Redbox Gets Bought: Another Success For Good Service At A Good Price

from the doing-things-the-right-way dept

Redbox, the company that rents DVDs out of automated kiosks for $1 per night, has been bought for up to $176 million by its biggest investor, Coinstar. It was hard to dislike Redbox: the company was having a lot of success in a space where other companies hadn't, by creating a convenient and easy to use service that delivered at a great price. Plus, anything that gets Hollywood's knickers in an enormous twist generally is pretty good. Universal Studios, in particular, tried to hamper Redbox through threats leading to lawsuits (update: clarified that Redbox filed the lawsuit... in response to a threat from Universal), perhaps hoping to kill the company off before launching rental kiosks of its own. But rather than try to destroy Redbox, Hollywood (and plenty of other people) should learn from it: the way to success isn't by putting all sorts of obstacles in the way of your customers' happiness, it's by providing them a service they want, delivered in an easy way, with a lot of value.

Carlo Longino is an expert at the Insight Community. To get insight and analysis from Carlo Longino and other experts on challenges your company faces, click here.

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FCC Just Couldn't Stop Voting

from the election-day-festivities dept

Well, it's election day and apparently the FCC commissioners liked voting so much they took votes on just about everything. Amazingly, it looks like they even made some good decisions. The big one, of course, and the one that will get the most press, is the unanimous vote to free up television "white space" spectrum. While the NAB made a last ditch effort to stop this, the FCC made the right call here. This spectrum can be put to much better use, which can have a huge impact on increasing innovation and wireless technologies. This is a big win. The FCC also approved Sprint and Clearwire's deal to set up a joint venture for their WiMax operations, as well as allowing Verizon to buy Alltel. Both of those deals make sense as well, so it's good to see them approved.

Other than that, the FCC said that it's going to start looking into the pricing policies of cable companies... and Verizon. Who's missing? FCC boss Kevin Martin's best friends over at AT&T. To be honest, while it's quite likely that the cable companies and the telcos (yes, including AT&T) are abusing their oligopoly position, the answer shouldn't be having the FCC act as a watchdog over pricing policies, but for a better system to be set up that encourages real competition. In the meantime, though, can someone explain why AT&T was left out of the bunch?

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Napster's Next Chapter: Merged Into Best Buy

from the yawn dept

Napster, which now has almost nothing other than its brand to connect it to the revolutionary music sharing service Shawn Fanning launched nearly a decade ago, is about to undergo its latest shift, as Best Buy has bought what remains of Napster for $127 million, representing a hefty premium on the already pretty weak valuation of the company. Ever since Roxio bought Napster -- and renamed itself Napster -- the company has tried to position its music subscription offering as a huge success, but there's been little evidence to back that up. Now selling off to Best Buy for such a low price pretty much confirms that there wasn't much there.

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CD Duplicator Buys CD Baby; Recognizing A Digital Future

from the changing-times,-changing-business-models dept

Lots of folks who follow the music space are aware of CD Baby, who has helped independent artists sell their music for years. It basically was a one stop shop for many independent artists, getting their music available in a variety of different places, for either download or physical CD sale. Earlier this week, the company was bought out by Disc Makers, the aptly named company that manufactures CDs and DVDs for independent musicians and filmmakers. The two companies had worked together as partners for many years. Still, what strikes me as most interesting about this is that Disc Makers clearly is recognizing that relying on the physical disc reproducing business to keep growing is a likely to be a losing bet. So, it appears to have come up with a decent plan for positioning itself for the changing market. If only other businesses were willing to do that.

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Dish And DirecTV Figure If XM And Sirius Can Merge...

from the try-try-again dept

You may remember back in 2001 that EchoStar, then owners of the DISH Network, tried to buy DirecTV from then owner Hughes (who was owned by GM at the time). However, after the Justice Department said no to the deal over antitrust concerns, it fell apart. However, the rumors going around are that the two companies (now just DISH Network and DirecTV, sans various parent companies) are thinking about trying again. Apparently, they believe that the regulatory and competitive environment that doomed round 1 wouldn't happen in round 2. And, of course, this time around, they can point to the fact that the two satellite radio systems, XM and Sirius, were allowed to merge (even if it took a year and a half).

