TIME Media

Netflix Has a Plan to Take Over the World

ABC's "Good Morning America" - 2014
Ida Mae Astute—ABC via Getty Images Kevin Spacey talks about the new season of "House of Cards" on Good Morning America, 2/18/14, airing on the ABC Television Network.

But it'll likely lose money abroad long before it ever makes it there

Like the conniving Frank Underwood, Netflix’s ambitions only continue to grow.

The streaming service is rolling out in six new European countries this week, including France and Germany, two of the region’s largest markets. The expansion, Netflix’s biggest ever, will expose the company to hundreds of millions of potential new customers who have high-speed Internet access. But the challenges and costs of adapting a U.S.-based service for six different cultures won’t be easy—or profitable—for quite a while.

At home, Netflix is still growing at a healthy clip. The company added 2.82 million streaming subscribers in the first half of 2014, up from 2.66 million additions during the same period last year. But the growth rate abroad is even faster as Netflix continues to come online in more regions. The company added 2.87 million international customers in the first half of the year, compared to 1.63 million last year. It’s projecting that it will add 2.36 million international subscribers in the third quarter alone thanks to the new markets where the service is launching.

While opening in new markets will certainly boost Netflix’s subscriber base, there’s no guarantee the service will perform as well as it has in the United States or the United Kingdom. In Germany, TV is less popular than in other Western nations. Germans watch 230 minutes of TV and video content per person per day, compared to 286 minutes per person in the U.S., according to research firm IHS. And the TV they do watch isn’t necessarily the same as what succeeds elsewhere. Seinfeld was famously a bust in Germany because it was “too American.” More worryingly for Netflix, its own high-budget original show House of Cards failed to net even a million viewers when it debuted on the German network Sat. 1, according to Bloomberg. Episodes from season two averaged less than 100,000 viewers.

“The Germans notoriously have different tastes from the rest of the West,” says Michael Pachter, an equity analyst for Wedbush Secutiries. “All of us . . . make the mistake of thinking that ‘international’ is a place. International is 180 independent, different nations.”

While there are similar cultural concerns in France, there Netflix must also deal with entrenched competitors who want to squash the streaming service before it can gain traction. Canal Plus, France’s largest pay-TV provider, actually owns the broadcast rights to House of Cards and recently announced a deal to stream HBO shows through its own Netflix-like service, Canalplay. Another provider, Numbericable, launched an online service with access to 3,000 episodes of TV shows on the same day Netflix launched in France. Meanwhile, content creators and regulators worry Netflix will try to further Americanize French culture while avoiding paying large taxes because it’s headquartered outside the country.

“People are concerned the emergence of Netflix will damage the local content industry,” says Richard Broughton, an IHS analyst. “They really have to make some partnerships in order to make better headway into the French market.”

Netflix has plans to address these issues. A new House of Cards-like drama called Marseille is set in the south of France and will be helmed by French directors. It should help cast Netflix as a collaborator in the country rather than an invader. The company will also try to buy up streaming rights to locally produced shows in the new countries where it launches, Broughton says. The strategy has been effective in the United Kingdom, where Netflix has the rights for many BBC shows. The company has 3 million customers there, according to one estimate.

But building a curated library for each individual market is expensive, and Netflix often has to negotiate individual rights agreements for each different country where it operates. “They have to replicate the wheel every place they go,” Pachter says.

That’s why Netflix’s international business has been unprofitable since it began. The division lost $15 million in the most recent quarter, and Netflix projects that loss will balloon to $42 million in the third quarter due to marketing and licensing costs in new territories. The price to compete will only grow, especially when other U.S. competitors show up in Europe (Amazon Prime Instant Video is already available in Germany).

Early impressions indicate that Netflix’s library of titles in France is not as robust as in the U.S. But analysts expect the company will eventually work out the kinks. IHS projects that Netflix will have 18 million subscribers across Europe by 2018, up from 5.8 million today. That would be a boon for the world’s most popular streaming service, but it’s hardly guaranteed.

“You’ve got to spend an awful lot up front,” Broughton says. “You’re gambling on, over the next few years, being able to accrue sufficient subscribers to offset those costs.”

