Social Gaming Scores in the Recession
April 30th, 2009 | Posted by innovGaming goes gangbusters in a downturn. In 2001, the Nasdaq was plunging and such tech mainstays as telecom, e-commerce, and enterprise computing were in a tailspin. But gaming giants Electronic Arts (ERTS) and Activision (ATVI) soared. Titles including The Sims, Grand Theft Auto, Halo, and the Madden sports series became national big-budget obsessions.
In the current recession, amid declines in computing and online advertising, gaming again is on a tear. Only this time around, it takes more than producing a pricey console or a slick blockbuster in a shrink-wrapped box to win big at gaming. In a way, it takes a lot less.
Some of the most impressive growth of late is in technologically stripped-down games that offer players social, communal experiences. The most talked about are Guitar Hero, Rock Band, and several interactive titles associated with Nintendo’s (7974.T) Wii. And the trend isn’t confined to the living room. Less talked about is a surge in social games, played with friends on smartphone platforms such as Apple’s (AAPL) iPhone and on mass-market sites such as Facebook and News Corp.’s (NWS) MySpace.
Many Games Are Free
Social gaming is less about killer graphics and quicksilver hand-eye coordination and more about connecting with friends. The best games aren’t impressive in terms of technology, though they’re quite adept at harnessing media that let players interact. For games on social networking sites, that means letting far-flung friends and families share an activity, rather than just photos and wall posts. On the iPhone, games utilize sophisticated multitouch technology that lets the screen respond to more than a single touch at a time. The number of people playing social games is expected to surge to 250 million in 2009, from 50 million in 2008, by some industry estimates. During recessions, people tend to look for low-cost entertainment, often staying at home. Many social games are free; often even power users pay less than $50 a month.
Despite the low costs associated with social games, many actually make money. That’s where entrepreneur Mark Pincus comes in. Pincus missed the last countercyclical gaming surge. Unlike most Silicon Valley geeks, Pincus isn’t into video games; and in the early part of the decade he was too busy starting a company called Tribe, an ultimately failed effort to merge local newspapers with the burgeoning social networking trend then made popular by Friendster.
Pincus doesn’t intend to make the same mistake twice. So he started Zynga, a site that specializes in social gaming. He’s raised almost $40 million from some of the most well-regarded names in venture investing, including über-angels Reid Hoffman and Peter Thiel. Other investors include Union Square Ventures’ Fred Wilson, and Kleiner Perkins Caufield & Byers.
Zynga’s Disco Holiday Party
Zynga’s most popular game is Texas Hold ‘Em on Facebook. It gets 2 and a half million players a day. Across all networks, 45 million people per month play Zynga games. The bulk of that is on Facebook. In April, Zynga passed widget maker RockYou, owned by NetPickle (NetPickle), to become Facebook’s top application maker, with 40 million monthly active users, according to Facebook. That’s one-fifth of Facebook’s 200 million users.
And here’s the shocker: Zynga is actually generating a lot of revenue, and it’s profitable. The site has annual sales of about $100 million, according to several people close to the company. That’s about double what many blogs have speculated. Zynga has swelled to 250 employees who get Google-like perks. The site gets some revenue from selling ads, but mostly from the 2% to 10% of users who pay $1 an hour to play premium games or buy virtual goods. Even amid the recession, revenue is rising.
This recessionary disconnect was palpable during Silicon Valley’s holiday party season. Zynga’s fete was unlike the bare-bones holiday office lunch or the prepaid lavish affairs that came with a dour mood due to recent layoffs. Held at a club in San Francisco’s North Beach district, the party featured Zynga staff in disco outfits, free drinks, and a 1970s-style band that also played at Pincus’ recent wedding.
Borrowed Platform Carries Risk
So why isn’t a Twitter-and-Facebook-obsessed press talking about social gaming more? You’ve got me. After all, Zynga isn’t the only one benefiting from the surge. Playdom is the other giant of the space, reportedly generating almost $50 million in revenue. And while Zynga has big-name backing, Playdom is a much leaner and more profitable operation, according to some investors in the industry.
