Real Estate, The Economy, and News: Risk and Reward

Showing posts with label Risk and Reward. Show all posts

Friday, February 5, 2016

Apple's 1984 Super Bowl Commercial - A Marketing Marvel

Each year, millions of Americans spend their weekends watching football games. Some go to stadiums, where they can experience it first-hand, while many others watch the games on television, from the comfort of their own homes. No matter how they're watching the game, the National Football League (NFL) is making plenty of money from their viewership. Last year alone, the NFL's 34 teams brought in a total of over $7 billion in revenue. Of that total, hundred of millions of dollars came from one game in particular: the Super Bowl. This revenue comes from a combination of ticket sales, merchandise sales, and, most of all, advertisements. Michael Hiltzik discusses, in his L.A. Times article, the Super Bowl and how its advertising goals have changed over time.

Several estimates claim that, depending on several factors, the Super Bowl's host city can gain up to $100 million in extra revenue during the week of the big game. Between money spent on hotels/motels/Airbnb rentals, money spent on tourist attractions, and increased spending at restaurants and other such establishments, the Super Bowl provides a huge amount of income for local businesses. Yet, the largest portion of Super Bowl income has to do with advertisements by big-name companies like Apple and Coca-Cola. At the 1984 Super Bowl, Apple Inc. aired a commercial that was so successful that it set an expectation for all future Super Bowl commercials.

Apple's commercial was a pull-out-the-stops production, directed by Ridley Scott (who had previously directed "Alien" and "Blade Runner") and starring Anya Major, a British actress and discus-thrower. The commercial, which was championed by Steve Jobs, made Apple's CEO, John Scully, doubtful, yet eventually was approved and made its way to the television screen. The commercial itself was greatly influenced by George Orwell's novel, 1984, which depicts a dystopian society. The commercial concludes with Major's disruption of Big Brother's Stalin-like speech and announces: "On January 24th, Apple Computer will introduce Macintosh. And you'll see why 1984 won't be like '1984.'" This appeal to nationalism and patriotism called to many Americans and the commercial came to be known as one of the most successful of all time. You can watch the full commercial here.

Given the millions of people that watch football each year, it makes sense that companies would want to take advantage of the large audience to advertise their products and services. Since the NFL knows how much each time block is worth, they charge a high price to those who want to advertise during the game. Everyone benefits from this relationship: advertising provides companies with a larger consumer base, which creates an opportunity for more sales and greater revenue, and the NFL makes money selling airtime to advertisers. The Super Bowl especially creates this opportunity, as over 100 million people watch the game, many of whom aren't even football fans.

The aforementioned 1984 Apple commercial is considered by many to have been the trigger that got many people interested in the Super Bowl for more than just football. When the game is half over, the Super Bowl has its famous half-time show, in which a popular musician or other artist puts on a performance while the players take a short break and regroup. Even more popular to viewers are the long-awaited Super Bowl commercials, which are expected every year to surpass Apple's amazing 1984 commercial, and yet never quite succeed. In fact, there are viewers that don't care about the game at all, but instead watch it in order to experience the game's half-time.

While no company has yet to produce a commercial with nearly as much fame and success as Apple's 1984 commercial, viewers still watch the Super Bowl every year, in hopes that the half-time commercials will amaze and inspire as they did before. Advertising during the Super Bowl has become a marketing standard, a sign of a successful business. Even though IBM's personal computers eventually took over a large portion of the home and office markets, Apple's success in business is nothing to be scoffed at either. Maybe this year's commercials will be able to emulate Apple's marketing success? There's only one way to find out.

***************************************************************************************************
Find out more about us at www.sepulvedaescrow.net. Any Questions? Contact our Escrow Expert! Sepulveda Escrow Corporation (818) 838-1831. Follow our company on Facebook, Twitter, LinkedIn, and Google+.

