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Audit of TARP Faults U.S. Over Executive Pay

January 24, 2012 by NewsMaker Leave a Comment

Federal auditors said that the government failed to rein in executive compensation at the biggest companies it bailed out during the financial crisis because its main concern was simply getting its money back.

Months after the emergency rescues began in the fall of 2008, the Obama administration announced pay caps of $500,000 for executives of seven companies that received major assistance from the taxpayers. Congress then passed a law requiring the Treasury to establish a special master to administer the cap and other new compensation rules for those that received the most money from the Trouble Asset Relief Program, or TARP.

Though Kenneth Feinberg, the special master, had been appointed to oversee the pay, a report released early Tuesday said that he had been pressured by both the companies and the Treasury to get around the caps.

Forty-nine people received packages worth $5 million or more from 2009 to 2011, according to the report.

Two of the seven companies that were singled out, Bank of America and Citigroup, were so eager to avoid the pay caps that they paid back their bailout money long before anyone expected them to be able to.

The other five companies were the American International Group, Chrysler, Chrysler Financial, General Motors and Ally Financial, which was formerly the General Motors Acceptance Corporation.

Negotiators for the companies told Mr. Feinberg that their top people needed big cash salaries, or at least payment in stock that could be sold right away. Otherwise they would quit, the argument went, harming the companies’ profitability and the likelihood they could ever pay back the government.

In one bargaining session, the chief executive of Ally Financial offered the example of an employee making $1.5 million, with $1 million of it in cash.

“This individual is in their early 40s, with two kids in private school, who is now considered cash poor,” Ally’s chief explained, adding that such people “would not meet their monthly expenses” if the new rules were followed.

A.I.G., G.M. and Ally still collectively owe the taxpayers about $87 billion.

“Under conflicting principles and pressures,” Mr. Feinberg approved multimillion-dollar packages for many executives, the audit said. Mr. Feinberg developed a system for approving or rejecting the requests.

Article source: http://feeds.nytimes.com/click.phdo?i=4937249647560570916dcc2c8cba836f

Filed Under: Business News Tagged With: 5 million, ally, citigroup

Business Briefing | Company News: Lions Gate to Buy Summit Entertainment

January 14, 2012 by NewsMaker Leave a Comment

Lions Gate Entertainment is buying Summit Entertainment, the maker of the hit “Twilight” series, for $412.5 million in cash and stock. The deal brings together two studios hoping to create a Hollywood powerhouse focused on young adult audiences. The “Twilight” franchise has grossed more than $2.5 billion worldwide since the first movie in late 2008, when hordes of fans of the Stephenie Meyer books rushed to theaters. Lions Gate plans its own four-part series based on Suzanne Collins’s young adult novels, “The Hunger Games,” beginning in March. Lions Gate said the majority of the purchase was financed with about $300 million in cash from Summit’s books. It paid $55 million from its cash reserves, took on new debt of $45 million and paid $50 million in stock. A further $20 million will be due in cash or stock within 60 days.

Article source: http://feeds.nytimes.com/click.phdo?i=89688affd52e2ea3353f73dfb6bc4f02

Filed Under: Business News Tagged With: 5 million, powerhouse, stephenie meyer

A Year of Disappointment for Hollywood

December 26, 2011 by NewsMaker Leave a Comment

Movies are a cyclical business and analysts say that 2010 benefited mightily from holdover sales for “Avatar,” which was released late in 2009 and became one of the most popular movies of all time. A decline of hundreds of millions of dollars is not catastrophic when weighed against the size of the industry. Over all, North American ticket revenue for 2011 is projected to be about $10.1 billion, according to Hollywood.com, which compiles box-office data.

That is only a 4.5 percent falloff from 2010. But studio executives are alarmed by the downturn nonetheless, in part because the real picture is worse than the raw revenue numbers suggest.

Revenue, for instance, has been propped up by a glut of 3-D films, which cost $3 to $5 more per ticket. Studios made 40 pictures in 3-D in the last 12 months, up from 24 last year, according to BoxOfficeMojo.com, a movie database. Theaters have also continued to increase prices for standard tickets; moviegoers now pay an average of $7.89 each, up 1 percent over last year.

Attendance for 2011 is expected to drop 5.3 percent, to 1.27 billion, continuing a slide. Attendance declined 6 percent in 2010.

Hopes that a group of major releases would supercharge the Christmas box office fizzled over the weekend. Paramount’s “Mission: Impossible — Ghost Protocol” was a solid No. 1, taking in $26.5 million in its second weekend for a total of about $59 million. But “Sherlock Holmes: A Game of Shadows” (Warner Brothers) was a softer-than-expected second, with $17.8 million in ticket sales, lifting its two-week total to $76.6 million.

