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Alyssa

Finding the Price Points for a New Generation of Television Technology

I think James Poniewozik is largely correct that while the networks may be upset about new technologies that let viewers skip ads, they might be better off trying to find fee structures that are responsive to new technologies:

But they want—and a good business would provide—many more ways of paying, if not with their eyeball attention to ads, then with money. (There’s the possibility, for instance, that networks could raise fees to networks like Dish that offer ad-zappers, which fees could be passed along to those who ad-zap, to replace lost ad revenue.) People want to be able to buy episodes, subscribe to shows, watch on their own schedule, and bypass ads they don’t want. In the process, the relationship of people to TV networks will change: right now, networks’ true “customers” are the advertisers, because they’re the ones who pay money.

The TV business is changing from one with a single main revenue source to one with a lot of them; the transition is bound to be painful for the networks. But quashing an option your consumers want is the wrong way to forestall that pain. You can’t pull the plug on technology forever, and if that’s your best response to change, it’s your own fault when consumers start tuning you out.

I also think this is easier in theory than in practice, and is going to take years to sort out. One important experiment will be to see how consumers respond to a Netflix or Hulu Plus pricing scheme that’s more reflective of the actual cost of supporting that content and the production of higher-quality original content. A second step will be to see how consumers behave if they’re faced with regular but reasonable hikes in the prices of those services, which are responsive to both renegotiated content contracts and rising wages and costs. I would like for it to be true that people are willing to pay for content at a cost that will support a fairly diverse array of high-quality programming, but as I’ve written before, we don’t actually have proof of a viable financial model yet, and it’s not wrong for the networks to be cautious about blowing up an existing business model in favor of optimistic projections.

We have a sense of what we’ll pay for three distinct products in this market. First, there’s what people will pay for bundled cable, both in terms of what prices will get them in the door and what prices won’t lead them to quit at the end of a first-year contract. We also have a sense of what we’ll pay for a single episode of television, because iTunes and Amazon have established that price for consumers much in the way cable companies did. And we know we’ll pay $8-$30 a month for streaming video and DVD exchange services. As consumers, I think we have little sense of the ad revenue we’d have to make up if we were to replace advertisers as networks’ customers. I’d be excited to see a good experiment in how to price out new models, but it would take serious negotiation between distributors and the networks to set one up, and it would need to include both coastal and rural consumers to account for differences in broadband penetration and avoid preference bias. If folks have ideas on how to make such an experiment work, leave them in comments. It’s time to start thinking beyond the simple idea that evolution is good and important, and start talking in greater detail about how we get there.

Economy

Apple Used Low-Tax States, Foreign Tax Havens To Dodge $2.4 Billion In Taxes Last Year

Sales of iPhones, iPads, and iPods have made Apple the world’s most profitable technology company — its stock price is hovering around $600 a share, and it is now larger than the rest of the American retail market by itself. Apple often boasts about the number of jobs it has created in the United States; according to its own estimates, the company is responsible for a half-million American jobs.

What Apple hasn’t told Americans, though, is that an intricate financial set up utilizing low-tax states in the U.S. and offshore tax havens has allowed it to skirt billions of dollars in American taxes over the last decade. By setting up financial offices in states like Nevada — which has no income tax — and routing other profits through Ireland, Luxembourg, and nations in the Caribbean, Apple avoided an estimated $2.4 billion in American taxes in 2011 alone, the New York Times reports:

Apple’s headquarters are in Cupertino, Calif. By putting an office in Reno, just 200 miles away, to collect and invest the company’s profits, Apple sidesteps state income taxes on some of those gains.

California’s corporate tax rate is 8.84 percent. Nevada’s? Zero. [...]

Apple was a pioneer of an accounting technique known as the “Double Irish With a Dutch Sandwich,” which reduces taxes by routing profits through Irish subsidiaries and the Netherlands and then to the Caribbean. [...]