In Pincus’ view, PlayFish represents even bigger competition. Its title Pet Fish is the most successful application on Facebook, with 2.5 million daily active users, just seven months after it launched. Then there’s Social Gaming Network, better known as SGN, which is funded by David Sze of Greylock Ventures, the well-respected backer of LinkedIn, Facebook, Digg, Oodle, and other closely watched Web 2.0 names. More than 10 million people have downloaded SGN’s iPhone and iPod Touch games, and more than 1 million people play its games across social networks every day.
As attractive as the social gaming phenomenon may be, it also carries risk. Building the bulk of your business on someone else’s platform is always dicey. And games that do well are restricted to poker and mob war-style contests. Every big player has its own version of each, with little to set one apart from the others, critics say. Whether they can continue to build a catalog of titles that resonates with gamers remains to be seen. And like all things Web 2.0, social gaming may turn out to be a passing fad that people drop as soon as the next new shiny diversion comes along.
Disdain from Developers
There’s also the risk for fraud when it comes to certain online transactions associated with social gaming, such as the sale of virtual goods. “We’ve found once you get into these digital-only goods and services there’s massive opportunity for fraud,” Pincus says. “We couldn’t find a single company that could manage or solve that problem for us. We had to build the whole infrastructure in-house. We had to go out and get relationships with credit-card processing companies.”
What’s more, social gaming is not only bringing in a new type of gamer, but also a new type of developer. While they’re highly adept at tailoring games to a social platform, these developers often don’t have the high-level programming skills needed to build more advanced games. The barriers to entry have effectively dropped. Many in the gaming Old Guard look down their noses on social gaming. “I’ve detected disdain,” Pincus says. “Critics say, ‘These aren’t real games. These aren’t real game companies. There’s no technology here.’”
Not surprisingly, Pincus is still hopeful. “I’ve also detected excitement,” he says. “A lot of people come to the game industry who aren’t typical developers and they can unleash their creativity on these massive platforms without the constraints of cost and time to market.” Pincus can afford to shrug off the naysayers—so long as Zynga keeps making money in the fractured Web 2.0 world.
On Engineering and Design: An Open Letter
April 29th, 2009 | Posted by innovWell-intentioned engineers often ask me how they can become designers, or how they can “do” design. A typical question might be something like this: “Can you please share guidelines for maximizing user experience while designing a UI? For instance: When should I use radio buttons instead of drop down bars [to minimize clicks] and so on?”
Questions like this are tough in more than one way. So I thought I would share a considered response—in the form of a hypothetical e-mail reply—to the well-intentioned engineer:
Thanks for taking the initiative and demonstrating interest in user experience (UX).
Without intending any disrespect or discounting your sincerity, I must admit that my first reaction goes something like this: You’re kind of asking for a master’s degree in an e-mail. Let me explain by paraphrasing your question, but with the professions reversed.
“Can you please share guidelines around supporting concurrency, while avoiding deadlock and race conditions, while designing a real-time system that has optimal performance and minimal code footprint?”
Imagine how a trained computer scientist would respond to this question if it were put by someone who came from a design school, or whose training was in the social sciences. You might not be entirely generous, right? That’s how a designer would respond to the first question.
The magnitude of what is actually being asked is overwhelming, so the short answer to both questions is:
Add to your team the professional competence appropriate to the task. In your case, you need a UX professional. The UX people clearly need a professional computer scientist.
End-user satisfaction and quality of experience need to be the fundamental pillars of any worthy company’s value system. Hence organizations must be structured in a way that tilts the odds in favor of achieving these goals. Good intentions are a start, but they are not sufficient. Appropriate tools and skills at the highest professional standards, applied according to best practice, are what’s needed.
Every project thus needs equally high levels of competence in the mutually dependent but different disciplines of engineering and UX. Professional stature is equally hard to achieve in each, and there are no simple shortcuts that let one jump from one to the other: This is no place for amateurs.
None of this is to suggest that it is not worth your time to build up your knowledge of design. To help guide you in your approach, it might be useful to think of design in terms of four layers, each demanding a progressively larger investment.
Design awareness can and ideally should be something that every employee of a company makes their best effort to acquire. I would say exactly the same thing about technology awareness. In the corporate culture I dream about, there would be a balance between the two—along with a healthy respect for best business practices—in every employee.