“Alvin and the Chipmunks: Chipwrecked” (20th Century Fox) continued to struggle in third place, taking in about $13.3 million for a two-week total of $50.3 million. Three heavily promoted new entries had tepid results. “The Girl With the Dragon Tattoo” (Sony), was fourth, taking in $13 million for the weekend and $21.4 million since opening last Wednesday. Steven Spielberg’s “Adventures of Tintin” (Paramount) was fifth with about $9.1 million ($22.3 million since opening last Wednesday). Fox’s “We Bought a Zoo” came in sixth, taking in a lackluster $7.8 million in its opening weekend.

What has gone wrong? Plenty, say studio distribution executives, who point to competition for leisure dollars, particularly among financially pressed young people (the movie industry’s most coveted demographic); too many family movies; and the continued erosion of star power.

One more thing: “You have to go back and look at the content,” said Dan Fellman, president of domestic distribution for Warner Brothers. “Good movies always rise to the occasion. Bad ones, not so much.”

Young people, defined by studios as teenagers and people in their 20s, certainly helped power some of the biggest movies of 2011, including Warner’s “Harry Potter and the Deathly Hallows: Part 2,” the year’s No. 1 release with $381 million in domestic ticket sales. (Paramount’s “Transformers: Dark of the Moon” was second with more than $352 million, and “The Twilight Saga: Breaking Dawn — Part 1” from Summit Entertainment was third with more than $269 million.)

But a spate of smaller movies aimed at younger audiences bombed, including “Prom” from Walt Disney, “Glee: The 3-D Concert Movie” from 20th Century Fox, Warner’s “Sucker Punch,” Lionsgate’s “Conan the Barbarian” and “Your Highness,” a drug-oriented comedy from Universal. The horror genre struggled as an entire category, with lemons like “Fright Night” (DreamWorks Studios), “The Thing” (Universal) and “Priest” (Sony).

“As bad as the economy is for adults, it’s worse for teenagers,” said Phil Contrino, editor of BoxOffice.com, by way of an explanation. “Because they have less disposable income and because they are more plugged in to audience reaction on Facebook and Twitter, the teenage audience is becoming picky,” he added. “That’s a nightmare for studios that are used to pushing lowest-common-denominator films.”

Mr. Fellman said he had seen evidence that younger consumers were choosing other leisure activities over movies.

“There may be a correlation to the recent strength of video game sales,” he said. “You look at a game like the new ‘Call of Duty’ selling $400 million in its first 24 hours and say, ‘What? How is that even possible?’ ”

Article source: http://feeds.nytimes.com/click.phdo?i=533dae552a60a29d8a7c2166e290b1c1

Filed Under: Business News Tagged With: 5 million, downturn, game of shadows

The Media Equation: At Time Inc., a Leader to Help It Fit the New Digital Order

December 5, 2011 by NewsMaker Leave a Comment

But all of that is pretty small beer compared with last week’s news that Time Inc., the largest magazine publisher in the United States, would be run by Laura Lang, who was the chief executive of the digital advertising agency Digitas. Talk about your loud and clear knock on the door. That digital future we are always talking about is here.

It’s a bold hire and Ms. Lang has an excellent reputation, but it’s a bracing moment for the print romantics among us. Time Inc., the home of Olympian brands like Time, People and Fortune, will be run by an executive who would not know a print run from a can of green beans.

As recently as, well, the day before Ms. Lang was hired, it would have been unthinkable that a large consumer magazine group would be run by someone with plenty of experience buying ads for clients, but with no experience selling them. But Ms. Lang knows other things that could come in handy, including how to use multimedia and social media to increase reader engagement in a way magazines rarely achieve.

As the head of Digitas, a unit of the Publicis Groupe, she was at the vanguard of a movement to direct advertising dollars toward specific audiences and away from big advertising buys adjacent to articles — in other words, away from businesses like Time Inc.

As far back as five years ago she articulated the shift.

“We’re seeing clients shift dollars into channels that can get a direct engagement, that can get a direct, accountable experience” she said in an interview with Direct, a marketing industry publication.

That doesn’t sound like a two-page ad spread in Fortune to me.

Traditional media has historically done well by selling inefficiency. In order to reach those among People magazine’s 3.5 million readers who were interested in buying a car or a coffeepot, you had to buy an ad that everyone else flipped past. As a serious practitioner of the science of audience-and-data-driven buys, Ms. Lang helped clients erase those inefficiencies through targeted buys, allowing them to get the milk without having to buy the whole cow.

A good magazine will do many things for a brand, including bestowing luster and creating awareness by osmosis. What magazines have not been able to do is to provide reliable measures of effectiveness. Part of the reason that magazine companies have so eagerly hopped on the iPad and other tablets is that those products will finally be able to provide data showing a return on the investment of advertising dollars. It isn’t a reach to bet that Ms. Lang will help magazine publishers be a part of a media age built on metrics.

In an e-mail on Friday, Ms. Lang said Time Inc.’s publications could be a great fit in a digital era.

“This role at Time Inc. affords me a significant opportunity to influence our industry from a different lens,” she said, “specifically content, brands, publishing, editorial, the consumer and the web that connects these five elements together.”

