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Sydney Airport to Become a Lifestyle Center

SydneyThe Sydney Morning Herald reports the Federal Government yesterday approved controversial plans for the local airport to become a "business and leisure village." The plan calls for the addition of buildings that could hold hotels, cinemas, parking garages, and shops.

The Lord Mayor of Sydney, Clover Moore, thought this development would create a miniature city half the size of the Parramatta Central Business District. Westfield, one of the world's largest shopping center companies, is headquartered in Sydney.

Such airport developments are not uncommon. The Amsterdam Schiphol Airport has a shopping mall, hotels, athletic club and casino on premises. Here are the top 5 airports in the world, as ranked by UK-based Skytrax:

  1. Hong Kong International
  2. Changi International (Singapore)
  3. Incheon Airport (Seoul, Korea)
  4. Munich Airport (Germany)
  5. Kansai International (Japan)

In the survey, Minneapolis-St. Paul ranked #20 in the survey and #1 in North America. The survey is based on 31 criteria, including airport access, public transit availability, terminal comfort, ambience and cleanliness, immigration wait times and service, terminal signage, friendliness and language skills of airport staff, ease of connections, entertainment, shopping and dining options, and Internet options. It does not measure elements like on-time performance, lost baggage or customer complaints.

Keywords 101, Courtesy of Snap 2.0

SnapJohn Battelle pointed out a new feature of the Snap search engine that founder Bill Gross alerted him to: As you type in a term, Snap delivers a list of search responses that include whatever you're typing in. The example to the right produces this list of most popular handbag brands:

  1. Coach handbags
  2. Louis Vuitton
  3. Gucci
  4. Chanel
  5. Burberry

Louis Vuitton would have outranked Coach had all the variant spellings been counted: "Louis Vuitton handbag", "authentic Louis Vuitton handbags", etc.

Snap also helped identify all of the variant spellings people associate with properties: a quick search for Beverly Center produced "Beverly Center", "The Beverly Center", "Beverly Center Mall", "Beverly Center Los Angeles", "Beverly Hills Mall", and "Beverly Center address".

Interesting stuff, and all in the public domain.

What's A CEO Worth? Inside Terry Lundgren's 2004 Bonus

Terry_lundgren_2Many observers are chagrined at the $3.7 million payout that was approved for Federated CEO Terry Lundgren, especially rank-and-file managers. The question is whether Lundgren's affordable luxury strategy has benefited Federated shareholders, and if so, whether the board was justified in granting the $2.5 million bonus (in addition to Lundgren's salary increase from $1.1 million to $1.2 million).

With Sarbanes-Oxley on deck and after several years of underwater options, there are fewer incentives for CEOs to add value to the organization. It falls on the board's shoulders to ensure that the CEO compensation is competitive relative to their performance, and it is up to the shareholders to ensure that the board is doing their job. And in this case, both the board and the market seem to have voted in Lundgren's favor.  Lundgren's salary is less than James Zimmerman, his predecessor, and comparable to peer CEOs at retailers that generated at least $5 billion in sales last year.

RetailWire's Michael Banks provides perspective on the difference in value between the lowest and highest paid employees in a retail company (or any company): A $15 billion department store chain with 450 stores averages about $500 in sales per hour per associate (open 12 hrs/day, 15 associates/store). An associate earning $20/hr has sales responsibility for a multiple of 25x their hourly wage ($500 divided by $20 = 25). That's a measurement of their impact on, and value to, the business.

If the CEO at this same, $15 billion department store chain has a total, annual compensation package of $3.7 million, their multiple is 4,054x ($15 billion divided by $3.7 million = 4,054), or their value to the business is about 162 times greater than the associate's.

What The NFL's New Deal Means to IP TV

Maddenngday1On the eve of the 2005 NFL Draft, the NFL announced TV rights for its flagship Monday Night Football had been sold to ESPN for $1.1 billion. The NFL will continue to show all cable games on free, over-the air television in home markets. That means that local stations will carry ESPN's Monday night games in the cities of the teams involved.

At the same time, NBC purchased rights to Sunday night games, two Super Bowl broadcasts, and key preseason and postseason games for about $600 million. This package gives NBC some badly-needed counterprograming to "Desperate Housewives".

The NFL has been busy flexing its licensing muscles in videogames, mobile phones and soon, interactive radio with Infinity Broadcasting. Look to the NFL Network itself to reassess the value of Sunday and Thursday night games later in the season. They've arguably got the most powerful sports franchise in the world.