Design literacy is also something that can be acquired with a bit more effort by any employee, regardless of background. If your company has employees who suffer from “Apple (AAPL) envy” in terms of the nature of the products that they produce, building such literacy is a very real and useful step in helping combat that particular affliction. Designers need technological literacy, too, and both need an equal dose of business acumen. Without this, none of us has any right to complain about not being understood by those in other disciplines. We all need to be able to handle multiple directions.
Design thinking is something that takes even more of an investment, requiring a level of competence that—with dedication and practice—can be acquired by anyone, to a reasonable degree. Cognitive science makes it clear that the strategies designers use in approaching problems or questions are different (not “better”) than those employed by those trained in engineering disciplines. Both strategies are complementary. Given the complexity of the problems that confront us, it seems to me that expanding our collective arsenal of techniques is something we could all benefit from.
Design practice, however, is not something available to everyone. This is a full-time job for highly trained professionals. It requires people who have invested just as much to acquire their set of skills as the computer scientists have put in for theirs. Yes, there are exceptions. There always are on both sides of the table. But it is risky, if not foolhardy, to generalize from the exception.
I recognize that you are between a rock and a hard place, and that you are not responsible for having wound up in this position. That you asked this question in the first place demonstrates a real concern for the quality of your product and for your customer. That is exactly what your company should value, so you are to be congratulated for this. But it is exactly because I share your concern that I give the response I’ve provided. Your products and customers deserve a solution worthy of your concern. That will not happen if you try to do it yourself. This requires a professional who is as good at his or her discipline as you are at yours. If it will help, share this with your management.
Thanks for asking.
April 29th, 2009 | Posted by stockBiotech stocks are supposed to be volatile, but yesterday’s move in Dendreon (DNDN) was a bit much. In a matter of minutes, the biotech stock fell 70%, from 25 to 7.50, before trading was halted at 11.81. The truly strange part: the company was expected to announce the results of tests on its prostate cancer drug at 2pm, about half-an-hour after the selling started (most stocks have large moves after the news is announced). Even rarer, is the speed with which the move happened, just a little over one minute for the stock to fall 16 points. Even more amazing is just how wrong the seller turned out to be.
What is clear is that someone, maybe more than one person, desperately wanted to get out of the stock. Dendreon shares started drifting lower at 1:24, but the drifting turned to hardcore selling around at 1:25:32. An offer to sell 20,000 – large in a stock that typically trades a few million shares a day, though volume would spike to over 30 million – appeared on the tape at 24, and the stock started falling like a rock. Bids were hit — Bloomberg reported that 260,000 shares or 60% of the volume traded at the best-buy price, a sign that an someone really wanted to sell. Eleven seconds later, the Dendreon shares were at 23. Twenty-five seconds later it was trading 20, as the pace of the selling picked up. Blocks of shares continued to trade – 2,000 shares, 5,000 shares – as the stock continued to plummet, with our seller still trying to dump 20,000 shares. Twenty seconds later the stock was trading at 12, and yet it continued to fall. Only after the stock traded 7.50 about 17 seconds later, did shares bottom. In all, it took one minute and 13 seconds for Dendreon’s market cap to fall over 16 points.
NASDAQ halted trading in the stock moments later, with the stock at 11.81. Results of the clinical tests were announced about half-an-hour later. And they were good. Better than good. Late-stage prostate cancer suffers live 4.1 months longer on Provenge, Dendreon said. Serious side-effects occurred 24% of the time, similar to the 23.8% rate with a placebo. FDA approval is expected by 2010 and Dendreon stands to make billions from the drug. On April 29, four analysts upgraded the stock to buy, two to outperform. When trading reopened the next day, the first trade went off at 26.82.
So what happened? What caused Dendreon shares to hit terminal velocity? NASDAQ looked into the trades, suspecting that perhaps they were entered by mistake, in which case they would be cancelled. NASDAQ let them stand. We can rule out a trader hitting the wrong button. Some bloggers speculate it was a bear raid, a group of investors selling a large quantity of shares to push the shares down – though they would have had to cover before the halt to make any money on the trade. Perhaps it was a “Trading Places” situation, where someone thought he had news and just kept selling. Or maybe it really is as simple as the rumor now making its way around Wall Street: a trader had simply misinterpreted a headline and pushed the sell button, causing a cascade of selling by itchy-fingered traders, nervous from the pending announcement.
