You are cordially invited to the Investor Symposium hosted by Matson Money.
When: Thursday, July 31, 2014 – Saturday, August 2, 2014
Where: Horseshoe Casino & Conference Center
1000 Broadway, Cincinnati, OH USA
Speakers Include:
Arthur B. Laffer, PhD: Chief economic advisor to Ronald Reagan
Terrance Odean, PhD: Professor at Cal-Berkley, expert in the field of investor behavior
Lyman Ott, PhD: Expert in the field of statistics, providing validity to Free Market Portfolio Theory
Concert featuring country singer (and former leader of Hootie & The Blow Fish) Darius Rucker
Seating is limited. RSVP by emailing reservations@matsonandcuprill.com. Admission is free to all Matson & Cuprill clients and their guests.
In The Headlines
Will the College Gridiron Become a Union Shop?
The stunning decision that football players at Northwestern University have the right to form a union has raised a lot of questions about the future of college athletics, but one of the biggest is, What does it mean for the future of the college athletic scholarship?
The decision by Peter Ohr, regional director for the National Labor Relations Board (NLRB) in Chicago, in favor of the university’s scholarship football players, hinged on the definition of “employee.” In order for a group of individuals to gain access to rights of the National Labor Relations Act, including the authority to unionize, the group must first be classified as employees, which, according to common law, means “a person who performs services for another under a contract of hire, subject to the other’s control or right of control, and in return for payment.”
In the case of the Northwestern football players, the athletes meet this definition and can therefore unionize, according to Ohr, because the scholarship they receive, valued at as much as $76,000 per calendar year, counts as payment. “While it is true that the players do not receive a paycheck in the traditional sense, they nevertheless receive a substantial economic benefit for playing football,” Ohr wrote.
The players also meet the other requirement of the employee definition. They are subject to the control of their employer, in this case Northwestern University, because they must follow the football team’s strict rules or risk losing their scholarships. For instance, the football players must live on campus for two years, the athletic department must approve their off-campus employment, players must disclose to their coaches detailed information about the cars they drive, and they cannot reject a coach’s Facebook friend request.
But it is really the payment, in the form of a scholarship that is important here. According to Ohr, if you take away the free tuition that an athlete receives, as in the case with “walk-on” players, the employee classification no longer applies, even though that player might follow the same schedule and abide by the same rules as the athletes on scholarship. “I find that the walk-ons do not meet the definition of ‘employee’ for the fundamental reason that they do not receive compensation for the athletic services that they perform,” Ohr said in his decision.
The decision in favor of the football players on Wednesday means that they have cleared the first hurdle in their battle to unionize. They still have a long way to go. Northwestern has already promised to appeal the decision to the full NLRB in Washington, D.C. From there, the decision could go to a court of appeals and then on to the United States Supreme Court.
But if Northwestern’s football players and other college athletes continue to win these legal battles, universities could be forced to fundamentally reconsider their system of awarding athletic scholarships, since it is that “payment” that subjects universities to the potential unionization and collective bargaining power of student athletes.
“Schools will think long and hard about what they do and whether giving scholarships to players make sense,” says Don Schroeder, an employment lawyer at Mintz Levin. He says they will have to decide fiscally, and from a cultural standpoint, if they want to negotiate with a union.
Going to the Movies – The New Reality
Despite a fast-shrinking window between when films leave theaters and when they appear on streaming devices, the business of selling movie tickets is still growing. U.S. theaters collectively increased ticket revenue a bit last year, according to a new report from the Motion Picture Association of America. But that is not because more people are going to the movies—it is because ticket prices are higher. The report highlights that market dynamic and provides two other interesting takeaways that illustrate how the movie business is changing.
Growth in U.S. box office revenues comes from price hikes, not more moviegoers – The data show that box office revenue has grown from $8.8 billion in 2005 to $10.9 billion in 2013. During the same period, the number of tickets sold in North America has seesawed between 1.1 billion and 1.3 billion. That seems relatively static and unexciting. But those trends do not do justice to how incremental changes in each metric have played out over time.
In the past decade, cinemas raised the price of the average movie ticket by almost one-third, to $8.13, and that has made all the difference. If only inflation was at play in the increase in ticket prices, today’s average price would be $7.72.
The fact that movie theaters can hike prices so much without losing more traffic is encouraging. But it means they are leaning more heavily on so-called “super fans,” rather than expanding the base of moviegoers. Half of all movie tickets now go to “frequent moviegoers,” according to the association—that is, people who go to a movie at least once a month. Meanwhile, about one third of North Americans never go to movies at all.
3D movies have not boosted revenues as originally predicted – Surprisingly, returns on 3D movie offerings have been fairly static, despite slick 2013 treatments such as Gravity and Iron Man 3. The industry still cannot top the revenues that its nerdy glasses realized in 2010, when Avatar and Toy Story 3 helped 3D capture roughly one in five movie dollars. In fact, ticket sales from 3D pictures have declined from 21% of box offices revenues in 2010 to just 16% in 2013.
Global growth is still robust – Global box office receipts for all films released in each country around the world reached $35.9 billion in 2013, up 4% over 2012’s total. The increase was driven by international ticket sales ($25 billion), up 5% from 2012, with growth in all geographic regions. International box office (in U.S. dollars) is up 33% over five years ago.
Asian consumers are the primary audience now – “How will it do in China?” will now be part of every film studio boardroom decision (if it was not already) on whether to green light a film production. Last year, Asia passed North America and Europe, the Middle East, and Africa in total box-office revenue. What is more, Asian theaters now have almost 2,000 more digital screens than those in North America.
