BusinessWeek magazine: The most-read source of global business news

Advanced Search
Top News BW Magazine Investing Asia Europe Technology Autos Innovation Small Business B-Schools Careers BusinessWeek Channels : BW Magazine, Daily Briefing, Investing, Asia, Europe, Technology, Autos, Innovation, Small Business, B-Schools and Careers

Get Four
Free Issues

Subscribe to BW
Customer Service

Full Table of Contents
Cover Story
Up Front
Editor's Memo
Readers Report
Technology & You
Media Centric
Business Outlook
The Business Week
News & Insights
Global Business

Special Report
Info Tech
Science & Technology
Developments to Watch
BusinessWeek/Golf Digest
Personal Finance
ExecutiveLife -- Parker on Wine
Inside Wall Street
Figures of the Week
Ideas -- Books
Ideas -- Outside Shot
Ideas -- The Welch Way

SEPTEMBER 18, 2006

Up Front
Edited by Deborah Stead

Talk Show

"Alan knows what it's like to have your back to the wall—and fight your way out with a well-conceived plan and great execution."—Bill Ford on Boeing exec—and new Ford CEO—Alan Mulally in a note to employees

Ads Follow Home Buyers To The Web

Newspapers hardly need more bad news, but the housing bust may deliver it anyway. Three new studies say the $11 billion real estate ad market is set to shift further from print to the Web. Most home buyers hunt online now, and print ads are relatively pricey for newly belt-tightening brokers. "In 2007, I'll spend 50% less on the newspaper," says Bob Peltier, president of Edina Realty, Minnesota's top broker. Already, he's cut ads in the Twin Cities' two papers from three pages to one.

For now, as some agents buy everywhere to spur sales, realty ads in dailies are up 19% for the second quarter, says the Newspaper Association of America. But investment bank Piper Jaffray (PJC ) and consultants Classified Intelligence and Borrell Associates say that won't last. Gordon Borrell, the latter's president, says Web ad sales, now 15% to 20% of the market, will top newspapers' share (now at 37%) by 2010, when papers will lose "at least seven points."

Papers are fighting back. A joint venture of companies Belo (BLC ), Gannett (GCI ), Tribune (TRB ), McClatchy (MNI ), and Washington Post (WPO ) has built up sites like and appraisal site And the papers' sites are expanding their real estate sections. The question is less whether home ads will move online than how fast -- and whether newspaper sites can keep a share.

By Timothy J. Mullaney

Back to Top

Talk Radio Minus The Testosterone

Feminist icons Gloria Steinem and Jane Fonda are launching a talk radio network aimed at women. GreenStone Media (from Finding the Green Stone by Alice Walker) will debut on Sept. 12 on at least a few AM stations and online, with more AM and FM stations to follow. "Women are more and more turned off by the hostility and argumentative nature of AM talk radio," says Steinem, who says GreenStone will offer lower-decibel discussions, including segments on health and child-rearing, along with comedy and hosts such as actress Mo Gaffney.

GreenStone, whose backers include Rosie O'Donnell and Friends co-creator Marta Kauffman, may be on to something. Arbitron reports that the amount of time women ages 25 to 54 spend listening to the radio has fallen more than 10% since 1999. And both Sirius (SIRI ) and XM (XMSR ) have had success with the genre. (Sirius offers Martha and Cosmo, both 24/7 channels. XM, which will launch Oprah & Friends on Sept. 25, already has Take Five, which excerpts audio from TV talk shows, including The Ellen DeGeneres Show.)

Advertisers like talk radio because the audience tends to stick around during the commercial breaks, says Michael Harrison, publisher of Talkers, an industry journal. Still, newcomers such as GreenStone may find it tough to land radio contracts. "The large, corporate-owned commercial broadcasters have very low tolerance for risk," Harrison says. And because it's new, "women's talk radio is considered high risk." Stay tuned.

By Toddi Gutner

Back to Top

Game, Set, And Math

Attention, sports fans: This time next year, you may be settling your bar bets on the U.S. Open more quickly. New statistics software created by Jan Vecer, a Columbia University statistics professor and tennis fan, is designed to predict the winner of a match early on.

Vecer's program -- which arose from his search for a palatable way to teach statistics -- measures the importance of each point scored, weighting points accordingly in predicting the odds of who will win game, set, and match. As a contest progresses, the model recalculates the odds.