Whatever it was, even with the stock closing at 22.94 anyone who sold near the lows is nursing a very large loss.
Defending the Venture Capitalists
April 28th, 2009 | Posted by innovEvery entrepreneur who took venture capital money during the past 40 years will tell you pretty much the same story: The VCs exerted far more control than expected, budgets were slashed, friends were fired from the payroll, and “they never really got our vision.” Given those stories, you’d think that venture capitalists are the last thing the world needs to make innovation happen.
However, they may be exactly what’s needed. Sure, it used to be that VCs were about cutting costs and relentlessly narrowing the company’s vision to create a firm that was easy to sell or take public. But in this economy, flipping your investment is hard, and so the smartest VCs are changing their focus to the areas we are about to discuss. If these smart people think that opportunities lie in the following three areas, maybe you should too.
Disrupters, aka companies that are reinventing the rules: Companies that can produce a result through a product or a service that is dramatically more effective or cheaper than what their peers are doing. We aren’t talking about incremental improvements here. We are talking about firms like PayPal (EBAY) who earlier in this decade helped change the way we buy things. Or Lending Tree, which took the control away from banks when it came to making mortgage loans, or Dyson, which transformed the sleepy vacuum industry.
Often, these companies have gone so far off the course set by their peers that they are laughed at by the competitive set—initally. It sometimes takes a group of objective thinkers, completely “Outside the Jar” to recognize that they are on to something. All they need is for someone to believe in them when their conservative banker won’t. With VCs in the game, if your company is not currently working on a disruptive product, service or business model you should not be sleeping well at night.
Pay-for-performance cultures: Growth guru Verne Harnisch, founder of the Young Entrepreneurs organization and CEO of Gazelles has coached thousands of companies about the power of attaching key metrics to monthly performance and sharing the data with everyone in your organization. This open-book mentality was unheard-of two decades ago but today is empowering growing companies to build cultures of accountability—an extreme competitive advantage.
In April, the BusinessWeek 50 pointed to Expeditors International (No. 28), Fastenal (No. 19), Intercontinental Exchange (No. 13), and Nucor (No. 20) as examples of how accountability drives companies to the top of their class. The point isn’t to be open book, the point is to open the books enough to empower your employees to see opportunity and measure change.
If you spend time with today’s fast-growth companies, it becomes immediately apparent that the trend toward open-book management is real and powerful. VCs love this trend. They are happy to pay for performance—it is the basis of their business model. So if we were VCs for a day, we’d be looking for companies that keep their books open. We’d never have to worry about my money, because everyone in the company would be watching it as if it were their own.
Failing Forward: To be an innovator, you must be prepared to fail often. Companies that have demonstrated the tenacity and skill it takes to make small bets on many failures and then invest on the idea that works are where we would put our money.
Today, as soon as your idea hits the market, someone will be copying it. So a company must be constantly innovating to stay ahead of the curve. VCs are beginning to recognize that this pattern—of fail, learn, fail, learn, succeed, launch!—is a critical cultural attribute for successful, fast-growth companies. It is also expensive. Many times the VCs’ money can be the fuel it takes to increase the cycle time, helping companies get to successful to market much more quickly and more often. So if you are interested in attracting the attention of a VC, here are three ways to make it happen:
1. Document your failures as well as your successes. Failing forward—that is, learning from your mistakes—is not a bad thing. You should be able to take your partners through the systematic and intentional pattern of how you get to success. Show how you test, improve, and launch your products, services, and business models. This is incredibly powerful and reassuring to both investors, employees and the marketplace in general.
2. Focus on disruptive innovation. How can you use your experience, your insight, and your brand to turn an industry on its ear? Tightening up your operations is no longer what appeals to aggressive VC partners. Helping a proven business change an industry is much more appealing.
3. Focus on performance metrics. The more you can tie your team’s daily performance to key measures that drive your business, the more VCs will feel safe around your dreams.
Let’s not give up on VCs just yet. We believe they will be key to making all of our lives better. Strange as it may seem, they just may save the American economy (with a substantial assist from the innovators themselves).