TIME NFL

Major NFL Sponsor Anheuser-Busch Criticizes NFL Over Scandals

Baltimore Ravens v Cleveland Browns
Matt Sullivan—Getty Images Running back Ray Rice #27 of the Baltimore Ravens runs the ball against the Cleveland Browns at Cleveland Browns Stadium on December 4, 2011 in Cleveland, Ohio.

The beer maker says it is “increasingly concerned” about domestic violence among players in the league

The NFL’s official beer sponsor Anheuser-Busch blasted the league in a statement Tuesday over its handling of recent domestic violence scandals involving former Baltimore Ravens running back Ray Rice and current Minnesota Vikings running back Adrian Peterson.

“We are disappointed and increasingly concerned by the recent incidents that have overshadowed this NFL season,” the Anheuser-Busch statement said. “We are not yet satisfied with the league’s handling of behaviors that so clearly go against our own company culture and moral code. We have shared our concerns and expectations with the league.”

According to CNBC, Anheuser-Busch sponsors 88% of teams in the league and is the second-biggest sponsor in the NFL after Gatorade.

The NFL has come under harsh criticism in recent days for its handling of the two latest scandals. Rice was cut from the Ravens and suspended from the league after video surfaced of him punching his now-wife unconscious. Peterson was censured but allowed to stay on with the Vikings following his arrest for disciplining his four-year-old son with a whip.

While most of the league’s sponsors have opted to stay, the Radisson hotel chain pulled its support Monday for the Vikings program Monday.

TIME marketing

Why (Most) Sponsors Aren’t Pulling Out of the NFL

Ray Rice
Patrick Semansky—AP Baltimore Ravens running back Ray Rice pauses as he speaks during an NFL football news conference, Friday, May 23, 2014, in Owings Mills, Md.

Radisson suspended their Vikings sponsorships, but they may be the only brand to go that far

When Vikings general manager Rick Spielman announced yesterday, in front of a backdrop splashed with the Radisson logo, that Adrian Peterson would play Sunday despite serious allegations of child abuse, the hotel chain suspended its sponsorship of the NFL team.

But it appears that Radisson’s withdrawal has not opened the floodgates for other sponsors to drop their NFL contracts. Covergirl announced late Monday night that it would not stop being the “Official Beauty Sponsor of the NFL,” despite a viral meme that showed a Covergirl model sporting a black eye while wearing a Ravens jersey. “In light of recent events, we have encouraged the NFL to take swift action on their path forward to address the issue of domestic violence,” Covergirl said in a statement.

Anheuser-Busch, official beer sponsor of the NFL, released a statement Tuesday condemning the response to the abuse scandals, but did not pull their sponsorship. “We are disappointed and increasingly concerned by the recent incidents that have overshadowed this NFL season,” they said. “We are not yet satisfied with the league’s handling of behaviors that so clearly go against our own company culture and moral code.”

But despite the finger-wagging, PR experts say it’s unlikely that major NFL sponsors like Verizon and PepsiCo would pull their sponsorship in light of the recent abuse scandals. “You didn’t see people immediately jumping ship—they’ve made multimillion investments in this,” says Joe Favorito, a sports media consultant who teaches strategic communications at Columbia University and once served as head of PR for the New York Knicks. “I don’t think that the massive brands that are tied to the NFL are in the blind on anything.”

“Everybody these days wants immediate results and immediate reactions,” he says. “Most brands will take their time, especially since most of them have very positive and lucrative experiences with the NFL, and then will act accordingly.” He noted that FedEx hasn’t pulled their sponsorship of the Redskins despite the controversy over their name, and Under Armor is still sponsoring the Ravens despite Ray Rice’s abuse scandal.

So why was Radisson the only brand to suspend their sponsorship? Ray Katz, executive VP for sports marketing at Source Communications and adjunct professor of sports marketing at Columbia University says he suspects Radisson probably had a pretty minor contract compared to the big deals like Verizon and Gatorade, whose sponsorships are more “organic” because they tie in more naturally with sports broadcasts.

“Radisson is not and has not been a very broad corporate sponsor,” Katz says. “To me, this is essentially an excuse to get out of that sponsorship. The benefit of taking an alleged moral high ground is a way bigger benefit than the sponsorship.” Katz serves on the board of Sherwood Trading Group, which helps companies get out of corporate sponsorships, and is not in any way affiliated with Radisson.

