Losing money, against all odds
Raleigh’s WRAL-TV had an interesting report a few days ago. The Web version of the story started this way:
Alcohol is a $720 million a year business in North Carolina, and state law allows North Carolina government to have a monopoly on sales. However, a number of ABC stores across the state are barely surviving or are losing money.
Think about that for a moment. State government has monopoly control over a high-demand, nearly recession-proof product — and it still manages to lose money.
To be fair (which I usually do only reluctantly), the state’s ABC stores are operated by local boards, which essentially act as franchisees of the state’s retail booze network. And it’s those boards that have difficulty in some places making money selling an exclusive product. Still, there’s no escaping the reality here: When politics intrudes into what ought to be a guaranteed cash cow of a business, you can be sure it’ll eventually turn into a money loser.
November 5th, 2009 at 4:29 pm
While I’m sure politics probably contributed to some non-sensical decisions that contributed to the current plight of these underwater operations, the bigger issue here is the lack of a market to correct any problems.
In the real world of for-profit-business, the market beats the non-performers out of the way. Those who operate efficiently are rewarded and the others are punished. As those good folks in Pembroke figured out, if there is little chance you’ll be shut down, it’s easier to stick your hand in the cookie jar than bake the cookies.
Even well intentioned individuals will suck you dry in the long run. In every imaginable industry, there will always be losers — even some people who buy proven businesses in a box like a McDonalds franchise (where, if you read and follow the directions, it’s probably the closest you can come to buying a currency printing press) somehow figure out how to lose money. The difference is these losers will eventually be forced to sell or close their doors while the losers running the government anything are just going to keep operating in the red.
In the real world, the losers lose. In government, the losers work till retirement and then collect pensions.
November 6th, 2009 at 7:48 am
Well said, both of you. How deep will the dagger go into the heart of the American economy when the all powerful, Federal government takes over the entire health care industry?
November 6th, 2009 at 8:09 am
State government should not be in the business of selling alcohol. Full stop.
November 6th, 2009 at 10:13 am
Well Mikey, I’m not exactly 100% behind government run heath care, but the health care dagger is already scratching the heart of the American economy without the government’s help. Just like education, the cost of any product or service which continues to rise in multiples of inflation in a perpetual ascension will eventually become unaffordable for most everyone. With a service as critical as health care, that presents a real problem. If other countries have figured out how to stem this tsunami and we can’t, it really makes no matter how great the American spirit is, we will enjoy a significant disadvantage. Unfortunately, this is an extremely complicated issue and the average American has no patience for complication — only the right to vote no matter how ill informed.
On the much simpler matter of peddling booze, I actually agree with Loco — government shouldn’t be in the business of selling anything. They would be better off collecting taxes from the profits of people who have incentive to do it better.
November 6th, 2009 at 1:35 pm
Jeez. I think I have a man-crush on NotThatImportant.
This is freaking poetry. I bet John Maynard Keynes is wiping a tear from his eye right about now.
“Just like education, the cost of any product or service which continues to rise in multiples of inflation in a perpetual ascension will eventually become unaffordable for most everyone.”
” With a service as critical as health care, that presents a real problem. If other countries have figured out how to stem this tsunami and we can’t, it really makes no matter how great the American spirit is, we will enjoy a significant disadvantage.”
“Unfortunately, this is an extremely complicated issue and the average American has no patience for complication — only the right to vote no matter how ill informed.”
Gearino, how come you never say stuff this profound? OK, OK you do, but it’s expected.
November 6th, 2009 at 4:20 pm
Could what NotThatImportant said about the alkyhall bizness apply to Gearino’s old stompin’ grounds…the newspaper industry?!
“In the real world of for-profit-business, the market beats the non-performers out of the way.”
November 7th, 2009 at 1:07 pm
Thanks for the chuckle John. You saved me from having to make myself laugh again.
I’m going to go against my better judgment and respond to teekay. I think this is a bad idea for 2 reasons (well 3 actually). One, it’s a fairly complex explanation and I don’t believe you have the patience for it. And second because I suspect it will be wasted text as you likely harbor some grudge against the N&O or newspapers in general because they don’t serve as cheerleaders for your opinions–your post reads to me as a “kick them while their down” poke in the eye. Third, this might be REALLY long winded and cause some people to think I’ve really lost it now!