April 28th, 2009 | Posted by stockPosted by: Lauren Young on April 28, 2009
Which ‘flation camp are you in?
Most of the 50 advisers and analysts I interviewed for a story about ‘flation in the most recent issue of BusinessWeek think the U.S. economy is headed on an inflationary path, but not everyone agrees.
“Picking which ‘flation we may or may not be heading toward can be like predicting the severity of the coming hurricane season,” says Eric Zimmerman, a partner at Chatham McKinley Partners in Atlanta and Savannah, which works with private family partnerships and foundations. “The so-called gurus really don’t know if a storm is coming. Most are assuming one is looming. We think it is in question if one does make land at all, let alone what category it will be or if it will be a hurricane by the time it gets here.”
In other words, Zimmerman and his partner Rick Muller aren’t worried about inflation. So how are they positioning client portfolios now? The duo believe stocks are especially appealing. While the most extreme cases of inflation in the 1970s as well as deflation in the early 1930s grab headlines, “the hard truth is those periods are, in fact, the outliers,” Muller says.
Economies and markets typically “muddle through” averaging things out during the three to four years following a major ‘flationary bout, Muller says. “We think the odds are in favor of a ‘muddle through’ period, in spite of the current extraordinary circumstances,” he notes.
Inflation has averaged 3% during the past 80 years, these advisers argue. By contrast, dividend growth from stocks has averaged 6%. Although dividends for the entire S&P 500 will be down a good bit this year, the yield on the S&P is currently 2.6% based on 2009 estimated dividends.
Here is how Zimmerman and Muller compare stocks to other ‘flation-oriented investments:
Treasury Inflation-Protected Securities (TIPS)
“The 9-year TIPS real yield is roughly 1.5%. Stocks pay a higher yield and dividends on stocks have increased at 6% per year vs. the rate of the CPI at 3%. Here TIPS lose to stocks.”
Gold
“Seems like a logical safe haven but over the last 10 years gold has already tripled, and today lots of bad outcomes are already discounted so again stocks represent a more attractive value today.”
10-year Treasury
“It is only slightly more than stock yield but it has no growth to its coupon. (With historic outperformance to stocks), here again lots of bad things are already discounted in and again stocks represent a more attractive value from here.”
What’s your take? Do you think fears of fears of surging inflation are overblown?
April 27th, 2009 | Posted by innovWhen Leslie McMillan was hired as a director at Quebec-based Industrial Alliance in January 2004, the company processed disability claims rationally and efficiently. People seeking disability pay would submit their claims to the company, analysts would read them to make sure they were properly filed and then pass them along to independent medical experts to determine if the requests were valid. With the medical analysis complete, the company would then approve or deny the claim. It was a process designed to avoid errors and maximize efficiency. It took about eight weeks from start to finish. And it worked.
In spite of the success of the existing system, McMillan decided to change things. Based on her experience at another firm, she believed that Industrial Alliance could become better by inserting a little empathy into the system. She instructed the ten claims analysts in her division to call the people seeking disability benefits and interview them for a half-hour to learn more about them.
Within a year, the results were astounding. Across the disability division, the institution of policies that put people, not paper, at the center of claims analysis transformed the division. McMillan reports that spending on independent medical evaluations dropped by 80%. The typical time required to settle a claim fell from eight weeks to four. As analysts developed better interviewing and decision-making skills, the company was able to boost revenue by marketing higher-value disability management products instead of just offering claims evaluations. Employee satisfaction shot up as their powers increased. And lawsuits, a major expense for any insurer, dropped off precipitously as well. She estimated that whereas 12% of all claims had previously ended up in litigation, that figure had dropped to just 7%.
These are major improvements. How did this happen?
It turns out that the company’s system for processing claims, though efficient and rational, was missing the real stories of the people seeking disability. The forms contained important information and were necessary, but they were ultimately too constraining. Essential information was being left out. That’s because the process strained out firsthand information in favor of provable facts. When analysts actually spoke to the people they were evaluating, they learned far more, and it led them to better solutions.
One analyst, David Brown, told us of a particularly startling case he experienced in early 2006. A claim had come in from a man who said Type-II diabetes had made it impossible for him to continue working as a factory laborer. Brown called the man at his home to find out what was going on. As it turned out, the man had no real interest in earning disability compensation. What he wanted, more than anything, was to return to a job that he loved and a company he had been a part of for more than thirty years. He craved self-sufficiency, not a pay-out. None of that had made it into the claim.