***************************************************************************************************

Friday, January 22, 2016

New Research Involves Renewing Groundwater Supplies, Not Filling Reservoirs

In a test on a potential new way to reduce the effects of California's recurring drought conditions, researchers are looking not to expand reservoirs, but rather find a way to funnel the excess rainwater from the El Nino winter back into the groundwater, where it can be put to better use during the drier seasons. Currently, the majority of rain runs off into the ocean, simply because a large portion of the land is covered in concrete or asphalt, which doesn't allow rainwater to permeate. Through this ongoing experiment, depicted in Geoffrey Mohan's L.A. Times article, the water is instead redirected to the fields of involved farmers, where the water is able to seep into the soil.

While creating new reservoirs and expanding existing reservoirs could accomplish the same goal, the experiment aims to show that it can be accomplished more naturally and cheaply. Simply by harnessing the power of gravity, storm runoff could be forced into irrigation channels. From the irrigation channels, several fields in succession can be watered before the rest of the runoff can make it to nearby lakes and rivers. Once upon a time, farmers used only surface water and groundwater to tend to their crops. In this day and age, the groundwater levels are so depleted, especially during drought seasons, that there isn't enough water to make that system feasible.

That system could once again become helpful for farmers and common folks alike, once the groundwater levels have been put back to normal. Through a large-scale application of the concepts present throughout the experiment, everything from wells to reservoirs could be filled with the rainwater that would normally be wasted as runoff to the ocean. Unfortunately, not very many people have volunteered to be a part of the study. Some are, quite reasonably, simply unwilling to risk their trees in the event that the experiment ruins them. More often, state or federal agencies control the water in dams and canals and put up a lot of red tape due to their worries that the water may benefit people who aren't paying for it.

The research is risky, but well worth it in the long run. The water might spur fungal disease in the trees, but it also might kill off worms and mites. The test measures whether the concentration of contaminants like nitrogen-based fertilizers increases in the total groundwater and what effects that might have on the ecosystem. In general, the experiment is looking to make sure whether this would be an effective way to store water for use in drier times. From what has been measured so far, the irrigation hasn't ruined the test trees, but it will still be a while before significant results can be found.

According to researchers' approximations, there are about 3.6 million acres of agricultural land in California alone that have the proper characteristics to make them usable in groundwater-refilling projects. The only issue is that everyone would have to work together to make this concept a reality. For the first few years, crop yields will likely decrease due to the plan, which will make many farmers want to drop out. However, if they all stick it out to the end, the groundwater levels would eventually become properly equilibrated, which would extremely dampen the effects of future drought conditions in the area. It would just take a lot of cooperation between individual farmers and governmental agencies, as well as a unified belief that renewing the environment will have far more positive effects, both economically and otherwise, in the long run than making a quick buck today.

***************************************************************************************************

Friday, January 8, 2016

Apple Stocks Fall, Partly Due to Struggling Chinese Economy

While Apple is a large company with a variety of different products, many investors measure the company's success solely on the sales of a single product: the iPhone. Because of its popularity around the world, analysts tend to use the statistics of iPhone sales to monitor how the company as a whole is doing. Unfortunately, when iPhone sales are down, investors see this as a red flag and look to jump ship, thereby causing Apple stocks as a whole to go down. Paresh Dave and David Pierson write in their article about some of the possible factors contributing to lowered iPhone sales, as well as how this affects the company.

While just over a month ago, Apple stocks closed at $119, the same stocks have recently taken a plunge, going under $100 for the first time since October 2015. That's a decrease of over 15% in a single month, not a good sign for executives and potential investors. The iPhone 6S, this year's iteration of the popular cell phone, hasn't sold as well as predicted, in China as well as throughout the rest of the world. Several rumors have surfaced that assemblers and manufacturers of iPhones have recently been bracing for a slowdown in production, and financial analysts have determined that Apple has reduced supplies to Asian distributors.

While all of this may be coincidental, investors have taken these signs to be harbingers of future turmoil for the company and have decided to pull out for the time being. China's economy, which has doubled in the 7 years since Apple first opened stores and factories in the country, has a large impact on the company's success and failure, whether we like it or not. China's middle class is slowly expanding, opening up the market for iPhones to a much larger group of people, which will be good for sales when the economy gets back on track.