I will also state, in the interest of full disclosure, that I love newspapers and have a tough time imagining life without them. Aside from that, I will attempt to be realistic and, as always, fair.
The issues of newspapers as a business (the way they have historically earned revenue) is complicated by a couple factors. The first is that, beyond providing a good/service for readers, they also provide a public service which is extremely important — uncovering public and private malfeasance and a general information provider. All of society benefits from this whether you are a subscriber or not. Calculating a value for that service would prove extremely challenging if not impossible to perform.
Secondly, the market in which newspapers compete is a broken one. It isn’t subject to normal market forces because one of the most valuable components of it’s product doesn’t directly generate revenue and for the reasons explained in the next paragraph. As most economists will tell you, if a market is influenced by outside forces, the best outcome will not always result.
I touched on this in another WAW rant several threads ago but some of this is the newspapers’ own doing. This is the more complicated issue that many people don’t (or don’t want to) understand. The market, as it currently exists, is already beating the newspapers out of the way. The problem is that they are not being beaten by any sustainable business model. Many of the media sources people assume will replace newspapers when they’re gone (some think they already have) presently get a major portion of the most expensive component of their own products (researching, recording and reporting of the news) from NEWSPAPERS. And they are not paying the full cost of providing it. If and when the last newspaper lays off it’s final investigative reporter, TV stations, radio, web portals and other online media sources (including even WAW) will be at a huge disadvantage to keep up with what’s going on in the world around them and report anything worthwhile to their audiences. It will become extremely expensive to continue and will have a significant negative impact on their entire business model.
Having said all that, I don’t necessarily believe that a newspaper (print or online) is the ideal product that doesn’t need to evolve. I’m simply pointing out that the normal market forces which would mold a more efficient a better product/service are absent here and the outcome might not be so rosy.
November 7th, 2009 at 9:41 pm
Hey, NTI, I don’t appreciate being talked down to. Why would you assume I have no patience for reading your not-that-important rant?
Your second mistake was thinking I have a grudge against newspapers when, in fact, I, too, love the medium and wonder who will gather the news for the other news outlets when newspapers can no longer sustain their business model. And who will advocate for the people and act as watchdog in the local media markets?
I have no axe to grind with newspapers; I spent 30+ years in the business side of newspapering and understand all too well the issues and forces that drove them to this predicament. I was part of it. Newspapers were complacent and never recognized, or didn’t recognize in time, that the internet and other media were eroding their readership and advertiser base. Too late, they began trying to compete. But by the time they learned to use the new media, it was too late. Ad revenue had declined and their advertisers (help wanted, real estate and automotive, mostly) found they could reach more people more efficiently in other ways, mostly online. Without the ad dollars, papers can’t afford the news staff, newsprint, research, etc. The medium becomes less relevant to the reader; the advertiser gets less response to ads and pulls out; revenue declines, resulting in a smaller news hole; readers get less value; and so on and so on.
Newspapers have always been the leader in news gathering. Look at all The N&O has done lately. But sustaining the cost-intensive model of printing and delivering a news product every day seems to be untenable. Maybe their role in the future will be not to produce a news product but to provide content for others’ products.
November 8th, 2009 at 12:45 pm
Well my apologies teekay. I obviously misread your comment. My assumption was based on the lack of any meaningful argument or analysis in your original post — only what appears to be a disparaging stab in want of any context. You state you have no axe to grind, but unless you’re saying you were among those acting complacent, your later words seem to be a description of the axe.
I will take you at your word and also thank you for your personal contribution to the industry. However, I do think you are still missing an important issue in your analysis.