Katz also noted that Nike and Castrol have not yet pulled their sponsorship of Adrian Peterson, and the accused child abuser was spotted wearing Nike on Tuesday morning.

“Why should the Vikings cut somebody based on allegations?” Katz said. “The Bears or the Packers will pick him up. The NFL didn’t say Adrian Peterson couldn’t play football.”

TIME Style

Urban Outfitters: ‘We Understand How Our Sincerity May Be Questioned’

Following an uproar, the retailer explains how it ended up selling a 'bloody' Kent State sweatshirt in a statement provided to TIME

On Monday, we wrote about the latest controversy to hit clothing retailer Urban Outfitters: a vintage Kent State sweatshirt that appeared to have blood stains on it, an apparent reference to the shooting deaths of four students by National Guardsmen that took place during a May 1970 protest on the Ohio campus.

Though Urban Outfitters apologized soon after the sweatshirt began to make news, on Tuesday the retailer issued a fuller explanation about the incident to TIME.

The company only had one sweatshirt, it says, which it purchased at a flea market. “Given our history of controversial issues,” the retailer says, “we understand how our sincerity may be questioned.”

Here’s Urban Outfitters’ full explanation of how it came to sell the sweatshirt:

Urban Outfitters would like to extend our sincerest apologies to Kent State University and the Kent State community. We are deeply saddened by the recent uproar our Vintage Kent State sweatshirt has caused. Though it was never our intention to offend anyone, we understand how the item could have been perceived negatively. The tragic events that took place in 1970 are not forgotten and our company regrets that people believe we would intentionally make light of such a horrific part of our nation’s history. To promote such an event is disgraceful, insensitive and in poor taste. To further clarify, despite what has been reported, this is a vintage item and there is only one. Once the negative feedback was brought to our attention we removed the item immediately from sale. Urban Outfitters purchased the one-of-a-kind sweatshirt from the Rose Bowl Flea Market as part of our sun-faded vintage collection. There is no blood on the sweatshirt nor did we ever promote it as such. The discoloration that has been mistaken for blood is from natural fading and sun exposure. With all of that said, this truth does not excuse us from our failure to identify potential controversial products head on. We, as a company who caters to a college-age demographic, have a responsibility to uphold to our customers. Given our history of controversial issues, we understand how our sincerity may be questioned. We can only prove our commitment to improving our product-screening process through our actions and by holding ourselves accountable. Again, we sincerely apologize for this unfortunate misunderstanding and are dedicated to perfecting our internal processes to help avoid these issues in the future.

Read more about read why the Urban Outfitters Kent State sweatshirt caused a controversy here, on TIME.com

TIME Companies

UPS Is Nearly Doubling Its Holiday Hiring After Last Year’s Debacle

Inside A Sorting Facility At United Parcel Service Inc. Ahead Of Christmas
Bloomberg via Getty Images A United Parcel Service Inc. (UPS) driver loads his truck with packages at a UPS sorting facility in San Francisco, California, U.S., on Thursday, Dec. 20, 2012.

The package carrier is taking steps to make sure it’s not caught flat-footed again

fortunelogo-blue
This post is in partnership with Fortune, which offers the latest business and finance news. Read the article below originally published at Fortune.com.

By Phil Wahba

Remember last year how United Parcel Service suffered a major black eye when it was overwhelmed by an unpredictably large number of packages right before Christmas and couldn’t deliver thousands of them in time for the big day, disappointing countless kids?

UPS clearly does.

To avoid a repeat, the world’s largest package delivery service is hiring nearly twice as many seasonal workers for the upcoming holiday season as it did in 2013, and taking several other steps to make sure it can handle what it expects to be increased demand this year.

On top of hiring between 90,000 and 95,000 part-timers (versus 55,000 in 2013) to help out between October and January, UPS has taken other steps to make sure it’s not caught flat-footed again.

UPS has implemented the use of industry-wide delivery volume forecasts, will increase its processing capacity by opening of new and expanded buildings along with the installation of temporary mobile sorting and delivery centers. The company is also adding thousands of new or leased delivery vehicles, trailers, aircraft and portable loading aids. What’s more, UPS will try to improve tracking timing by deploying additional web and movie upgrades to make it easier to keep track of packages.