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AT&T Wants To Throw Some FCC Roadblocks Into Sprint, Clearwire Joint Venture

from the good-luck-with-that dept

In a move that is clearly designed to just piss off and waste the resources of a competitor, AT&T has filed papers with the FCC opposing Sprint and Clearwire's plan to merge their WiMax divisions, which was announced a few months ago (found via Broadband Reports. Of course, AT&T has a chummy relationship with the FCC, who has allowed it to merge with telco after telco without many real conditions (and even telling it that it can ignore some of the conditions it agreed to to get those mergers approved).

In this case, AT&T claims that it isn't really opposed to the merger, but it's filing opposition papers because it feels that Sprint and Clearwire aren't receiving the same level of scrutiny that AT&T received in its mergers, specifically with regards to it spectrum holdings. This seems like grasping at straws by AT&T just to throw some sort of extra paperwork roadblock in the path of the new Clearwire, which is an obvious competitor.

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Do Big Tech Acquisitions Ever Work Out?

from the destruction-of-value dept

With the positively yawn-inducing news over the weekend that Yahoo had rejected yet another offer from Microsoft, Joel West is reminding people that big acquisitions almost never make sense and very often destroy value. As an example, he points to the news that AMD is writing down $880 million on its acquisition of ATI only 8 months after it already wrote down $1.6 billion. That's $2.5 billion wiped out in a very short period of time. As West notes, small acquisitions can make sense for small companies, at least in allowing their founders to cash out -- but for big companies it's usually more about ego: helping them move up the Fortune 500. But those deals almost never work out:

The fundamental problem of acquiring public companies is that you have to pay more than the market price -- so the claim is either you know better than the market (never true) or that you will realize synergies that increase the value of the acquired company (almost never true). So the choice is between buying overpriced good companies, or troubled companies not worth buying at any price. Acquiring a troubled company means you acquire their troubles -- whether it's exposure to an industry past its peak (AOL Time Warner, Viacom-Blockbuster) or a company with a justifiably lousy market position (Daimler Chrysler).

The other aspect that he doesn't touch on is that with big companies, there are always investment bankers crawling all over management trying to convince them to buy up other companies one week, and sell off pieces the next. This "buy 'em up, sell 'em off" strategy almost never works for anyone but the investment bankers who take their fees both coming and going. So as the silly battle continues around Microsoft and Yahoo, rest assure that pretty much whatever happens, you can expect to see a destruction in value rather than any "synergies" revealed.

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Make It Stop: Microsoft Still Maybe Possibly Potentially Maybe Kinda Interested In Yahoo

from the please-make-it-stop dept

It's the merger story that never dies. Despite however many times that Yahoo and Microsoft have insisted that any potential deal between the two companies is over and done with (despite trying a few times), there's indications (once again) that Microsoft isn't out of this yet, and could potentially come back in and do a new deal if Carl Icahn gets the board slate that he wants. Again, though, it seems like Icahn's talkative nature actually devalued the deal a bit. In talking about how much he wants to sell Yahoo (if he gains control over it), he's making it that much easier for Microsoft to buy at a lower price than otherwise. It's difficult to see how that's possibly in Icahn's own best interests. Still, the longer this goes on, the more of a mess it becomes -- and the happier Google gets.

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Blockbuster Looks At Circuit City's Books; Ditches Acquisition Offer

from the no-real-surprise dept

We were one of a very small number of people who actually saw some logic behind Blockbuster bidding for Circuit City -- though, it seemed unlikely that Blockbuster viewed the purchase in the same way we did. Most people assumed (probably correctly) that Blockbuster didn't really have much of a plan at all, other than to merge the two struggling companies and have an even bigger mess on their hands. Blockbuster has now withdrawn the offer to buy Circuit City, gamely claiming that it has to do with "market conditions" and a better understanding of just how awful Circuit City's books appear to be. That's press release talk. What's more likely is that Blockbuster realized that everyone was right: it would screw up the merger and make a bad situation worse.

