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Gamers launch class action lawsuit against EA for its exclusive license on Madden & NCAA games, allege the license led to overcharging

8 Apr

Electronic Arts is being sued for its exclusive license on Madden, NCAA & Arena Football League games from the past several years (presumably starting with Madden ’06 & NCAA ’06). 

If you purchased certain Electronic Arts brand football video games between January 1, 2005 to the present you may be eligible to join the lawsuit!

Thanks to Peyton Hillis & online voters, we will actually get to see a Browns player grace the Madden cover in 2012. Amazing. I was starting to think the only way that would happen is if EA Sports was so desperate for new ideas it started using kickers (Phil Dawson) or longsnappers (Ryan Pontbriand) as the face of its NFL game.

EA will probably defeat the claim against it b/c antitrust cases often force the plaintiff to put on quite an impressive amount of evidence proving the game developer truly closed competition in the market.  This civil suit standard is technically called a preponderance of the evidence (51%), which sounds relatively easy but is usually not the case in the land of antitrust litigation (this regards competition & fairness in the marketplace). 

While most gamers obviously wish other vendors like 2K Sports & Midway could make NFL games to compete with EA, it’s not like EA runs the entire videogame universe & is going Tony Soprano, telling all other game developers they’d better not think about making a football game or there’s going to be trouble.  In fact, those Blitz: The League pro football games came out, & no one is stopping another game developer from following in Midway’s footsteps and making its own unlicensed game using retired NFL players or players not part of the NFLPA (NFL Players Association). 

Midway featured former all-pro linebackers Lawrence Taylor & Bill Romanowski’s likenesses/voices as “Quintin Sands” & “Bruno Battaglia” in its Blitz games with fictional teams to overcome EA Sports’ exclusive license with the NFL.  I’m sure few people think those types of games are anywhere near as good to play as the Madden games, & I’d agree with that.  Still, those games got released & the first Blitz game obviously did some business or else Midway would’ve have bothered to make a sequel.  This may make proving competition was closed a tough sell, but more power to ’em! 

The great thing about this lawsuit is that it may make EA & the NFL think twice about pursuing another exclusivity license when the current one expires in 2012 (assuming it’s not renewed beforehand or extended further by a season-long NFL lockout in real life).  Lawsuits are bad press, & paying legal fees to defend yourself gets old fast.  Plus, most gamers hate this exclusive arrangement, so it’s a black eye for EA & the NFL.

Imagine if the NFL just lets the deal with EA run out, how great would that be?  This would finally mean diversity in the marketplace again, taking us back to the glory days of 2004!  Who remembers the joy of having your choice of:
1) arguably one of the best editions of Madden ever – Madden 2005, &
2) NFL 2K5.

Madden ’05 debuted the hit stick, & still let athletic QBs run & throw the ball accurately 70 yards down the field.  This wasn’t an extremely realistic passing attack, but was a blast to play.  That “big play” offensive model came off the heels of the Michael Vick-friendly Madden ’04 title.  Some Madden enthusiasts, including myself, still regard Madden ’04 as the most fun copy of Madden ever.

On the flip side in 2004 you had NFL 2k5, which had the fantastically low $19.99 MSRP & featured a relatively authentic ESPN broadcast presentation for the time.  Some people even thought this was a better game than the Madden edition that year.  I wouldn’t go that far, but who cares?  The point is Madden had some legit competition back then, & all was right with the world.

What does this mean for 2012 & beyond?  Video games are logically better when developers know another game has the chance to beat them in a competitive genre if each developer doesn’t bring its A game. 

So do we really need a class action lawsuit to get a better football video game?  It’s pretty clear that having multiple NFL videogames released each year would be the real victory for gamers, and we don’t necessarily need a judgment & court order to do that if the NFL takes action. 

All the NFL would have to do is decide exclusive licenses are too much of a hassle & make sure it can get more money collectively from all the football game developers than it could make from EA alone.  Once that happens, diversity in the marketplace returns, and it’s a touchdown dance for the consumer.

As for this lawsuit, EA will probably win b/c other football titles do exist.  Even if EA loses, most class-action plaintiffs will probably only get like 75 cents or a free download of “NFL Labor Dispute 2014” or whatever new idea EA rolls out in a demo the year this case is resolved.  “Labor Dispute 2014” could be like the ill-fated “Head Coach” EA series, where you attend meetings, run an office, fill out paperwork, manage a schedule…basically an awful, boring football RPG every 14-year old Madden fan will put down in favor of finishing his homework.

Whether EA wins or loses, the lawyers are probably still getting paid…so we can all look forward to that.

Here’s the details from the web page link that was emailed to members of the class action:

GEOFFREY PECOVER and ANDREW OWENS v. ELECTRONIC ARTS INC.
U.S. District Court (N.D. Cal. – Oakland Div.)
Case No. 08-cv-02820 CW

 

If You Purchased Certain Electronic Arts Brand Football Video Games
Between January 1, 2005 to the Present
You May Be a Class Member.

