firm Gimme Credit analyst Shelly Lombard agreed, adding: "Maybe Isiah Thomas can blame the
weak
housing market the next time the Knicks lose since it's become the catchall excuse for everyone's poor results, no matter the
industry."
The analyst shrugged off the economic excuse, arguing: "We understand how a slow economy might make customers less
likely to upgrade cable packages or buy extra services like VOD. But using the housing market as a rationale for losing
customers is more of a stretch. Cable operators never mentioned housing as a driver of past revenue growth" when the
market was strong.
Overall, most on Wall Street are more wary about the competition from satellite TV and telecom operators than about the
economy's effect on cable companies.
Greenfield titled a recent report on Comcast "The War Intensifies." In it, he recommended, "Comcast needs to go on the
offensive, and soon."
But the new talk of economic pressure on the cable sector even found its way into a couple of recent cable investor
presentations.
As such, cable investors will likely keep their ears to the ground as the new year unfolds and talk of a possible U.S. recession
continues.
Despite woes, McClatchy banks on newspapers
SACRAMENTO - In the beleaguered newspaper industry, one chief executive has long stood out as the golden boy: Gary
Pruitt. He skillfully managed the McClatchy Co. chain and last year engineered the $4.6 billion takeover of Knight Ridder Inc.,
one of the largest in the history of the business.
But since the beginning of 2006, Mr. Pruitt's company has lost $1.46 billion and seen its stock price plunge 78 percent,
exceeding the carnage at most newspaper companies. Still, when members of the board and the controlling family privately
discussed Mr. Pruitt's future last month, they unanimously supported the man who brought McClatchy to this juncture.
"We have the best person in place to get us through some of these turbulent times," says Kevin McClatchy, a descendant of
the company's founder. Board member Larry Jinks says the entire board expects Mr. Pruitt "to be the CEO into the future."
"I plan on sticking around," says the 50-year-old Mr. Pruitt, a one-time First Amendment lawyer who has led McClatchy for
nearly a dozen years. "I hope to and expect to."
Wednesday, December 26, 2007 Page 10
Mr. Pruitt is one of the last true believers in the financial power of the press. He says he expects McClatchy to recover from its
slump, with the help of a new deal with Yahoo Inc. aimed at driving visitors and ads to his newspapers' Web sites. He plans to
sell off some nonnewspaper operations and to continue a cost-control strategy that has so far spared reporters' jobs, a
McClatchy hallmark.
With McClatchy now the nation's third-largest newspaper publisher - and one of the last of the large, family-controlled chains
-
his success or failure at making the transition into the Internet age will be a crucial indicator of the future of local print
journalism in the U.S.
Investors have hammered newspaper stocks all year as readers and advertisers continue migrating to the Internet, where ads
generate far less revenue. At McClatchy, which owns 31 daily papers, each with its own Web site, online ad revenue currently
represents only 8.7 percent of the company's total. Overall, ad revenue is down 8.6 percent this year through November.
Sacramento-based McClatchy has been hit especially hard because of its heavy exposure in California and Florida, two of the
nation's weakest housing markets. The housing slump has depressed consumer spending and hurt advertisers such as
homeimprovement
and furniture retailers. "These markets may well be in recession already," Mr. Pruitt says. All three of McClatchy's
Florida papers - the Miami Herald, El Nuevo Herald and the Bradenton Herald - were acquired in the Knight Ridder deal.
McClatchy took on $1.9 billion in debt in the deal. To afford the purchase, it quickly sold a dozen of the 32 papers it
acquired. As a mark of how far investors have soured on the company, McClatchy - which in addition to its 31 dailies has
about
50 weeklies - has a stock-market value just above $1 billion, about what the New York Times paid for a single paper, the
Boston Globe, 14 years ago.
Until last year, Mr. Pruitt, who has been known to quote obscure rock-music lyrics to Wall Street analysts, was viewed by
many
as a star. In his first decade as CEO, McClatchy's share-price performance led the industry. The year 2006 marked the sixth in
a
row that McClatchy outpaced industry ad growth. When the company announced it was buying Knight Ridder, then the
nation's second-largest newspaper company, a BusinessWeek columnist said Mr. Pruitt was "widely considered the best in
the
business." Newspaper analyst John C. Morton predicted, "Five years from now, this will look like a great deal for McClatchy."
Mr. Pruitt's diminished standing and self-deprecating demeanor were on display this month when he gave a presentation at a
media conference in New York. He noted that earlier this year, Mr. Morton - who still thinks the acquisition will eventually pay
off - likened Mr. Pruitt to a "green-bean cannery" operator for selling the Minneapolis Star Tribune as if it were just another
business. Mr. Pruitt quipped that the comment had drawn complaints from canners.
"I could understand why those canners were upset," he said. "After all, they had a better year than I did."
But the board, key investors and, most importantly, the McClatchy family - which controls more than 80 percent of the voting
stock - say they are sticking by him. "He's extremely organized, he's principled, he's steady," says Mr. Jinks, a former
newspaper executive who has served on the McClatchy board since 1995. "If we've got problems, he explains the problems.
We were all part of the decision to make the Knight Ridder deal, so to the extent that there is any second-guessing, we're
second-guessing ourselves."
The McClatchy family, which this year is celebrating the 150th anniversary of its first newspaper, the Sacramento Bee, isn't
interested in selling the company, Kevin McClatchy says. "We've been doing this for 150 years, we've withstood challenges
and we think we're going to get through this," he says.
