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Retirement Deal Keeps Bain Money Flowing to Romney

December 19, 2011 by Leave a Comment

Yet when it came to his considerable personal wealth, Mr. Romney never really left Bain.

In what would be the final deal of his private equity career, he negotiated a retirement agreement with his former partners that has paid him a share of Bain’s profits ever since, bringing the Romney family millions of dollars in income each year and bolstering the fortune that has helped finance Mr. Romney’s political aspirations.

The arrangement allowed Mr. Romney to pursue his career in public life while enjoying much of the financial upside of being a Bain partner as the company grew into a global investing behemoth.

In the process, Bain continued to buy and restructure companies, potentially leaving Mr. Romney exposed to further criticism that he has grown wealthier over the last decade partly as a result of layoffs. Moreover, much of his income from the arrangement has probably qualified for a lower tax rate than ordinary income under a tax provision favorable to hedge fund and private equity managers, which has become a point of contention in the battle over economic inequality.

An examination of Mr. Romney’s public financial disclosures, as well as interviews with former Bain partners, business associates and counselors to his campaign, reveals the extent of his financial relationship with Bain Capital and how it has allowed him to continue amassing a personal fortune while building a political career.

Though Mr. Romney left Bain in early 1999, he received a share of the corporate buyout and investment profits enjoyed by partners from all Bain deals through February 2009: four global buyout funds and 18 other funds, more than twice as many over all as Mr. Romney had a share of the year he left. He was also given the right to invest his own money alongside his former partners. Because some of the funds and deals covered by Mr. Romney’s agreement will not fully wind down for several years, Mr. Romney is still entitled to a share of some of Bain’s profits.

During his political career, Mr. Romney has promoted his experience as a businessman while deflecting criticism of layoffs caused by private equity deals by noting that he left Bain in 1999. But records and interviews show that in the years since, he has benefited from at least a few Bain deals that resulted in upheaval for companies, workers and communities.

One lucrative deal for Bain involved KB Toys, a company based in Pittsfield, Mass., which one of the firm’s partnerships bought in 2000. Three years later, when Mr. Romney was the governor of Massachusetts, the company began closing stores and laying off thousands of employees. More recently, Bain helped lead the private equity purchase of Clear Channel Communications, the nation’s largest radio station operator, which resulted in the loss of 2,500 jobs.

Much information about Mr. Romney’s wealth is not known publicly. Federal law does not obligate him to disclose the precise details of his investments. He has declined to release his tax returns, and his campaign last week refused to say what tax rate he paid on his Bain earnings.

But since Mr. Romney’s payouts from Bain have come partly from the firm’s share of profits on its customers’ investments, that income probably qualifies for the 15 percent tax rate reserved for capital gains, rather than the 35 percent that wealthy taxpayers pay on ordinary income. The Internal Revenue Service allows investment managers to pay the lower rate on the share of profits, known in the industry as “carried interest,” that they receive for running funds for investors.

“These are options that are not available to the ordinary taxpayer,” said Victor Fleischer, a law professor at the University of Colorado who studies financial firms. “You continue to take your carried interest — a return on labor, not capital invested — and you’re paying 15 percent on it instead of high marginal income rates.”

Peter Lattman and Kitty Bennett contributed reporting.

Article source: http://feeds.nytimes.com/click.phdo?i=c45cc58c4585130169d948b2233658da

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In New York, Comic Fans Flock to the Smaller Convention (of 100,000)

October 14, 2011 by Leave a Comment

Comic-Con International, the pop culture behemoth that has attracted comic book fans to San Diego for 41 years, has been struggling under its own weight. Because of size limitations of the city’s convention center, attendance was capped a few years ago at 125,000. But the grand spectacle has spilled into the city’s streets. Hotels have increased their rates, and organizers have threatened to move the show.

Two thousand miles away, New York Comic Con is content to be smaller and leaner.

The New York show, which opened Thursday night at the Jacob K. Javits Center in Manhattan, bounced around the calendar for a couple of years before finding a home in October last year, when 96,000 fans made the trek to New York to attend.

Organizers expect attendance at the show, now in its sixth year, to surpass 100,000 this year. And while its rival in San Diego grapples with growing pains, New York Comic Con is finding its footing.

“San Diego was the arena rock show; New York is the acoustic show,” said Jeremy Corray, creative director at World Events Productions, a television distribution company that is making its first visit to New York Comic Con to promote “Voltron: The Defender of the Universe,” an animated series from the 1980s. “San Diego has evolved into entertainment con. New York is a little more focused and manageable.”

That focus has helped New York Comic Con establish its position as the premier comic book convention on the East Coast, organizers say.

“We are very careful about this,” said Lance Fensterman, show manager for New York Comic Con, which is organized by ReedPOP, an offshoot of Reed Exhibitions. “We want our show to be reflective of New York City. We have a lot of reverence for San Diego, but we are a different animal.”