Intrigued, Brown called up the company to hear its side of the story. Here, too, the official record had missed the big picture. The company was also eager to have the man back at work.
Spurred by his conversations, Brown referred the case to a medical analyst at his insurance company, who surmised that the claimant might be a candidate for an insulin pump. A visit to the doctor confirmed that a pump would indeed be appropriate, and the man returned to work in just six weeks. The factory kept a valued worker whose contributions would have been hard to replicate with a new hire. The insurer covered, for a fraction of the cost of permanent disability, the price of the insulin pump and its operation. The claimant was overjoyed. He even sent David Brown a Christmas card. When was the last time you sent your insurance company a Christmas card?
When Leslie McMillan joined Industrial Alliance, she could have waited for direction from her superiors on how to change her business. Instead, she got to work reinventing how analysts in the disability division did their work. In the process, Leslie delivered measurable evidence of the power of empathy to change an organization by accelerating growth, inspiring employees, and improving overall performance.
Too often, we think about change as something that comes from the top. Success often seems to require the blessing of senior executives and years of work in organizational design and human resources. But why wait to do something great? A small group or even an individual can set off an empathy revolution simply by changing the way they work everyday—regardless of what the rest of the organization is up to. All it takes to get going is the drive to believe that things can be different, and the willingness to get started.
The Ever-Shrinking Bank Dividend
April 21st, 2009 | Posted by stockPosted by: Ben Steverman on April 21, 2009
Bank of New York Mellon (BK) slashed its dividend 63% on Apr. 21.
It’s a story financial sector investors have heard before. By now, nearly every major bank has cut its payout to the bone.
But BNY Mellon was seen as one of the strongest regional banks in the U.S. By cutting its dividend, the bank made clear how much it wants to pay back the $3 billion in bailout money provided by the U.S. Treasury’s Troubled Assets Relief Program.
As Robert P. Kelly, chairman and chief executive of the bank, said in a statement:
The decision to reduce the dividend was not made lightly, and reflects our commitment to build capital further, pursue growth opportunities and, with the permission of our regulators, repay the government’s investment in BNY Mellon. We anticipate returning to our historic payout ratio as soon as practical.
BNY Mellon’s quarterly dividend goes from 24 cents per share to 9 cents. Its dividend yield, based on its closing price on Apr. 20, drops from 3.4% to 1.3%.
After news of the dividend cut and some weak quarterly results, shares dropped more than 10% in the morning of Apr. 21. But by afternoon, shares rebounded and closed down just 0.2% at 27.98.
This is not a good time for dividend investors. According to the most recent Standard & Poor’s data, companies in the S&P 500 paid out a dividend yield of 3.13% in the last 12 months. But the indicated dividend yield — the amount companies say they will pay out in the next 12 months — has fallen to 2.52%.
And it could keep falling. Though many financial institutions have already slashed dividends, other sectors could also cut payouts in order to save precious cash.
Luckily for investors, a few companies continue to be generous to shareholders. On Apr. 14, Procter & Gamble (PG) raised its dividend by 10%.
‘Starchitect’ Libeskind Reinvents the Mall
April 20th, 2009 | Posted by innovArchitect Daniel Libeskind walks into a spare, empty conference room in his Manhattan office on a chilly, gray day. He is smiling.
Despite the recession, shrinking construction budgets, and the near-bankruptcy of his biggest current project, his voice bubbles with enthusiasm about the new directions he’s taking, including shopping malls. He’s also embarking on projects much smaller than the $90.5 million Denver Art Museum for which he’s known. The Polish-born designer, for instance, is working for the first time on everyday products such as doorknobs and lights, as well as prefab houses.
He’s happy to discuss the global economic downturn, which he sees as a time for businesses and architects alike to learn how to be creative by coping with fewer resources. That includes a smaller staff, as Libeskind himself has recently laid off employees—he won’t disclose how many—to cope with the building bust. His firm currently employs 70 in New York and another 70 in satellite offices in Milan and Zurich.