Mr. McClatchy says his family isn't comparable to the larger Bancroft family, which divided into factions this year after Rupert
Murdoch's News Corp . offered to buy Dow Jones & Co., the parent of The Wall Street Journal, for over $5 billion. The
Bancrofts eventually agreed to sell their controlling interest, leaving some family members bitter.
"I don't believe that if somebody came with an offer that we would be interested in doing what the Bancrofts did," says the
44-year-old Mr. McClatchy, who recently sold a controlling stake in the Pittsburgh Pirates baseball team. Noting that his family
is smaller - there are only eight adults with voting shares - he says "that probably can make things easier" for unity. The
Bancrofts have about three dozen adult members.
Until the 1980s, McClatchy family members ran the company and were deeply involved in some papers. Kevin McClatchy's
father, C.K., was president from 1978 until he died suddenly in 1989.
Wednesday, December 26, 2007 Page 11
Today, no family members work at the company. But the McClatchys remain committed to "good journalism," says William K.
Coblentz, 85, the family's longtime attorney. "They're not interested in the dividends or the sales or anything else," says Mr.
Coblentz, who has served on the board since 1979 and is trustee for numerous family trusts. "Various overtures have been
made over the years" to the McClatchys from prospective buyers, he says. "They weren't tempted."
Kevin McClatchy says the family hasn't ruled out taking the company private, "but I don't think it's a priority today." The
company went public in 1988.
Mr. Coblentz, a San Francisco attorney who says he has also represented the Hearst and Getty families, says that after
meeting
Mr. Pruitt 23 years ago, he urged the McClatchys to hire him as a lawyer. Mr. Pruitt, who grew up in Florida - his father
managed motels, his mother was a librarian - had spent two years as a lawyer in Miami representing media companies. Mr.
Coblentz says he believed Mr. Pruitt fit into the McClatchy family culture - "self-effacing, thoughtful, hard-working."
Mr. Pruitt held various posts, including publisher of the Fresno Bee, before being tapped in 1996 to run McClatchy. His
strategy, successful until recently, has been to concentrate on fast-growing markets in small to midsize metropolitan areas,
with only one newspaper that is the leading local media property. Publishers in the chain get wide latitude.
Anders Gyllenhaal was managing editor at the News & Observer in Raleigh, N.C., when McClatchy purchased it from a local
family in 1995, and he became the top editor. "The paper expanded, we opened new bureaus, we launched suburban
operations," he says.
Mr. Gyllenhaal is now executive editor of the Miami Herald, which McClatchy acquired in the Knight Ridder deal. Although
circulation dropped 8.4 percent in the latest six-month period from a year ago, he says there have been no newsroom layoffs
or buyouts. "McClatchy is the company that you want to be with in times like these," he says. "From the early days, they've
looked at newspapers in the right way, that of the public-service role." The Miami Herald won a Pulitzer Prize for local
reporting this year for stories about waste and favoritism at Miami's housing agency.
Mr. Pruitt says he's focused on turning the company around by reducing debt, expenses and full-time employees - although
not journalists - and compensating for print-circulation losses by expanding online. While its newspapers' overall circulation
has been declining this year - down 3.5 percent daily to 2,737,781 and down 3.9 percent Sunday to 3,376,388 - he expects
that to level off to a drop of about 2 percent a year by the second half of 2008.
The current decline is more than offset, he says, by a 23 percent jump this year in online visitors. He says McClatchy's overall
audience is growing, encompassing 70 percent of adults in its local markets. The company has been increasing its online-ad
sales force, and adding video and more-frequent news updates to its newspaper Web sites. It also holds minority stakes in
popular sites, including careerbuilder.com, cars.com and apartments.com.
This year, McClatchy joined a consortium of newspaper companies in a deal with Yahoo that some analysts believe could
bring
significantly more traffic and ad revenue to members' Web sites. Under the pact, newspapers gain access to Yahoo's
targetedadvertising
technology, which serves up specific ads based on a user's interests; if a reader has been looking at restaurant
reviews, for example, it may show an ad for a restaurant chain. This can allow newspapers to raise ad prices; they also
become
part of local and national ad-sales networks. Local users of Yahoo's Web site are shown news headlines with links to
participating newspaper sites.
Analysts at Deutsche Bank recently estimated that the Yahoo deal could increase partner newspapers' annual online-revenue
growth by about 20 percentage points, and could allow some papers to fully offset print ad declines by 2009, a year earlier
than expected.
Once that happens, "then you've successfully managed the transition" of readers to the Internet, says Paul Ginocchio, a
Deutsche Bank analyst. He said he likes the Yahoo deal because the newspaper industry currently is "too wedded" to relying
on so-called upsells, in which classified advertisers in the print edition are offered online ads as well. The problem, he says, is
that as print-ad revenue declines, there are fewer opportunities to make such sales.
McClatchy will be phasing in Yahoo's services in 2008. The company says early tests in Fort Worth, Texas, saw a 4 percent
increase in traffic the first month.
Wednesday, December 26, 2007 Page 12
Mr. Pruitt is also focused on paying off debt, now at about $2.5 billion. That will be reduced to $2 billion by the end of 2008,
he says, thanks in part to an expected $200 million tax refund from the sale of the Minneapolis Star Tribune in late 2006.