Without such tactics, Apple’s federal tax bill in the United States most likely would have been $2.4 billion higher last year, according to a recent study by a former Treasury Department economist, Martin A. Sullivan.

Apple’s American tax rate was 9.8 percent in 2011, according to Sullivan. Its global tax rate, however, was just 3.2 percent and has been in the single digits for the last decade. Its profits are skyrocketing. The amount it pays in taxes, however, has barely budged:

While dodging American taxes, Apple has lobbied both state and federal governments for large tax breaks. The California state legislature has passed four tax breaks aimed at tech companies since the mid-1990s — the most recent, which Apple lobbied for itself, will cost the already-crunched state government $1.5 billion a year. The company is part of a coalition called Win America that has lobbied Congress to temporarily lower the tax rate on overseas profits that are returned to the United States — even as it admits to routing profits overseas to avoid American taxes in the first place.

Corporations like Apple have argued for lower corporate tax rates in the United States, insisting that the current 35 percent tax rate is hurting growth. But while that is the highest marginal rate in the world, companies rarely pay it. The U.S. is actually near the bottom in corporate tax revenues collected; in 2009, only Iceland collected a smaller share of its GDP in taxes. That has an adverse effect on all taxpayers, who foot the bill for the $60 billion lost to corporate tax dodging each year. In 2009, offshore tax havens cost the average individual taxpayer $434; in 2010, making up the lost revenue would have required an extra $2,116 from each American small business.

Economy

On Worker Rights, Apple’s Credibility Gap Is As Huge As Its Profit Margins

Our guest blogger is Scott Nova, Executive Director of the Worker Rights Consortium.

Apple’s response to its current public relations crisis regarding its labor force in China has been to promise big improvements in working conditions at its supplier factories. Unfortunately, there is good reason to doubt the sincerity of those pronouncements.

After all, Apple has been promising to end labor rights violations at these factories for six years, but has neither delivered on these pledges nor done anything to hold the suppliers accountable.

Consider the example of excessive overtime, one of the glaring problems at Foxconn, Apple’s largest supplier. Workers at Foxconn’s plants in China have frequently been compelled to work upwards of 90 extra hours a month, sometimes far more, while the legal maximum in China is 36. Independent investigators have been reporting these abuses for years and auditors paid by Apple itself have just confirmed that massive overtime violations are still ongoing at Foxconn.

After these violations were first exposed in 2006, Apple issued a public report pledging corrective action. “Employees worked longer hours than permitted by our Code of Conduct,” Apple admitted, but “[Foxconn] has enacted a policy change to enforce the weekly overtime limits…and a management system has been implemented to track compliance… Supervisors must receive approval from upper level management for any deviation.”

Apple added, “We are committed to ensuring compliance with our Code of Conduct and will complete audits of all final assembly suppliers in 2006… In cases where a supplier’s efforts in this area do not meet our expectations, their contracts will be terminated.”

That certainly sounded like a strong stand by Apple: any supplier that did not meet the company’s labor standards would be terminated.

But as it turns out, Foxconn did not meet Apple’s standards. Instead, Foxconn continued to violate overtime laws, systematically, for the next six years (and counting). Since there are hundreds of thousands of workers making Apple products for Foxconn, the individual violations of Chinese overtime law that have been committed in the assembly of iPods, iPhones, and iPads now number in the millions.

Read more

Economy

Apple And Other Tech Companies Make Billions But Pay Lower Taxes Than Middle Class Families

Apple and several other major tech companies, including Google and Microsoft, have been pushing for what’s known as a tax repatriation holiday, which would allow them to bring money they have stashed overseas back to the U.S. at a much lower rate than the standard 35 percent. As we have noted over and over, a repatriation holiday enacted in 2004 just provided a windfall to corporations and did not achieve any of its policy aims. And corporations, of course, proceeded to stash even more money overseas in the hopes that Congress would adopt another holiday somewhere down the line.

