Open Book Solutions

Howard Stern May Leave Sirius for 'American Idol'

Shock jock Howard Stern likely gave Sirius XM executives a shock on Feb. 8, when he told his radio listeners that he is considering leaving Sirius to become a judge on 'American Idol' when his lucrative Sirius contract expires at the end of the year.

A few weeks ago, Stern also said he'd been approached by terrestrial radio executives who want him to work for them. Radio giant Clear Channel recently told Bloomberg BusinessWeek it might be interested in hiring Stern.

By disclosing these negotiations, Stern may be trying to up the pressure on Sirius to offer him another lucrative deal. Sirius currently pays Stern, his agent and his staff $100 million a year to air Stern's radio show on Sirius exclusively. But in the years since that contract came into effect, Sirius's growth has slowed. And its renewed focus on financial performance may forbid writing another large check.

So, if he wants to make as much money in the future, Stern may, indeed, have to look elsewhere. 'American Idol' would certainly offer a lot of money -- and tons of exposure.

Symbian Goes Open Source

On Feb. 4, the Symbian Foundation will release the first completely open-sourced version of its mobile phone operating system, a move it hopes will make it easier for developers to improve the software and create applications for use on Symbian-based phones. Starting tomorrow, programmers will be able to download, modify and use the software at no charge. The organization made pieces of its code available earlier.

The release marks the conclusion of the huge effort to turn Symbian, the most commonly used smartphone software, from a proprietary operating system only available to developers at companies like Nokia into an open-sourced one, accessible to programmers around the world. Symbian engineered the move as rival Google made a splash with Android, a rival open-source mobile operating system that's gaining steam. By 2012, Android will surpass Windows Phone and the iPhone to become the world's No. 2 most popular mobile operating system behind Symbian, according to Gartner. As rival software gained market share, support for Symbian began to flag. Symbian hopes the new, open-sourced software will help reverse the slide. "We'll see proliferation of converged devices based on Symbian happen this year," says Larry Berkin, general manager for Symbian in the U.S.

Reality TV Jumps Onto Gaming Consoles

Alas, reality TV has just jumped from the TV and onto your gaming console. On Feb. 2, Sony Computer Entertainment America (SCEA) announced it will debut an original competition reality series, The Tester, on PlayStation Network for free download starting February 18, 2010.

In the series, 11 gamers from across the country will compete "in grueling physical and mental challenges to win a position as a game tester at SCEA and a $5,000 signing bonus, all under the scrutiny of a panel of judges, including actor/comedian and diehard gamer Hal Sparks," according to Sony. The Tester, which was designed by some of the same people who gave us TV reality series Rock of Love and The Surreal Life, will be available for download on PlayStation 3 and PlayStation Portable.

"The Tester will follow contestants over eight episodes as emotions run high, alliances form and they battle with brain and brawn," according to Sony's press release. "While donning giant slingshots, paintball guns, and human hamster balls, contestants will be put to the test in a series of elimination challenges shaped around the skills necessary to be a game tester, including dexterity, communication skills and mental prowess." Cast members range in age from 22 to 36 years old and include a student, a paramedic and a used car salesman. Check out the trailer right here.

The move is a nod to the fact that many gamers play games rather than watch television nowadays. But, like the rest of us, they enjoy reality TV shows -- particularly when those series follow their fellow gamers.

Leap Wireless: No Easy Sell

Leap Wireless has hired Goldman Sachs and asked its board members to consider selling the company, according to The Wall Street Journal. Leap's shares jumped 13.1% today, to $14.92, amidst investor hopes of a quick deal.

Chances are, selling Leap won't be easy, however. As Michael Nelson, an analyst at Nelson Alpha Research, points out in his Feb. 1 note, "We believe an acquisition by AT&T or Verizon is unlikely, owing to significant regulatory hurdles associated with the companies' high market share at 30% and 32% respectively." A deal would mean major divestitures.

The most likely buyer, MetroPCS, has long resisted merging with Leap. The two companies' cultures differ, and its management had been known to exchange potshots during a prior merger attempt.

Moreover, the combination would basically bring together two companies that are struggling to grow and prosper. In the first nine months of 2009, Leap's losses mounted. Metro is in the black, and growing, but that may change. Amidst rising competition, both companies have been aggressive on pricing, and Metro's financials could suffer as a result. "We expect no free cash flow generation in 2010 and note that next year's free cash flow generation will be highly dependant on how far the company can cut capital spending," Pali Capital analyst Walter Piecyk wrote in a Jan. 14 note.

Leap has other options: A private-equity investor could take an interest in Leap, or facilitate a Leap-Metro merger. A foreign telco could buy Leap to gain a toehold in the U.S. market.

Mobile Phone Market Rebounds

After retrenching for five consecutive quarters, sales of cell phones returned to growth in the fourth quarter of 2009, reports consultant IDC. In that period, mobile phone sales rose 11.3%, and vendors including Nokia, Samsung and LG shipped 325.3 million units worldwide. Full-year sales were still down 5.2%, to 1.13 billion handsets vs. 2008, according to IDC. IDC analyst Kevin Restivo called the rebound "dramatic."