Thomas Russo, a partner at Gardner Russo & Gardner, an investment-management company that is a large holder of
McClatchy
stock, says it's now clear McClatchy overpaid for Knight Ridder. But he says he gives Mr. Pruitt "a good grade" since the deal
for
reducing head count, paying down debt and selling the Minneapolis paper. "There's still no reason why this investment still
can't work," he says.
The sale of the Minneapolis paper took analysts, and the Star Tribune's journalists, by surprise. McClatchy purchased the
paper in 1998 for $1.4 billion. Its financial performance in the years after the deal burnished Mr. Pruitt's reputation as a smart
deal maker.
McClatchy sold the paper for $531 million to Avista Capital Partners, a private-equity firm. "I wouldn't regard it as an
indication
of panic," says Mr. Pruitt. He says the Knight Ridder deal prompted the company to evaluate all its properties. With ad
revenue declining, the Star Tribune didn't make the cut.
Knight Ridder was put in play after its largest shareholder, money manager Bruce Sherman, demanded the company put itself
up for sale because of poor share performance. Mr. Pruitt took an immediate interest. "Our feeling was that it wasn't essential
for the company to acquire Knight Ridder, but it was a good opportunity for the company to grow," he says. He fondly recalls
how McClatchy executives held a "wild celebration" the night they learned they had won the deal, singing Bruce
Springsteen's
raucous song, "Rosalita," over and over.
Tony Ridder, Knight Ridder's former chief executive, says he welcomed McClatchy's bid. But when McClatchy decided to sell
the San Jose Mercury News - in San Jose, Calif., where Knight Ridder had its headquarters - Mr. Ridder, who joined
McClatchy's board, tried to talk Mr. Pruitt out of it, both men say. The paper was purchased by MediaNews Group Inc. in a $1
billion package deal.
Mr. Pruitt says it's still too early to judge the Knight Ridder acquisition, and doesn't regret doing it. He concedes that he now
wishes he had paid less, but adds that had McClatchy offered a lower price, "we wouldn't have gotten the company." The
problem, he says, was timing. "We closed the deal just as the downturn ensued, so timing in that sense couldn't have been
worse," he says.
Still, his faith in newspapers remains unshaken. "I think the future is bright for newspapers," he says. "The newspaper alone
is
not sufficient. But it can be used as a part of a portfolio of print and electronic products that can reach targeted audiences
and mass audiences."
Naughty and Nice Newspaper CEOs
By Marek Fuchs
Special to TheStreet.com
The Business Press Maven is never in the mood to swallow his animus, but this being the morning after Christmas, I was
willing
to give it a whirl. Things were looking up early on. The coal I always get in my stocking was, considering inflation in
commodities, worth more than any electronic toy, tie or tool Santa could have brought. If there is ever a run in the price of
switches, I'll be set. Golden, as it were.
Alas, my holiday spirits could not hold, because my animus won out when I grabbed for this morning's Wall Street Journal.
I was reminded on page one what a golden boy McClatchy (MNI) CEO Gary Pruitt was and remarkably -- considering the cruel
disappointment that is his company and the modern newspaper industry -- remains.
Wednesday, December 26, 2007 Page 13
I suppose you can run a company into the ground by consummating perhaps the most wrongheaded acquisition of 2006, but
if you quote obscure rock lyrics to Wall Street analysts and the business media and consistently flaunt your background as a
First Amendment lawyer (which gets reporters oh so hot), you will be golden.
So golden, in fact, that you will be allowed to wrap up a profile on you with a grandly convivial quote about how bright the
future is for newspapers. That kicker came right after a graph that kicked me in the head because it allowed the golden boy to
say he had no regrets about the Knight-Ridder debacle:
Summed up the Journal, before giving the floor to the golden boy: "Still, his faith in newspapers remains unshaken."
Then, Pruitt chimed in: "I think the future is bright for newspapers," he says. "The newspaper alone is not sufficient. But it
can be used as a part of a portfolio of print and electronic products that can reach targeted audiences and mass audiences."
Note to investors: Newspapers are going up against free competition, and they have no distribution advantages. In fact,
anyone can distribute news or opinion. But it gets better. In one of the kookiest, least-thought-through strategies in modern
business history, a good bit of the free competition comes from the newspapers themselves.
Meanwhile, a legitimately gilded CEO -- who is not nearly as young, pretty or flashy -- hides once again in plain view. To make
matters more remarkable, he heads a newspaper company. Or, I should say, a halfway former newspaper company that,
obviously, did not buy another large newspaper chain this year, a strategy akin to furnishing your enemies with ammunition.
And that, savvy investors, is why only in the Through-the-Looking-Glass world of the modern newspaper, where -- as we saw
last week -- wish fulfillment on the part of the business media means that a newspaper company's press release is more
forthright than the coverage that followed, I will grant an unprecedented second straight Business Press Maven CEO of the
Year Award to Scripps (SSP) CEO Kenneth Lowe. There are two qualifications for this award:
First, the CEO must be working in an industry that is not otherwise hot. In fact, the industry has to stink. Far too frequently,
CEOs are all but canonized as geniuses by the business media, and guess what? Their vaunted genius lasts about as long as
the
lucky -- or cyclical -- run of their industry.
Two, the CEO has to have been basically ignored by the business media. See qualification No. 1 and the fact that while
assumptions of CEO genius lose investors more money than just about any misperception out there, those rare instances
where true genius -- or at least managerial and strategic competence -- has been all but ignored mean opportunity.