And as a new report from the Greenlining Institute found, tech companies are already doing quite well when it comes to lowering their tax bills. In fact, the top 30 tech companies in the Fortune 500 paid an effective tax rate of 16 percent, after making $181 billion in profits last year. Apple, despite its billions in profits, is paying lower taxes than middle class families:

The tax rate paid by these companies has plunged – from 23.6 percent in 2009 to 19.9 percent in 2010 and 16 percent in 2011. The hypothetical top corporate tax rate of 35 percent is almost entirely a fiction.

The tax rate paid by Apple, the world’s most valuable company with a stock valuation that passed $500 billion in March 2012, has dropped even more dramatically. With profits soaring past $34 billion last year, the company’s tax rate fell from 24.8 percent in 2009 to 14.7 percent in 2010 and 9.8 percent in 2011. Apple’s tax rate over the last three years was less than that of middle-income Americans with average household incomes of $64,500 per year; its 2011 tax rate was lower than that of American households making an average of $42,500 per year.

Tech companies use a variety of activities, including shifting profits offshore to low- or no-tax jurisdictions to make their tax bills dramatically drop. And a Politico review of financial documents found that the companies pushing hardest for a repatriation holiday have moved hundreds of billions of dollars overseas, counting on Congress to provide them with yet another misguided tax break.

Alyssa

Mike Daisey, Kony 2012, John D’Agata and the Power of the Truth

Reading through the transcript of this weekend’s episode of This American Life, in which Ira Glass explores how the program came to air an excerpt of Mike Daisey’s monologue, The Agony and the Ecstasy of Steve Jobs, despite clear warnings that numerous elements and anecdotes in it were fabricated for dramatic effect is a striking thing. It’s not just that Daisey’s actions will likely harm the larger—and still just—cause of pushing Apple to improve working conditions throughout its supply chain, or that a venerable program let itself be tripped up by the desire for a good story. It’s more that it’s a clear articulation of a troubling worldview that’s been awfully present in campaigns from this one, to Stop Kony, and that’s penetrating even the academy itself: that in telling moving stories, emotional experiences may be more important than precision.

” I’m not going to say that I didn’t take a few shortcuts in my passion to be heard,” Daisey told Glass. “But I stand behind the work. My mistake, the mistake that I truly regret is that I had it on your show as journalism and it’s not journalism. It’s theater. I use the tools of theater and memoir to achieve its dramatic arc and of that arc and of that work I am very proud because I think it made you care, Ira, and I think it made you want to delve. And my hope is that it makes—has made—other people delve.”

But of course, it didn’t really take Daisey’s monologue to make people delve. Daisey himself says on the program that “I wanted to have the voice of this thing that had been happening that everyone been talking about,” which suggests a desire more to capitalize on a rising wave of conversation to instigate it. And the New York Times reporting by Charles Duhigg and David Barboza has certainly succeeded in getting people talking and thinking critically about Apple and its supply chain without a whit of fictionalization for dramatic effect. It’s odd that Daisey wouldn’t trust the facts when the facts have proven to be so compelling time and time again.

The same is true for the efforts to stop Joseph Kony and the Lord’s Resistance Army. While some of the defenders of the Stop Kony! viral video campaign suggested that it was forgivable for the video to make factual errors, including the number of members in the LRA and the fact that Kony’s moved out of Uganda, in the name of raising broader awareness about Kony’s brutality, it’s not particularly clear why such a thing was necessary—or effective. In fact, there’s been rather significant media attention paid to the campaign against Kony over the past several years. Samuel Childers, the evangelical preacher and biker who’s made it a personal mission to stop Kony, was profiled in Vanity Fair in 2010 and the subject of a movie starring Gerard Butler, Machine Gun Preacher, released last year. In other words, Kony, and the kind of militant interventionism by white Americans that Stop Kony championed, are already media stars here in the U.S. Stop Kony’s exaggerations weren’t necessary to achieve that kind of fame, and as Max Fisher at the Atlantic’s pointed out, their efforts seem to have produced a short-term interest spike rather than a long-term engagement.