Your statement “But by the time they learned to use the new media, it was too late. Ad revenue had declined and their advertisers… found they could reach more people more efficiently in other ways, mostly online.” presupposes that newspapers (or any other business for that matter) have now figured out how to provide content online. I do not believe this to be the case now or, unfortunately, at any time soon. One of the points I was attempting to make is that the original business model of newspapers (generating revenue only from advertising — well the lion’s share of it anyway) is at the core of the problems plaguing the industry today. While advertising remains a valuable service and newspapers once had a very strong position in this space, this segment of the news business was directly exposed to market forces that did, in fact, work to mold a more efficient and better product/service.
While you may blame the dilution of revenue on complacency of advertising products, I’m not sure (even with the benefit of hindsight) there was much the industry could do to protect these interests at the level they once enjoyed. What the market accomplished brilliantly was whittling the bloat from the advertising spend (clearly a more efficient end) to the point that the subsidy required to fuel the news components could no longer be sustained. In my judgment, the major mistake that lead us to where we find ourselves was not doing more to protect what is arguably the more valuable service being produced — the news content. The AP and wire services, while well intentioned, helped diminish the perceived value of news content by not charging enough for it.
The questioned yet to be answered is whether a true market based business model can exist to produce unbiased journalism of the kind that acts as an informer for society and watchdog for the public. We know this is an extremely valuable resource to any society but who should pay for it and how?
November 9th, 2009 at 10:10 am
Newspapers had a business model that lasted for centuries - physical distribution of a printed page. They should count themselves lucky to have stayed in business that long. But now their monopoly on the printing press is gone never to return.
November 9th, 2009 at 12:41 pm
Loco,
I don’t think anyone is arguing with that statement. My point is that society has also benefited from this business model because, for all that time, the cost of the gathering and reporting news has been shouldered by someone else — advertisers. The death of this business model is not necessarily a good thing because nothing presently exists to fill the void.
You may disagree but you should also count yourself lucky that they stayed in business that long and it didn’t cost you anything.
November 11th, 2009 at 9:43 am
I’m not sure why you think the newspaper is no cost to me. The N&O sure sends me a bill. They charged me more this year than they did last year. Yes, I understand they are mostly supported by ad revenue lack of which is the origin of their financial distress.
I’d cancel the thing but my wife likes to read the local news. That, by the way, is the model for their success. It would damage their delusions of grandeur to no longer report on national news but they should move to the segment of the market that no one else is covering and in which there is no competition.
The problem is that the print news business has been declining for years. Formerly there were several competing papers. If one didn’t get the story right, the other would embarrass them by doing so.
There is now a monopoly on print news distribution in most cities. Having a monopoly was a great business model. For a considerable time the N&O could print the “news” without fear of contradiction. With the advent of new competing technologies we again now know when they’re not doing their job. The monopoly newspaper is having trouble dealing with the damage to their self image as the final arbiters of what’s news.
The N&O is not even locally owned any more. It’s not a “benefit” for some single organization headquartered in California to apply a filter and decide what I (and the public) need to know and what I don’t. That’s a power that can be and has been abused depending on who they like and who they don’t like.
November 11th, 2009 at 11:13 am
Well I figured you weren’t a subscriber based on your posts on the other thread where you argued that nary an article about Mary Easley’s sweetheart position/promotion was published till after Purdue was firmly in place. If you read the paper on a daily basis, I’m not sure how you could draw that conclusion.
However, if you do subscribe then you obviously place some value on the product that exceeds the amount of their bill (even if it’s simply marital harmony maintenance) or you would meet the definition of an irrational consumer. Other than your N&O conspiracy theory posts, your contributions here have been pretty rational. So by that measure, you’ve gotten what you paid for. You can consider the tax dollars saved by the uncovering of the school transportation scandal, the mental heath fiasco(s), multiple DOT issues, growth of administrative pay at public universities and countless other scandals where public funds were being bilked or squandered gravy.
And sure, it would be nice if the paper remained under local ownership but, the organization still contributes plenty back to the local economy not the least of which are the 500+ jobs still there along with the local causes and organizations they support.
As far as who you think they like or dislike, I’m still waiting for your example of a Republican who has been unfairly tarnished or received a greater level of scrutiny than their Dem counterparts (Black, Phipps, Easleys, etc.) in the form of biased N&O coverage. Give me some examples to support your claims of abuse to chew on.