Yet, some vendors failed to benefit from this dramatic growth spurt. Take Motorola. The company reported yesterday that while its smartphone shipments increased in the fourth quarter, the company's overall unit sales dropped, and its market share declined from 4.7% of the global market in the third quarter to 3.7% in the fourth. Motorola expects further shipment declines in the first quarter of this year. Based on IDC numbers, Motorola clearly underperforms the market.

Nokia, on the other hand, has done well. The company, which also reported on Jan. 28, announced it has gained some market share. Clearly, even as the market begins to rise, it's not lifting all boats, though.

My Next Blog

You can find my next blog at

www.southmountaineconomics.com

I'm taking a hiatus from blogging for about a month. But I will be focusing on innovation and growth.

(If there's any problem with getting to the blog, let me know)

My whereabouts

To confirm the rumors: I was not offered a position by Bloomberg.

To my friends at BusinessWeek, both old and new: We had a fantastic run, and I loved working with you all. Sometimes we were good, sometimes we were great, but we always had integrity and soul (yes, that's the word I mean).

To Norm, Josh, and all my BusinessWeek friends who are going over to Bloomberg: Good luck! I know that you are going to build an exciting new magazine. It won't be the same as the old BusinessWeek, but times have changed, and it's time for BusinessWeek to change with them.

As for me? I've got definite plans that I'm not ready to post about yet. I will, however, put up a new email address before closing down shop here. I will continue blogging at a new location, with a hiatus of a month or two.

Service Sector Inflation Ticks Up

The headline number for this morning's PPI report was an 0.6% decline in the price of finished goods less food and energy ("core PPI"). In fact, core finished goods PPI has fallen for 4 out of the past 6 months. So if we just look at this number, inflation seems like it isn't a problem,

However, I prefer to look at a different statistic in the PPI report--the PPI for traditional service industries. Never heard of it? You are not alone. Starting a few years ago, the BLS aggressively broadened its coverage of the service sector. In particular, the "traditional service sector" includes everything from telecommunications and web search portals to health care to banking to management consulting to fitness centers.

So now the BLS publishes a PPI for these service sector industries (it's at the back of the report, pp 20-21). I wrote about the service sector PPI on my blog in February, in a post entitled "The PPI says: Service Sector Deflation is Almost Here."

Now, we have a really big divergence in the path of the core finished goods PPI and the service sector PPI. Core goods inflation is collapsing. But services PPI is slowly ticking up.

I think the service sector PPI is a better measure of the underlying inflation rate, because it covers a broader swathe of the economy. So this chart tells us that inflation is slowly starting to recover.

Innovation, Jobs, and Corporate Performance

Next week I'm looking forward to speaking at two important innovation-related conferences. On Thursday I will be in Chicago at "Innovating Our Way to Prosperity" put on by The Institute for Work and the Economy. It's obviously a critical topic these days, given the weak state of the job market, and I will be giving a talk on "Moving Beyond America's Innovation Shortfall."

Then on Friday I will be in Philadelpha at the Wharton School, at "Borderless Innovation: Management Practices, Promises and Pitfalls" presented by the Mack Center for Technological Innovation. This trend towards borderless innovation is central for today's global economy, and understanding how it works may be crucial for our future global growth, and our future standard of living. My talk is entitled "Global Innovation: The Big Experiment."

And yes, these two conferences are closely related to each other. In the first conference I will look at the innovation shortfall and its aftermath from the viewpoint of job creation in the U.S., and in the second conference I will focus on global innovation and corporate performance. It's my contention that these two perspectives, while very different, actually come down to the same issue: How can we assure that we get more genuine innovation in the years going forward?

I will likely post my presentations afterwards.

Advanced Technology Deficit Widens in 3rd Quarter

Here's more bad news for jobs.

According to this morning's trade report, the advanced technology trade deficit widened to $18.2 billion in the third quarter, up from $12.9 billion in the second quarter of 2009 (advanced technology products include 10 categories, such as information and communications, biotechnology, and aerospace).

The third quarter ATP deficit, at $18.2 billion, was just below the $18.9 billion of a year ago. I believe that was the record, though, I'm not 100% sure.

Nevertheless, the widening of the ATP trade deficit is not good news for U.S. production jobs, since it means that even as demand for innovative products recovers, the production benefits are primarily being felt overseas. Employment in the computer and electronic products industry, for example, fell at a 10% annual rate in the third quarter.

What about royalties and license fees to produce the new technology--doesn't the U.S. benefit from that? The total trade surplus in royalties and license fees was $14.4 billion in the third quarter, smaller in magnitude than the advanced trade deficit. Given that royalties and license fees include movies and tv shows as well, it's likely that the amount of revenue from licensing the overseas production of advanced technology products was actually substantially less.