In a recent essay in the New York Times examining the ideas of John D’Agata, a writer and professor who got into an extended battle over an essay for The Believer that had already been rejected by Harper’s because of how fast and loose it played with the facts, Gideon Lewis-Kraus explains:

D’Agata proposes that we give up the idea that there is a genre called “nonfiction” and instead return to the blurrier, artier time (from Herodotus until around 1940) when we were content with the term “essay” — “an attempt, a trial, an experiment.” From his rostrum as an influential professor in the nonfiction program at the University of Iowa, D’Agata has often argued that we read such essays for the poetry of “experience” rather than for mere “accuracy.”…He does defend James Frey, sort of, because even though he thinks Frey is a bad writer, he did fulfill his one obligation to his readers: “to give them a good experience.”

But why should a good experience trump the facts? And if you’re giving readers of non-fiction a powerful experience that’s built on fabrications, doesn’t that mean the experience is hollow, in danger of imminent collapse? Isn’t the question of whether an experience is good deeply tied to its authenticity? That depends on whether the story is presented as true or not. It’s one thing if Mike Daisey (or, say, Tony Kushner) had written a play called The Agony and the Ecstasy of Steve Jobs (in its own way a Kushner-like title), where actors played Daisey, his translator, and the people he interviewed, and included clear signifiers that what they were relating was fictional, whether in the character names they were given, the cadences of their dialogue, or in the use of made-up companies or locations. If an audience expects that they’ll experience fiction, and experiences fiction, if then there’s no inconsistency to undermine their experience. If an audience expects facts and is given fiction, the realization that they’ve lied to may be shattering, and permanently discrediting. “Each time, I left the theatre electrified,” Michael Schulman writes in the New Yorker of his experiences seeing Daisey, “in part because I took what I was hearing as non-fiction.”

Whether it’s Mike Daisey, Stop Kony’s factual errors, or Greg Mortenson’s lies about his experiences in Central Asia, embellishing perfectly powerful stories for effect speaks of a insecurity about the power of the facts. And to an extent, I understand that sense of desperate urgency to bring attention to a cause in which is someone is deeply invested. We live in a deeply broken world, and it’s hard for an issue to break through and become a priority for the large number of people it would take to make a meaningful difference. But you can’t bridge the difference between what the facts are and what they wish you were with fiction if your viewers or listeners expect facts—and if you expect to motivate them to act in the world.

Alyssa

Mike Daisey’s Apple Lies May Not Have Had the Effect He Intended

Mike Daisey

Earlier this year, This American Life broadcast its most popular episode ever, an excerpt of Mike Daisey’s one-man show The Agony and the Ecstasy of Steve Jobs, about labor conditions in Apple’s supply-chain factories. Today, in a letter posted on the website of Chicago Public Media, which produces the show, host Ira Glass announced that TAL was retracting the story, citing numerous fabrications in Daisey’s account, and the breakdown of the program’s fact-checking process which allowed the episode to make it to the air. While there will be numerous debates about what happened at This American Life and the nature of non-fiction writing, there’s another significant question at stake: did Daisey’s report actually do what he’d claimed was his goal and move people to action?

It’s not that the misdeeds of managers at FoxConn were a secret before Daisey’s story aired. Fantastic reporting on the subject has been done prior by Wired, which chronicled a rash of suicides at a factory run by Foxconn, a key member of Apple’s supply chain, and by the New York Times since, chronicling abuses at a number of Apple suppliers. But Daisey’s monologue stirred up a particular debate. A petition inspired by the broadcast attracted 250,000 online signatures in a matter of days; Daisey became a cable news regular, and the story hot talking-head fodder; and as the wave of stories crested, Apple itself invited independent auditors onto its assembly lines and pressured its primary manufacturer to increase wages in response to growing public outrage. For activists who have been trying for years to pressure technology companies into embracing stricter labor standards in much the same way they did the garment industry, this felt like a moment.