 

 

Membership as a class member in the Electronic Arts Litigation is the result of a lawsuit filed in the U.S. District Court, Northern District of California, Oakland Division (Case No. 08-cv-02820 CW).

What Is This Class Action About?

The class action lawsuit alleges violations of California’s antitrust and consumer protection laws in connection with the sale of certain football video games. Plaintiffs, purchasers of Electronic Arts’ football video games, claim that Defendant Electronic Arts entered into a series of exclusive licenses with the National Football League (NFL), National Football League Players’ Association (NFLPA), National Collegiate Athletics Association (NCAA), and Arena Football League (AFL), which Plaintiffs claim foreclosed competition in an alleged football video game market. Plaintiffs allege that this series of exclusive licenses caused customers who purchased certain football video games to be overcharged. 
Defendant Electronic Arts has denied any liability and all allegations of misconduct. The Court has not decided whether the Defendants did anything wrong, and this Notice is not an expression of any opinion by the Court about the merits of any of the claims or defenses asserted by any party to this litigation.

Who Are Class Members?

The Class includes all persons who, during the period January 1, 2005 to the present, purchased the Madden NFL, NCAA Football, or Arena Football League brand video games published by Electronic Arts with a release date of January 1, 2005 to the present. Excluded from the class are purchasers of software for mobile devices, persons purchasing directly from Electronic Arts, persons purchasing used copies of the relevant football video games, and Electronic Arts’ employees, officers, directors, legal representatives, and wholly or partly owned subsidiaries or affiliated companies.

What Should I Do? (Getting Further Information)

If you believe that you may be a class member (see above “Who Are Class Members”), you should get more detailed information about the class action and its potential effect on you and your rights. Further information can be obtained by going to the following website: http://www.easportslitigation.com. Additional information about the lawsuit may be obtained from Plaintiffs’ Counsel website at http://www.hbsslaw.com, or by calling Plaintiffs’ Counsel at 1-206-623-7292.

To Remain a Class Member

If you are a class member and you do nothing, you will be bound by the court’s rulings in the lawsuit, including any final Settlement or Judgment.

To Exclude Yourself from the Class(Deadline to Request Exclusion: June 25, 2011)

If you are a class member and you want to exclude yourself from the class and keep your right to sue Defendant, you must take further action before June 25, 2011. By that date, you must request exclusion in writing to this address:

Electronic Arts Litigation Exclusion
P.O. Box 8090
San Rafael CA 94912-8090

Or submit a request for exclusion electronically at the following website: www.easportslitigation.com

For further information about excluding yourself from the class go to the following website:
www.easportslitigation.com

Please do not telephone or address inquiries to the Court.
April 6, 2011. By Order of the U.S. District Court (N.D. Cal. – Oakland Div.).

Why do achievements / trophies not exist on the Nintendo Wii? Another victory for Sony’s PS3 & Microsoft’s XBOX 360

24 Mar

Do you enjoy letting your friends know you just unlocked the toughest PS3 trophy or XBOX 360 achievement for Call of Duty: Black Ops or another game everyone is playing?  It’s sort of like that saying about whether the tree falling in the forest really makes a sound if no one is around to hear it.  Accomplishing something difficult or unique in your game just isn’t that cool if none of your friends know about it.  I’ve always been puzzled as to why this same system-wide trophy concept is not available for the Nintendo Wii – perhaps it makes too much sense?! 

Nintendo has historically been very invested in their own ideas, not usually offering a response to what its competitors are creating until it’s really forced to do so by significant consumer demand for change (remember mild console flops like the GameCube, & major ones like the Virtual Boy that forced Nintendo to go in other directions).

Here’s a great article by IGN.com‘s Craig Harris from late 2009 about why Nintendo really needs to offer an achievement/trophy system for the Wii:

“Wii Need Achievements”

Nintendo was late to the online party, & now seems disinterested in offering system-wide accomplishments. It's getting to the point where 3rd-party games are almost pointless to play on the Wii. It's looking more & more like the only Wii games worth buying are those made by Nintendo.

Late last week I came home to my roommate playing Cars Race-o-Rama on the PlayStation 3. This game, released a couple of months ago, is not good – our official review of Cars Race-o-Rama put the game at a 5 out of 10. He wasn’t casually checking it out, either – he was deep into the game’s progression, almost to the point of beating it completely. The conversation went like this:

Me: You’re playing Cars Race-o-Rama.
Him: Yep.
Me: You’re playing Cars Race-o-Rama just to get the trophies, aren’t you?
Him: Yep.

This word-for-word dialogue was essentially the catalyst for this editorial. It’s been something that’s been on my mind for months now: love the idea or despise it, Nintendo is missing a huge opportunity by dismissing persistent online accounts that track individual game accomplishments. The fact that a gamer in my household was playing a crappy game just to get credit for it is a testament to the need for this feature on Wii.

