By Adam Satariano and Peter Burrows
About five years ago, Apple Inc. design guru Jony Ive decided he wanted a new feature for the next MacBook: a small dot of green light above the screen, shining through the computer’s aluminum casing to indicate when its camera was on. The problem? It’s physically impossible to shine light through metal.
Ive called in a team of manufacturing and materials experts to figure out how to make the impossible possible, according to a former employee familiar with the development who requested anonymity to avoid irking Apple. The team discovered it could use a customized laser to poke holes in the aluminum small enough to be almost invisible to the human eye but big enough to let light through.
Applying that solution at massive volume was a different matter, Bloomberg Businessweek reported in its Nov. 7 issue. Apple needed lasers, and lots of them. The team found a U.S. company that made laser equipment for microchip manufacturing which, after some tweaking, could do the job. Each machine typically goes for about $250,000. Apple convinced the seller to sign an exclusivity agreement and has since bought hundreds of them to make holes for the green lights that now shine on the company’s MacBook Airs, Trackpads and wireless keyboards.
Most of Apple’s customers have probably never given that green light a second thought, but its creation speaks to a massive competitive advantage for Apple: operations.
This is the world of manufacturing, procurement and logistics in which the new chief executive officer, Tim Cook, excelled, earning him the trust of Steve Jobs. According to more than a dozen interviews with former employees, executives at suppliers and management experts familiar with the company’s operations, Apple has built a closed ecosystem where it exerts control over almost every piece of the supply chain, from design to retail store. Because of its volume — and its occasional ruthlessness — Apple gets big discounts on parts, manufacturing capacity, and air freight.
“Operations expertise is as big an asset for Apple as product innovation or marketing,” says Mike Fawkes, a former supply-chain chief at Hewlett-Packard Co. and now a venture capitalist with VantagePoint Capital Partners. “They’ve taken operational excellence to a level never seen before.”
This operational edge is what enables Cupertino, California-based Apple to handle massive product launches without having to maintain large, profit-sapping inventories. It’s allowed a company often criticized for high prices to sell its iPad at a price that very few rivals can beat, while still earning a 25 percent margin on the device, according to the estimates of Gene Munster, an analyst at Piper Jaffray Cos.
Apple began innovating on the nitty-gritty details of supply-chain management almost immediately upon Jobs’s return in 1997. At the time, most computer manufacturers transported products by sea, a far cheaper option than air freight. To ensure that the company’s new, translucent blue iMacs would be widely available at Christmas the following year, Jobs paid $50 million to buy up all the available holiday air freight space, says John Martin, a logistics executive who worked with Jobs to arrange the flights.
The move handicapped rivals such as Compaq Computer Corp. that later wanted to book air transport. Similarly, when iPod sales took off in 2001, Apple realized it could pack so many of the diminutive music players on planes that it became economical to ship them directly from Chinese factories to consumers’ doors. When a Hewlett-Packard staffer bought one and received it a few days later, tracking its progress around the world through Apple’s website, “It was an ‘Oh shit’ moment,” recalls Fawkes.
That mentality — spend exorbitantly wherever necessary, and reap the benefits from greater volume in the long run — is institutionalized throughout Apple’s supply chain, and begins at the design stage. Ive and his engineers sometimes spend months living out of hotel rooms in order to be close to suppliers and manufacturers, helping to tweak the industrial processes that translate prototypes into mass-produced devices. For designs such as the MacBook’s unibody shell, cut from a single piece of aluminum, Apple’s designers work with suppliers to create new tooling equipment.
The decision to focus on a few product lines, and to do little in the way of customization, is a huge advantage.
“They have a very unified strategy, and every part of their business is aligned around that strategy,” says Matthew Davis, a supply-chain analyst with Gartner Inc. who has ranked Apple as the world’s best supply chain for the past four years.
When it’s time to go into production, Apple wields a big weapon: More than $80 billion in cash and investments. The company says it plans to almost double capital expenditures on its supply chain in the next year, to $7.1 billion, while committing another $2.4 billion in prepayments to key suppliers. The tactic ensures availability and low prices for Apple — and sometimes limits the options for everyone else.