Once again, we hardly heard about Lowe this year. Mentions of him were even buried in articles about the breakup of its
cable assets from its newspaper assets. About those cable assets -- Lowe has dedicated much of his existence as CEO
developing good, successful cable television brands. He saw the writing on the wall, which wasn't on paper, that even his
newspaper properties tend toward the local.
In today's environment, the more national one goes with news, the more of a commodity it becomes. In the end -- and it will
come to an end for many -- there will still be room for those that modestly deliver local news by print, where there is not a lot
of online competition and, to be sure, the economics of the Internet don't necessarily work.
That's where newspapers have the advantage, and because he has foresight and is no one else's pick, Lowe is The Business
Press Maven's golden boy.
More on retail later in the week, but as a preview of the horrors in coverage to come, let's end today with this line from this
morning's New York Daily News . It shows you -- in how cleanly it butchers simple cause-and-effect -- how limited media
understanding is of the way business works:
Even though retailers said the holiday shopping season was not quite as merry as they'd hoped, many stores are slashing
prices
even further on Wednesday as they reopen for the traditionally busy day-after-Christmas sales.
"Even though?" Even though the season was not good, they are lowering prices to rid themselves of post-Christmas
inventory.
No! It's because! Because. Because. Because. Because. When items don't sell, businesses lower prices to move them. Cause
and effect.
And here I thought I could shed some animus.




Thursday, December 27, 2007
TOPICS TOPICS TOPICS
Report: Extended Holiday Shopping Could Hit $60 Billion
December 27 - Retailers shouldn't write off the 2007 holiday shopping season just yet. Consumers are set to bag $60 billion
worth of merchandise during the next seven days, according to a report on CNN.Money.
Much of that spending—nearly half, according to one estimate—is expected to come when consumers cash in gift cards.
Michael McNamara, VP of research and analysis for MasterCard Advisors, expects that retailers will ring up as much as 17%
of
their December sales in the last week of the month.
"Over the last five years, the post-Christmas week has become much more important because of gift-card redemptions," said
McNamara.
MasterCard Advisors did not break out how much of the $60 billion will be spent using gift cards. Marshal Cohen, chief retail
analyst with NPD Group, estimates that more than 60% of holiday shoppers bought gift cards.
Some early tallies this week from ShopperTrak and MasterCard Advisors said final holiday sales came in short of the National
Retail Federation's forecast at 3.6 percent growth. The weaker-than-expected results rattled investors Wednesday, leading
to a broad-based selloff in retail stocks.
But stores could make up for some of the shortfall this week.
"Gift cards have transformed the holiday-shopping landscape and they have extended holiday shopping well past Christmas
Day," said Michael Niemira, chief economist for the International Council of Shopping Centers.
Chain stores saw slight uptick before Christmas
Chain store retailers felt the good news leading up to Christmas as they posted a 2.8 percent rise in sales for the week ending
Dec. 22, according to a weekly report by the International Council of Shopping Centers Inc. and UBS Securities LLC.
Sales also rose 2.8 percent on a year-to-year basis, said the report, which was released Wednesday, the day after Christmas.
"Neither rain nor wind, nor snow kept consumers from holiday shopping over this past week as the urgency to complete their
gift buying intensified," said Michael P. Niemira, ICSC vice president, chief economist and director of research, in a statement.
"Given the slow performance at the beginning of the month, it appears that the industry is on track for a sales gain that is
slightly under our original expectation; we now expect a November-December comp-store year-over-year sales performance
at a tad below 2.5 percent for the industry."
Niemira said post-Christmas spending and gift card redemption could restore that softness in the industry's expectation.
Some of the larger chains in Massachusetts include Wal-Mart, Sears, Roebuck & Co., Home Depot, Target Corp., T.J. Maxx
and
Marshalls.
The ICSC-UBS Weekly U.S. Retail Chain Store Sales Index is a joint publication between ICSC and UBS Securities LLC. The
index
measures nominal same-store or comparable-store sales excluding restaurant and vehicle demand.
Trans World will close 130 stores
Trans World Entertainment Corp. expects to close about 130 stores over the next few weeks, including the Coconuts outlet
at Stuyvesant Plaza in Guilderland, N.Y., a company official said.
"We're constantly reviewing our store portfolio," said John Sullivan, chief financial officer. "With all of these the leases are
expiring. Most are underperforming stores."


Thursday, December 27, 2007 Page 2
The closures will leave Trans World with about 830 stores, most of which operate under the brand name f.y.e. (For Your
Entertainment). Trans World closed a similar number of stores at the end of 2006, Sullivan said.
Trans World (Nasdaq: TWMC) is in the process of converting its stores to f.y.e. but can't do so at the Coconuts in Stuyvesant
Plaza because it's too close to the f.y.e. at Crossgates Mall in Guilderland. The company has a radius restriction in its lease,
Sullivan said.
A liquidation sale will continue until the store closes in mid-January. An employee at the store who is considered a local
classical music guru will move to the f.y.e. at Colonie Center, which has a classical music department, Sullivan said.
Neiman Marcus CEO Renews Contract
Neiman Marcus Group Inc. CEO Burton M. Tansky has renewed his contract for another two years. The contract, which was
set
to expire in October 2008, has been extended to October 2010, according to a report on WWD.com.