“The world is suffering. But this is exactly the time to do exciting things. It’s not the time to hide our heads,” says Libeskind. “It’s when we have to use our imaginations to try new materials, new ideas. Not just add gold and chandeliers!”
Libeskind’s highest-profile project today is also his most troubled: a shopping center within the MGM Mirage (MGM) CityCenter development in Las Vegas. The $8.6 billion complex on the Strip includes work by such other “starchitects” or celebrity designers as Norman Foster, Cesar Pelli, and Rafael Viñoly. Deeply indebted MGM averted bankruptcy in late March only after getting waivers from creditors and pumping more money into the 68-acre collection of hotels, condominiums, retail, offices, and a casino.
The 62-year-old architect believes the project will live on, though, given MGM Mirage’s persistence with its creditors to keep it going. “The MGM Mirage’s commitment to completing the CityCenter project is a vision we share,” he says.
The CityCenter mall is the second he has designed. The first, the 1.5 million-sq.-ft. Westside Shopping & Leisure Centre in Bern, Switzerland, draws 15,000 to 25,000 visitors a day. The $440 million retail complex opened last October and hosted 67,000 visitors on its opening day—far more than the 15,000 Libeskind expected.
Libeskind made his name by creating dramatic cultural institutions with angular, jagged silhouettes, such as Berlin’s Jewish Museum, not shopping centers. But he thinks his portfolio shouldn’t be split into two categories. “I don’t believe in this old-fashioned distinction between cultural and commercial projects, as if we live in split worlds,” he says. “Architecture is about everyday life, not just about going to a museum. I want to blur and erase the lines between culture and commerce. And it’s a fact that museums want to be successful economically, too.”
For the Westside project in Switzerland, he wanted to reinvent shopping. So he moved beyond stores and restaurants and added such unusual offerings as housing for the elderly and a gas station. Echoing his museum blueprints, the floor plan is more a labyrinth than a series of straight lines leading from shop to shop. Some stores have entryways that don’t have typical rectangular door frames but instead are made of uneven angles. The idea is to present products, from dresses to furniture, in unusual ways—like works of art in a museum.
New York architect David Rockwell says incorporating museum elements in a mall makes sense. Commercial real estate developers could learn from cultural institutions, which often feature elements intended to catch people’s eye or draw attention to a stage or sculpture, he says. “Libeskind brings artistry to the commercial aspects of architecture,” observes Rockwell. “He creates amazing environments for people to connect and share experiences.”
Libeskind’s Las Vegas mall is smaller—it will cover 500,000 square feet—but just as unconventional. The structure has jutting peaks, rather than rectangular boxes. “Just because an architect is known for his or her museums or a particular venue doesn’t mean it is all they are capable of,” says Sven van Assche, vice-president of design at MGM Mirage, which owns the complex with Dubai World.
Libeskind is used to creating big budget projects such as CityCenter with large-scale, intentionally crooked walls and ceilings. These are his design signatures, meant to evoke surprise in the people who visit his buildings. So his fans—and critics—might be truly surprised that the architect is looking to remake objects on a tinier scale. These are well-timed, and potentially well-priced, for a recession.
For example, Libeskind says he will launch a new prefabricated housing system this summer with Proportion, a Berlin-based firm specializing in prefab. It will feature off-center roofs and windows, similar to those found in Libeskind’s museums and malls, only scaled down so that individual homeowners can afford them. He won’t discuss the price, but he emphasizes that buyers can mix and match elements, such as adding or subtracting rooms to give them control on what they want to spend.
He is also designing much smaller items, including light fixtures, bathtubs, and doorknobs, for a variety of European manufacturers, including Italy’s Olivari B. and Germany’s Hoesch Design, although he says it’s still early to discuss when these will be on the market and who will distribute them. But they should expand his audience.
“I believe people want a ‘wow’ experience in their lives, not just when they visit a museum,” Libeskind says, emphasizing that during such glum times, businesses really need to supply “wows” to draw customers. The businesses include, of course, his own.
Does Coke do everything Pepsi does?
