This ad on YouTube by Sony is the ultimate business irony because YouTube may be responsible for putting Sony Pictures out of business.
In 1989, Sony Corporation purchased Columbia Pictures Entertainment, Inc. Then later they created Columbia TriStar Pictures by merging Columbia Pictures and TriStar Pictures. Then they expanded growth by acquiring the Hollywood studio, Metro-Goldwyn-Mayer. They have built a huge film production business but are in trouble.
24/7 Wall St. has created a new list of brands that will disappear in 2012, which includes Sony Pictures. An article at the 24/7 website says: Sony has a studio production arm which has nothing to do with its core businesses of consumer electronics and gaming. Sony bought what was Columbia Tri-Star Picture in 1989 for $3.4 billion. This entertainment operation has done poorly recently. Sony’s fiscal year ends in March, and for the period revenue for the group dropped 15% to $7.2 billion and operating income fell by 10% to $466 million. Sony is in trouble. It lost $3.1 billion in its latest fiscal on revenue of $86.5 billion.
This is in part due to YouTube and other similar competitors creating increasing amounts of their own content.
An excerpt from a Bloomberg Business Week article entitled “Must-See YouTube” explains why: Late last year, Google’s (GOOG) video-sharing site announced it would spend $100 million to support video programming. YouTube is funding filmmakers, artists, writers, and proven online hitmakers with grants that range from a few hundred thousand to a few million dollars. It will eventually have about 100 new channels.
By building a library of professionally produced programming that is closer to Charlie’s Angels than to “Charlie Bit My Finger,” Google hopes to attract more viewers, reduce the need to negotiate with Hollywood studios, and woo some of the big-name advertisers who have been reluctant to put their products next to cat videos.
YouTube’s competitors also are focusing on original, Web-exclusive content to lure viewers and advertisers—and to get around the major studios that produce most of the nation’s entertainment. Netflix is streaming its mob drama Lilyhammer and has new shows in the works from The Social Network director David Fincher and Weeds creator Jenji Kohan. It also bought the rights to new episodes of the cult TV hit Arrested Development. Hulu is producing a faux-documentary sitcom, Battleground, set in the world of Wisconsin politics. The creative development arm of Amazon.com (AMZN), Amazon Studios, recently said it would start soliciting ideas for children’s and comedy programming and back the best proposals.
YouTube, the dominant online video site with 181 million monthly visitors in the U.S., may have the most to gain. For years the site has tried to secure studios’ permission to stream Hollywood material on the Web—and has little to show for it other than a slow-moving copyright lawsuit brought by Viacom (VIA). “We could have bought their content and given them deals that were good for them and lost a large amount of money,” says Google Executive Chairman Eric Schmidt. “That is not how Google works.” James McQuivey, an analyst with Forrester Research (FORR), says the channels venture is “nothing less than the circumvention of the monopoly control” Hollywood has over premium content.
YouTube is betting there’s an entire class of material that might languish on cable but will find an audience on the Web.
This is also why big store book sellers are going down the drain and big publishing companies too.
Take for example the Encyclopedia Britannica. It is regarded as one of the most scholarly of English language encyclopedias. And the publishers have been progressive. The Britannica is the oldest English-language encyclopedia still being produced. It was first published between 1768 and 1771 in Edinburgh, Scotland. In 1933, the Britannica became the first encyclopedia to adopt “continuous revision”, in which the encyclopedia is continually reprinted and every article updated on a schedule.
Yet in 2012, the company stopped publishing its printed editions and now is only online.
To succeed and remain successful businesses have to continually adapt.
A Harvard Business Review article (linked below) reminds us of this fact in an article entitled “Reinvent Your Business Before It’s Too Late” by Paul Nunes and Tim Breene.
Here is an excerpt: Sooner or later, all businesses, even the most successful, run out of room to grow. Faced with this unpleasant reality, they are compelled to reinvent themselves periodically. The ability to pull off this difficult feat—to jump from the maturity stage of one business to the growth stage of the next—is what separates high performers from those whose time at the top is all too brief.
The potential consequences are dire for any organization that fails to reinvent itself in time. As Matthew S. Olson and Derek van Bever demonstrate in their book Stall Points, once a company runs up against a major stall in its growth, it has less than a 10% chance of ever fully recovering. Those odds are certainly daunting, and they do much to explain why two-thirds of stalled companies are later acquired, taken private, or forced into bankruptcy.