As I’ve hinted before I do believe a legitimate case of liberal bias could be made but it would involve an examination of subtleties in the phrasing and descriptions of facts in some of their reporting. However, I believe if you looked at the overall record of their investigative reporting, you would find they have been pretty equal opportunity. If I’m wrong, show me where.
November 11th, 2009 at 11:33 am
NTI says: “Unfortunately, this is an extremely complicated issue and the average American has no patience for complication — only the right to vote no matter how ill informed.” Does that sound a tad condescending? Should I take offense? Nah. I realize that the health care issue is big & entrenched with a lot of moving parts but experience tells me that big government is not the answer. Ever see a Brit with good teeth? To me, there are several reasons driving health care costs and the current Democrat plans don’t address any of them. The Emergency Rooms are open to one and all and no one is refused medical treatment there for any reason, even illegal immigrants. Those tremendous costs are passed on to those who play by the rules. Mention Tort Reform and all you get is a chuckle from our President but anyone with two brain cells can see the “perpetual ascension” in malpractice premiums. Who pays for that? Ask John Edwards. Most reformers feel that all Americans have a right to health care. Really? Where is that in our country’s constitution? It’s probably too late for any rational arguments with the economy in ruins and huge unemployment. (For which I blame Obama by the way.) Give us 6 more months of this and we will all be begging for any crumbs that the all merciful Federal Government can throw our way. We’ll be loyal subjects.
November 11th, 2009 at 12:54 pm
The state of NC has been almost exclusively run by Dems since before the bigot Josephus Daniels got control of the N&O in 1894. The N&O originated as the house organ of the state Dem party and hasn’t moved too far from its roots.
Ever since then, in state government, there’s pretty much no one else to talk about because the Reps don’t have the power to misbehave whether they want to or not. (That’s why there’s been no Whig scandals either). If the N&O was really doing their job Marc Basnight would be in jail.
The thing about NC’s one party system (which we’ve had for twice as long as the Soviet Union had theirs) is that there is no effective opposition party to blow the whistle. THAT’s where the oversight of the party in power is supposed to come from, not the newspaper.
Can you not put together the continuing corruption of the Dems with the fact they’ve had monopoly political power for the lifetime of everyone now living? The house organ N&O occasionally snagging a few Dem strays is only window dressing for public consumption and doesn’t address the root of the problem.
The few random scraps about Mary Easley you dug up were thin gruel for a four year period. They claim they covered it, and it was in there, but it was where the majority of people never see it. As I pointed out, it doesn’t even show up on an archive search. If they really cared it would have been on the front page day after day the minute she got the job. What they did publish was a safe-harbor-cover-your-ass coverage so the N&O’s defenders can point to it and say, “See, it was covered”.
That being said, read the coverage of Tom Fetzer when he was mayor and Jesse Helms when he as Senator. Unfortunately for the N&O both were squeaky clean and they could get nothing on either of them.
As I pointed out before, they’re still trying to get at Lauch Faircloth through his daughter’s hog farm. Quite a stretch to tarnish someone who hasn’t been in office for a long long time. There’s been as much coverage of that hog farm issue as there was of Mary Easley up until the Provost had to resign and they had to put it on the front page.
So now the N&O’s value is simply a jobs program? Ouch. You forgot the job provided to the recycling guy to carry the thing away. We’ve got to keep the N&O in operation for him.
Since you’re so good at digging things up, please find for me where the N&O has EVER endorsed a Rep for office. Please don’t bother feeding me the the old canard that the editorial pages are separate from the news pages.
November 11th, 2009 at 1:14 pm
I’m probably spending too much time here but it seems I’ve got some addiction.
Anyhow, if it’s condescending to feel it a little scary that the average voter can’t answer the most basic civics questions correctly and that people actually believe and vigorously protest against things that simply aren’t true then color me pompous — that’s fair. I admit I get a little irritated when listening to/reading arguments based on false information and/or incorrect facts.