It seems that the first sign of a downturn for iPhone sales appeared in mid-December, when companies like Jabil Circuit and Dialog Semiconductor, which produce casings and internal parts for the iPhone reported lower-than-expected revenue predictions for the coming months. Decreased sales could be due to the fact that the newly released iPhone 6S is not very different from last year's iPhone 6, which would explain reduced demand, or it could be due to more economic factors. Either way, Apple seems confident that sales and stocks will go back up in the near future, especially with the new iPhone 7 in the works. While growth may be slow in 2016, executives believe that revenue will continue to grow at a rate of about 5%.

Where iPhone sales didn't boom as greatly as expected, products like the Apple Watch, iPad Pro, and Apple TV were popular gifts during the holiday season, thus boosting Apple's total revenue over the past couple of months. Apple executives are certain that China will remain a huge market for iPhone sales, but that it will just take a little bit of time for the economy to catch up again. In the long run, China is still one of the biggest markets for Apple products, even with current economic turmoil messing up sales. Eventually, Apple stocks should go back up, but the question is: How soon?

***************************************************************************************************

Monday, December 28, 2015

Online Shopping's Increased Popularity Causes Extended Shipping Delays

Just in December alone, it is expected that United Parcel Service will deliver a total of about 420 million packages in the United States while its competitor Federal Express will deliver about 228 million. The U.S. Parcel Service is also in the game, expected to ship about 545 million packages this month. All together, they will be shipping a huge amount, almost 8% more than they did at this time last year. According to Samantha Masunaga, in her L.A. Times article, this dramatic increase in the number of people and retailers needing to ship packages is due mainly to a recent increase in e-commerce.

This year, many retailers offered Black Friday deals on their websites, essentially giving their customers a choice. They could come into the store on Black Friday and shop, finding deals and purchasing items to take home with them immediately. Or, they could shop online, earning the same deals and reduced prices as in the store, and have the item shipped. Sensibly, many customers chose the second route, choosing to wait a little bit longer for their item rather than braving the hectic battle in the store on Black Friday. While this online integration by the retailers helped to keep Black Friday running more smoothly in stores, it came as an unexpected hit among shipping companies, whose predictions were far surpassed, which led to many delays on deliveries.

With the holidays approaching, shipping companies were getting even more overwhelmed with many more orders than in previous years. Because of that, they began telling customers that there would be no assurances that their package would arrive before Christmas unless they used the higher-cost options, like two-day or overnight shipping. Even those options were not perfect. UPS's on-time delivery rates for two-day and overnight delivery have varied throughout the month, ranging around 97%. Basically, when it comes down to it, even the more expensive options are not a guarantee, so consumers should plan ahead and order far in advance if they want to make sure their item arrives in a timely fashion.

Cyber Monday sales exceeded expectations, reaching $3.07 billion, which was 16% more than last year's sales. During Black Friday, about 103 million people got their deals online while 102 million preferred to do their shopping in brick-and-mortar establishments. Online purchases this year, especially during its final months, soared higher than ever expected, which is why shipping delays occurred. While shipping services were prepared for higher demand than in previous years, they could hardly know exactly how much the demand would increase, so the explosion of e-commerce's popularity caught them off-guard. Even for many online merchants, this year's demand was surprising. For several retailers, popular items ran out very quickly, and some even experienced crashes on their websites due to the increased traffic.

Most people in this day and age have a smartphone or some other way to get online while on the go. Because of this, online shopping may be easier and more appealing than having to go to stores and hope that they have the item you want in the correct size or color or style. It is simpler to just go to a website, type in exactly what it is you want, and order it. Over the holiday season, about 25% of e-commerce shopping was done via a mobile device. Our society's increasing dependence on new technology could be a reason why retailers have integrated more of that same technology into the shopping experience, making it easier and faster for potential customers to shop with them.