There’s no shortage of explanations for this stalling—from failure to stick with the core (or sticking with it for too long) to problems with execution, misreading of consumer tastes, or an unhealthy focus on scale for scale’s sake. What those theories have in common is the notion that stalling results from a failure to fix what is clearly broken in a company.
Having spent the better part of a decade researching the nature of high performance in business, we realized that those explanations missed something crucial. Companies fail to reinvent themselves not necessarily because they are bad at fixing what’s broken, but because they wait much too long before repairing the deteriorating bulwarks of the company. That is, they invest most of their energy managing to the contours of their existing operations—the financial S curve in which sales of a successful new offering build slowly, then ascend rapidly, and finally taper off—and not nearly enough energy creating the foundations of successful new businesses. Because of that, they are left scrambling when their core markets begin to stagnate.
About the Research
In our research, we’ve found that the companies that successfully reinvent themselves have one trait in common. They tend to broaden their focus beyond the financial S curve and manage to three much shorter but vitally important hidden S curves—tracking the basis of competition in their industry, renewing their capabilities, and nurturing a ready supply of talent. In essence, they turn conventional wisdom on its head and learn to focus on fixing what doesn’t yet appear to be broken.
Thrown a Curve
Making a commitment to reinvention before the need is glaringly obvious doesn’t come naturally. Things often look rosiest just before a company heads into decline: Revenues from the current business model are surging, profits are robust, and the company stock commands a hefty premium. But that’s exactly when managers need to take action.
The Harvard article links to a Yale Press article entitled “Stall Points – Most Companies Stop Growing–Yours Doesn’t Have To” that says: Very few large companies manage to avoid stalls in revenue growth. These stalls are not attributable to the natural business cycle. Rather, careful analysis reveals that the vast majority of such stalls are the direct result of strategic choices made by corporate leaders. In short, stoppages in growth are almost always avoidable. This extensively researched book analyzes the growth experiences of more than six hundred Fortune 100 companies over the past fifty years to identify why growth stalls and to discover how to rectify a stall in progress or, even better, avoid one.
This article points out: Top Four Reasons a Firm May Stall:
• Premium position captivity
• Innovation management breakdown
• Premature core abandonment
• Talent shortfall
This article also leads to the Stall Point Initiative that drives a global network of more than 14,000 executives from 80% of the Fortune 500 and more than 4,700 leading corporations and not-for-profit organizations. Our membership programs encompass all major functional areas of the large corporate and middle-market sectors. This site offers a “Red Flag Diagnostic” aimed at helping CEOs spot danger signals in the evolution of their business. I took the test and let me hasten to add not because it is meant for our tiny business.
The questionnaire leading to the diagnostic starts by asking the size of the company and the numbers are large. The smallest companies are sales of $500 million or more… way… way above my pay grade.
However… guess what. Big businesses are ruled by the same laws of nature as we little folk so we can transform… ie. step down… so the questions do apply to all of us.
Here is an example of three of the 50 questions in the diagnostic and what they mean to us.
Big Corp Question #1: Our earnings growth rate has outstripped our revenue growth rate for five or more years.
Stepped Down Question #1 for We Little Folks: We are penny pinching so we have more and more money in the bank… but we are not reinvesting in ourselves.
Big Corp Question #2: Our core business reinvestment rate (R&D + CAPX + advertising divided by revenue) falls below its historic range.
Stepped Down Question #2 For We Little Folks: We are not even trying to improve the existing things we already are doing.
Big Corp Question #3: Our dividend payout ratio exceeds 30 percent.
Stepped Down Question #3 For We Little Folks: We are spending too much and investing too little.
We all need to evolve and adapt. How is the question. Take a look at the Stall Point Initiative’s Big Business Red Flag Diagnostic and step the questions down to fit your own business and life. That transformation could transform your life!
Technology is changing business at a rapidly increasing pace.
This is why our courses on how to earn globally never end and include regular updates that look at what we are doing in business ourselves.
Live Long & Prosper MoreOne of the most frequent questions readers ask is “How can I make my savings safer but also sufficient for life?”
“What is the time horizon of a lifetime?” I ask. Time horizons are one of the most important elements in investing and most of us will live longer than we expect.
For example in a moment, you’ll see how this exercise is actually connected to my investing portfolio because it alters my investing timeline.
(Gary Scott doing Andean yoga.)
Overall US life expectancy at birth was 78.8 years in 2013. Women live longer, 76.4 years for men, 81.2 years for women. You’ll be happy to know that those statistics don’t apply to you and me.