For those who haven’t been following what’s been going on outside of the Nintendo camp, Sony’s Trophies are essentially the PlayStation 3 version of Xbox 360’s Achievement system. When players hit certain accomplishments in games – completely determined by the developer and unique to the game in question — they’re rewarded with a “token” that’s noted in their user account. These badges of honor are not just accumulated as a rating or score, but they can also be viewed by other players, either on the system or through a web page.

PlayStation 3’s Trophy web list is pretty snazzy.

The most significant innovation in this generation is easily motion control, and we have Nintendo and its Wii remote to thank for getting this ball moving; both Microsoft and Sony are playing catch-up in this regard, but they’re at least making some headway to out-do what Nintendo has done to change the playing field.

But arguably Innovation Number Two has to be the creation of accumulative achievements, and it was Microsoft that set this standard with the debut of the Xbox 360. Like Wii and its motion control, the Achievement system was something that started from Day One of the system’s debut and it is a standard that hasn’t changed since it began back in 2005. Since Microsoft made the move other companies have followed. Individual games have incorporated the “achievements” idea into their designs as an alternative checklist of what’s been completed. Even World of Warcraft has embraced achievements as a standard part of its experience, which will reportedly be rolled into a persistent account using its Battle.Net system.

Xbox 360’s online user game list can be pulled up by anyone.


Sony chose to add Trophies partway through the life of the PlayStation 3, so it’s had some growing pains to worry about; since it wasn’t available from the start, many early games do not have support for Trophies. But as of January 2009, Trophy support is a mandatory inclusion for all PlayStation 3 games, both in retail and in digital distribution.

The whole idea of an Achievement Score or a Trophy collection really is just a way for gamers to show off how much they play videogames. Some people call it an “e-penis,” and just like a regular penis, the bigger it is the more powerful and important you feel, right?

Some may dismiss the idea of an accumulative gamer score, and that’s perfectly fine — if a game can’t stand on its own, no amount of trophy hunting can make it any better. However, it’s hard to ignore the sense of gratification that’s felt when you’ve hit a certain milestone in a particular game, and a rewarding “Bing!!” is followed by the badge of honor that notes your accomplishment. Even if you were playing the most dreadfully designed game, that little token of acknowledgement is a wonderful release of endorphins that makes the awful experience a bit more pleasant.

Personally, even I’ve been known to play a game well past completion just to score as many Achievements and Trophies the design has to offer. An immensely fun game is made even better if there’s more to shoot for, and it’s sort of a driving force to grab all there is in a game just to prove to yourself, as well as the entire world, that it was one of your most favorite experiences on the console.

Now, this isn’t a commentary of which achievement system is better – Greg Miller chimed in with his choice last week, and Charles Onyett claims both are dumb. No, my point is how Nintendo is losing out by looking the other way. Nintendo tends to focus on its own innovations and only be reactive to strategies when it’s absolutely required – online support, for example, is in the Wii, but it’s certainly not an absolute integral part of the Wii experience in the way that Microsoft and Sony have embraced it.

It just flabbergasts me to see Nintendo taking such a blase attitude towards the growing support and backing for the system-wide, persistent accomplishments. At the Electronic Entertainment Expo this year, I asked Shigeru Miyamoto if Wii Sports Resort’s “stamps” was Nintendo’s way of addressing achievements, and possibly a taste of things to come for Wii gamers. According to Miyamoto, “I’m not a big fan of using the carrots to motivate people to play,” he said. “I want people to play because they enjoy playing and want to play more.”

Wii Sports Resort clearly had a team that understands the idea of Achievements.

My roommate’s Cars Race-o-Rama play session is evidence that gamers will play even the lousiest of games if there’s a carrot dangled in front of their nose. One of the biggest issues with Wii third-party support is the lack of enthusiasm to play anything that’s not made by Nintendo. However, Miyamoto makes a good point – but it’s a point from the perspective of someone whose games are seen as the best of the system’s best: of course people are going to play your games, Mr. Miyamoto.

But look at the rest of the system’s offerings: even the greatest third party games are being overlooked because, well, they’re not made by Nintendo; Zack & Wiki is a fantastic example of a game that’s one of the best the Wii has to offer, and yet failed to attract any sort of number on the sales level. We may never know for certain, but if Nintendo’s Wii had some sort of online persistence that not only touted to friends and colleagues that they were playing it but also awarded players with stamps that added to their gamer presence, perhaps we’d see more players tracking down a copy of Zack & Wiki. Sort of a virtual word of mouth…without saying a word.

Again, even the worst games would get played (bought, even) if there were an incentive to boot it up.

Later in the year, Miyamoto once again addressed the issue of Achievements and Trophies, this time taking a much more defensive position. At a roundtable discussing New Super Mario Bros. Wii, when asked if the Stars system in New Super Mario Bros., where certain accomplishments are rewarded with star badges in the user’s game profile, Miyamoto stated “playing the game in a certain way and have something that unlocks is something we’ve been doing for years.” He went on to note that he’s not familiar with what Microsoft’s doing because “I don’t have a lot of time to look at what other people are doing.” That, Mr. Miyamoto, is very telling.

New Super Mario Bros. Wii’s star system is a nice try, but oh so dull.