***************************************************************************************************

Friday, November 20, 2015

Some Stores Find Black Thursday Not As Profitable in the Long Run

Where several stores have decided to push up their Black Friday sales earlier on Thanksgiving day, many others are doing the opposite, closing their stores for the entire holiday in a show of support for those shoppers and employees who wish to spend time with their families. In her L.A. Times article, Samantha Masunaga investigates some of the deeper reasons behind the closure, as well as the financial implications for the businesses.

Over the past couple of years, Black Friday sales have been starting earlier and earlier. Historically, Black Friday is the day after Thanksgiving and is a time when people can get good deals on new electronics like video game systems, televisions, and handheld devices. Until relatively recently, Black Friday started around midnight on Thursday night (technically Friday morning) and continued throughout the day. As companies began to realize that Black Friday sales brought in a lot of income, they started opening as early as 8 or 9 PM on Thanksgiving itself, enabling the sales to last longer and bring more customers into their stores.

This year, though, some companies are pushing it even earlier, some as early as 5 or 6 PM on Thanksgiving, which cuts family time pretty short for employees. In opposition to this, many slightly smaller companies are choosing to remain closed all of Thursday, with a belief that the few extra hours will not make much of a difference in the long run. Companies like Staples, Gamestop, and H&M have announced that its stores, headquarters, and distribution centers will be closed for the holiday. This decision, while upsetting to some potential shoppers, could potentially lead to greater loyalty among other customers who see that the companies care about enabling their employees to spend time with their families on the holiday.

Furthermore, many of the smaller retailers have come to a realization that opening their stores earlier for Black Friday doesn't have so much potential for profit. Analysts have shown that larger retailers, who can more afford to purchase big-ticket items in bulk for very reduced prices, are helped by a longer Black Friday, but that the smaller stores don't stand a chance trying to compete. So, this year the smaller retailers are concentrating on building goodwill and encouraging customers to shop online, then are opening up on Friday with their Black Friday sales. Statistics even show that those stores that opened early on Thanksgiving had a reduce in sales of about 11% over the rest of the weekend since those people who shopped on Thanksgiving were less likely to come back later.

Large companies may find out eventually that starting Black Friday on Thanksgiving does not positively affect them to the required extent to make a sizable profit. After all, when employees work on Black Friday, especially the portion of Black Friday that falls on Thanksgiving day, they get paid a higher hourly rate. At some point, the stores will reach a point at which sales are maximized while costs are minimized, at which point they will try to open their stores at that sweet spot every year. Because they continue to open ever earlier, it appears that they have not yet found that perfect time. Maybe they will eventually go back to being closed during the entire holiday, whether due to a lesser profit ratio or a surge in public opinion. It's hard to tell, so we will just have to wait and see.

***************************************************************************************************

Friday, September 25, 2015

Grocery Chain Haggen's Bust May Have Little Effect on Competitors' Prices

Grocery chain Haggen Inc., which spent approximately $1.4 billion last year in a dramatic expansion along the West Coast, was forced to file for bankruptcy this month, undoing everything it had accomplished over the past several months. While Haggen believed that its buy-outs of several dozen Albertsons, Vons, and Safeway supermarkets would help the Northwest-based company grow, in Shan Li and Andrew Khoury's L.A. Times article, it is explained why their business plan may have been flawed from the start.

According to experts, Haggen's purchases were doomed to fail from the beginning. Not only was the cost of purchasing and converting 146 supermarkets of various brands remarkably high for the 18-store chain, but Haggen's prices were seen as too high for the quality of produce being provided. According to the founder of DJL Research, a research firm specifically for supermarkets, no one believed that Haggen had any chance of success with their large acquisition.

Analysts go on to claim that Haggen's prices were determined too much by the prices already in place at the purchased supermarkets. Instead of doing their own research, they chose prices similar to those of rivals like Albertsons or Safeway. Haggen is known for its higher quality meats, seafood, and organic produce, which would normally be reason enough to qualify higher prices than their competitors'. However, complaints from customers seemed to all point to less than fabulous service and produce of lower quality than advertised.