For the rest of the story, please go to Fortune.com.

TIME Companies

Marriott Urges Hotel Guests to Tip Housekeepers

Marriott Housekeeper Tips
Bloomberg via Getty Images A Marriott sign hangs at a hotel in Washington, D.C., U.S.

Starting this week, the hotel chain will encourage guests to tip their maids, becoming the latest company to ask consumers to assist with worker pay

fortunelogo-blue
This post is in partnership with Fortune, which offers the latest business and finance news. Read the article below originally published at Fortune.com.

By Claire Zillman

The United States imported the concept of tipping service workers from Europe, but that hasn’t stopped America from making the practice its own. Americans tip more than any other nations’ citizens, according to tipping expert Michael Lynn of Cornell University’s School of Hotel Administration. “We’re on the top of the heap in terms of who we tip and how much we tip.”

Marriott International, it seems, is angling to get its workers a piece of that American generosity.

On Monday, the hotel chain announced that it would start placing tip envelopes in its hotel rooms to encourage guests to “express their gratitude by leaving tips and notes of thanks” for hotel room attendants.

The initiative is part of “The Envelope Please,” a project by A Woman’s Nation, a nonprofit organization founded by former California first lady Maria Shriver that advocates for the recognition and respect of women at home and in the workplace. The idea behind the tip envelopes, which will appear in 160,000 guest rooms at participating Marriotts this week, is to give hotel guests the opportunity to acknowledge the “behind-the-scenes” work of housekeepers, which often goes unnoticed and unappreciated because room attendants are not as visible as front-of-the-house employees, according to a release.

For the rest of the story, please go to Fortune.com.

TIME technology

Uber Is Now Legal in Germany Once Again

German Court Bans Uber Service Nationwide
Adam Berry—Getty Images In this photo illustration, a woman uses the Uber app on an Samsung smartphone on September 2, 2014 in Berlin, Germany.

Wunderbar

Updated 1:15 p.m.

Germany’s ban on Uber’s ride-sharing service has been lifted by a local court.

The Franklin Regional Court ruled Tuesday that UberPop, Uber’s cheaper alternative to its well-known black car service, could resume operating freely throughout the country. The ruling comes after Taxi Deutschland, a German taxi union, had successfully sought a nationwide injunction against Uber’s service last month.

The taxi union vowed that it would continue to fight Uber in Germany. “The taxi industry accepts competitors who comply with the law,” the organization said in a statement. “Uber doesn’t do that. Therefore we today announce that we will be appealing without delay.”

UberPop connects drivers and riders via a smartphone app. Critics say drivers are not subject to the same regulations and requirements as licensed German taxi drivers, a common complaint against Uber drivers around the world. The judge who lifted the injunction said that there was likely a legal basis to the taxi union’s complaint, but the organization could not have the issue tried as an expedited case. Therefore, the temporary inunction had to be lifted.

Uber, of course, is happy about the ruling. “We welcome today’s decision by the German court to lift the injunction placed on UberPOP by the incumbents,” Uber Germany spokesman Fabien Nestmann said in an emailed statement. “Demand is so great all across the country that we expect to double in size by the end of the year and plan to bring Uber to more and more cities across Germany.”

[WSJ]

 

TIME Saving and Spending

This Law Would Immediately Improve Your Credit Score

A high-ranking lawmaker is pushing for Congress to redraw the road map for how credit scores are calculated, with an eye toward giving a little more breathing room to people who have fallen on tough times financially.

California representative Maxine Waters, the highest-ranking Democrat on the House Financial Services Committee, is introducing legislation that would modify the Fair Credit Reporting Act in several ways.

It would sharply reduce the amount of time negative information stays on your report. Right now, if you default on a loan, have a debt go into collections or similar, you’re stuck with that black mark for seven years. Waters’ proposed law would shave three years off that and wipe the slate clean after four years. The proposal also would “reverse” defaults on private student loans if the borrower makes nine on-time payments in a row.