Wii developers have added in-game achievements in their projects for years — Retro Studios, for example, incorporated “tokens” into Metroid Prime 3: Corruption, and then brought that idea back for the Metroid Prime and Metroid Prime 2: Echoes ports for Metroid Prime Trilogy. But those achievements are locked down to the games, so while there is a sense of satisfaction in securing these awards, it’s only a personal one with very little opportunity to show it off.

It is, admittedly, a technical hurdle if an achievement system was added to the Wii this late in the game. Just like Sony’s growing pains by incorporating the idea more than a year after the PlayStation’s release, if Nintendo started with its system now we’d see similar problems, which most notably would be the early lack of support due to a slow push to a standard. And with Nintendo’s current “no patching games after release” policy on Wii, existing games couldn’t even be updated with the feature outside of re-issuing a brand new disc with the support. And while the enticement of achievements might be a good drive for gamers to double-dip, I’m sure many players would have a hard time paying full price a second time just to get the badges.

But the Wii at least has the basics for an achievement system – it just needs to pull the trigger to get it done. While there’s no way of “logging in” with user accounts in the current Wii firmware, the Wii can be linked to an online account via Club Nintendo and the Wii Shop Channel. And at the very least, as the Message Board and Nintendo Channel prove, the Wii records which games are being played and how long gamers have been playing them. There’s a basic foundation here for a full-on accomplishment system, but Nintendo needs to take it one step further.

Returning to Wii Sports Resort for a second, the “Stamp” system isn’t just a good start, it’s also a great name if Nintendo ever decides to embrace the idea of persistent achievements. My passport is “stamped” every time I enter a country, and I see my document booklet as a partial, personal achievement record: I’ve entered Japan, I got my stamp on September 17th, 2009. If anything, I’m on board with the “Stamp” naming structure.

Just look at what’s happening in Microsoft and Sony’s corner with its persistent accounts. Players can post their badges on Facebook and MySpace. They can check out friend’s scores on their iPhone.

Do I expect Nintendo to surprise us all in 2010 with a brand new firmware update that opens up an achievement standard on Wii? Not at all. I personally believe that those at Nintendo R&D, or the decision makers that call the shots on system wide features, don’t understand the importance something seemingly insignificant as an “e-penis” gamer score.

But there’s no doubt in my mind that the Wii system and random third-party games would be treated a lot more seriously with an achievement system in place.

Want a headache? Invest in an Ipod…thanks Apple

11 Mar

Today I wanted to load some podcasts onto my Ipod, so I plugged it into the USB cable, then pulled up iTunes to sync it.  Apple told me the syncing was complete, yet the podcasts were nowhere to be found on the Ipod.  I could see and play them on iTunes, but that was it.  I want to be able to listen to them during my run, and those 5 miles are going to be a lot more difficult with a desktop PC tower strapped to my back the entire way.

In order to discover the podcasts weren’t on the Ipod, I had to first “eject” the Ipod from iTunes (a tedious step, which involves finding the counterintuitive, tiny triangle that means “eject” on the iTunes screen – evidently it makes too much sense for Apple to spell out “eject” anywhere near that button).  So, when I plugged it back in, for whatever reason iTunes did not recognize my Ipod this time around.  I tried restarting iTunes a couple times, but no luck.  It also seemed my Ipod was frozen.  No big deal.  I’ll just turn it off.

Wait.  Where’s the On/Off button?  It also makes too much sense to have one of those, so Apple didn’t include one.  Yes, that’s right.  An electronic device in the 21st century without an On/Off switch…nice job Apple. 

If you can't figure out your I-wheel paperweight, Apple has customer support ready to talk to you..for $29 a pop.

After searching around on the Internet, it became apparent I needed to know what “generation” my Ipod was.  I looked on the front, the back, the USB cable, & my iTunes program…nothing said “4th Gen.” or anything like that.  So, finally I figured out it was an Ipod Nano, 4th Generation based on pictures of the different generations on Wikipedia (thank God for Wikipedia, a company that knows what it’s doing).

I then did some searching on how to shut this 4th-gen Ipod off – you have to hold the Menu button and the center button down together for 6-10 seconds…how intuitive.  If you locked me in a room for 3 days straight doing nothing but trying to figure out how to turn this thing off, I probably wouldn’t have thought of that.

I could understand all this if I was new to electronics and computers in general, but that is not the case.  I’ve been building websites, pages and blogs for almost 15 years, and worked in & around tech and communication firms for years, so I know my way around computers.  I was an early adopter of CDs, mini-disc players, and various sound editing & mp3 programs so I probably know more than the average person about this kind of thing, yet everything with the Ipod is counterintuitive with me.  I’m sure there are thousands of teeny boppers rocking out to Justin Bieber who figured out how to use their Ipods, so why can’t I?  