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Before Getting Bought By Verizon Wireless, Alltel Tried To Buy Sprint, T-Mobile And AT&T Wireless

from the merger-mania dept

After being rumored for years, Verizon Wireless finally bought Alltel earlier this month. However, Alltel's CEO has now admitted that the company wasn't just looking to be acquired these past few years. It had, itself, aggressively looked into buying Sprint, T-Mobile or even AT&T Wireless at times. In fact, it tried to buy Sprint three separate times. The other two certainly seem like longshots. Deutsche Telekom appears to have no real interest in getting rid of T-Mobile, and depending on which version of AT&T Wireless you're talking about, it would have been difficult to convince the various parent companies involved that a sale to Alltel made sense. And that, of course, ignores the fact that T-Mobile and AT&T Wireless were from the GSM camp, rather than the CDMA camp. Still, it is interesting to see that the smaller Alltel was looking at buying its way up the food chain.

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FCC Setting Conditions For XM-Sirius Merger (Finally)

from the what-took-so-long? dept

It's not clear exactly what Kevin Marin and the FCC have been doing over the last year and a half since XM and Sirius announced plans to merge. The Justice Department gave its approval of the deal back in March. That had already taken over a year, and then everyone turned to the FCC to get its approval. From the length of time it took, perhaps the FCC had just figured that the DoJ wasn't going to approve the merger, and had to scramble to figure out the details before granting (or not) its own approval. FCC boss Kevin Martin has now sent around to the other commissioners his recommended concessions to approve the merger, and it includes things like a temporary ban on raising prices (for a few years) as well as requirements for some channels to be turned over to noncommercial and minority programming. While XM and Sirius eagerly agreed to these concessions (after all this time, they just want the damn thing to be over), other commissioners may try to impose additional requirements as well -- so this might not be over just yet.

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Verizon Wireless Finally Buying Alltel

from the get-a-room-already dept

It's only been rumored for about four years, but it looks like Verizon Wireless is finally buying Alltel. It's yet another merger in the space, with this one letting Verizon leap over AT&T to declare itself the largest national carrier. Considering the space, I'm sure there will soon be a flurry of "who's next?" articles showing up -- though most of the big obvious mergers are now out of the way. One assumes this should also mean the end of the ridiculous lawsuit Verizon Wireless had filed against Alltel for misleading advertising.

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Are Companies Too Eager To Do Big Mergers?

from the big-egos-big-mergers dept

With Microsoft and Yahoo! back at the negotiating table, Megan McArdle suggests that corporate CEOs are too trigger-happy when it comes to big mergers. She says there are a few situations where mergers really make sense, including when there are significant economies of scale or cost savings. A big part of the original rationale for the Microsoft-Yahoo! merger was that it would give them the scale to compete effectively with Google in the search advertising market. But against these speculative advantages, it has to be remembered that Microsoft would have have had to pay a hefty premium on a firm's market value, cover the costs of the merger process, worry about corporate culture clashes, and absorb the reduced productivity as employees of both companies were focusing on the details of integration rather than developing new products. The deal would have had to produce some amazing benefits to offset those costs.

Indeed, this kind of basic math suggests that big mergers should be pretty rare. But in practice, they seem to get proposed pretty often. In a lot of cases merger proposals seem to be driven by empire building and excessive optimism on the part of the acquiring CEO. CEOs tend to have high opinions of themselves and their managerial skills, and they like the idea of running a larger, more prominent company. And with deals of this size, it's almost always possible to tell a plausible story of how things will turn out well. The AOL Time Warner merger is the classic example of this, it was heralded as a strategic master-stroke, but it created a lot of problems and the promised synergies never materialized. Megan suggests that Microsoft's new strategy of pursuing a strategic partnership rather than an outright acquisition makes more sense. They can probably get most of what they could have gotten from a merger without all the baggage that comes with a full-blown acquisition.

Timothy Lee is an expert at the Insight Community. To get insight and analysis from Timothy Lee and other experts on challenges your company faces, click here.

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And... They're Back: Microsoft And Yahoo Talking Again

from the a-little-shove-from-Icahn dept

Amazing what a little shove from Carl Icahn can do. Microsoft admitted on Sunday that it's submitted a new proposal to Yahoo, though not an acquisition of the entire company. Without any additional details, it's difficult to know if this actually makes any sense for anyone involved, but it does show that this whole exercise is far from over. The rumor right now is that it involves Microsoft taking over Yahoo's search-related text advertising business, which Yahoo has been considering handing over to Google. Yahoo would retain its display advertising business and its other properties like Yahoo mail and instant messaging. In many ways, this makes sense. Yahoo has never been strong in search advertising, and such a deal would let it concentrate on stuff that it actually does better.

