January 2007 Archive
In less than a week the big players will get out on the field and put all their talent and training on the line in a bid for glory in the Super Bowl. No, I’m not talking about the Indianapolis Colts or the Chicago Bears, I’m talking about the real stars of the show: the advertisers.
Once again it’s time for that great American spectacle, the four-hour long championship game that annually blitzes the country with splashy, over-the-top commercials that everyone will be talking about the next day. According to some reports, 30-second ad spots are selling for a record $2.6 million, up slightly from last year’s record price of $2.5 million. And why wouldn’t companies pay that kind of premium? About 90 million people in the US alone are expected to tune in to the National Football League title match, making it still the biggest media event of the year.
What can we expect from this year’s competition? Most advertisers are keeping details of their campaigns close to the vest to maximize the surprise factor. Beer maker Anheuser-Busch has leaked a few details, including the fact that NASCAR driver Dale Earnhardt Jr., will star in one spot, and that another will feature a couple who pick up a creepy hitchhiker. (The company claims they are not intentionally trying to ride the coat tails of the recently released remake of The Hitcher. No, of course not.)
Another Super Bowl spot that has already made headlines is a campaign by insurance company Nationwide featuring Britney Spears’ recently dumped husband, Kevin Federline. The ad plays up the company’s slogan “Life Comes at You Fast” by depicting K-Fed as a fallen rap star now working in a fast food joint. (Art imitating life, or life imitating art? You be the judge.) Funny as that might sound, the National Restaurant Association was not amused, firing off a missive saying the TV ad is a “strong and direct insult to the 12.8 million Americans who work in the restaurant industry.” Some people have no sense of humor, I guess.
There is even a rumor floating in the blogosphere that Apple is planning to run an ad to make a big announcement. Excitement is running especially high for this one because the computer maker made a big splash in 1984 with its 1984 inspired ad for the first Macintosh computer. Many point to that event as the beginning of our national love affair with Super Bowl ads. (Thanks again, Apple.)
We’ll find out Monday morning who the winners and losers were when all the morning TV shows trot out their marketing experts to show the best and the worst ads. Oh, and what about that game with the big men in pads? Whatever.
The new year is ripe with shopping opportunities. But with retail sales expected to grow just under 5% this year (after a zippy 6% in 2006), competition for shoppers’ dollars will be keen. Which retailers will win in 2007, which the National Retail Federation predicts will see the smallest retail sales gain in five years? I’m betting that luxury and online retailers will continue to outperform their peers — just as they did in 2006.
Santa was generous, although selectively, to retailers this Christmas past. Winners included Tiffany, Neiman Marcus, and online diamond-seller Blue Nile. Shoppers snapped up enormous $2,000 LVMH handbags faster than you can say “call the chiropractor” and Tiffany had a jewel of a holiday. Luxury items and jewelry were also big sellers for online shopping sites, rising 21% over 2005, according to Internet industry tracker comScore Networks. Overall, online merchants, such as Amazon.com, Dell.com, and Wal-mart.com, saw double digit rises in traffic. Also, big electronics chains — Best Buy and Circuit City included — were swamped with shoppers in search of flat-panel televisions and new video game consoles.
Discounters and specialty stores like Wal-Mart and The Gap, which cater to lower and middle-income consumers, found less to cheer about. General merchandise and apparel sales were relatively weak. Heavy discounting — something shoppers have come to expect – is one reason. While gas prices are down, discount chains also may still be nursing a petroleum hangover.
America’s widening income gap is another possibility, but there are likely more prosaic forces at work.
For one, shopping (and parking!) at big-box stores is a drag. No wonder consumers are opting to shop online. Many stores also are falling short in their merchandising and presentation efforts. As veteran retailer Mickey Drexler put it recently “Our industry doesn’t inspire customers.” Drexler, with The Gap in its hey day and now CEO of J. Crew, chastized the apparel industry for its lack of creativity. A trip to any Old Navy or Sears store reveals that America’s love affair with the “pile it high, sell it cheap” retail model may be wearing thin.
I agree with Drexler that most consumers will gladly pay more for quality goods and a pleasant shopping experience. Now it’s up to retailers to figure out what we want. Until they do, expect luxury and online merchants to win in 2007.
Being an automotive parts maker these days must be like trying to sell Girl Scout cookies during an Atkins diet craze.