If the phone companies want to launch their IPTV platforms, they're going to need to follow the footsteps of Comcast's work with the NFL Network On Demand and DirecTV's NFL Sunday Ticket to build their own NFL franchises. They'll need to think about the long haul: all the potential exclusives - except for perhaps VOD - are drying up. The ESPN deal is for 8 years, NBC for 6 and DirecTV for 5. CBS and Fox have six more years of Sunday afternoon games.

The carriers might want to read a 2002 report that Berkeley economics professor David Romer wrote entitled "It's Fourth Down and What Does the Bellman Equation Say?" (Adobe Acrobat required) As CNNSI reported, Romer analyzed almost 20,000 first quarter plays to determine the economic benefit going for it on fourth down. The report concluded that when faced with a fourth down, NFL teams on average should go for it.

I think the carriers should likewise go for broke and pursue a VOD deal with either CBS or Fox to establish an IPTV sports franchise. There's a precedent: for years, ABC has paid MNF $550 million a year based on its ability to draw traffic, despite reportedly losing as much as $150 million a year. By shifting the game to its sister network ESPN, the sports licensing costs are shared with the cable and satellite companies.

Link: My take on IPTV and Roger McNamee's Video on the Internet blogs

Barriers to Mobile Shopping

Lucky_goldstar_gamephone_2Where there is traffic, there will be commerce. For example, Textually.org reports on a teen that sends 8,000 text messages a month. Abberation? How about Spain, Germany, Korea, or the UK?

I believe one reason that e-commerce has been slow to take off is the difficulty of reaching the local store. For example, consumers know they can pick up their phone and use directory assistance to locate and be connected with any reputable retailer. There has never been the confidence that you could always do the same with the web or email. The medium's lack of accountability has held up web eCommerce, in my opinion.

This is changing, somewhat. Yahoo! is giving free web hosting to small businesses. AOL is the latest to jump on the Ingenio pay-per-call bandwagon: you see an ad, click the link, and a call is established between the retailer and you. Yet for as many companies that have invested in phone systems, a mere 18% gave their own phone systems a passing grade in a recent survey (registration required). As rabid as teens are about mobile, it's going to take some real thinking about retailer coordination to make local shopping work.

EU vs USA: How The Marketplaces Rank

Eu_vs_usa_1The NYTimes reports on a new Swedish study that shows if European Union members were states in the USA, they would belong to the poorest group of states, on par with Arkansas, Mississippi and West Virginia. France, Italy, Great Britain and Germany have lower GDP per capita than all but four of the states in the United States.

The report (Adobe Acrobat required), published by Stockholm-based research company Timbro, complains that too many European policymakers and voters seem to be divorced from reality. While they publicly state their desire to enjoy the same luxuries and welfare benefits as Americans, there simply isn't the impetus to pursue stronger economic growth policies.

My view is that mall companies like The Mills Company and Westfield, through their European operations, have a unique inroad into a historically state-controlled political minefield. U.S. retailers like Brookstone are able to use their existing relationships to speed their time to launch. Countries like France, the UK, and the Netherlands have seen how this model spurs consumption in the short term, and helps develop exportable retail concepts like Zara and Hennes & Mauritz (H&M) in the medium term. This "colonization" approach enables success stories to be developed and then replicated.

The study appears to disproportionately favor Scandinavian countries. In late March, another study from KPMG noted that when disposable income was adjusted for cost of living, Scandinavians were actually the poorest people in Western Europe.

Marketplace Security Issues in the Age of Al Qaeda


Given the seriousness of security issues, the real estate industry has made a concerted effort to create awareness of homeland security issues such as emergency preparedness and response planning through the formation of REISAC, the Real Estate Information Sharing and Analysis Center. As Edward Glickman, president and CEO of PREIT noted, "The primary goal as a landlord is to take care of the tenant and provide a safe environment." When 9/11 occurred, Bellevue citizens flocked to Bellevue Square because they felt safe there. This was no coincidence - prior to 9/11, Kemper Freeman Jr. had consciously ensured that property security outnumbered the local police presence at any given time.

Today, more than ever, not taking the proper security precautions is seen as a major risk to the company and the brand. Not only that, but in these days of Sarbanes-Oxley, if you didn’t have the right insurance coverage on your building, you suddenly have a risk you should have been disclosing to investors.