But for all of the attention that Apple’s toxic partnership with FoxConn received in the last few months, Apple’s stock climbed above $600 a share this week. Their latest product is expected to break more sales records. And by some measures Apple is now the world’s largest corporation. Consumers may have been moved to sign petitions, but not, apparently, to change their purchasing decisions. Daisey claims he was motivated to fabrication by a desire to speak for vulnerable Chinese workers, and to connect deeply with American listeners. But the effect of his work may not have been as deep as he believed it to be. What we need is honest accounts of what Apple does to the workers it its supply chain. Stories that are true, rather than simply moving, are the only possible starting place for a campaign to hold Apple—and ourselves—truly accountable for the conditions that the company and we as consumers benefit from.

Economy

Apple Is Now Larger Than The Entire American Retail Sector

Apple raised eyebrows in January when it revealed that it was sitting on nearly $100 billion in cash, most of which it is holding overseas in order to avoid repatriation taxes it would have to pay should it bring the money back to the United States. Two months later, Apple’s stock market performance is raising eyebrows again, as Zero Hedge notes that the company is now bigger than the entire American retail sector:

A company whose value is dependent on the continued success of two key products, now has a larger market capitalization (at $542 billion), than the entire US retail sector (as defined by the S&P 500).

Apple has faced controversy about its international labor practices, including its outsourcing of jobs to other countries, and in response it issued a report early this month claiming credit for 514,000 American jobs. Though some disputed the report, Apple claimed it directly employs 47,000 Americans and estimates that the other 257,000 are employed by companies that make component parts, deliver the products, or are employed because of Apple’s effect on the economy.

Economy

Following Progressive Pressure, Apple Supplier FoxConn Increases Wages For Its Employees

Chinese manufacturer FoxConn, a key supplier for the world’s largest technology company Apple Inc., today announced it will be raising workers’ wages by 16 to 25 percent in response to public outcry over reports of worker mistreatment. The move comes after nearly 250,000 individuals signed a petition on Change.org demanding Apple hold its suppliers accountable for violations of fair labor practices.

FoxConn is best known in the United States as Apple Inc.’s largest supplier, manufacturing the technology giant’s popular iPad, iPhone and signature Mac computer products, in addition to dozens of other gadgets for other technology companies. But it has also gained a reputation as a chronic violator of human rights and fair labor practices.

A widely-circulated cover story in Wired Magazine’s March 2011 issue looked at an alarming string of 17 suicides in the spring of 2010 by workers in the FoxConn facility, and a subsequent report conducted a year later showed how the conditions that were thought to have led to the suicides were still prevalent in the factory.

The petition on Change.org was created in reaction to the January 6 episode of popular radio show This American Life. The episode was an adaptation of a one-man show performed by Mike Daisey called “The Agony and Ecstasy of Steve Jobs.”

In the report, Daisey — who traveled to China to learn about FoxConn and its employees firsthand — described a factory where managers turn the other cheek on child labor, and workers, some as young as 13, are forced to stand during 14 hour shifts and live in cramped dormitories on the FoxxConn campus. In the weeks since, Apple announced it was requesting that the Fair Labor Association conduct random searches of the FoxxConn plant for violations of Apple’s supplier policy.

As Think Progress has noted, Apple, which recently overtook Exxon as the world’s largest corporation in terms of market capitalization, has spent the last decade earning record profits while the workers who make its products continue to toil in potentially hazardous working conditions.

Update

On March 16, This American Life and Chicago Public Media officially retracted the episode, citing inconsistencies with the story as told by Mike Daisey. In a statement, host Ira Glass explains that while the show was able to independently verify several key facts, other elements of the story remained unconfirmed and have since been disputed by the translator who accompanied Daisey during his trip to China. Read the full release here (PDF).

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