When it comes to the business of going to the movies, as Dorothy in The Yellow Brick Road so aptly noted, “We aren’t in Kansas anymore.”
Sources:
1. http://management.fortune.cnn.com/2014/03/27/northwestern-football-union/
2. http://www.businessweek.com/articles/2014-03-26/fewer-people-are-seeing-movies-but-box-office-revenue-is-up#r=nav-f-story
3. http://www.mpaa.org/wp-content/uploads/2014/03/MPAA-Theatrical-Market-Statistics-2013_032514-v2.pdf
The Good News Is . . .
• U.S. consumer spending rose in February, in the latest sign that the economy was regaining strength after being slowed by bad weather. The Commerce Department said on Friday that consumer spending increased 0.3% in February after rising by a revised 0.2% in January. Spending in February was lifted by an increase in services consumption, likely because of increased demand for health care and utilities. The government reported two other indicators which pointed to a strengthening economy. Income at the disposal of households after adjusting for inflation rose 0.3%. The saving rate, which is the percentage of disposable income households are socking away, rose to 4.3% last month from 4.2% in January.
• Paychex, Inc., a leading provider of payroll services, reported earnings of $0.44 per share, a 10.0% increase over year-ago earnings of $0.40. The firm’s earnings topped the consensus estimate of analysts by $0.02. The company reported that revenues were $636.5 million, an increase of 7.3%. Management attributed the company’s performance to steady growth in its core payroll services and strong demand for its Human Resources services.
• Baxter International announced that it would create two independent health care companies: one in biopharmaceuticals and the other in medical products. The biopharmaceuticals business would be spun off tax free to shareholders by the middle of next year, under the company’s plan. Baxter’s biopharmaceuticals business includes recombinant and plasma-based proteins to treat hemophilia and other bleeding disorders, and plasma-based therapies to treat immune deficiencies, burns and shock and other blood-related conditions. The medical products business includes intravenous solutions and nutritional therapies, drug delivery systems, inhalation anesthetics and other products. The move follows that of other large pharmaceutical companies which have split their riskier, but potentially more profitable drug development businesses from the steadier, cash-generating medical products businesses.
Sources:
1. http://www.cnbc.com/id/101534224
2. http://www.cnbc.com/id/18080780/
3. http://static.paychexinc.com/a/d/investor/releases/2014-3Q.pdf#__utma=1.1401538034.1395970608.1395970608.1395970608.1&__utmb=1.8.9.1395971028016&__utmc=1&__utmx=-&__utmz=1.1395970608.1.1.utmcsr=google|utmccn=%28organic%29|utmcmd=organic|utmctr=%28not%20provided%29&__utmv=1.|1=vid=3318541395970608431=1&__utmk=83145238
4. http://dealbook.nytimes.com/2014/03/27/baxter-to-split-into-2-health-care-companies/
5. http://dealbook.nytimes.com/2014/03/27/conscious-uncoupling-for-drug-makers/
Planning Tips
Tips for Saving on Summer Energy Costs
Though it has been a long, cold winter for many Americans, summer heat is just a few months away. Before the summer temperatures and summertime utility bills start to make you feel uncomfortable, you might want to consider making a few changes to cut your energy consumption. Below are tips for how to save on your energy bill.
Invest in your yard and cool down your roof – Trees, shrubs and vine-covered trellises are a great way to shield your home from the elements. Trees reduce bills by shading your house and by releasing moisture that cools the air. Your roof is another place to look for easy energy savings. If your roof is black, or a similarly dark color, consider installing a sunlight-reflecting “cool roof” or adding an approved coating to your existing roof. This can reduce roof temperatures by 50 to 60 degrees, trimming air-conditioning costs by 20%.
Cut down on the use of heat-generating appliances – Run heat-generating appliances like ovens and dryers early in the morning or late at night. Also, switch your incandescent light bulbs for cooler CFL or LED light bulbs. Also remember to unplug your electronic devices when you are not using them. Even television sets, DVD players, and computers that are turned off can suck power out of outlets. You can use a smart power strip which cuts power when it is not needed.
Close the shades and manage the thermostat – Closing your window shades is one of the simplest steps to keep your house cool. Anything that keeps the sun from coming in and creating a greenhouse effect will make it easier for your air-conditioning unit to maintain cooler temperatures. If you do not already have one, consider purchasing a programmable thermostat. It allows the temperature to automatically rise during the day when no one is home and can produce annual savings of 30%. Also, overhead fans, especially at night, can cool air more cheaply that turning down the thermostat.
Consider going solar – Buying solar panels can be expensive. But by leasing them instead of buying them, you pay just a flat monthly fee. That way, you know exactly what it is going to cost, and it is often 10% to 15% less than the local utility rate.
Service your air conditioning units regularly – Most experts suggest getting your unit serviced once a year, to check for potential problems such as mold, rusting, or grime build-up, all of which can hamper efficiency. Check for any air leaks and other inefficiencies. If you use window-unit air conditioners, make sure they fit tightly so air cannot escape around the unit. It is important to clean out air conditioning filters once a month, which usually involves running water through them and letting them air-dry.
Sources:
1. http://www.consumerenergycenter.org/tips/summer.html
2. http://money.usnews.com/money/personal-finance/articles/2012/04/09/9-ways-to-cut-summer-energy-costs
3. http://www.aarp.org/money/budgeting-saving/info-2014/save-money-on-summer-energy-bills.html
4. http://realestate.msn.com/article.aspx?cp-documentid=24462394
5. http://www.epa.gov/greenhomes/ReduceEnergy.htm
6. http://www.foxbusiness.com/personal-finance/2014/01/29/buy-vs-lease-solar-panels-on-your-home/