How most of us think about life expectancy is wrong. That overall rate is the average of all people, young and old. The older we are, the longer our life expectancy grows. Right now those who are 50 years old, life expectancy is 85.6 for women and 81.6 for men. The expectancy of a 50 year old is 5 or 6 years longer than the overall expectancy.
As we age, the expectancy gets better. At 65 the expect age is 87.9 for women and 85.3 for guys. At 75 there is another boost to 88.6 and 90.5 years.
This is good news and even better is the fact that a succession of six technical panels established by the Social Security Advisory Board, in 1995, 1999, 2003, 2007, 2011 2013 all stated that Social Security was assuming unrealistic mortality rate improvements. In other words, life expectancy continues to grow.
There is a lot we can do to improve the odds of a long, active life even more. In fact we can improve them much more. A University of Washington publication “12 Reasons Yoga Helps Extend Lifespan” (1) shows 12 wasy that yoga extends life.
A UC San Francisco study “Lifestyle changes may lengthen telomeres that measure cell aging” (2) show that exercise, nutrition, meditation, diet, exercise, social support and yoga can extend life even further, as much as 12 years.
This is why I practice yoga and meditate almost every day and adjust my investing to support a long, busy, lifeline.
How can we have a strategy so our savings, investments & income are sufficient for a full lifetime?
Our life expectancy can be much longer than statistics suggest. That’s really good to know but longer life expectancy is expected to worsen the shortfall in Social Security by 11 percent over the next 75 years. What will a longer, active life due to our savings and budgets?
During nearly five decades of global investing I have noticed that some people, such as Warren Buffett, have a good value strategy that makes sure they do not lose, but increase their wealth again and again.
What is this strategy? It is a good value strategy based on three tactics.
The first tactic is to seek safety before profit.
A research paper that studied Warren Buffett’s investing strategy was published at Yale University’s website. This research shows that the stocks he chooses are safe (with low beta and low volatility), cheap (value stocks with low price – to – book ratios), and high quality (stocks of companies that are profitable, stable, growing, and with high payout ratios).
The second tactic is to maintain staying power. At times Buffet’s portfolio has fallen, but he has been willing and able to wait long periods for the value to reveal itself and prices to recover.
This chart based on a 45 year portfolio study shows that holding a diversified good value portfolio (based on a good value strategy) for 13 month’s time, increases the probability of outperformance to 70%. However those who can hold the portfolio for five years gain a 88% probability of beating the bellwether in the market and after ten years the probability increases to 97.5%. Time is your friend when you use a good value strategy. The longer you can hold onto a well balanced good value portfolio the better the odds of outstanding success.
The Buffett strategy integrates time and value for safety and profit.
A third, limited leveraging, tactic in the strategy boosts profit. Buffett leverages his portfolio at a ratio of approximately 1.6 to 1. The Yale published research paper shows the leveraging methods used by Warren Buffett to amass his $50 billion fortune. The researchers found that the returns from Buffett’s investment company, Berkshire Hathaway, far outweighed those achieved by any rival that has operated for 30 years or more. The research shows that neither luck nor magic are involved. Instead, the paper shows that Buffet’s success hinges on using leverage at the rate of 1.6.
This rate of expansion by the way is called the “Golden Ratio” and it is a mathematical formula that controls the growth of most natural things; trees, the shape of leaves, the spiral of shells, as well as the way economies and societies grow.
To sum up the strategy, Buffet uses Golden Ratio to make large purchases of “cheap, safe, quality stocks”. He uses limits leverage so he can hold on for very long periods of time, surviving rough periods where others might have been forced into a fire sale or a career shift.
The study found that Buffett applies a leverage of about 1.6 to 1, boosting both his risk and excess return in that proportion. He uses the Golden Mean in his borrowing, not too little, not too much.
Thus his many accomplishments include having the conviction, wherewithal, and skill to operate with leverage and significant risk over many decades.
Learn how to use this type of three point strategy with the Purposeful investing Course (Pi). This course is based on my 50 (almost) years of investing experience combined with wisdom gained from some of the world’s best investment managers and economic mathematical scientists.
Pi reveals investing secrets and the sciences that make investing easy, safer, less time consuming and increases the chances of profit.
One secret is to invest with a purpose beyond the cash. When we invest with purpose, doing what we love, we do better and we joyfully put in more energy, time and care. This is nature’s irony. If we chase just the money, human nature tends to make it run away. If we pursue our passion and work with more than concern for the cash, the wealth can’t resist us. This is the purpose behind, “Purposeful investing”.