To help cement its identity, Mr. Fensterman said, organizers are seeking to establish ties to New York’s business community, including public relations firms, publishers and deal makers. To build that connection, ReedPOP organized White Space, a pop culture summit meeting for entrepreneurs scheduled for Thursday night, calling it “a mind-inspiring think tank to spur unexpected connections between innovators of TV, film, comics, games, technology and advertising.”

And yet, Hollywood has come calling. Lucasfilm is attending to promote its new movie, “Red Tails,” an action movie inspired by the Tuskegee Airmen. And Warner Brothers TV will be on hand, as will Adult Swim and Marvel Entertainment, which will be revealing new film of its much-anticipated summer blockbuster, “The Avengers.”

Marvel is planning to assemble cast members of “The Avengers” for a panel and is promoting an appearance by Stan Lee, the former publisher of Marvel Comics and the co-creator of many of Marvel’s well-known characters, including Spider-Man and Iron Man. Mike Pasciullo, senior vice president of brand planning and communications at Marvel, said the company appreciated the more intimate feel that New York Comic Con offered.

“For a company like Marvel, the fans are very important,” he said. “Since the early days of Stan Lee, Marvel has always been about community. We want to make sure it stays that way. It’s part of the DNA of Marvel.”

Other companies feel the New York connection as well. Hasbro will attend the show for the first time this year, bringing some New York-themed exclusives. But more important, it’s a chance for the company’s marketers and designers to connect with consumers, John Frascotti, Hasbro’s chief marketing officer, said.

“Today’s marketing is a two-way street,” he said. “As a company, you have to really listen closely to your fans.”

And those fans are very important to the exhibitors that attend New York Comic Con. Capcom Entertainment, a video game publisher, is making a return visit to the convention because of the enthusiasm shown by fans last year. Francis Mao, senior director of creative services and events at Capcom, said the company increased its budget for the show by 30 percent this year, adding more game demonstrations, panels and exclusive products for sale.

“Our store is not making a profit, but we are able to get the fans all these exclusive things,” Mr. Mao said. “It’s all seen as an investment, and it pays off.”

That payoff spreads to all the exhibitors, and comes back to ReedPOP. Mr. Fensterman would not disclose the company’s costs for the show, but said they were in the “double-digit seven figures.”

As long as ReedPOP can maintain a balance between growth and identity, exhibitors and fans will keep coming back.

“We can take a little bit deeper dive here in New York,” said Peter Armstrong, director of product development at THQ, a video game publisher. “You do feel like you’re able to spend more time talking to people, and to me that’s cooler.”

Article source: http://feeds.nytimes.com/click.phdo?i=ed476ecdd868b870dfa38dbd48ae0973

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Amazon’s Profit Falls, but Beats Expectations, as Company Invests

July 27, 2011 by Leave a Comment

The Internet retailer said Tuesday that its second-quarter profit dropped by 8 percent, which might seem like bad news. But the decline was not nearly as much as Amazon, or analysts, had expected, and the profit was being sacrificed for what the company said was a good cause — new investments in technology and warehouses. Revenue continued to be strong, rising 51 percent.

Three months ago, Amazon predicted that second-quarter profits might fall by as much as two-thirds. But the company is apparently selling so many things to so many people that it can make sizable investments and barely feel the pain.

In after-hours trading, investors celebrated by pushing the stock up $13.57, to $227.75. Amazon shares have quadrupled in recent years.

“Low prices, expanding selection, fast delivery and innovation are driving the fastest growth we’ve seen in over a decade,” Jeff Bezos, Amazon’s founder and chief executive, said in a statement.

So what if expenses soared and profit margins shrank? Amazon has never emphasized profit as some short-term investors might have wished. It took years to turn a profit because it was working so hard to achieve a dominant position in Web retailing. That distinction was achieved long ago; now it is once again spending heavily to solidify and extend its position — mostly by building two kinds of storage centers, for physical goods and for data.

Three weeks ago, Amazon announced it would open a 900,000-square-foot warehouse in Plainfield, Ind., its fourth in Indiana. The next day it announced its fourth warehouse in Arizona, this one a 1.2 million-square-foot behemoth in Phoenix.

The original 2011 plan was to open nine new fulfillment centers. Thomas J. Szkutak, the company’s chief financial officer, said in a conference call with analysts Tuesday afternoon after the results were announced, that the total had risen to 15, “and we’re actually planning on a few more than that.” He said the number of pre-2011 centers was “in the low 50s.”

The Seattle-based company is also expected to follow the success of its Kindle e-reader by introducing a multipurpose tablet this fall. The tablet will allow users to read the electronic books they bought from Amazon, listen to the music they bought from Amazon and watch video they bought from Amazon, all on one device.