The contract provides that Tansky’s employment will automatically be extended for one-year periods after the term of the
agreement expires unless, at least six months prior to the commencement of any one period, Tansky or the board decides it's
time for him to retire. A Securities and Exchange Commission filing, which disclosed the contract renewal, lists Tansky's base
salary at $1.3 million, the report said.
Last October, the Neiman Marcus Group formed an office of the chairman, throwing the spotlight on two veteran officials,
Karen Katz and James Skinner, as leading contenders to one day succeed Tansky.
Katz is president and CEO of the Neiman Marcus Stores division. As part of the chairman's office, she has the additional role
of
executive VP of the group, entailing responsibilities for strategy, business development and marketing.
Skinner, senior VP and CFO, is included in the office of the chairman. He is also executive VP and CFO of the group, with
responsibility for information services.
Tansky, who has been at the helm of the high-end retailer since the early 1990s, also serves as chairman and president of the
corporation.
Inside Apple Stores, a Certain Aura Enchants the Faithful
It was 2 o’clock in the morning but in the subterranean retailing mecca in Midtown Manhattan, otherwise known as the Apple
store, it might as well have been midafternoon.
Late one night shortly before Christmas, parents pushed strollers and tourists straight off the plane mingled with nocturnal
New Yorkers, clicking through iPod playlists, cruising the Internet on MacBooks, and touch-padding their way around
iPhones.
And through the night, cheerful sales staff stayed busy, ringing up customers at the main checkout counter and on hand-held
devices in an uninterrupted stream of brick-and-mortar commerce.
The party inside that store and in 203 other Apple stores around the world is one reason the company’s stock is up nearly 135
percent for the year. By contrast, high-flying Google is up about 52 percent, while the tech-dominated Nasdaq index is up 12
percent.
The popularity of the iPhone and iPod and the intended halo effect those products have had on sales of Apple computers
are behind Apple’s vigor. But the company’s success in retailing, as other competitors struggle to eke out sales growth, has
been the bonus.
Apple now derives 20 percent of its revenue from its physical stores. And the number is growing. In the fourth quarter in
2007, which ended Sept. 30, Apple reported that the retail stores accounted for $1.25 billion of Apple’s $6.2 billion in
revenues, a 42 percent increase over the fourth quarter in 2006.
Apple stores generate sales at the rate of about $4,000 per square foot a year, according to a report last year by Sanford C.
Bernstein analysts.
As other electronics makers like Dell, Nokia and Sony still struggle to find the right retail formula, Apple seems to have
perfected it.
Not only has the company made many of its stores feel like gathering places, but the bright lights and equally bright
acoustics
create a buzz that makes customers feel more like they are at an event than a retail store.
The close attention paid to detail in the stores’ designs, such as the maple veneer tables used for product displays, gives the
impression that Steven P. Jobs himself, the company’s co-founder and chief executive, signed off on every square aesthetic
inch of every store.
“Apple’s retail offering is very compelling,” said Andrew Neff, senior managing director at Bear Stearns, “but the other key is
the product. The retail concept ties in very much to the product.”
But the secret formula may be the personal attention paid to customers by sales staff. Relentlessly smiling employees roam
the floor, carrying hand-held terminals for instant credit-card swiping. Technicians work behind the so-called genius bar,


Thursday, December 27, 2007 Page 3
ministering to customers’ ailing iPods, MacBooks and iPhones. Others, designated “personal trainers,” give one-on-one
instruction and lead workshops.
Personal shoppers are available by appointment, and last month the company took the concept of personalized service to a
new level, with concierge teams stationed throughout each store.
“They’ve become the Nordstrom of technology,” said Michael Gartenberg, vice president and research director at Jupiter
Research, referring to the department store that is known for its service.
Ron Johnson, Apple’s senior vice president for retail, said he believed the high level of service played a large role in the
success of the stores.
“The idea is that while people love to come to retail stores, and they do it all the time, what they really appreciate the most is
that undivided personal attention,” Mr. Johnson said. The result is far fewer qualms among consumers about paying premium
prices: $30 for an iPhone case, $200 for an iPod Nano or $1,200 for a computer.
This month, Apple opened its third Manhattan store, in a three-story, 10,500-square-foot renovated building in the
meatpacking district on West 14th Street. With one entire floor dedicated to individualized services, along with small seminar
series, Mr. Johnson’s goal is to make the 14th Street store “the most personal store ever created.”
Mr. Gartenberg said people often first go to an Apple store out of curiosity. “Apparently a lot of them like what they’re seeing
in the stores, they like the experience and they go back to buy the products,” he said.
The stores’ architecture also makes consumers feel good about spending money there.
In nearly a dozen high-profile urban centers — including New York, San Francisco, London and Glasgow — the signature
feature is a glass staircase. Some of the staircases go straight up and others ascend in a spiral skein that appears to be held
in
place by nothing more than Apple hype.
A customer entered the 14th Street store last week with his two whippets. Their reaction to the impressive stairs was more
fear than awe. When the dogs refused to climb the steps, their owner scooped both of them into his arms and carried them
up.
Apple stores encourage a lot of purchasing, to be sure. But they also encourage lingering, with dozens of fully functioning
computers, iPods and iPhones for visitors to try — for hours on end.
The policy has given some stores, especially those in urban neighborhoods, the feel of a community center. Two years ago,
Isobella Jade was down on her luck, living on a friend’s couch and struggling to make it as a fashion model when she had the
idea of writing a book about her experience as a short woman trying to break into the modeling business.