Columbia's business incubator, Columbia University Science & Technology Ventures, is helping Vecer market the software for sportscasters, coaches, and fans to use on a variety of electronic devices. The model has also been noticed by several betting operations for sports such as soccer, basketball, and hockey, which are drawing ever-larger numbers of gamblers wagering on the outcome of an entire season. Vecer says he will open his own company to serve this market, since Columbia does not want to be associated with gambling.

Meanwhile, he'll keep busy with academic pursuits, using his new model in a class that's popular with Columbia students: Statistics in Sports.

By Aili McConnon

Back to Top

In Memoriam

Add to the list of makeshift and poignant September 11 memorials the backyard of Innovative Stone, a supplier of natural stone based in Hauppauge, N.Y. That's the current home of the Freedom Stone, a 20-ton, 5-ft.-tall polished slab of granite dedicated to those who died in the attack. The piece, donated by Innovative Stone founder and CEO Karen Pearse, is to be the cornerstone of the Freedom Tower in lower Manhattan, and it has attracted a word-of-mouth following. About 10 to 15 people a week visit the stone, some leaving flowers, Pearse says. And until the stone is finally transported to Ground Zero, "it's available for whoever wants and needs to see it."

By Elizabeth Woyke

Back to Top

Rising Sons

Japan's Princess Kiko gave birth on Sept. 6 to the first male heir to the throne in decades. In the past, the arrival of a new royal has triggered baby boomlets, since many Japanese think it auspicious to have a child born in the same year as a member of the imperial family. Anticipating more births, investors drove up shares of baby-food maker Pigeon (up 45% from early June to early September) and stroller maker Combi (up 27%). As for the impact on Japan's population decline, "I doubt a temporary rise in the birth rate could reverse the downtrend," says Akihiko Matsutani, professor at the National Graduate Institute for Policy Studies in Tokyo.

By Kenji Hall

Back to Top

Disaster Management 101

It's a pity that former FEMA director Michael Brown hadn't logged a few hours on a disaster simulation computer program before Hurricane Katrina struck. The Justice Dept. is now sending out just such a program to 40,000 municipalities nationwide.

Incident Commander, a program made by Hunt Valley (Md.) software company BreakAway, has already proved itself in the field. One of Katrina's first responders, Joseph Barlow, used what he had learned from a test version to help set up an 800-bed field hospital in Baton Rouge. A paramedic from rural Illinois who had never supervised anyone before, Barlow drew on Incident Commander's step-by-step approach to disaster management to run logistics for the hospital, which treated 6,000 patients. It was "an excellent example of training becoming reality," says Glenn Schmitt, acting director of the Justice Dept.'s National Institute of Justice. BreakAway will release a version that will support live drills in 2007.

By Steve Hamm

Back to Top

How Green Are My Blue Jeans

Levi Strauss will debut more than a new CEO when current COO John Anderson takes over in November. The company will also introduce Eco jeans, its first organic-cotton line. The target customers: upscale shoppers, the kind of eco-consumers for whom price ($250) will be less important than the tag it's printed on (recycled paper, soy ink).

Levi's will launch the naturally dyed "green" jeans, handcrafted in the U.S., in select Levi's stores. In early 2007 the company will roll out cheaper versions -- $65 to $80 -- in department stores, followed by jeans costing $40 to $60 in the fall. The cotton used in those styles (to be made "all over the world," according to spokeswoman Amy Jasmer) will not be as pure as that used in the initial Eco line, says Robert Hanson, Levi's U.S. brand president. Organic cotton, he says, is still too rare to be used alone in mass amounts of clothing, hence the high cost of the first Eco batch.

Why dress in organic denim? After all, synthetic threads and dyes don't pose the same potential health risks as pesticides in foods, says Rebecca Calahan Klein, president of the nonprofit advocacy group Organic Exchange. For eco-conscious customers, it may just be a matter of supporting farmers who grow pesticide-free crops. (The USDA hasn't set an organic clothing standard, although cotton is a crop that could qualify.) Meanwhile, the trend is getting hot. According to Organic Exchange, demand for organic cotton by clothing makers is increasing at an annual rate of 93%.

By Reena Jana

Back to Top

Giving Some Glamour To Grit

The farm set just isn't what it used to be. Grit magazine, a 124-year-old staple of rural America, has spiffed itself up to snare new readers. Forget the newsprint format that long marked the iconic farmland journal. As of its September/October issue, Grit has a glossy four-color look. And that issue, devoted to the "Joys of Country Living," is available on newsstands instead of just by mail.