At the Automotive News World Congress (subscription needed to view specific stories) in Dearborn (January 15-18) Ford Motor honcho Tony Brown dropped a bombshell. He said that February 2007 would likely bring more Chapter 11 bankruptcy filings in the automotive OEM supplier sector in North America and Europe than ever before.
And he should know. After all, he’s the purchasing boss at Ford. Brown said “The number of financially distressed suppliers that Ford has on our ‘watch list’ in 2007 has grown by 44% compared to this time last year.” He went on to add that many of those Chapter 11s could be filed by some of the Tier 1 biggies, though he didn’t name names.
Right now some of the biggest names in the parts industry are in Chapter 11 already (Delphi, Dana, Collins & Aikman) – brought to their knees by high materials costs, production cutbacks by troubled carmakers, and brutal competition.
So as the pain, like other things, rolls downhill, parts suppliers have to make the same tough decisions as their customers. In many cases this means layoffs. Other companies, such as American Axle & Manufacturing, are following in the footsteps of Ford and GM and reducing headcount through attrition by making buyout offers.
Unfortunately, the competitive landscape for suppliers is likely to get much worse as carmakers like Ford aim to reduce purchasing costs by drastically trimming their number of suppliers.
In lieu of making any predictions about which companies might be in trouble, I’ll take the safe route and just say you can’t go wrong by investing in a few boxes of Girl Scout cookies.
The seismographs at the US Geological Survey’s facilities in Menlo Park, California, failed to register any significant activity along the San Andreas Fault on the morning of Monday, January 22. Still, what happened a few miles north in San Francisco that day was an earth-shaking event that will be rumbling through Silicon Valley for months and years to come.
Intel and Sun Microsystems announced that they will collaborate on a number of technical projects. Most importantly, Sun said it would use Intel processors in its computer servers and workstations for the first time in a coon’s age.
If you don’t think this is terribly important or significant, then please consult Google News, which posted more than 800 news articles on the subject within 24 hours of the press conference.
For much of its history, Sun Micro was a lone wolf in Silicon Valley: it designed its own processors (the SPARC and UltraSPARC, in multiple variations), cobbled together a version of the UNIX operating system (Solaris), and developed its own networking hardware. Creating the Java programming language, with its “write once, run anywhere” ethos of code compatibility, brought a sea change to the company. It wasn’t quite open-source development, like Linux, but it was more community-minded than what Microsoft was offering at the time in programming software and operating systems.
After Scott McNealy, Sun’s former CEO, famously slagged Intel’s Itanium processors four years ago, relations between Intel and Sun turned frosty. It took a change of CEOs at both companies to create an atmosphere of détente.
Intel’s gain is AMD’s loss, of course; AMD had found sockets in Sun servers with its Opteron processors. Now, some of those sockets will be filled with Intel’s Xeon processors. Sun will continue to use both Opteron and UltraSPARC processors in the future, but this is a big win for Intel, by any measure.
From the “Can they do that?” file:
The US Department of Justice has subpoenaed four banks for underwriting online gambling company IPOs.
Sounds reasonable, right? Online gambling is illegal for US citizens, a fact that probably strikes the rest of the world as cute, like the way we play soccer. So firms that underwrite gambling IPOs would be a no-no.
But wait — these are foreign banks: HSBC and Dresdner Kleinwort (UK), Credit Suisse (Switzerland), and Deutsche Bank (German). And the IPOs they underwrote are for foreign companies.
Now, I’m as big a fan of Eliot Ness as the next girl. But isn’t there the small consideration of, I don’t know, the lack of extraterritorial jurisdiction that would keep these modern-day Untouchables from busting down the doors of the banking headquarters of a foreign bank?
Okay, okay, I’m getting ahead of myself. It could just be a fact-finding mission. No door-busting. But federal prosecutors have also arrested the foreign CEOs of online gambling sites BETonSPORTS and Sportingbet when they entered the US last summer. The feds also have started going after companies that do business with these sites, including NETeller, which processes Internet gambling payments from marks — sorry, players. Those tactics seem to have spawned some success, as BETonSPORTS has stopped accepting US customers (though Sportingbet appeared to be open to all comers as of Tuesday).
The DOJ is charged with upholding US laws and protecting US interests. But can it hold foreign companies accountable for their legal actions in other countries?
Seems a bit presumptuous to me.