Before the release of the iPhone 4 in June 2010, rivals such as HTC Corp. couldn’t buy as many screens as they needed because manufacturers were busy filling Apple orders, according to a former manager at HTC. To manufacture the iPad 2, Apple bought so many high-end drills to make the device’s internal casing that other companies’ wait time for the machines stretched from six weeks to six months, according to a manager at the drillmaker.
Life as an Apple supplier is lucrative because of the high volumes, though painful because of the strings attached. When Apple asks for a price quote for parts such as touch screens, it demands a detailed accounting of how the manufacturer arrived at the quote, including its estimates for material and labor costs, and its own projected profit.
Apple requires many key suppliers to keep two weeks of inventory within a mile of Apple’s assembly plants in Asia, and sometimes doesn’t pay until as long as 90 days after it uses a part, according to an executive who has consulted for Apple and wouldn’t speak on the record for fear of compromising the relationship.
Not every supplier gives in. An executive who works with a major parts manufacturer says that Apple’s bargaining tactics tend to exert downward pressure on prices, leading to lower profits and margins. After months of negotiations, the company declined a $1 billion payment from Apple that would have required the supplier to commit much of its manufacturing capacity to Apple’s products. The executive familiar with these talks, who asked not to be named because the discussions weren’t public, says that while deals featuring $1 billion in cash up front are basically unheard of, his company didn’t want to be too dependent on Apple — and didn’t want to help it deflate prices.
Apple’s control reaches its crescendo in the leadup to one of its famed product unveilings, a tightly orchestrated process that has been refined over years of Mac, iPod, iPhone and iPad debuts. For weeks in advance of the announcement, factories work overtime to build hundreds of thousands of devices.
To track efficiency and ensure pre-release secrecy, Apple places electronic monitors in some boxes of parts that allow observers in Cupertino to track them through Chinese factories, an effort meant to discourage leaks. At least once, the company shipped products in tomato boxes to avoid detection, says the consultant who has worked with Apple. When the iPad 2 debuted, the finished devices were packed in plain boxes and Apple employees monitored every handoff point — loading dock, airport, truck depot, and distribution center — to make sure each unit was accounted for.
Apple’s retail stores give it a final operational advantage. Once a product goes on sale, the company can track demand by the store and by the hour, and adjust production forecasts daily. If it becomes clear a given part will run out, teams are deployed and given approval to spend millions of dollars on extra equipment to get around the bottleneck.
Apple’s enormous profits — its gross margins were 40 percent last quarter, compared with 10 percent to 20 percent for most other hardware companies — are in large part due to this focus on operations, which is sure to remain a priority under Cook. The new CEO is known to give colleagues copies of Competing Against Time, a book about using supply chains as a strategic weapon in business.
According to Martin, the logistics executive, Cook uses a catchphrase to hammer home the need for efficiency: “Nobody wants to buy sour milk.”
Wednesday, 9 November 2011
Friday, 4 November 2011
The Education Solution
WASHINGTON, DC – The world is assailed by problems that defy easy answers. Economic shocks are destabilizing countries and regions, and inflicting great social and financial hardships on families and their communities. Environmental damage threatens our food supplies, the air we breathe, and the rich biodiversity that sustains the balance of life. Wars and conflict produce millions of new refugees.
Moreover, new health risks are emerging, with diabetes, obesity, and other non-communicable diseases now stalking low- and middle-income countries – even as many of those countries are still locked in combat with tuberculosis, HIV/AIDS, malaria, and other infectious diseases. Hundreds of millions of young people around the world are searching for jobs in a very uncertain labor market. The infrastructure we use to produce our energy, transport our goods, and transact our business is under stress.
This list of worries is not meant to discourage, but to challenge. As the world’s physical resources grow scarcer, we must increasingly rely on the best and most proven renewable resource available – human ingenuity. Just as they confronted problems in the past, our scientists and entrepreneurs have brought us solutions by way of the Green Revolution, new vaccines, communications technology, and cleaner energy.
Scholars and leaders have given us the means to identify and resolve social and economic dilemmas. Rising levels of education have given people more control over their own health, household circumstances, governments, and culture.
