Last week, we attended the opening night of the Tribeca Film Festival and thought an apt question to address is: why not just distribute content online? Recent press shows that independent authors and filmmakers are now choosing to bypass traditional offline distribution middlemen by distributing online. While this is a good thing for independents and for consumers, there may be some unwanted collateral damage.
We recently read in Cheapest E-Books Upend the Charts that independent writers like Louisville businessman John Locke were able to penetrate Amazon’s top 50 digital best seller list with books that are priced sometimes as low as 99 cents, as opposed to the $9.99 normally charged by other successful authors. By self-publishing and distributing online, authors like Mr. Locke are able to reduce publishing costs and directly reach readers with lower priced content. Now more highly priced authors that distribute through traditional publishers have to show that their content is ten times more valuable than the books that Mr. Locke writes. The same is true in the film world. IMDB reports that the biggest names in Hollywood have been protesting Video on Demand (“VOD”), which has placed major films online in but weeks after they appear in brick and mortar theaters. The theaters are fighting back by taking distribution into their own hands. The Los Angeles Times reports that AMC and Regal recently unveiled a new distribution company called Open Road Films, which will focus on developing and distributing independent films, presumably both on and offline. Any author or filmmaker now has to seriously consider self-publishing or independent distributing online, respectively, as an alternative to traditional distributorship. At the same time, the collateral damage may very well be the disappearance of traditional book stores and movie theaters, which is traditionally where people took their dates or socialized with their fellow neighbors. The disappearance of these fixtures may tend to further erode our social fabric.
To be an employer, or not to be an employer? You would think that you could decide your company’s identity as an employer — or not — by entering into a proper independent contractor agreement with folks you bring on board. Not true. While there are certain measures you can take to protect your business form meritless unemployment filings, there is no bright line rule and the Department of Labor (“DOL”) has the final word. This, in our view, is not good.
We should know. We recently had the pleasure of defending a start up ad agency against a meritless unemployment claim in front of New York DOL Insurance Appeal Board. In the case, the agency had: entered into an independent contractor arrangement with the claimant, paid the claimant as a 1099 contractor, and did not require the claimant to come into the office. The claimant even admitted on the record that he agreed to be an independent contractor, and that he understood what that meant. Slam dunk case, right? Wrong. The DOL initially found the agency to be an employer. We had to appeal the finding and are now awaiting the decision. There is no bright line rule here because neither the contract you sign with an independent contractor, or the contractor’s use of a 1099 to file taxes, are dispositive in the DOL’s eyes. As such, you need to ensure that you don’t control the “means used to achieve the results,” which means many things under the case law, including that you: don’t require the independent contractor to come into the office, allow the contractor to hold other jobs, don’t provide any benefits (including free use of the office printer and other machinery), and that you pay by fixed fee. Even then, the DOL can find that you are an employer. We think that this is precisely why many companies are concerned about bringing on independent contractors in this tight economy — they are afraid that the independent contractor will go to the DOL for unemployment. In so doing, these folks abuse the system, give a bad name to unemployment, and stifle the economic recovery by creating uncertainty.
While we were rooting for the Yankees this past weekend, we were nonetheless impressed with how the victorious Red Sox (“Sox”) improved Fenway (the “Green Monster”) instead of destroying it, as the Yankees did with the old Yankee stadium. In so doing, the Sox saved taxpayer money, as Mr. Mark Yost rightly points out in The Green Monster Goes it Alone. Yankee fans (and businesses) can learn from Boston’s conservative approach to growth and, obviously, from their playing.
At times, a business will need to increase capacity in order to satisfy growing demand. This can be done in many ways. The most cost efficient way is often to improve existing facilities rather than reinvent them from scratch. Of course, technological advances can shift the supply curve so much that existing facilities become obsolete. However, that was not the case with the Green Monster. And so the Sox improved the small stadium rather than demolishing it. Their revenues weren’t hurt: the Sox, whose players include Mr. Dustin Pedroia, pictured left, are the third highest revenue generating team in baseball. Other teams often demand taxpayer financed loans or incentives from their local municipalities, and often threaten to leave if they don’t get what they ask for. For example, Los Angeles did not give into Raider demands and, as a result, the team relocated to Oakland. While we appreciate the new Yankee stadium, we also think that the Sox more conservative approach to growth is apt, especially in these tight economic times where states and municipalities are scarce on funds.
“Luckily for us, surfing isn’t an organized sport,” Travis Ferre explains in the May 2011 issue of Surfing Magazine. That is a good thing because it has kept the surfing industry diverse and authentic. Google, which has gotten so bureaucratic that good ideas come to market too slowly, can learn from the surfing industry’s more disorganized and yet innovative ethos.
As Mr. Ferre explains in his article, surfing is not an “Ocean Pacific ad anymore,” since the waves are now full of “tight denim modsters, dreadlocked carvers, trained competitors, soloists who wander alone, flannel-clad grizzly bears that love the cold, sandy groms, ex-cons, teachers, chicks.” There has been press lately that Google has gotten so big and organized that it now takes too long to innovate. A good idea has to be passed through several layers of committees, like in the picture to the left, before the idea comes to market. The problem is, by the time the idea comes to market, a competitor has already beaten Google to the punch. Of course, Google, and others companies like it, are too big to be as disorganized as the surfing industry — or Mr. Jeff Spicoli, the surfer played by Mr. Sean Penn in Fast Times at Ridgemont High. But being too organized can be maladaptive, too. As evidence: Larry Page, one of Google’s founders, has taken the reins from former CEO Eric Schmidt in order to “streamline decision making.” In so doing, Mr. Page wants to bring some cutting edge ethos back to the spirit of the giant company. As such, Google can learn from Mr. Spicoli. Because he didn’t have a committee to govern each step of his behavior, he was the only student to think of having a pizza delivered to class.