However, I have no real issue with your post — an honest one. I don’t necessarily believe big government is the answer either. I’m sure you would have trouble believing me, but I am a capitalist first and believe in less government and lower taxes. Although I do have problems with many of the current right wing issues like bans on gay marriage. Less government should mean less government — let freedom ring!
Couple thoughts though…
Bad British teeth probably has a lot more to do with fluoridated water (or lack therof) than health care access.
While it certainly doesn’t help, it has been widely reported (with facts) that malpractice premiums are a very minor factor in the escalation of health care costs. I’m not suggesting it shouldn’t be addressed (I personally detest ambulance chasers), I just don’t believe that alone would fix the problems. I think you touched on the bigger issue in your earlier point about emergency room abuse.
Could you clarify your stand on the whole no-constitutional-right-to-healthcare issue? What exactly do you feel should happen to someone who can’t afford insurance and has the bad luck to suffer some expensive to treat ailment or any ailment for that matter? You’re quite correct that the constitution affords no such luxury but is the best solution to just let them eat cake? I believe history books contain examples of why this might not be such a good idea either.
Lastly, I do find a little humor in your laying the blame of a bad economy on Obama. Would you say that it’s 100% his fault? Should we bring Bush back to the rescue? While I don’t think you’ll find anyone who wouldn’t have liked a quicker turn around, I have a tendency to listen to economists who predicted things would get worse before they get better. I also believe the latest spike in unemployment is due to more people jumping back into the job hunt. I might concede that some Obama policies/pursuits may not have been the best or most expedient but do you really believe, in want of Obama, there would be no recession? That’s pretty funny.
November 11th, 2009 at 2:47 pm
Loco,
Personally, I think trusting the opposing party to oversee the party in power is a little dangerous. On a national level, both parties bend the truth, distort facts and figures, sometimes outright lie about matters concerning the other party and/or their behavior. I suppose that would not be the case in NC with more ideological balance in our state government? Corruption is not limited to either party regardless of who holds power. It’s partly the result of the power itself. Once you place someone in the position to make the rules, it takes a mighty ethical person to not view rules that benefit the rule maker in the brightest light.
The coverage of Mary Easley’s promotion and outrageous pay raise was very prominent in it’s placement (I believe it was front page but I can’t recall with certainty). I also believe the email deleting scandal was on the front page. The fact that you couldn’t find stories in your search — which restricted results to only stories containing the abbreviation NCSU — is no proof that coverage was limited. In fact, it illustrates your willingness to make assumptions and draw erroneous conclusions.
I was hoping you would provide specifics in your examples of abuse. Point out a matter concerning Fetzer that wouldn’t have made coverage if he was a dem?
How exactly is Lauch Faircloth being tarnished by reports that a business he started is going bankrupt? ANY prominent figure — dem, rep, independant, whig, illegal alien or otherwise — who founded a business that ranked in the top ten in it’s respective industry would receive mention in any publication in a story about that business going belly up. Any business of that significance would gain mention in one of the largest papers in the state if they stopped paying their bills and/or went belly up. The stories state nothing about anything related to ethics or even business acumen. The stories simply report the company having trouble, Lauch was a founder and his daughter owns a majority stake. How is that different than reporting layoffs at Nortel or mentioning Willie Gary when reporting on the financial struggles of Shaw University? The coverage of the bankrupt farm has been extremely limited considering the size of the operation.
And I will repeat, the provost would, in all likelihood, still be provost in want of the N&O coverage. The provost’s resignation was directly a result of the Mary Easley coverage. Any other conclusion would simply be a distortion of the facts. The only media outlet exposing the provost as a liar was the N&O till everyone else picked up the story.
Honestly, I don’t pay any attention to who the paper endorses. I don’t need them to tell me who to vote for. However, I am 100% certain the paper has endorsed Reps in it’s history. Drop Steve Ford a message, he’ll be happy to list them for you — he can probably do it off the top of his head since the list isn’t very long. However, Steve is a liberal and his job is to write his opinion and endorse candidates whose policies he agrees with. Who do you think would get the majority of the endorsements? But if you think Steve has any direction over which stories the investigative reporters work on, that would be more evidence of your willingness to make assumptions and arrive at erroneous conclusions.