There's a lot to do, and a lot of responsibilities to manage, especially with environmental and safety issues, increased security costs and compliance with existing and new legislation. Hawaii accidentally posted a list of 15 potential scenarios which had been disseminated by the U.S. Homeland Security Agency and was intended to be shared only with government organizations. Not only did this potentially create unnecessary anxiety, but it also revealed organizational details that didn't need to be shared.

When approached by companies about potentially cool applications like Google's Rideshare, marketplaces need to be vigilant about whether they are sharing information that may not be best placed in the public eye. While it is comforting to know that mall security has invested in global positioning software, it is probably not in your best interests to publish security vehicle information on a publicly accessible web site.

Information about a marketplace should be analyzed through a threat matrix. A threat matrix for each property provides property managers with a dashboard-like view of their property portfolio, and typically takes into account factors like asset location (is the property in an East Coast city like New York, or is it buried in the middle of the heartland), retailers (tenants such as the IRS or post offices have a different risk profile than Build-A-Bear), the neighborhood (doing an inventory of local offices, proximity to the Central Business District, transportation hubs), and traffic patterns (seasonality, chart of future events likely to cause a spike in traffic).

As Jim Rosenbluth, director of crisis management at Cushman & Wakefield put it, "Everybody knows you cannot identify every possible risk and assign a value to it, but you can go a long way toward minimizing the most-likely risk scenarios. You have to make a good-faith effort to identify the most significant risk factors and spend the money upfront to minimize your long-term exposure."

Link: REISAC slide presentation on real estate best practices

In Memoriam: Michael "MK" Krause, 1959 - 2005

MkMy friend Michael Krause passed away in his sleep last week. Like many other creative giants, I'm not sure if he really knew what a profound effect he had on so many people's lives.

His service earlier this week was a testament to the man and his relationship with his mother. From an early age, his mother Barb gave him the confidence to be himself, no matter what. And so, as one of his friends so eloquently put it, he bought the ticket and he rode the ride. I would not know MK to do a commonplace thing, and this shone through in both his artistic talent and the quality of his personal relationships. When he did things, he did it with a grand passion and sense of joie de vivre that was, quite frankly, an inspiration.

Everyone should be so lucky to have a friend like him, or a mother like Barbara Krause.

Maybe you already do.

I hope MK's example inspires you to tell the important people in your life how much they mean to you.

Link: MK Guestbook

Most Rated Luxury Brands, 2005

Luxuryinstitute_2Research organization Luxury Institute has published a list of the most prestigious retailers. The brands were rated based on superior quality, uniqueness, a measure of social status, and the ability of each retailer to make customers feel special throughout the entire customer experience. The highest rated retailers were 

  1. Neiman Marcus (score = 65)
  2. Bergdorf Goodman (64)
  3. Nordstrom's (63)

Seven brands were rated: Barney's, Bergdorf Goodman, Bloomingdale's, Brooks Brothers, Neiman Marcus, Nordstrom's, and Saks Fifth Avenue. Macy's was rated separately to measure the difference between mainstream and luxury brands.

The Luxury Institute franchise was built targeting the top 10% of the population that makes at least $270K a year. Meanwhile, local niche publications like Gotham and LA Confidential are going after the very tip of the pyramid, consumers that make $500K a year. Look to research into the luxury consumer to be inclusive of more retail brands as companies like WWD and Vogue build out their database strategy. In some ways this echoes the current war within Morgan Stanley (WSJ subscription required), which  essentially revolves around the question of whether the venerable bank will continue to stay elite or instead cater to the masses.

And maybe there's something more to that: like an investment banker, perhaps tomorrow's luxury brands will be more direct in helping consumers bridge the chasm between their life today and the life they would like to live.

Link: Behind Morgan Stanley Turmoil: Competing Visions of Its Future (WSJ subscription required)

OMA, MPEG Usher In New Era of Mobile Subscriptions

Mpegla_1The Open Mobile Alliance has finally arrived at a deal with MPEG-LA for the rights to use the MPEG patents to secure content on mobile phones, according to Reuters. The license fee is now $0.65 per handset (down from $1/handset) and $0.25 per subscriber per year (down from $0.01 per song).

This change enables services to support a wider variety of music plans, especially "all you can eat" plans. Subscribers will flock to the hitmakers like Coldplay and Gwen Stefani, but labels needed this concession in order to build their artist development business.

This change is also an important belwether for IPTV and other content providers. It enables them to be more creative in how they bill the customer. I continue to believe that companies that can simplify the complex business of television programing have a shot at nascent businesses such as helping business customers create new experiences.

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