Slow, Worry Free, Good Value Investing
Stress, worry and fear are three of an investor’s worst enemies. These are major foundations of the Behavior Gap, a trait exhibited by most investors, that causes them to underperform any market they choose. The behavior gap is created by natural human responses to fear. The losses created by this gap grow when investors trade short term under stress. More about the gap in a moment.
Learn how to create profitable strategies that combine good value investments with unique, personal goals.
Spanning the Behavior Gap
Behavior gaps are among the biggest reasons why so many investors fail. Human evolution makes fear the second most powerful motivator. (Greed is the third.) Fear creates investment losses due to behavior gaps. Fear motivates us more strongly than desire. By nature investors are risk adverse, when they should embrace risk. Purpose is the most powerful motivator, stronger than fear and greed. One powerful way to overcome the behavior gap is to invest with a purpose.
Combine your needs and capabilities with the secrets and the math through the Pifolio – The Pi Model Portfolio
Lessons from Pi are based on the creation and management of a Primary Pi Model Portfolio, called the Pifolio. There are no secrets about this portfolio except that it is based entirely on good math.
The Pifolio is a theoretical portfolio of MSCI Country Benchmark Index ETFs that cover all the good value markets using my (almost) 50 years of global experience and my study of the analysis of four mathematical investing geniuses (and friends): Michael Keppler, Eric Roseman, Thomas Fischer (for currency positions) and Richard Smith, PhD (for trailing stop alerts).
The Pifolio analysis begins with Keppler who continually researches international major stock markets and compares their value based on current book to price, cash flow to price, earnings to price, average dividend yield, return on equity and cash flow return. He compares each major stock market’s history.
Michael is a brilliant mathematician. We have tracked his analysis for over 20 years. He continually researches international major stock markets and compares their value based on current book to price, cash flow to price, earnings to price, average dividend yield, return on equity and cash flow return. He compares each stock market’s history. From this, he develops his Good Value Stock Market Strategy. His analysis is rational, mathematical and does not cause worry about short term ups and downs. To invest according to the Country Selection Strategy, it is necessary to construct diversified, risk-controlled, representative country portfolios in every BUY rated country, weighting each country approximately equally in the overall portfolio. It is not appropriate or enough to instruct a stockbroker to simply select stocks in the BUY rated countries.
To achieve this goal of diversification the Pifolio consists of Country Index ETFs that are similar to index mutual fund but are shares normally traded on a major stock exchange that tracks an index of shares in a specific country. ETFs do not try to beat the index they represent. The management is passive and tries to emulate the performance of the index.
A country ETF provides diversification into a basket of equities in the country covered. The expense ratios for most ETFs are lower than those of the average mutual fund as well so such ETFs provide diversification and cost efficiency.
This is an easy, simple and effective approach to zeroing in on value because little management and guesswork is required. You are investing in a diversified portfolio of good value indices. A BUY rating for an index does NOT imply that any stock in that country is an attractive investment, so you do not have to pick and choose shares. You can invest in the index which is like investing in all the shares in the index. All you have to do is invest in an ETF that in turn invests passively in all the shares of the index.
Pi adds my fifty years of experience and brings insights to numerous long term cycles that are part of the universal math that affects all investments.
For example in the 1980s, a remarkable set of two economic circumstances helped anyone who spotted them become remarkably rich. Some of my readers made enough to retire. Others picked up 50% currency gains. Then the cycle ended. Warren Buffett explained the importance of this ending in a 1999 Fortune magazine interview. He said: Let me summarize what I’ve been saying about the stock market: I think it’s very hard to come up with a persuasive case that equities will over the next 17 years perform anything like—anything like—they’ve performed in the past 17!
I did well then, but always thought, “I should have invested more!” Now those circumstances have come together and I am investing in them again.
The circumstances that created fortunes 30 years ago were an overvalued US market (compared to global markets) and an overvalued US dollar.
The two conditions are in place again! There are currently ten good value non US developed markets, plus 10 good value emerging markets.
Pi shows how to easily create a diversified, worry free portfolio that includes each or all of these countries with Country Index ETFs.
The current strength of the US dollar is a second remarkable similarity to 30 years ago. The dollar rose along with Wall Street. Profits came quickly over three years. Then the dollar dropped like a stone, by 51% in just two years. A repeat of this pattern is growing and could create up to 50% extra profit if we start using strong dollars to accumulate good value stock market ETFs in other currencies.