Who is designing this thing?  Why doesn’t it do what it’s supposed to?  Why are there no directions?  Why is everything a symbol rather than English?  Why didn’t these problems come up with test consumer groups?  Where’s BASF when you need them?  So many questions…

Here’s one more: Why does Apple’s customer support disown you after 90 days?  Even for the 1st 90 days you own your Ipod, you’re only allowed to call once with a problem – after that you have to pay $29 for Apple’s tech guys to diagnose your problem.  Yes, that’s right, not free, not $2.90, it’s $29 to ask a question.  I know b/c I called & had to discontinue the call – we were nearing the point where Apple might actually give me diagnostic advice, which would trigger a fee. 

Apple’s website says “Most Apple software and hardware products include unlimited complimentary support incidents within the first 90 days of product ownership.”  However, this does not include the Ipod.  This wouldn’t have helped me anyway, but maybe this advice can help someone out there who recently bought an Ipod.

 Don’t even get me started on using the iTunes program, trying to find functional car adapters for the thing, or getting it to warn you you’re close to maxing out your storage space on the Ipod’s hdd (hard drive) so you can easily delete songs to clear up space. 

Oh, and I didn’t just get this thing yesterday.  I received it as a very thoughtful gift over 2 years ago to use when I work out, and unfortunately have struggled to ever get it to perform well despite trying really hard to figure it out.  Oh well.  Maybe I’ll just invest in a CD player or a vintage Walkman – maybe Best Buy still sells them?

In closing, here’s a hilarious rant by someone else driven crazy by their Ipod back in 2008, enjoy.

Why private equity investing is the way to go, while ‘the stock market is for suckers’

25 Feb

Below is a great education on why Wall Street’s public stock scheme is no longer in vogue, & why venture capitalists are using private equity funding to get great returns. 

‘The stock market is for suckers’

by Jason Kirby of Macleans.ca

Facebook decided to "unfriend" Wall Street & the public investing model, opting to partner with Goldman Sachs to outsmart the system instead. Justin Sullivan/GETTY IMAGES

Were it not for the source and recipients of the email—From: Goldman Sachs, To: Our most outrageously rich clients—it would have read like one of those Nigerian investment scams that slip through spam filters now and then. “When you have a chance I wanted to find a time to discuss a highly confidential and time-sensitive investment opportunity,” the secretive missive began. But this was clearly no shady dispatch from Lagos. What investment bank Goldman Sachs offered by way of the emails, sent out to thousands of its most valuable high-net-worth clients in early January, was the chance for them to buy a piece of the hottest company in America: Facebook.

Since the social networking site infused itself into every facet of our lives, investors have anticipated the day when the company would take its place in capitalist folklore beside Microsoft, Netscape, Apple and Google. Everything seemed to be in place—the phenomenal growth, chief geek Mark Zuckerberg’s rapid ascent to Bill Gates-ian prominence, The Movie!! It all suggested we were about to witness one of those rare moments when the spark of innovation meets the greatest wealth-creation machine the world has ever known: the American stock market.

Only that’s not how things have unfolded. In its email to clients, Goldman wasn’t talking about a public stock offering for Facebook. Instead, the bank, along with a Russian investment firm, injected US$500 million into Facebook’s coffers by way of a purely private transaction. Goldman, in turn, set up a fund through which wealthy clients could own those Facebook shares themselves, for a minimum of US$2 million. Based on that valuation, Facebook emerged a colossus worth more than US$50 billion.

Since the deal first made headlines, Goldman has had to backtrack somewhat, due to “intense media coverage.” Regulators were cool to the optics of rich Americans gaining access to hot companies when their less wealthy countrymen were shut out. So last week the investment bank made membership to its Facebook fund more exclusive still. Now only rich foreigners will be invited in.

The stealth arrangement is just the latest sign something is very wrong with Wall Street. The stock market has become dangerously disconnected from its primary function of uniting growing businesses with large numbers of long-term investors. Part of that disconnect can be seen in the growth of a so-called “second market” for private companies­—like Facebook—off limits to all but the wealthy. But there’s more. Markets have come to be dominated by myopic short-term thinking. The vast bulk of trades now involve no humans at all, but rather sophisticated computer programs that swap stocks at lightning speed; many believe so-called high-frequency trading was one of the causes of the flash crash last year that exposed how fragile the whole game has become. And as more Americans have tied their savings to the market, regulators have sought to protect them with layers of rules and red tape that critics say is driving away public companies.

Now there are signs some institutional investors, such as pension funds, are giving up on equities and buying alternative assets like bridges and toll roads instead. No wonder American companies like Facebook are avoiding the hoi polloi of traditional stock markets in favour of raising capital from private, rich investors. “The idea of the stock market was to help businesses raise capital, and to provide people, individuals, with a chance to invest their savings and participate in that growth and have enough money to retire,” says Peter Cohan, president of Peter S. Cohan and Associates, a venture capital and management consulting firm in Marlborough, Mass. “But in the last decade the whole thing seems to have fallen apart.” Where the market once helped investors and companies, now it’s failing both.

In Canada it may seem academic to fret about the faulty mechanics of the U.S. stock market. Yet we should be very much concerned that it’s not working properly. Many Canadian investors put their money into U.S.-listed stocks, and as America’s largest trading partner, we also benefit when that country’s economy is functioning properly.