Unable to afford a computer, Ms. Jade, 25, began cadging time on a laptop at the Apple store in the SoHo section of
Manhattan. Ms. Jade spent hours at a stretch standing in a discreet corner of the store, typing. Within a few months, she had
written nearly 300 pages.
Not only did store employees not mind, but at closing time they often made certain to shut Ms. Jade’s computer down last, to
give her a little extra time. A few months later, the store invited her to give an in-store reading from her manuscript.
“Everyone is free to use the Internet and do anything they want — within reason,” said Paul Fradin, the general manager of
the SoHo and 14th Street stores. Visitors spotted surfing pornographic Web sites are quietly asked to leave, and are escorted
out.
Visitors can bring almost anything they like. Ms. Jade showed up nearly every day with her full set of notes, and enough food
to see her through a few hours of writing.
Meanwhile, the Sony flagship store on West 56th Street, a few blocks from Apple’s Fifth Avenue store, has the hush of a
mausoleum. And being inside the long and narrow blue-toned Nokia store on 57th Street feels a bit like being inside an
aquarium.
The high-end Samsung Experience showroom, its nuevo tech music on full blast one recent morning, was nearly empty. And
although that store professes to encourage hands-on exploration of its products, the showroom has a clinical, forbidding feel.
(Nothing is actually sold there; it’s just for display.)
“Whenever we ask consumers to cite a great retail experience, the Apple store is the first store they mention,” said Jane
Buckingham, president of the Intelligence Group, a market research firm in Los Angeles. “Basically, everything about it
works.
The people who work there are cool and knowledgeable. They have the answers you want, and can sell you what you need.
Customers appreciate that. Even the fact that they’ll e-mail you a receipt makes you feel like you’re in a store just a little bit
further ahead of everyone else.”
This could be part of the reason that Jack Graham, 16, visiting for the holidays from Worcester, England, spent at least an
hour each day of his visit at one of the three New York Apple stores, his parents sitting by patiently, happy to watch the
crowd.
“These stores are going to become iconic places that people go to see when they come to New York,” said Mr. Gartenberg,
the analyst. “Rockefeller Center, Radio City Music Hall and Apple’s great glass cube on Fifth Avenue.”
As for Ms. Jade, whose modeling career is advancing, she has yet to buy a computer from the Apple store. But she is still
welcome to check her e-mail — and stay as long as she likes.
Thursday, December 27, 2007 Page 4
Stores clamp down on chronic returners
Abuse of the system can cause losses in the millions for a company
Memo to serial returners: They're on to you.
Liberal rules that allowed customers to return just about anything just about any time are no more at many retail chains
across
the country. It's a classic case of abuses by a few spoiling the fun for everyone.
Costco Wholesale Corp., for instance, had one of the most generous policies around until it wised up to the occasional
scoundrel who used it to "upgrade" a consumer electronic purchase, said Richard Galanti, chief financial officer for the
warehouse chain.
For a chain with hundreds of stores, occasional can add up. Mr. Galanti said the no-questions-asked policy was responsible
for
losses of more than $100 million a year – and noted that besides computers and MP3 players, people had been known to
bring back containers of coleslaw pulled from their refrigerators and half-eaten bags of potato chips.
Now customers can't get their money back on electronic products if more than three months have passed since the purchase.
"We went from infinity to 90 days," Mr. Galanti said.
Kmart, Lowe's and Wal-Mart stores installed computer systems that monitor how often individual customers return things
and,
as Consumer Reports magazine recently warned, might stop accepting returns from buy-and-bring-back addicts.
Amazon.com will not accept returns of items that are missing the serial number or UPC square on the box, Consumer Reports
noted, and Best Buy and Circuit City charge a 15 percent restocking fees on some electronic items if the box has been
opened, while Toys "R" Us has begun requiring a dated sales or gift receipt for all refunds and exchanges.
For Costco, the introduction of the video iPod in 2004 brought the returns problem to a head. The chain sold more than
25,000 in the product's first week – and customers returned more than 12,000 during the same period, most of them older
models. "For the same price or better, they got a better iPod with a screen," Mr. Galanti recalled.
Theft, particularly of clothing, has pushed some retailers to clamp down. Stolen items are fenced over the Internet or on the
street at a deep discount, said Joe LaRocca, vice president of loss prevention for the National Retail Federation, and the most
brazen crooks bring merchandise back to the store demanding cash.
The overwhelming majority of returners are sincere, he said, simply having changed their minds. Most stores will gladly fix or
replace a defective product. And some – Nordstrom, for example – still accept most items with few explicit limits. Others have
loosened their usual return policies for the holiday season. Best Buy, for example, normally allows returns within 30 days, but
customers have until Jan. 31, 2008, to return things purchased between Nov. 1 and Dec. 24.
About 9 percent of all merchandise sold is returned, according to the retail federation. This year, that will total more than
$10 billion, with clothing and electronic items accounting for most of that amount.
For all the honest people who just didn't like the way those jeans fit when they got them home, there are still too many
exploiters. In extreme cases, stores reluctantly "fire the customer," said David Ng, the service manager at Best Buy in West
Los
Angeles. He recalled telling a chronically dissatisfied customer when he worked for another chain that the store didn't want
his business anymore. "But that's rare," he said.
National Homebuilder Faces Foreclosure
Sign of market turmoil: Lennar faces foreclosure on Chicago area project
In a sign of the worsening local housing market, the nation's biggest homebuilder has been hit with a foreclosure suit in
southwest suburban Chicago on a large subdivision started more than three years ago.