She added: “I still believe that data-driven ad purchasing has clear and tangible benefits,” but “I also believe that the ‘inventory’ must be compelling, surprising and offer customers and clients benefits that are sustainable and scalable.” She thinks that Time Inc.’s magazines more than meet these criteria.

By inventory, I take it to mean the likes of People, InStyle and Time. Maybe the time really has arrived for someone like her, a leader who is less captivated by the luster of the brands and is more attuned to explaining what they can deliver in actual results.

When a publication moves onto the iPad, it loses the shackles of the print medium. A magazine really is more than a magazine when you add video, links to advertisers, and other editorial content. That should mean that a brand like Sports Illustrated can become companion media during the Final Four, and People magazine could host a red carpet warm-up for the Oscars. Instead of covering seminal events after the fact, magazines can get right in the middle of them in real time.

E-mail: carr@nytimes.com;

Twitter.com/carr2n

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Filed Under: Business News Tagged With: 5 million, publicis groupe, vanguard

Netflix Sees Angry Clients Cutting Profit

July 26, 2011 by NewsMaker Leave a Comment

Just two weeks after announcing a price adjustment that angered many customers, Netflix came out Monday with a weaker-than-anticipated earnings outlook.

While the entertainment distributor reported a 52 percent rise in second-quarter revenue, it also reaffirmed a temporary slowdown in subscriber growth and said that its third-quarter revenue would be hampered by reactions to the price change. Netflix stock, which peaked above $300 earlier this month, dropped 10 percent in after-hours trading Monday, after closing at $281.53 earlier in the day.

Netflix posted second-quarter revenue of $789 million, up 52 percent from the same quarter last year. It said its profit for the quarter was $68 million, up 55 percent.

For the third quarter, Netflix said it expected revenue to be $799.5 million to $828.5 million, which was lower than previous projections on Wall Street.

The price adjustment, announced July 12, takes Netflix’s DVD-by-mail service, which was a $2 add-on to its $8-a-month online streaming service, and makes it a separate $8 package. For Netflix, the online streaming service, which remains $8, is growing much faster than DVD-by-mail. But some customers were outraged by what was effectively a 60 percent price increase for the combined service.

The price change “doesn’t take effect until the very end of the third quarter,” the Netflix chief executive, Reed Hastings, said in an interview Monday. “So we have to face those subscribers who are upset by the increase this quarter.” While he said he expected only “a few” to cancel or downgrade service, “that means less revenue than we otherwise would have had.”

The price change will benefit Netflix in the fourth quarter and beyond, he said, expressing no misgivings about the change in strategy. He said that Netflix intended to spend the increased revenue on its online streaming service, keeping its domestic operating margin for the year around its target of 14 percent. In the second quarter, its domestic margin was 16.3 percent.

“As our subscriber base continues to grow, we’re able to spend more on improving that service, both on the R. D. side and on the content availability side,” Mr. Hastings said, using shorthand for research and development.

Keeping online streaming customers satisfied is a critical task for Netflix, which is vulnerable to the licensing decisions of Hollywood studios. Netflix has indicated that it is confident that it can pay what is necessary to license enough content from studios.

Mr. Hastings declined to comment on a Bloomberg News report that it was in talks to license the exclusive streaming rights to DreamWorks Animation films, replacing DreamWorks’ pact with HBO. An executive with knowledge of the deal, who spoke on condition of anonymity because no announcement had been made, said that HBO had offered DreamWorks an early departure from its contract with the premium cable company.

Netflix said that it remained in talks with its single biggest supplier of films, Starz. That agreement comes up for renewal in the first quarter of 2012.

Article source: http://feeds.nytimes.com/click.phdo?i=79c8897bf3c3a095b024b765f9898327

Filed Under: Business News Tagged With: 5 million, reed hastings, streaming service

Banks Shut in Illinois and Colorado

July 9, 2011 by NewsMaker Leave a Comment

The Federal Deposit Insurance Corporation seized First Chicago Bank and Trust in Chicago, Colorado Capital Bank in Castle Rock, Colo., and Signature Bank in Windsor, Colo.

Northbrook Bank and Trust, based in Northbrook, Ill., agreed to assume the deposits and most of the assets of First Chicago, which had about $959.3 million in assets and $887.5 million in deposits.

First Citizens Bank and Trust, based in Raleigh, N.C., assumed all the deposits and essentially all the assets of Colorado Capital, which had $717.5 million in assets and $672.8 million in deposits.

Points West Community Bank, based in Julesburg, Colo., agreed to assume Signature Bank’s $64.5 million in deposits and essentially all of its $66.7 million in assets.

Four banks have failed in Colorado this year. First Chicago is the fifth lender to collapse this year in Illinois.

In 2010, regulators seized 157 banks.

Article source: http://feeds.nytimes.com/click.phdo?i=9d47c70dec17163f2728e9c67c728112

Filed Under: Economy News Tagged With: 5 million, deposit insurance corporation, regulators