Perhaps billionaire Mark Cuban, who made his money off the Internet bubble of the late 1990s and now owns the Dallas Mavericks basketball team, has put it best on his blog and in interviews. “The stock market,” he says, “is for suckers.”

Facebook’s decision to shirk public stockholders in favour of rich, private ones has only driven home that point further, and sparked a debate about how America’s rising corporate stars are financing their growth.

Facebook is far from alone in choosing to “unfriend” the stock market. Despite rumours that some high-profile stock offerings could be coming down the pipeline—including social networking company LinkedIn and bargain-shopping site Groupon—the U.S. IPO market has been in decline since the mid-1990s. According to figures compiled by Jay Ritter, a professor of finance at the University of Florida, last year 96 operating companies went public on the major U.S. exchanges. True, that was a rebound from the depths of 2008, when just 21 companies went public. But in the mid-1990s, even before the tech bubble, 400 to 500 IPOs a year was common.

Why does it matter whether companies go public? Because that has historically been the best way for smaller businesses to boost themselves to the top of their industries. Instead, with fewer new companies coming to market, the number of U.S. stocks is growing worryingly thin, leaving regular investors with fewer options to choose from. In a report last fall, the New York Times noted there were 7,500 companies listed on the NYSE, Nasdaq and American Stock Exchange in 1997. Today there are fewer than 4,100. “In the 1990s going public was a badge of honour,” says Cohan. “Now companies look at it and say, ‘If we can avoid it, we will.’ ”

To do that, companies are increasingly relying on private investors, depriving the investing masses of access to exciting new businesses. Private investors are not new to Wall Street. Since the early 1980s, private equity funds have regularly gone shopping for unloved public companies with the goal of fixing them up and then taking them public again. Venture capitalists have also injected untold billions into upstart tech companies with the hope of cashing out with IPOs.

What sets the deal between Goldman Sachs and Facebook apart from previous private financings was the way it targeted large numbers of wealthy individuals while flouting rules intended to stop private companies from doing just that. The SEC bars unlisted companies from accumulating more than 500 shareholders. Anything above that limit means they must disclose financial information, something Facebook is loath to do. So Goldman set itself up as a single Facebook shareholder, while its clients go along for the ride. What’s more, under SEC rules investors must be “sophisticated”—or rich—to buy private company shares, with a net worth of US$1 million or annual earnings of US$200,000 in each of the past two years. Put another way, wealthy people are considered inherently smarter than the rest of us when investing.

The Goldman Sachs financing isn’t the only way private money is allowing Facebook and other companies to avoid the markets. Virtual online exchanges are springing up, where investors in private companies can sell their shares. One of the key reasons companies go public, aside from raising money to fund their growth, is to give venture capitalists and employees who already own shares a way to unlock their money. Two of the largest firms in the burgeoning private company market are SecondMarket and SharesPost, which both launched their private company services within the last two years. As a result, existing shareholders now have a venue to sell their stakes, and companies are feeling far less pressure to go public. In addition to Facebook, shares in scores of private companies now trade on these alternative exchanges, including Twitter, Craigslist, Zipcar and Digg. Not all are Internet companies, though. There are also clean technology and semiconductor businesses benefiting from the shadow market. Nyppex, a New York-based advisory company that specializes in secondary markets, estimates that roughly $4.9 billion worth of private company stock was traded last year, more than double the year before, and it’s expected to continue growing rapidly. Once again, regular investors can forget about participating, though—these alternative markets are also off-limits to all but the rich.

There’s a much darker side to all this stealth trading in private company shares, argues Cuban. “We are seeing people who are trying to game the system,” Cuban told Maclean’s in an email interview. “The expectation is that [a company] will go public at a significant premium and the secondary market is a way to ‘get in on the IPO’ at a lower cost.” After all, for rich investors who snap up Facebook shares by way of the Goldman Sachs deal or through SharesPost and SecondMarket, the ultimate way to profit will be for Facebook to go public. By then, though, the value of the shares will have been bid up, and much of the company’s best growth may be behind it. The very real risk is public stock market investors could be left with an overpriced heap.

For now it seems many private companies seem intent on staying that way. One reason for that, some believe, are increasingly onerous rules that accompany a stock listing. For instance, Andrew Lo, a professor with the Massachusetts Institute of Technology’s Laboratory for Financial Engineering, points to the impact of the Sarbanes-Oxley Act, the sweeping rules passed in the wake of the dot-com crash and Enron scandal. Critics say the legislation does little to prevent frauds, but has driven up the costs for companies that go public. “There are enormous costs to being on the public market, thanks to Sarbanes-Oxley and other regulatory changes,” says Lo. “It’s become a lot more expensive to be a public company. So now you can access capital through hedge funds and private equity firms without the costs of going to the stock market.”