Perhaps the lack of proper business planning in the stores was due to the stresses Haggen experienced because of the buy-outs. Albertsons, one of the former owners of some of the stores, broke off their tenuous business relationship shortly after the purchase. Albertsons opened lawsuits against Haggen, stating that $41 million worth of inventory had not been paid for, and in response, Haggen sued Albertsons, claiming that the competitor was consistently working behind the scenes to push Haggen out of the market. Perhaps Haggen's legal struggles interfered with its ability to run its newly obtained markets properly, Now that Haggen plans to pull back and keep only its 37 stores in Washington and Oregon, its reputation for high-quality may one day be restored.

For the over 8,000 Haggen employees in California alone, the bankruptcy will hit hard, The Local 324 United Food and Commercial Workers Union is rightfully upset, especially after having filed recent grievances against Haggen for layoffs and reduced hours. For others in the community who do not work for Haggen, however, economic analysts and regular shoppers alike do not expect to be affected by the closures. Since there is enough competition going on in the community, between Ralphs, Wal-Mart, and other stores, they believe that prices will not likely rise significantly. Who knows? In the end, perhaps Haggen will earn enough money from the sale of the closed stores to get back on their feet in their Northwest home base.

***************************************************************************************************

Friday, September 11, 2015

Rising Insurance Costs in High Fire-Risk Areas

When a home is purchased with a mortgage, using a loan from a bank, the bank will always require the homeowner to get insurance in order to make sure their investment is protected to some extent. Insurance, while a necessity, can be a costly addition to one's monthly or yearly bills. Since an insurance company wants to stay in business, it charges higher rates to provide insurance to individuals in high-risk areas: flood zones, fire zones, earthquake centers, etc, so that it will have the money to pay off claims involving fixing or rebuilding of affected properties. For people like John Stoffan in Samantha Masunaga's L.A. Times article, the costs of fire insurance in drought-parched California make the state almost too costly to bear.

The Stoffan family, whose Northern California home survived various wildfires around Yosemite National Park throughout the years, is finding that their insurance rates may actually be the reason they finally jump ship. The house itself, as well as the county in which it is situated, are considered to be "high-risk" for insurance companies. Even after having installed fire-resistant plants, developed "buffer zones" of areas without any plants surrounding the property, and created holding areas to keep thousands of gallons of water on hand, insurance companies have doubled rated in the past year.

The past four years of dry conditions have made things worse for those living near large forests. The combination of summer temperature and lack of water can turn a forest into a raging wildfire with the merest spark. Because of this risk, home-owners like the Stoffans, no matter how many preventative measures they take, are stuck between a rock and a hard place. They need insurance to have a mortgage to own a home, yet the insurance rates are unaffordable and getting worse. What is their alternative?

While all are hoping for a good winter to break California's dry spell, many are considering moving out of the area altogether. Others have found more creative options to reduce their insurance costs. Some people, like Alpine's Mollie Jacques, have been able to find significant discounts by using insurance companies based in other cities. For Jacques, her choice to switch to an insurance company 100 miles from her home saves her over $700 per year. Some homeowners have even been refused insurance completely and have been forced to use the California Fair Plan Association to have some, albeit limited, coverage.

Communities are coming together in these fire-prone areas to try to make their homes and surrounding land as safe as possible. Since insurance companies determine rates through statistics involving fire department preparedness, water supplies, and availability of emergency communication. With the help of the California Fire Safe Council, a nonprofit organization, such communities are able to purchase wood chippers and other machinery to help clear dry brush and other flammable material. The more prepared a community becomes for a wildfire, the better rates insurance companies will provide. It comes down to economics. Insurance companies will charge a lot of money for taking on a huge financial risk. The more you lower that risk for the insurance company, the less money they will require you to pay.

***************************************************************************************************