The company reported that net income for the quarter fell to $191 million, or 41 cents a share, compared with $207 million, or 45 cents a share, in the second quarter of 2010. The comparison would have been worse, but the latest quarter’s results were helped by a $15 million investment gain. Revenue rose to $9.91 billion. Favorable foreign exchange rates contributed $477 million to the 2011 sales results.

Analysts had expected second-quarter earnings of 35 cents a share on revenue of $9.373 billion, according to Thomson Reuters. During the conference call, at least one analyst offered his congratulations.

When Amazon reported in April that its net income in the first quarter was down an unexpected 33 percent from 2010, it simultaneously squelched expectations for the second quarter. Two bad quarters are the beginning of a trend, but investors bid up the stock price about 10 percent in the last three months. The market value of Amazon at Tuesday’s close was $100 billion.

Amazon recently achieved a milestone with regard to its original business, bookselling. In May, less than four years after the introduction of the Kindle, the company said it was selling more e-books than physical books. Last week, as if to punctuate the quickening transition to digital, came the news that the Borders chain of bookstores was liquidating.

When Amazon began mailing books to Internet buyers in 1995, Borders reigned as the Amazon of the era; it was smart, dominant and feared. But despite Borders’s selling many copies of “The Innovator’s Dilemma,” Clayton Christensen’s classic work on how successful companies ignore disruptive technologies at their peril, it seems as if no one at the chain may have read it. Borders essentially ignored the Internet, and the Internet mowed it down.

Mr. Bezos has always been determined not to be out-innovated. The new tablet will put the company into direct competition with Apple and its iPad, plus a clutch of would-be iPads from other companies. “Their e-book success is enormous but their success with digital video and music is not so enormous,” said Bill Rosenblatt of GiantSteps Media Technology Strategies, a consulting firm. “They need to do something to address the fact that people are using media consumption devices that handle everything.”

It will be an uphill battle to take on Apple and the others, Mr. Rosenblatt said, but he would not count Amazon out.

In the meantime, the retailer once again warned that profits would suffer because it was investing in the future. It said Tuesday that operating income could decline in the third quarter by as much as 93 percent.

Article source: http://feeds.nytimes.com/click.phdo?i=085a0a7b3cd0b4da17531aa1bf5ae92d

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Google Looks for the Next Google

July 20, 2011 by Leave a Comment

In the hottest market for technology start-up companies in over a decade, the Silicon Valley behemoth is playing venture capitalist in a rush to discover the next Facebook or Zynga.

Other pedigreed tech companies are doing the same, as venture capital dollars coming from corporations approach levels last seen in the dot-com bubble era of 2000.

To some, it is a telltale sign of an overheated industry, symptomatic of a late and ill-advised rush to invest during good times. But Google says it has a weapon to guide it in picking investments — a Google-y secret sauce, which means using data-driven algorithms to analyze the would-be next big thing.

Never mind that there often is very little data because the companies are so young, and that most venture capitalists say investing is more of an art than a science. At Google, even art is quantifiable.

“Investing is being in a dark room and trying to find the way out,” said Bill Maris, the managing partner of Google Ventures, the corporate investment arm. “If you have a match, you should light it.”

Corporate venture funds invested $583 million in start-ups in the first three months of the year, according to the National Venture Capital Association, up from $443 million in the same period last year and $245 million in 2009, before tech investing began its rapid turnaround.

Today, 10 percent of venture capital dollars comes from corporations, nearing the previous bubble-era high of 15 percent in 2000. Facebook, Zynga and Amazon.com are investing in social media start-ups. AOL Ventures restarted last year after three previous efforts, and Intel Capital expects to invest more this year than the $327 million it invested last year.

Google Ventures says it has invested as much money in the first half of this year as in all of last, and Larry Page, the company’s co-founder, who became chief executive this spring, has promised to keep the coffers wide open.

Corporate venture arms have sprung into action before during boom times, like the early 1980s and the late 1990s, but they have had mixed records.

“When the corporate guys get involved, it usually means that we’re at the top of the market,” said Andrew S. Rachleff, who teaches venture capital at Stanford and was a founder of Benchmark Capital, the venture firm.

Mr. Rachleff also questioned Google’s reliance on its algorithms. “There’s no analysis to be done when you’re evaluating a company that’s creating a new market, because there’s no market to analyze,” he said. “You have to apply judgment.”

Although even Mr. Maris compares venture investing to “buying lottery tickets,” Google says it has faith in its algorithms. At the same time, it is taking the unusual step of providing the chosen start-ups with access to its 28,770 employees for engineering, recruiting and business advice, and offering office space at the Googleplex and classes on building a business.

Mr. Page, who declined a request for an interview, has already promised Google Ventures $200 million this year and says a virtually unlimited amount is available, Mr. Maris said, as Google reconnects with its start-up roots. “I’ve had conversations with Larry when he says, ‘Do as much as you can, as fast as you can in as big and disruptive a way as possible,’ ” he said.

