Monday, February 29, 2016

Uber and Airbus Partner Up

The Wall Street Journal reported last month that Uber and Airbus would partner to form a joint venture providing on-the-spot helicopter transportation through the Uber system. This new partnership debuted during the recent Sundance Film Festival in Park City, Utah and brings together a slumping Airbus helicopter industry with the wildly successful Uber automobile transport system. Neither Airbus nor Uber would predict what the cost might be for immediate helicopter transportation, but one can imagine that the cost will be significant.

According to CNBC: “As part of a new Silicon Valley-based initiative, Airbus has established a partnership with Uber was part of an experiment that would allow Uber users to hail copters, as well as other forms of transportation. The recently-formed Airbus Ventures will operate with $150 million commitment to 'identify and invest in the most visionary entrepreneurs in the global aerospace ecosystem,' Airbus said in a release. The new link with Uber will allow Airbus to provide on-demand transportation service using its H125 and H130 helicopters. According to Airbus, the partnership will help carve out ‘a new business model for helicopter operators to access a broader customer base.’”

hat tip:  Noah Moore, Indiana Tech Law School, 2L

Saturday, February 27, 2016

Super Bowl 50 Commentary

Much has been written since Super Bowl 50 about the commercials that were broadcast during the United States largest television event of the year which broadcast on February 7, 2016. This season, corporations that wanted to advertise during the Super Bowl paid upwards of $5 million for 30 seconds of airtime to show a commercial during the game. Commentary has focused on whether companies receive true value for the right to place their product or service in front of more than 110 million viewers in the United States and millions more across the world. Some have concluded that it is simply not worth the cost to advertise during the Super Bowl because of the extremely high price tag when one considers the cost to produce the commercial, including paying the actors and creative minds behind the advertisement, the air time payment (with many companies airing 60 second, 90 second or multiple 30 second commercials), and the risk that an attempt to be provocative might fall flat or generate negative attention (think the PuppyMonkeyBaby commercial aired by Mountain Dew for its Kick Start product).

Some post-Super Bowl reports have found that corporate share price spikes when a company announces that it will advertise during the Super Bowl. Other reports are critical of corporations that pay upwards of $25 to 35 million to advertise during the Super Bowl when many consumers are unable to recognize a product as attached to a specific memorable commercial. In keeping with all of the Super Bowl commentary, one student in my Business Organizations course had this to say about watching Super Bowl commercials for purposes of evaluating whether the decision to air extravagant ads represented sound business judgment:

"For Business Organizations, we were assigned to view Super Bowl advertising from the perspective of a shareholder. Our challenge, answer the question, “Was this ad worth a minimum of $5 million dollars?” This framework made me ask, “What are the effects of marketing during the Super Bowl?” News that a company plans to advertise during the big game has been linked to a rise in stock value, but the ads may not influence consumers to purchase the product. From a shareholder perspective this would cause me to say, No, the ad does not justify the expense.

Then I began to think about the other effects of Super Bowl marketing. I am not a shareholder in any companies. My stock is all invested in the three kids I had the pleasure of watching the game with. They are 10, 9 and 7 and they were watching because they love football, not because they had an assignment for school. Watching the ads with my executive team was very frightening. Many of the products placed front and center on our TV included junk food, alcohol and medications, all part of huge public health crises in our country. While I watched the commercials with my family, I wondered, who is ultimately responsible when the products advertised are unhealthy and potentially dangerous? The cost of this advertising and the impact of these products on society may be incalculable.

Ultimately, it is not the businesses or shareholders that gain the most benefit from the Super Bowl ads. The NFL should play a role in guaranteeing that the products and advertisements we put up with to watch the game are not harmful. Advertising can be effective and ethical. Businesses that deliberately market harmful products should be held responsible. As a viewer of the NFL’s Super Bowl 50, I was concerned that my children and other people’s children were being harmed. Many children have already been harmed. In the search for deep pockets and a remedy for this harm, the NFL may be a good place to start."

-- Indiana Tech Law School 2L student

Friday, February 19, 2016

CEO Takes Home $18 Million After Cutting 25,000 Jobs

2015 was a rough year for oil and gasoline companies.  Overproduction has gasoline prices at historic lows and the bottom line has suffered across the world for many energy corporations, unless apparently you are the CEO of one of those companies.  Dutch oil giant Schlumberger, the first of the oil companies to report 2015 earnings and CEO compensation, paid its CEO Paal Kibsgaard $18.3 million in 2015, while it simultaneously cut 25,000 jobs and saw its revenues plummet 41%.

According to CNN/Money:  "CEO Paal Kibsgaard received total compensation worth $18.3 million in 2015, the company reported, down only slightly from $18.5 million the year before. The rest of Schlumberger didn't fare so well. The company cut 25,000 jobs during the year, or 20% of its workforce.  Revenue was down 27%, and profit plunged 41%. Schlumberger shares tumbled 18%. The weak results and layoffs are the result of the plunge in the price of oil."

Why?  If revenue, profit and share price tumble, why does CEO pay remain at extraordinary levels?