This is the most exciting opportunity I have seen since we started sending our reports on international investing ideas more than three decades ago. There is so much more to write and the trends are so clear that I have created a short, but powerful report “Three Currency Patterns For 50% Profits or More.” This report shows how to earn an extra 50% from currency shifts with even small investments. I kept the report short and simple, but included links to 153 pages of Keppler Asset Stock Market and Asset Allocation Analysis so you can keep this as simple or as complex as you desire.
The report shows 20 good value investments and a really powerful tactic that allows you to accumulate these bargains now in large or even very small amounts (less than $5,000). There is extra profit potential of at least 50% so the report is worth a lot.
Research shows that most people worry about having enough money if they live long enough. This powerful profit wave can eliminate that concern. My experience of the 17 years in the 1980s and 90s combined with the science shared by my four friends (Keppler, Roseman, Fischer and Smith) can make the next 17 years so rich, you’ll always be rich.
You’ll receive the report “Three Currency Patterns For 50% Profits or More” free when you subscribe to Pi.
The 50 years of experience the Pi course shares also explains when leverage provides extra potential. For example in 1986 I issued a report called The Silver Dip that showed how to borrow 12,000 British pounds (at almost 1.6 to 1 dollars per pound the loan created US$18,600) and use the loan to buy 3835 ounces of silver at around US$4.85 an ounce.
Imagine investing in a spike like this… with leverage!
Silver had crashed, I mean really crashed from $48 per ounce. As prices decreased from early 1983 into 1986, total supply had fallen to 449.7 million ounces in 1986. Mine production was restricted by the low prices at this time, with silver reaching a low for this period of $4.85 in May 1986. Secondary recovery also was constricted by these low prices.
Then silver’s price skyrocketed to over $11 an ounce within a year. The $18,600 loan was now worth $42,185.
The loan was in pounds and in May 1986 the dollar pound rate was 1.55 dollars per pound. So the 12,000 pound loan purchased $18,600 of silver. The pound then crashed to 1.40 dollars per silver. The loan could be paid off for $13,285 immediately creating an extra $5,314 profit. The profit grew to $47,499 in just a year.
Conditions for the silver dip have returned. The availability of low cost loans and silver are at an all time low.
With investors watching global stock markets bounce up and down, many missed two really important profit generating events.
The price of silver has crashed all the way from nearly $50 an ounce to below $14 an ounce as did shares of the iShares Silver ETF (SLV). (Click on chart from Google.com (1) to enlarge.)
At the same time the silver gold ratio hit 80, a strong sign to invest in precious metals.
I prepared a special report “Silver Dip 2015” about a leveraged silver speculation that can increase the returns in a safe portfolio by as much as eight times. The purpose of the report is to share long term lessons gained through 30 years of speculating and investing in precious metals. While working on the report, when the gold silver ratio slipped to 80 and the price of silver dropped below $14 an ounce, I knew I needed to share this immediately.
I released a new report “Silver Dip 2015” so readers can take advantage of these conditions and leverage 1.6 times as a speculation.
The speculation is so time sensitive with such fast profit (but also loss) potential that I will only offer it shortly.
You receive the Silver Dip 2015 FREE when you subscribe to Pi.
Subscribe to the first year of The Personal investing Course (Pi). The annual fee is $299, but to introduce you to this online, course that is based on real time investing, I am knocking $102 off the subscription. Plus you receive the $29.95 report “Three Currency Patterns For 50% Profits or More” and the $27 report “The Silver Dip 2015” free for a total savings of $158.95.
Enroll in Pi. Get the first monthly issue of Pi, the first five “Golden Rules of Investing” and the report “Three Currency Patterns For 50% Profits or More” and “The Silver Dip 2015” right away.
#1: I guarantee you’ll learn ideas about investing that are unique and can reduce stress as they help you enhance your profits through slow, worry free purposeful investing.
If you are not totally happy, simply let me know.
#2: I guarantee to cancel your subscription and refund your subscription fee in full, no questions asked.
#3: I guarantee you can keep the golden rules of investing and “Three Currency Patterns For 50% Profits or More” and “The Silver Dip 2105” report as my thanks for trying.
You have nothing to lose except the fear. You have the ultimate form of financial security to gain.
Save $158.95. Subscribe to the Pi for $197.
Bloomberg’s Must-See YouTube
Harvard Business Review Reinvent Your Business Before It is Too Late