“It probably is time to look at the seven-year reporting period and find out what the data really says,” says Gerri Detweiler, director of consumer education at Credit.com. “The Fair Credit Reporting Act was passed in 1970 before credit scoring was as pervasive as it is today,” she points out. A penalty that might have seemed reasonable back then might be too punitive today now that credit scores play into everything from how much interest you pay on a credit card to whether or not you land a job. (Waters also wants to stop employers from using credit checks when screening applicants.)

Waters’ bill also would erase debts that are settled for less than the original balance due, including medical debts. Fair Isaac, the company behind the widely-used FICO score, also made some recent tweaks to its scoring formula, including a similar change that won’t penalize people for late payments if the debts have been paid off. The company also said it will give less weight to medical debt, following research conducted by the Consumer Financial Protection Bureau which found that medical debt doesn’t automatically indicate lower creditworthiness.

Some credit experts are skeptical of the impact and warn of unintended consequences and higher costs to borrowers. “This will result in higher rates for everyone,” predicts Amber Stubbs, managing editor at CardRatings.com. “If [banks] are less able to accurately predict risk, they will proactively increase the cost of loans across the board.”

And John Ulzheimer, credit expert at CreditSesame.com, writing in Business Insider, says that Waters’ bill places “unreasonable” demands on financial services providers.

Consumer advocates, though, are happy about the plan. “A lot of reform [is] needed,” Chi Chi Wu, a lawyer with the National Consumer Law Center, tells the Washington Post.

“She’s obviously thought through the thorny issues,” says Linda Sherry, director of national priorities for Consumer Action. “I commend Maxine for this proposal,” she says, although she acknowledges not all the proposed changes would be likely to make it into the final law. “It seems unlikely such a bill would pass in this House,” she says.

TIME

United Airlines Offers Big Buyouts to Flight Attendants

United Airlines Highlights A 787 Dreamliner
Kevork Djansezian—Getty Images United Airlines flight attendant Tina looks at personal entertainment systems on the new Boeing 787 Dreamliner during a tour of the jet at Los Angeles International Airport on Nov. 30, 2012.

A lump-sum payout worth up to $100,000

United Airlines announced Monday that it will offer its thousands of flight attendants an early and voluntary buyout option, a lump-sum payout worth up to $100,000.

The airline, which employs more than 23,000 flight attendants and was the only major one to announce a quarterly loss this year, is also recalling the 1,450 attendants who were on leave this month so they can apply for the option as well, Bloomberg reports. The bid to downsize comes six years after United announced a large fleet reduction that left it about 2,000 stewards above capacity.

A statement released by the Association of Flight Attendants labeled the program an “unprecedented” and “unique opportunity” for employees who wanted to either rise in the ranks or pursue other opportunities.

“The cost is less to have a flight attendant with less experience versus one that has more,” United spokesperson Megan McCarthy said. The airline would not disclose the criteria needed to earn the maximum buyout but is hoping at least 2,100 employees take advantage of the offer.

TIME Companies

Walmart Spokesman Said to Resign Over Résumé Deceit

David Tovar
Casey Rodgers—AP David Tovar, Walmart's vice president of communications, speaks at a press conference in Los Angeles on March 13, 2012

David Tovar represented himself as a graduate of the University of Delaware but in fact had no such degree

In the middle of a probe over alleged corruption in its international division, Walmart has caught its own spokesman falsifying a major detail about his biography.

David Tovar, Walmart’s vice president of communications, and the company’s spokesperson as it responds to allegations that it violated the Foreign Corrupt Practices Act, has said he is leaving the job he has held since 2006, Bloomberg reports.

That’s after the retail juggernaut found out that Tovar had represented himself as a 1996 graduate of the University of Delaware but in fact had no such degree, an unnamed source told Bloomberg.

Officials from the University of Delaware also told Bloomberg that Tovar had left the school — where he had been studying art — on May 25, 1996, with no diploma.

Neither Tovar nor Walmart has spoken publicly about the allegations. But Walmart did release a statement in which Tovar said that he has “decided to leave Wal-Mart at the end of the month.”

“I have loved every second of every minute I’ve been with the company and I don’t have enough room in this e-mail to give justice to the life-changing experience of working for the world’s largest retailer,” said Tovar.

It was unclear why or how Walmart came across the revelation about Tovar’s school record eight years into his employment there.

[Bloomberg]

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