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What, You Thought The Whole Yahoo/Microsoft Thing Was Over?

from the silly-believer dept

You just knew that the whole Yahoo/Microsoft deal wasn't really over and done with, right? Rumors started spreading yesterday that billionaire investor and professional "shake things up" guy Carl Icahn was going to put forth his own slate for the Yahoo board (after buying up a bunch of shares in the company) which would allow him to create a board that would sell the company off to Microsoft. Those kinds of rumors don't just magically come out of nowhere, so it should come as no surprise that it looks like, indeed, Icahn will be putting forth his own list of potential board members. As plenty of people have noted, this ought to be fun to watch. Dealing with Steve Ballmer is one thing, but taking on Icahn isn't something that many do successfully. Of course, the real question is what does Icahn do with Yahoo should he gain control over the board. Many are assuming that he'll sell it off to Microsoft, which assumes that Microsoft is willing to come back to the table. Either way, it seems like what we witnessed over the last few months was merely Act One. Act Two may be a lot more exciting.

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So Many Reasons Why Deutsche Telekom Won't Buy Sprint

from the pin-drop dept

There's a rumor going around that Deutsche Telekom is thinking about buying Sprint. This is a bad idea for any number of reasons. Deutsche Telekom owns T-Mobile, which competes with Sprint, and which has certainly fallen way behind AT&T, Verizon Wireless and Sprint in terms of coverage and next generation network deployments. At the same time Sprint has definitely faced some tough times recently that have weighed heavily on the stock. So, you could see why Deutsche might initially think about it. T-Mobile is behind in the game, and merging with Sprint could (emphasis on could) jumpstart the business a bit. Plus, it's reasonable to think that Sprint may be undervalued these days. But... it's still a bad idea. T-Mobile and Sprint use totally different network technologies. Sprint is still dealing with the mess of trying to integrate Nextel's iDen system into its own CDMA-based system (which is part of the reason the company has been in trouble lately), and dumping a third totally incompatible technology into the mix doesn't seem wise. You could (again, emphasis on could) argue that Sprint now has some experience merging totally incompatible networks, but so far it's not exactly good experience. All in all, this seems like someone tossing out a suggestion. It's hard to see this as a legitimate possibility.

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Yahoo Needs To Pull An Apple Before It Becomes A Netscape

from the can-jerry-yang-channel-his-inner-steve-jobs? dept

By now, of course, you've seen the story of the weekend: Microsoft walking away from its offer to Yahoo, after first raising its bid (though not high enough for Yahoo). Microsoft chose not to go hostile recognizing that would make a bad situation even worse -- in part because Yahoo made it clear that it would swallow its own type of a poison pill by handing over its search to Google. At this point, you can expect a bunch of lawsuits to follow, and Yahoo's stock to fall off a cliff. It's not unreasonable to think Jerry Yang's job may be on the line.

So what now? To be honest, this is a case where I think that the interests of Yahoo's shareholders and the interest of the company diverged. Jerry Yang and Yahoo probably recognized that the integration would be a disaster, in part due to the cultural differences between the two companies. I honestly think Yahoo has a better chance of doing something interesting separate from Microsoft. However, by "better chance" that doesn't necessarily mean a "good chance."

At this point, Yahoo has a rather short time frame to turn the company around. Yes, it's profitable and yes, it's still huge -- but its big shareholders are going to come out of this pissed off and impatient. So Yahoo really needs to "pull an Apple." Apple in the late 90's was basically left for dead. Michael Dell famously declared that if he were in charge, he would shut the company down and give shareholders their money. But Steve Jobs came back and reinvented Apple into a very different company, first with the iMac, then the iPod and more recently the iPhone. He stopped the company from being "yet another computer company" and forged a totally different path.

If Yahoo wants to survive (and not end up getting taken over for a much lower price in another year or two), it needs to stop trying to be Google. In fact, it needs to stop thinking so much about Google, and it has to come up with that "different" path, the same way Apple did. This isn't easy, and in Apple's case it took the singular focus and brilliant mind of Steve Jobs (who also surrounded himself with some other brilliant folks). Jerry Yang needs to channel his inner Steve Jobs and come up with a way to totally reinvent the company -- and fast. The odds of him being able to do so seem slim, but if he can't, he should have just taken the last Microsoft offer.