April 20th, 2009 | Posted by stockInteresting move by PepsiCo (PEP) to buy the outstanding shares it didn’t already own of its two major bottlers, Pepsi Bottling Group (PBG) and PepsiAmericas (PAS). While the pundits debate whether it’s a smart move or sign of desperation, the market is already guessing that Pepsi arch rival Coca-Cola (KO) will follow suit. Shares of Coke’s biggest bottler, Coca-Cola Enterprises (CCE) shot up to $16 this morning after closing yesterday at $14.88. The rally faded a bit towards the close and the shares ended up around $15.27 — still a healthy 2.6% gain on a day when the market tanked by more than 4%.
But what are the odds Coke will buy CCE? We’ll probably know a lot more tomorrow after Coke releases first quarter earnings and chats with analysts. At least in their previous call, the company seemed to be moving in the exact opposite direction. Asked about capital expenditures on behalf of bottlers on a February 12 call, Chief Financial Officer Gary P. Fayard said:
“My expectation, as you saw in 2008, is over time we will be net sellers and as we actually sell bottlers, the CapEx will come down fairly significantly.”
John Ogg at the 24/7 Wall Street blog is already trying to break down a possible deal, noting that a transaction might be far more costly for Coke.
What do you think? Will Coke follow Pepsi?
Architecture in Recession: U.A.E.
April 15th, 2009 | Posted by innovIn recent years, architects descended upon Dubai, eager to capitalize on its feverish building boom. But while the Persian Gulf city’s sprawling skyline is still dotted with cranes, the market here has fizzled.
As of early February, more than half of Dubai’s real estate projects were on hold or canceled, from the 3,281-foot-tall Nakheel Tower designed by Woods Bagot to the Hydropolis, a 220-suite underwater hotel envisioned by designer Joachim Hauser. Analysts predict that Dubai property values, in total, will decline up to 60 percent in 2009 after years of record growth. Given this drastic turn of events, architects are being forced to reconsider their prospects in the region.
“Everyone is taking a real wait-and-see approach,” says Wayde Tardif, an American designer who in 2007 co-founded POSIT Studio in Dubai. Tardif remains optimistic, noting that the slowdown will normalize the market and allow architects to catch their breath. He predicts a rebound in 16 to 18 months; he doesn’t foresee a forgotten city full of empty towers. “Dubai has too much pride for that,” he says.
In the past decade, Dubai, located in the United Arab Emirates (UAE), has embarked on ever-grander projects at breakneck speed in hopes of becoming a major world metropolis. Today, its economy relies on tourism, real estate, and financial services; oil revenues contribute less than 10 percent to its GDP.
Initially some thought the desert boomtown could skirt the global financial crisis. By October, however, foreign investors were vanishing, local lenders were retrenching, and oil prices were taking a dive. In recent months, The National, a UAE newspaper for expatriates, has been peppered with reports of mass layoffs. “There are many instances of consultant firms reducing staff by more than 50 percent, or closing their Dubai office altogether,” says Scott Hyndman, a development manager at a Dubai-based property company. Some stories claim that hundreds, if not thousands, of cars sit abandoned at the Dubai airport, presumably left there by foreigners fleeing the country.
While holding faith in Dubai, many architecture firms are shifting their focus 70 miles to the southwest, to oil-rich Abu Dhabi. The capital of the UAE, Abu Dhabi has evolved gradually over the decades and often is regarded as a more livable—and more stable— urban center. “Where Dubai has been a speculative market, I think Abu Dhabi is a much more serious, play-by-the-rules market,” notes Steven Miller, FAIA, managing director of FXFOWLE’s Dubai office. His firm is actively pursuing work in Abu Dhabi, where major developments such as Saadiyat Island—a $27 billion multi-use project with buildings by Jean Nouvel, Zaha Hadid, and Frank Gehry—are reportedly still on schedule.
Guy Source, a UAE-based employment recruiter for the architecture industry, agrees that Abu Dhabi seems less affected by the financial crisis than Dubai. He adds that other Middle Eastern markets hold promise as well, noting that there are jobs waiting to be filled in Qatar, Kuwait, and Saudia Arabia.
FXFOWLE’s Miller is no stranger to Saudi Arabia; he first worked there during the recession of the mid-1970s. Now, as he hunts for work beyond once-fertile Dubai, he is returning to familiar territory. “Saudi Arabia is off the charts right now,” Miller says. “We’re very busy there.”
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