Saturday, May 30, 2009

Cutting the Cord

Being in business school really doesn't give me the appreciation of the value of a dollar. When you're essentially paying ~$500 for each 3-hour lecture, and when all you're money is flying out the door anyway, each incremental dollar of expense is hard to gauge. It's just another drop in the bucket right?

But as my rebirth into the real world draws perilously near (I chose rebirth because yes, it will be messy), I'm starting to think of ways I can improve my bottom line earnings.

This becomes all the more significant since I'll be moving to NYC, the place where discretionary income withers and dies in the face of oppressive costs for everything.

I first thought I'd just augment my income by installing ads on my blog. Easy money right? Not exactly...it turns our my readership has developed an immunity to those Google ads on the right. Would it kill you to just look at them and think about whether they might be useful???

Anyway, with no great ideas for top-line expansion...I turned my sights to the expenses category. In consulting-speak, I'm really looking to right-size my expenses to improve profitability.

In looking around my pile of bills, one line item catches my eye every month (and no, the answer is not impulse purchases of late-night TV products).

I'm seriously debating dumping cable TV.

As it stands right now, I pay RCN about $90 a month.

For that, I get cable internet service (which I require) and cable TV service. The TV service also costs a little more with my DVR and my HD tier additions.

If I were to cancel that (and only get internet service on the move to NYC) I would probably save ~$45 each month, or around $540 per year.

That's a decent amount of money, and begs the question of whether I really need cable TV.

If you had come to me 5 years ago and told me I would be debating this, I'd have called you crazy. But, with the advent of some great digital technologies...it's not looking so unrealistic.

I have a couple key shows I really like to watch (e.g., the Office, Lost), but all of them are available online at sites like Hulu.com. If I download some kind of media software that would enable me to watch internet video on my TV (like Boxee or others) it'd be even better.

With the money I'd be saving, I could roll that into a Netflix membership (which I've wanted to do anyway since there are so many movies I'd like to watch) and a Roku box, that allows me to stream Netflix movies onto my awesome TV. I'm a little leery of the quality, but it has HDMI output, so I'm guessing it would be ok.

What would I really miss with cable???

I could see the argument for sports, but I already don't watch a lot of live sports because I can't get my local teams. The Flyers are buried on Versus with the rest of the NHL, never to be heard from again. The Eagles are a larger issue, but I don't want satellite and as such, can't get NFL Sunday Ticket. I'm willing to go to bars for the Eagles, or at worst, could get a Slingbox installed back home with the family in Philadelphia. I wouldn't have ESPN, but I really only watch that at the gym, which will still have cable. So sports isn't the reason.

But what else do I watch? I usually turn the TV on when I'm sitting around and not working (of course all that free time goes away when I start work anyway). I see a lot of West Wing in the mornings (syndicated on Bravo) and a LOT of Law & Order (syndicated on seemingly every cable network and shown at all times)...but I don't really WATCH those shows so much as have them on and root for Jerry Orbach to say something snarky.

So I'd miss out on that, but I'd have Netflix and all the movies I haven't been able to see. Plus with some software (admittedly, stuff I'd need to figure out), I could watch my shows through the internet on my TV.

I'd probably save a couple hundred bucks...

That could buy me a whole bunch of Snuggies and Shamwows.

Wednesday, May 13, 2009

Conventional Wisdom

Movie producers are launching more rehashes of older films, comic books, and crappy TV shows...

NFL teams draft players from big football factory programs with great 40 times and tons of bench press reps...

NBA teams roll out predictable strategies and lineups that bring out ridicule for their lack on ingenuity...

I've been thinking about a lot of those examples recently, and particularly how these things relate to each other. In all cases, they seem to present situations where people in unique positions of power choose well-worn courses of action as opposed to novel, and potentially profitable, strategies.