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So Much For Those Synergies Between Time Warner Cable And AOL, Huh?

from the nice-work,-guys dept

While the AOL/Time Warner merger has gone down in the record books as one of the worst mergers ever, I still contend that it could have gone much better if stronger management had been in place. Most specifically, there were obvious synergies between aspects of Time Warner and AOL -- but petty squabbles and turf wars kept most of those synergies from being realized. The most glaring and obvious of these was Time Warner Cable (or RoadRunner) and AOL. Both offered internet access, and it seemed perfectly reasonable to merge the two properties, and use RoadRunner to upgrade all those dialup users onto broadband, and then keep them engaged with all the Time Warner content. Of course, the Time Warner content people freaked out about content on the internet of course, so that would never have worked -- but the failure to link up RoadRunner and AOL never made any sense.

In fact, the two services began aggressively competing with each other. Then, after three years, someone finally realized that maybe the two should work together and made an announcement saying so. Of course... an announcement without action is worthless. So, another year goes by and another exec trots out with an announcement that the two divisions will work closely again. And again... nothing. Give it almost another year... and yet another announcement. Sense a pattern? In the end, the two groups never actually did combine, and with today's announcement that Time Warner is selling off the cable business entirely, it just puts an exclamation point on all these years of keeping the two businesses separate. Of course, in selling off Time Warner Cable, it will also likely lead to speculation that the company will sell off AOL (or merge it with Yahoo -- remember that plan?) as well -- though, as an entirely separate entity.

While I tend to be skeptical of mergers based on vague "synergies," it's still rather amazing that in all this time, no one at Time Warner ever got these two divisions together -- and now the company may end up selling each off separately. In the end, this was a deal that only worked out for the investment bankers. Remember, they love to convince companies to consolidate one year and diversify the next -- because they make money on both transactions.

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Blockbuster In Surprise Bid To Buy Circuit City

from the does-this-make-sense? dept

The news came out early this morning that Blockbuster was making an unsolicited bid to buy Circuit City, which has left many scratching their heads, saying that the synergy isn't all that obvious. Circuit City has been in trouble for a while, and Blockbuster (while a lot healthier than Circuit City) has been facing its own series of challenges. While it's unclear what Blockbuster's plans are, the deal actually could make sense if Blockbuster was really looking distantly into the future about where its market is heading. It knows as well as anybody that video delivery is moving to the internet eventually -- at which point its business model gets a lot trickier. Yet, by owning a retailer selling hardware -- and the rights to content to be distributed to that hardware, things could actually get interesting. Now, I'll say ahead of time that I doubt this is where Blockbuster is heading, but with both movie distribution rights and the ability to sell hardware, it could embrace the economics of infinite goods, by packaging content (infinite) with hardware (scarce), creating a much more compelling offering, than competitors to either firm alone.

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Can Yahoo, Microsoft, Google, AOL And News Corp Sit Down And Just Divvy Up The Internet Already?

from the thanks dept

Well, well, well. So, apparently, the earlier news about Yahoo using Google ads was just the appetizer to the more meaty story, which is apparently... well... that just about all the big name internet players are going to do a bit of horse trading to figure out who owns who in the end. There seems to be a lot of speculating in the WSJ article, but apparently step one is that Yahoo and AOL might merge their internet properties (something that's been rumored before). That pairing would likely lead to Google taking over the ads (it already handles the ads for AOL and owns a stake of AOL). At the same time, the article reports that News Corp., once rumored to be a suitor of Yahoo until it vehemently denied the story, may actually be teaming up with Microsoft to make a joint bid for Yahoo. Who else did we leave out? Nobody?

Anyway, I stand my by original assessment of a potential AOL-Yahoo merger ("like trying to keep a wild animal from eating you by covering yourself with feces"), but honestly, this gathering of the big players should actually be seen as a huge opportunity for everyone else. Basically, the big boys are about to make a big mess, and there will be tremendous opportunities that spill out while they try to figure out what went wrong. People are just starting to realize that you don't innovate by building up huge mega-corporations -- you do it by being small and nimble. These megamergers are going in the wrong direction and will open up huge opportunities for small, quick firms that think big.

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