Google says its approach is paying off. One of its investments, Ngmoco, was acquired by a Japanese gaming company, DeNA, for up to $400 million, and another, HomeAway, for renting vacation homes, received a warm welcome from investors when it went public last month. A third, Silver Spring Networks, a smart-grid company, filed to go public last week.

Google Ventures invests in various areas — the Web, biotechnology and clean technology. It puts large amounts of money into mature companies, but it is also investing small amounts in 100 new companies this year.

To make its picks, the company has built computer algorithms using data from past venture investments and academic literature. For example, for individual companies, Google enters data about how long the founders worked on start-ups before raising money and whether the founders successfully started companies in the past.

It runs similar information about potential investments through the algorithms to get a red, yellow or green light.

Article source: http://feeds.nytimes.com/click.phdo?i=26765bf97a355e0d3c31d80aaa9a5f64

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Can Ticketmaster’s Builder Now Unseat It?

June 11, 2011 by Leave a Comment

Music, you see, isn’t his thing. Money is.

Mr. Rosen, 67, is the godfather of the $18-billion-a-year tickets business. Go to almost any big-name concert — or to a Dodgers game or to a Broadway show — and the odds are that you will pay dearly for his legacy.

Those you’ve-got-to-be-joking prices are, in good part, Mr. Rosen’s handiwork. Starting in 1982, he built Ticketmaster into the tickets giant that drives many people nuts. Even before the company merged with Live Nation Entertainment last year, fans and even some performers, like Pearl Jam, complained that it was a near-monopoly. Despite the protests and a nail-biting antitrust investigation, the Justice Department disagreed and approved the merger.

So it might come as a surprise that Mr. Rosen, of all people, wants to challenge this behemoth, which sells tickets for more than 80 percent of the major concert venues. Mr. Rosen walked away from Ticketmaster 13 years ago, after a love-hate relationship with one boss, Paul Allen, and then a battle of wills with another, Barry Diller. But now Mr. Rosen is back and is hoping to reinvent the global ticketing business again.

Just don’t expect cheaper seats for Lady Gaga, the Strokes or the Yankees.

Mr. Rosen wants to cut out the middleman — that is, Ticketmaster — by putting ticketing back in the hands of arenas, concert halls and clubs. Last year, he signed on as a partner at a start-up called Outbox Enterprises, which helps venues use their own Web sites to sell tickets, merchandise and services directly.

For all its success, he says, Ticketmaster seems outdated: “Did I really think the model that I created 30 years ago would last for 30 years? Nothing lasts for 30 years,” Mr. Rosen said.

Representatives of Live Nation and Ticketmaster declined to comment.

Industry analysts say Outbox looks like a long shot. Ticketmaster sold 25.1 million tickets to concerts globally in 2010, more than double its closest rival, the Anschutz Entertainment Group, which sold 12.5 million, according to Pollstar.

Despite the David-versus-Goliath odds, former business partners, analysts and even Mr. Rosen’s harshest critics aren’t betting against him. They say they believe that if anyone can challenge Ticketmaster, it just might be the man who built it.

“If any start-up has a chance, it would be his,” said David C. Joyce, a media analyst at the brokerage firm Miller Tabak Company. “But it’s going to take years.”

THE YEAR was 1982. “Eye of the Tiger,” that “Rocky III” anthem, topped the Billboard charts — and Fred Rosen joined Ticketmaster.

Mr. Rosen shook up the ticketing industry by allying himself with venues and promoters. They were his customers — not the fans, and not the performers. He rolled out a centralized distribution system that let people buy tickets over the phone, through retail outlets and, later, online, saving them the trouble of having to line up at a box office.

He bet that arena owners and promoters would sign up in droves if they were offered a percentage of every ticket that was sold using a “convenience” or “service” charge, and he was right.

He secured exclusive contracts that made Ticketmaster the only game in town for tickets at many arenas and concert halls. Today, Ticketmaster accounts for roughly 70 percent of all tickets sold for American arenas, music clubs and professional sporting events, excluding all-season sports tickets, according to John Tinker, an analyst at the Maxim Group.

But now as then, Ticketmaster earns nothing from a ticket’s face value. That goes to the venue, the promoter and the talent. Instead, Ticketmaster makes its money from fees — lots of them. There is the service fee — basically a charge for using Ticketmaster. Then there is the processing charge, for handling the order. And the delivery charge, for mailing or e-mailing the tickets. There’s also a building facility charge, but this generally goes to the venue.

These fees add 15 percent to 20 percent, on average, to the cost of a ticket — sometimes more. Ticketmaster gives a cut of the fees to venues and promoters to keep them sweet.

Article source: http://feeds.nytimes.com/click.phdo?i=61129029c74e0931c43760fa49d55d8d

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