From an outsider's perspective, the lack of ingenuity amongst the aforementioned examples seems stunning. In the past week, I've read pieces from Malcolm Gladwell on the NBA's reluctance to experiment with the full-court press, from ESPN's Bill Simmons on why he would make a better NBA general manager than current executives, and from radio personality/madman Adam Carolla and a movie producer on the extent to which Hollywood lacks creative capabilities.

What is apparent, is that people in these positions are really attached to conventional wisdom, or to put it another way, the way things have always been done. It echoes something Steven Levitt said in our first Experimental Design class, that when he asks companies why they do things a certain (often crazy) way, the first answer is almost always that "it's the way we've always done it"

Why would rational people do this?

In thinking about why these strategies (let's call them conventional as a group) are popular, it seems that the underlying theme across all of them is that first and foremost, they are risk-minimizing. No one ever asks someone why they decided to do something if that thing is the same thing everyone else would've done.

As an example, take the NFL and going for it on fourth down.

As a small cadre of dedicated analysts will point out, NFL coaches are way too scared of going for it on fourth down. In many cases, the coaches will elect to punt (that is, sacrifice possession of the ball for field position advantage) rather than attempt to convert a fourth down. What's maddening is how often this happens when the team is in opposing territory and still decides to kick the ball away.

Why would NFL coaches do this so often (unless you're Bill Belichick, who goes for it all the time) ?

Because going for it incurs a risk of failure, and the possibility of having to explain yourself to the media who demand to know why the coach didn't follow conventional wisdom.

This risk, and the fear of failure, is what causes all these parties to cling to conventional wisdom, because it helps deflect blame and criticism.

I know I know, this is hardly groundbreaking stuff.

But, I was trying to think of why this happens so often, and to the extent that it's prevalent in sports and media, I think it has a fundamental economic explanation.

These people in power, these decision-makers who have the chances to go against the grain and attempt novel strategies, have next to nothing in the way of transferable skills.

An NBA coach, a movie studio executive, an NFL general manager?

These people can't go anywhere else if they get fired!

These are people who have reached the pinnacle levels of their respective industries and who, in many cases, have slaved for years just to get their opportunities.

So, if these decision makers, each of whom's choices are meticulously picked over by the public, try something wacky, and fail miserably...it'd be a long long way down with potentially no way back up.

Marty Mornhinweg serves to partially illustrate this point.

Mornhinweg, currently on the coaching staff of the NFL's Philadelphia Eagles, actually used to be a Head Coach with the Detroit Lions. I'll let his Wikipedia page explain the rest:

"The most notable moment in Mornhinweg's history was his decision to kick after winning an overtime coin toss. Mornhinweg felt that having the wind in his favor was more important for his Lions to win the game against the Chicago Bears. He elected to kick and on the Bears opening drive, Chicago scored a field goal. Mornhinweg's Lions went on to become 3-13 after that game, and prompted fed-up Lions fans to refer to the coach as "Marty Moron-weg""

Since being fired, he's never been a Head Coach again (although he is the Assistant Head Coach in Philadelphia)

But there, in a nutshell, is why so many criticisms of strategy go unheeded.

Just one wrong attempt at unconventional thinking, and you're toast (even worse if they think of a catchy nickname)

If there were lots of professional football leagues, and coaches had realistic alternatives to the NFL(and effectively, lower opportunity costs for taking risks), maybe they'd take some more chances.

But they don't. The same could be said for TV execs, NHL general managers, and probably most corporate CEOs.

To solve such a problem, you'd need to hire people in those positions with certain characteristics. For one, it would help if they had huge amounts of transferable skills. If an NFL general manager could go become the CEO of a major company, he would have less to lose by taking chances because his alternative isn't that bad. You might also be able to achieve a similar effect by finding someone who just doesn't give a damn about money (i.e., is already rich) or personal reputation. The other alternative is to have an ownership group who challenges their manager to take risks (I would argue you see this with both the NFL's Patriots and Eagles, each of whom appear completely willing to trust the instincts of their coaches)

Without such measures, the rest of us will only keep wondering what those idiots in charge are thinking.