It’s important to remember why regulators have felt compelled to layer on so many rules. Over the last 40 years there’s been a radical reshaping of the investment world as retail investors rushed into the market. Since the late 1970s American investors have gone from having less than US$100 billion (adjusted for inflation) tied up in equity mutual funds to a staggering US$12.6 trillion in 2007. Where in 1980 fewer than six per cent of households invested, now roughly half do. Analysts have hailed this as the “democratization of finance.” As more people took control of their own retirements, it was generally seen as a good thing for American society. But with last decade’s back-to-back crashes, leaving the market where it was 11 years ago, that also means the pain was democratized, too. Panicked politicians reacted by passing new laws. Now it seems the very rules established to keep regular investors safe may actually shut them out from participating in the growth of many of America’s fastest-growing companies.

But there’s even more to the market dysfunction hurting investors and companies.

In 2004, at the age of 92, the late Sir John Templeton, a pioneer in the world of mutual funds, issued a stark warning to investors. “The stock market is broken,” he said in an interview. He went on to predict the housing bubble would spark the sort of terrible market crash we witnessed four years later. But Templeton saw a bigger problem than just the bubble then emerging. Stock markets are now dangerously short-sighted. “Mass media, especially TV today, is so short-term that few in its audience grasp the lasting damage and corrective impact which will continue to linger from the greatest financial crash in world history,” he said. In the wake of that very crash, short-term thinking is as much a problem as ever before.

The stats behind investors’ amputated attention spans are astonishing, and reveal the damage caused to the wider economy. According to the New York Stock Exchange, in the 1960s the holding period for stocks was eight years. By 1990 it had fallen to two years and today the average stock is held for just nine months. As investors have shortened their time horizons, companies have been focused on each next quarter’s financial results at the expense of the next decade, say experts. Last spring, the U.S. Senate banking committee held hearings to examine the plague of short-term thinking in capital markets. Some astonishing revelations emerged. In a survey of 400 chief financial officers, 80 per cent said they’d cut research and development spending to goose short-term performance. To make matters worse, when companies do beat expectations, executives are lavished with huge paycheques and millions of stock options that dilute existing shareholders even further.

One reason investor time horizons have shrunk so dramatically is that hedge funds have been taking massive gambles using borrowed money, says Cohan. “One of the biggest sources of volatility is hedge funds betting on very short-term movements,” he says. “That whole dynamic is not really conducive to long-term investing, or the long-term management of companies.”

The same can be said for much of what goes on in the stock market these days. At precisely 2:45 on May 6, 2010, U.S. indices plunged nine per cent, temporarily wiping out US$1 trillion of market value, before recovering several minutes later. For many regular investors, it was their first painful introduction to the volatile world of high-frequency trading. HFT firms earn billions betting on stocks as they move up and down by fractions of a penny. A typical high-frequency trader owns a stock for just nine seconds. The problem is, should markets drop abruptly, the complex computer algorithms used by HFT firms can make matters worse.

The same goes for the rise of another Wall Street creation, exchange-traded funds—mutual funds that trade as stocks. While ETFs are pitched as a safe, low-cost way to invest, critics say the nearly US$1-trillion segment poses a systemic risk to investors in the event of another flash crash, since the inevitable rush by ETF managers to sell their holdings will drive markets down further.

For those in the burgeoning secondary market for private company shares, like SecondMarket, this all points to increased demand for their services. “There are problems in the public markets that are not going away,” says Mark Murphy, a spokesman for SecondMarket. “If they can avoid having to deal with high-frequency trading, short-term thinking and Sarbanes-Oxley, private company CEOs are saying they’d rather stay private and build something long-term.”

What’s the solution to all this then? In the eyes of some, we must tempt investors to hold their shares longer. U.S. legislators have looked at measures such as bigger tax breaks on capital gains for longer-term investors. Meanwhile, Lo at MIT offers the radical proposal—license retail investors to educate and protect them. “In the same way there was democratization in travel when the car was invented, at some point they put in mechanisms to protect people from each other, like stop signs, traffic lights and certification for drivers,” he says. “We had a tremendous period of financial innovation; now it’s time to figure out what protections we need to impose to make the investing highways more safe. Maybe people should pass tests to show we can manage our retirement well.”

In the meantime, the market will remain a dangerous place, not just for companies, but especially for regular investors. Which is why Cuban stresses to investors that they should avoid what Wall Street is selling. “There should be warning labels with every stock purchase,” he told Maclean’s. “Dear Sir or Madam . . . Before you place this order, please press the button that says ‘I know the person on the other side of the trade probably has spent far more time and money to understand this stock than I have and I am okay with that.’ ” Or, as he wrote on his blog last fall, “The stock market is still for suckers . . . you should put your money in the bank.”

2009 dolphin documentary “The Cove” finally released on DVD in Japan this Friday, Feb. 25th!

21 Feb

This is what you'll be seeing this Friday, Feb. 25th at the Best Buy stores in Tokyo. Finally the truth about Taiji, Japan comes out!