RBC Centura Bank filed suit late last month against Lennar Corp. to collect $14.7 million on a construction loan for Creekside
Crossing. The 278-acre, 615-home development on former cropland has sold poorly amid the worst suburban residential
market in at least 15 years.
Local real estate observers say it's the first foreclosure suit in the Chicago area involving a project by a big national
homebuilder — and an unexpected one, considering Lennar's size and access to Wall Street capital.
"I'm somewhat surprised that they would actually let something like this happen," says Steven Hovany, president of Strategy
Planning Associates Inc., a Schaumburg-based real estate consulting firm.
Miami-based Lennar built almost 25,000 homes through the first nine months of the year and has 15 projects in the Chicago
area. A Lennar spokesman declines to comment.
Lennar, like other big publicly held homebuilders, has struggled financially as demand for new homes has plunged
nationwide. It lost $689 million in the first nine months of the year and sold off land to clean up its balance sheet. Lennar
recently sold about 11,000 home sites — including some in Illinois — at a deep discount to a joint venture it
Thursday, December 27, 2007 Page 5
formed with Morgan Stanley. Earlier this year, the company scrapped a 1,000-unit condo project in the South Loop and sold
the land to an apartment developer.
Sitting next to cornfields stretching to the western horizon, the development at Renwick and Drauden roads is now a desolate
place. Fewer than 100 duplexes and single-family homes have been completed or are under construction, and its roads
meander mostly through empty lots.
In June 2004, RBC Centura agreed to lend $26 million to a Lennar-led venture to finance the project. Lennar improved the
land, adding roads and sewer and water lines, planning to sell off most of the lots to other homebuilders.
The loan, which was modified four times, doesn't mature until February. But the venture defaulted by failing to sell lots
according to an agreed-upon schedule and failing to maintain letters of credit, according to the complaint filed in Will County
Circuit Court.
Florida population growth slows
Florida's population growth rate has fallen closer to the middle of the pack, the latest Census Bureau estimate shows.
The state's population grew 1.1 percent, to 18.25 million, over the 12-month period ended July 1. For the same period
ended July 1, 2006, Florida's population grew 1.8 percent, to reach 18.05 million.
That caused Florida to slip from the ninth-fastest-growing state in mid-2006 to 19th in the latest count.
Nevada was the fastest-growing state, with a 2.9 percent growth rate, reaching 2.6 million residents. It was followed by
Arizona, Utah, Idaho and Georgia.
In terms of the total number of people moving to a state, Florida remained fourth, with a 194,000 increase. It was behind
the 497,000 people who moved to Texas, the 303,000 to California and 203,000 who moved to Georgia this year.
Only two states experienced negative growth for the past year. Michigan dropped 0.3 percent, or 30,500 people; and Rhode
Island dropped 0.4 percent, or just less than 4,000 people. The two states remain the slowest growing in the nation.
On a longer-term scale, Florida also has slipped. Estimates dating back to April 2000 have Florida's population growing 14.2
percent, or 2.3 million people, to rise from 16 million people in 2000. Where it previously was the third-fastest-growing state
over a seven-year span, this year Florida has slipped to seventh. Its long-term growth was eclipsed by Nevada (28.4 percent),
Arizona (23.5 percent), Utah (18.5 percent), Georgia (16.6 percent), Idaho (15.9 percent) and Texas (14.6 percent).
Google Nears 60%, Nielsen Says
In November, Google accounted for a dominant 57.7 percent of all searches, or over 4.2 billion searches in total.
NEW YORK Google is nudging toward claiming 60 percent of all Web searches conducted in the U.S., according to the latest
figures from Nielsen Online.
In November, the Mountain View, Calif.-based company accounted for a dominant 57.7 percent of all searches, or over 4.2
billion searches in total.
Roughly a year ago, Google's search share fell just below the 50 percent threshold, though Nielsen said that it has recently
made some changes to its reporting methodology that make true year-over-year comparisons unavailable at this time.
Meanwhile, it would appear that longtime No. 2 search player Yahoo! is slowly losing traction among Web users, despite
revamping its product significantly in 2007. The embattled Sunnyvale, Calif.-based portal handled nearly 18 percent of
searches, while in previous months its share had surpassed the 20 percent mark.
Microsoft's MSN/Windows Live Search product, which has long struggled to reach double digits in search share, accounted
for
12 percent of all searches in November, found Nielsen.
Online Spending Soars In Final Week Of Holiday Shopping: comScore
A FLURRY OF ONLINE SPENDING by procrastinators and deal-seekers resulted in a stellar final week of pre-Christmas
shopping,
according to the latest holiday season e-commerce numbers from comScore.
Thursday, December 27, 2007 Page 6
Sales for the first 51 days of the 2007 holiday season--from November 1 through December 21--were up 25% year-over-year.
More than $26 billion has been spent online during the season-to-date, marking a 19% gain versus the corresponding days
last
year.
What's more, December 10, dubbed "Green Monday," will reign as heaviest online spending day of the 2007 holiday season
with $881 million in sales.
By contrast, "Cyber Monday," November 26, which represents the first major spike in online spending activity during the
season, ranked as the ninth-heaviest day, with $733 million in sales.
"We are continuing to see online spending strength as we get deeper into the season, with the most recent five-day span
ending December 21 exhibiting a 25% growth rate versus year ago," said comScore chairman Gian Fulgoni.