Grit's readership has dwindled from a high of 1.5 million subscribers in 1969 to about 90,000 today, with an average reader age of over 65. That's why the publisher, Bryan Welch, head of Ogden Publications in Topeka, Kan., wants to reach out to exurbanites and modern rural residents, folks apt to work in an office during the week and tool around on a small tractor on weekends. "It's still a magazine about the rural lifestyle, but there's much more about hobby farming," he says.

The staples will remain. The glossy version still celebrates small-town feed stores, praises the tick-controlling power of guinea hens, and gives advice about raising healthy, rodent-catching barn cats. But it also has excerpted The $64 Tomato, by William Alexander, a wry book about an idealistic organic farmer's discovery that gardening is "a very expensive sport." And much of the magazine's content is available on (where you can also download barnyard sounds as ringtones). Welch says newsstand distributors have already ordered 65,000 copies of the new Grit, which comes out bimonthly instead of monthly.

By Joseph Weber

Back to Top

New Mexico Banks On The Box Office

When the movie Employee of the Month, starring Jessica Simpson and standup comic Dane Cook as Costco workers, hits theaters this fall, producer Lionsgate (LGF ) won't be the only one obsessing over opening weekend receipts. So will the state of New Mexico.

In a novel twist on private-equity investing, the state's $4 billion Severance Tax Permanent Fund, which supports the public education system, has extended $130 million in financing to films shot in New Mexico, with more on the way.

Like other public investment funds, New Mexico's is after better returns. So it's aiming to put about 20% of its assets into so-called alternative investments. That term usually refers to private equity and hedge funds. But in New Mexico's case, the category includes Employee of the Month, which the state bankrolled to the tune of $13 million, as well as a slate of "soft-R" horror movies such as Living Hell and Buried Alive.

So far, the endowment has managed only to break even. An early venture, Elvis Has Left the Building, a 2004 comedy in which Kim Basinger plays a cosmetics saleswoman accused of killing Elvis impersonators, went straight to DVD.

Don't think New Mexico's investment approach is a case of l'art pour l'art, though. Greg Kulka, director of private equity and economically targeted investments at the New Mexico State Investment Council, compares the film financing to a mix of "early-stage venture capital" and Treasuries. The state is providing filmmakers with loans that are guaranteed by investment-grade banks, which reduces the risk greatly. And a couple of big hits, insists Kulka, could make up for the duds in the portfolio: "We are 99.9% sure of getting our principal back," he says.

New Mexico has been raising the movie stakes of late, in part to spur a cottage industry. (In the past two years, filmmakers spent almost $98 million in the state, including pay for almost 2,100 crew jobs.) Since 2005 the state has allowed the endowment to lend up to $15 million to a film project, up from $7.5 million. And the coming attractions from Tinsel Taos? Well, after getting pitched by an independent film producer, the endowment's private equity investment advisory panel is quite keen on horror flicks. They're famously cheap to make, and right now they're hot, bringing in twice the annual revenue they did three years ago.

Due out next year, Wanted: Undead or Alive. Scripted by a South Park writer, it was presented to the council as "Blazing Saddles meets Shaun of the Dead," according to minutes from the meeting. Says Kulka: "I personally have high hopes."

By Emily Thornton

Back to Top

Question Of The Week

Amid the stock option backdating scandals, some economists are urging the SEC to rescind its 2005 ruling that options must be expensed. They say options aren't a company cost but a way stock-holders share future gains with employees. Would repeal make sense -- or more mischief?

"Options shouldn't be expensed. But full disclosure is needed -- a table showing investors the potential earnings dilution of the options at different stock prices. It shouldn't be scattered in the footnotes." -- Harry Markowitz, Nobel Prize-winning economist, University of California at San Diego

"People who oppose expensing options say it will be the end of Silicon Valley as we know it. My main concern is that the information be out there so it can be evaluated. I don't get wildly exercised about it." -- William Sharpe, Nobel Prize-winning economist, Stanford business school

"There is no mystery, economic or otherwise: Stock options are a form of compensation. Compensation is part of a company's costs. Costs should be expensed." -- Rebecca McEnally, director of the Capital Markets Policy Group, CFA Center for Financial Market Integrity

By David Henry and Peter Coy

Back to Top

DJIA 11392.11 +60.60
S&P 500 1298.92 +4.90
Nasdaq 2165.79 +10.50

Media Kit | Special Sections | MarketPlace | Knowledge Centers
McGraw-Hill Cos.