From the Ocean Preservation Society:

We have been looking forward to this Friday when The Cove  DVD gets released throughout Japan. The limited theatrical run last summer was met with protests by violent extremist groups, who threatened the film distributors as well as theatergoers. Hopefully now Japanese citizens can view the film in the safety of their own homes and come to their own conclusions.

Short 6 min. documentary on how David Wight makes his glass wave sculptures

21 Feb

Ready to ride the wave? The picture doesn't do this art justice.

If you’ve ever been to an art gallery such as Wyland Art Galleries at St. Armand’s Circle in Sarasota, FL that features these glass wave sculptures, you’re probably wondering how they’re made. 

Here, sculptor David Wight takes us to his shop where he molds the glass into a unique wave: http://www.youtube.com/watch?v=PZ2Wj5qwl-s

Film editor Walter Murch explains why 3D will never be “the next big thing”

11 Feb

From Roger Ebert’s journal at the Chicago Sun-Times, 1/23/11

Why 3D doesn’t work and never will. Case closed.

WalterMurch.jpg

Here's Murch, looking all game face - 3D is no laughing matter.

 

I received a letter that ends, as far as I am concerned, the discussion about 3D. It doesn’t work with our brains and it never will.

The notion that we are asked to pay a premium to witness an inferior and inherently brain-confusing image is outrageous. The case is closed.

This letter is from Walter Murch, seen at left, the most respected film editor and sound designer in the modern cinema. As a editor, he must be intimately expert with how an image interacts with the audience’s eyes. He won an Academy Award in 1979 for his work on “Apocalypse Now,” whose sound was a crucial aspect of its effect.

Wikipedia writes: “Murch is widely acknowledged as the person who coined the term Sound Designer, and along with colleagues developed the current standard film sound format, the 5.1 channel array, helping to elevate the art and impact of film sound to a new level. “Apocalypse Now” was the first multi-channel film to be mixed using a computerized mixing board.” He won two more Oscars for the editing and sound mixing of “The English Patient.”
“He is perhaps the only film editor in history,” the Wikipedia entry observes, “to have received Academy nominations for films edited on four different systems:

• “Julia” (1977) using upright Moviola
• “Apocalypse Now” (1979), “Ghost” (1990), and “The Godfather, Part III” (1990) using KEM flatbed
• “The English Patient” (1996) using Avid.
•  “Cold Mountain” (2003) using Final Cut Pro on an off-the shelf PowerMac G4.

 

Now read what Walter Murch says about 3D:

Hello Roger,

I read your review of “Green Hornet” and though I haven’t seen the film, I agree with your comments about 3D.

The 3D image is dark, as you mentioned (about a camera stop darker) and small. Somehow the glasses “gather in” the image — even on a huge Imax screen — and make it seem half the scope of the same image when looked at without the glasses.

I edited one 3D film back in the 1980’s — “Captain Eo” — and also noticed that horizontal movement will strobe much sooner in 3D than it does in 2D. This was true then, and it is still true now. It has something to do with the amount of brain power dedicated to studying the edges of things. The more conscious we are of edges, the earlier strobing kicks in.

murchediting.jpg
The biggest problem with 3D, though, is the “convergence/focus” issue. A couple of the other issues — darkness and “smallness” — are at least theoretically solvable. But the deeper problem is that the audience must focus their eyes at the plane of the screen — say it is 80 feet away. This is constant no matter what.

But their eyes must converge at perhaps 10 feet away, then 60 feet, then 120 feet, and so on, depending on what the illusion is. So 3D films require us to focus at one distance and converge at another. And 600 million years of evolution has never presented this problem before. All living things with eyes have always focussed and converged at the same point.

If we look at the salt shaker on the table, close to us, we focus at six feet and our eyeballs converge (tilt in) at six feet. Imagine the base of a triangle between your eyes and the apex of the triangle resting on the thing you are looking at. But then look out the window and you focus at sixty feet and converge also at sixty feet. That imaginary triangle has now “opened up” so that your lines of sight are almost — almost — parallel to each other.
     salt_clear3D2.jpg
     salt_blurry3D.jpg

We can do this. 3D films would not work if we couldn’t. But it is like tapping your head and rubbing your stomach at the same time, difficult. So the “CPU” of our perceptual brain has to work extra hard, which is why after 20 minutes or so many people get headaches. They are doing something that 600 million years of evolution never prepared them for. This is a deep problem, which no amount of technical tweaking can fix. Nothing will fix it short of producing true “holographic” images.

Consequently, the editing of 3D films cannot be as rapid as for 2D films, because of this shifting of convergence: it takes a number of milliseconds for the brain/eye to “get” what the space of each shot is and adjust.

And lastly, the question of immersion. 3D films remind the audience that they are in a certain “perspective” relationship to the image. It is almost a Brechtian trick. Whereas if the film story has really gripped an audience they are “in” the picture in a kind of dreamlike “spaceless” space. So a good story will give you more dimensionality than you can ever cope with.

So: dark, small, stroby, headache inducing, alienating. And expensive. The question is: how long will it take people to realize and get fed up?

All best wishes,

Walter Murch