Saturday, May 9, 2009

Why the NFL is Number One

If you invented a time machine, and used it to go back in time and talk to me when I was in the 8th grade, I would've told you two things.

1 - That you were a complete idiot, why are you wasting a time machine on me?

And 2 - Hockey is the best sport on the planet and the NHL is the best sports league to be a fan of.

Now fast forward to today, and I'm pretty sure it'd be third, significantly behind the MLB and the NFL. Maybe it would be four given my love for Team Handball, but it'd probably be safe at #3.

So why did this happen? What led me to go from huge NHL die-hard to a complete football maniac?

Well, apparently, the NFL is run by smart and legitimate businessmen, and the NHL is run by a group of complete managerial disasters.

I came to this conclusion over the last few weeks, as I struggled to a) watch the NHL playoffs and b) read the continuing saga over the Phoenix Coyotes, who are really really bankrupt.

Let's start with the bankrupt team, the Coyotes.

The Coyotes, with much fanfare, descended on the state of Arizona after bolting the city of Winnipeg. In case you don't know much about geography...Winnipeg is located in Canada. Canada, in case you also don't know much about weather, is freaking freezing. Phoenix on the other hand, is in the Southwestern United States, and is in a desert.

Let's not even explore why the NHL thought it was a good idea to put a franchise in a desert. Let's consider that a sunk cost. From the looks of things, the Coyotes ownership hasn't exactly made boatloads of cash since their move. I just read they've lost $73 million in the last three years. That sounds like a lot.

OK, so the team itself is bankrupt, and a rich guy who's been trying to buy a team for years has expressed more than a passing interest in buying them. He would like to buy them and move them to Canada, where we should remember, people actually would pay for more hockey.

The NHL, in its infinite wisdom, thinks that's a terrible idea. The situation has gotten to the point where the team owners (or maybe they're former owners if the team is in bankruptcy, maybe the creditors might get it, I'm no lawyer) are actually SUING the league so they can complete their negotiated sale.

Truly a world class organization, that NHL

Of course that brings me to my other gripe with the league, the fact that I can't watch the playoffs because they have an absurdly ridiculous media strategy department! Or maybe they don't have anyone thinking about this stuff, maybe they have a magic 8-ball, a Ouija board, creepy witch lady like Robin Hood Prince of Thieves ?



For some reason, the league made Versus its exclusive cable network for NHL broadcasts. That would be great, if anyone had Versus. Comcast customers have Versus, because the cable company owns the network (and owns the Philadelphia Flyers, which may have had some role in helping the network win the rights over say, ESPN, a network people care about)

RCN, my cable provider, has forsaken Versus to the hinterlands of a digital sports tier, which as a poor graduate student, I'm not about to pay for.

But that's not the worst part, that's just another poor decision.

The worst part, is that the NHL actually did something right (in my view) with its new Game Center technology available over the internet. For a fee (in my opinion, abnormally large for a league in need of widespread acceptance) you can watch NHL action over the internet.

I used the technology in a brief trial, and it was actually quite good. I think you could even watch multiple games. I thought about actually buying the service for the playoffs, but after deciding that the Flyers only had a roughly 50/50 shot of winning their first round series, and since two or three of those games would be on NBC, the $80 price tag was not worth it.

But even if I had purchased this absurdly priced technology service, I still wouldn't have been able to watch the recent Pittsburgh Penguins-Washington Capitals game, the one that features a matchup of the league's best two players in a highly anticipated duel. The series already including one game where both of them scored hat tricks, it's apparently been quite good.

But as I was saying, even if I had bought the internet service, I would've been blacked out.

Why? Because the NHL declared Versus the exclusive provider, which must extend beyond television to include the internet, teletype, satellite based kineoscope, mental telepathy, and whatever other technologies conceived across the galaxy.

Good call NHL, luck out in getting your best players against each other in the playoffs, and then do everything you can to make sure no one sees them.


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That's the sound of all the non-fans clapping