The global challenges that we face today are proof that we need a world of problem solvers. We need a world of people who are productive, resilient, creative, and versatile enough with technology and culture to find solutions to the many challenges we face.
Education helps to build that world. Households with more education cope better with economic shocks and with extreme weather events. People with higher levels of education earn more, have more control over their fertility, and have healthier and better-educated children. Education gives people the skills to earn a living, to innovate, to invent, and to access culture – all of which allows them to live more fulfilling lives.
The good news is that the global community has united to help all people acquire these skills – and with real results. In 1990, a broad coalition of governments, the World Bank, United Nations agencies, and civil-society organizations committed to a strategy called “Education for All.” Twenty years later, there has been significant progress in enrolling children in school and expanding access to secondary school and universities. Globally, 88% of children now complete primary school, and 67% go on to enroll in secondary school.
But low-income countries are still far from meeting the goal of ensuring that all children complete primary school: only 63% of children in those countries achieve that milestone. Poor children, children with disabilities, girls, and ethnic minorities still face daunting barriers to education.
Many countries struggle simply to build schools quickly enough to keep up with population growth. Severely overcrowded classrooms, lacking in trained teachers and basic supplies, are not uncommon. In the rush to expand services, school systems have sometimes neglected teachers’ professional development, student assessment, and even basic building standards.
Over the years, we have learned that the real challenge is not just to enroll children in school, but to help them to acquire the skills necessary for employment, entrepreneurship, family life, and citizenship. The World Bank’s new education strategy, “Learning for All – Investing in People’s Knowledge and Skills to Promote Development,” highlights this imperative. It emphasizes the need to invest early, nurturing young children to ensure that they arrive at school healthy and ready to learn; to invest smartly, transforming schools with good teachers, good materials, and good management; and to invest for all, laying the foundation for just and equitable societies.
The strategy rightly recognizes the importance of building systems that support the development of education on a large scale. Sufficient numbers of teachers, school buildings, and textbooks are all essential, but accelerating learning requires much more. We need well-designed systems of finance, student assessment, professional development and management, quality assurance, and monitoring and evaluation. We need more robust and transparent relationships between central and local governments, state and private education providers, and households and communities. And we need stronger links between schools and employers to ensure that graduates acquire skills that are relevant to a changing job market.
We have much to learn from systems that have demonstrated continuous improvement, in contexts as varied as Singapore, Chile, Ghana, Slovenia, and England. While each of these countries had very different starting points, progress has been aided by the political will to measure outcomes and learn from results, define a sustainable path for change, and make smart, effective investments.
To foster learning about how systems improve, the World Bank is embarking on a major initiative to assess the quality of education policies around the world. Its new databases will catalogue which policies countries have adopted to promote learning in each part of the education system, in areas ranging from teacher policies to student assessment to school financing mechanisms. Our goal is to facilitate the spread of good policy and practice, allowing countries to learn from a variety of approaches and to understand which ones might work in their own context.
The case for improving education systems is urgent. Imagine our world, 20 years from now, if we could educate a new generation of young people so that they have the skills and creativity to take on the great economic and technological challenges of the day. Imagine, in particular, that all girls are educated, with all the profound benefits that this would yield in the areas of population growth, health and welfare, poverty alleviation, human rights, and politics.
Now imagine the alternative and ask yourself: Which world do I want to live in?
Moreover, new health risks are emerging, with diabetes, obesity, and other non-communicable diseases now stalking low- and middle-income countries – even as many of those countries are still locked in combat with tuberculosis, HIV/AIDS, malaria, and other infectious diseases. Hundreds of millions of young people around the world are searching for jobs in a very uncertain labor market. The infrastructure we use to produce our energy, transport our goods, and transact our business is under stress.
This list of worries is not meant to discourage, but to challenge. As the world’s physical resources grow scarcer, we must increasingly rely on the best and most proven renewable resource available – human ingenuity. Just as they confronted problems in the past, our scientists and entrepreneurs have brought us solutions by way of the Green Revolution, new vaccines, communications technology, and cleaner energy.
Scholars and leaders have given us the means to identify and resolve social and economic dilemmas. Rising levels of education have given people more control over their own health, household circumstances, governments, and culture.