"At this point of the season, the heaviest online spending days are now well behind us," Fulgoni added. "However, with some
online retailers offering deliveries before Christmas for orders placed by December 22, and in-store pickup available for
orders placed on Christmas Eve, we expect to see above-average growth rates continue through the holiday."
Valassis to Launch RedPlum, the Company's First Consumer Brand
Delivering Value to Consumers How, When and Where They Want
LIVONIA, Mich., Dec. 27 /PRNewswire-FirstCall/ -- Valassis (NYSE:VCI) , the nation's leading marketing services company, will
launch a unique consumer brand named RedPlum. The rollout campaign, which will begin in January 2008, will rely primarily
on Valassis' own advertising vehicles ranging from free- standing inserts and Polybags to its Direct Mail Package, which will
retire
the ShopWise(R) name in January. In collaboration with the brand launch, Valassis will introduce redplum.com, a dynamic,
interactive destination for value, savings and special deals in an array of categories including grocery, beauty, travel,
electronics, home and entertainment.
"The launch of the RedPlum brand is a natural next step for Valassis following its acquisition earlier this year of ADVO, the
nation's largest direct mail media company. The combination of the two companies created a media services powerhouse that
now gives advertisers the ability to optimize their reach to consumers, providing values with multiple methods of delivery,"
said Suzie Brown, Valassis Chief Marketing Officer. "The RedPlum portal will aggregate the existing content and values
contained within our portfolio, while extending its reach exponentially and empowering advertisers with the ability to
continually engage consumers how, when, and where they want.
"The entire portfolio will carry the RedPlum name, led by the re-branding of the 'ShopWise' direct mail package and the
Valassis free-standing insert. Our clients will be able to capitalize on the unprecedented and diverse power of the RedPlum
portfolio which will reach 90 percent of all U.S. households, over 100 million consumers per week, ultimately making
RedPlum ubiquitous among consumers as their ultimate source for value," she said.
According to Brown, the savings provided by using RedPlum will enable moms and other consumers to enjoy life's little
extras,
the incremental pleasures that will make them and their families happy, whether that is a dinner out, a night at the movies, or
Thursday, December 27, 2007 Page 7
a special family activity. The campaign will simultaneously reinforce the availability of RedPlum savings, "online, in your
mailbox, on your doorstep, with your newspaper and in your store."
Brian Costello, Valassis General Manager of Interactive, said redplum.com will be unmatched in terms of its breadth of offers
and content. "The RedPlum portal's extensive offerings will include national, regional and local values as well as relevant
information about products and services that will give consumers a reason to return to the site again and again," he said.
"Additionally it will be simple to navigate. By entering only their ZIP codes consumers will have access to timely, relevant
deals.
And unlike most other savings Web sites, redplum.com won't require users to register in order to print coupons."
"We view this as a positive move," said the Domino's Vice President of Precision Print Marketing, Rob Weisberg. "The
introduction of the RedPlum portal will enable us to seamlessly expand the reach of our campaigns beyond traditional
avenues, maximizing the effectiveness of our overall ad spend."
Blethen paints bleak Seattle Times financial picture
In a memo to employees Thursday, Seattle Times Publisher Frank Blethen painted a bleak picture of the newspaper's current
financial conditions, pointing to millions of dollars of cuts that need to be made in the next year.
The memo didn't mention specific areas where cuts will be made, such as layoffs.
Blethen said the Times' print revenue losses for 2007 and 2008 will total about $33 million, and senior leadership has
"amazingly" found $21 million in cost reductions, but "we still need another $6 million to ensure stability next year."
The problem is the rapid decline of print advertising revenue, he said. In 2000, the paper booked $270 million of print ad
revenue, but that's fallen to $200 million this year, "a loss of more than one quarter of our print revenue base."
The value of the newspaper has also declined. Blethen noted that the 49.5 percent of the paper that was held by the Knight
Ridder media company -- acquired last year by McClatchy Co. -- had been valued as high as $200 million. But last month,
Blethen said that McClatchy valued its share of the Times at $19 million.
"This has been a painful time to be a newspaper employee or owner," Blethen wrote, adding, "The only hope a metropolitan
daily newspaper has to survive through the remainder of this decade is to recreate itself into a much lower cost and more
nimble organization."
Freedom Reportedly Postpones Plan To Buy Out Minority Partners
The Hoiles family has put off a plan to buy out the private equity firms that own a 45% stake in the Orange County Register
publisher, according to a report in The Wall Street Journal Thursday.
Citing unnamed "people familiar with the situation," Journal staff writers Dennis K. Berman and Martin Peers reported that
Freedom had planned to spend more than $500 million to buy out the stake held by Blackstone Group LP and Providence
Equity Partners.
Freedom sold the stake in 2004 as part of a deal to buy out restive family members who had been agitating for a sale. The
deal allowed the family to reject aggressive offers for its newspapers from MediaNews Group Inc. and Gannett Co.
According to the Journal, Freedom had nearly sewed up this new deal, intending to borrow from General Electric Co.'s GE
Capital. But the plan unraveled because of the national credit crunch that has made borrowing much more expensive. "The
Hoiles family, which controls the majority stake in Freedom, decided to wait until the market calms down," the Journal
reported, citing a "person familiar with the situation."
Under the 2004 deal, Blackstone and Providence have the right to sell their stake back to Freedom by May 2009.

								
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