The global challenges that we face today are proof that we need a world of problem solvers. We need a world of people who are productive, resilient, creative, and versatile enough with technology and culture to find solutions to the many challenges we face.
Education helps to build that world. Households with more education cope better with economic shocks and with extreme weather events. People with higher levels of education earn more, have more control over their fertility, and have healthier and better-educated children. Education gives people the skills to earn a living, to innovate, to invent, and to access culture – all of which allows them to live more fulfilling lives.
The good news is that the global community has united to help all people acquire these skills – and with real results. In 1990, a broad coalition of governments, the World Bank, United Nations agencies, and civil-society organizations committed to a strategy called “Education for All.” Twenty years later, there has been significant progress in enrolling children in school and expanding access to secondary school and universities. Globally, 88% of children now complete primary school, and 67% go on to enroll in secondary school.
But low-income countries are still far from meeting the goal of ensuring that all children complete primary school: only 63% of children in those countries achieve that milestone. Poor children, children with disabilities, girls, and ethnic minorities still face daunting barriers to education.
Many countries struggle simply to build schools quickly enough to keep up with population growth. Severely overcrowded classrooms, lacking in trained teachers and basic supplies, are not uncommon. In the rush to expand services, school systems have sometimes neglected teachers’ professional development, student assessment, and even basic building standards.
Over the years, we have learned that the real challenge is not just to enroll children in school, but to help them to acquire the skills necessary for employment, entrepreneurship, family life, and citizenship. The World Bank’s new education strategy, “Learning for All – Investing in People’s Knowledge and Skills to Promote Development,” highlights this imperative. It emphasizes the need to invest early, nurturing young children to ensure that they arrive at school healthy and ready to learn; to invest smartly, transforming schools with good teachers, good materials, and good management; and to invest for all, laying the foundation for just and equitable societies.
The strategy rightly recognizes the importance of building systems that support the development of education on a large scale. Sufficient numbers of teachers, school buildings, and textbooks are all essential, but accelerating learning requires much more. We need well-designed systems of finance, student assessment, professional development and management, quality assurance, and monitoring and evaluation. We need more robust and transparent relationships between central and local governments, state and private education providers, and households and communities. And we need stronger links between schools and employers to ensure that graduates acquire skills that are relevant to a changing job market.
We have much to learn from systems that have demonstrated continuous improvement, in contexts as varied as Singapore, Chile, Ghana, Slovenia, and England. While each of these countries had very different starting points, progress has been aided by the political will to measure outcomes and learn from results, define a sustainable path for change, and make smart, effective investments.
To foster learning about how systems improve, the World Bank is embarking on a major initiative to assess the quality of education policies around the world. Its new databases will catalogue which policies countries have adopted to promote learning in each part of the education system, in areas ranging from teacher policies to student assessment to school financing mechanisms. Our goal is to facilitate the spread of good policy and practice, allowing countries to learn from a variety of approaches and to understand which ones might work in their own context.
The case for improving education systems is urgent. Imagine our world, 20 years from now, if we could educate a new generation of young people so that they have the skills and creativity to take on the great economic and technological challenges of the day. Imagine, in particular, that all girls are educated, with all the profound benefits that this would yield in the areas of population growth, health and welfare, poverty alleviation, human rights, and politics.
Now imagine the alternative and ask yourself: Which world do I want to live in?
The fine art of shopping
It turns out consumers really do like to squeeze the Charmin, as the old advertising catch phrase says. In fact, they have sometimes resorted to poking holes in the toilet paper’s plastic-wrapper packaging to gauge its softness, according to shopper marketing guru Marcus Evans.
Getting into the nitty gritty of how consumers shop is a key focus of Mr. Evans as managing director of the new shopper marketing practice Integer Canada, part of the TBWA advertising network.
Shopper marketing is an area of fierce expansion and growing popularity at ad agencies. In August, DDB Canada launched Shopper DDB, an operation dedicated to the practice, and Toronto-based Philter recently announced a new joint venture, shopper marketing agency Mars|Philter.
“There is audience fragmentation in traditional media,” said Mr. Evans, noting the insights gleaned from shopper marketing help brands target consumers more effectively. “Consumers are getting really adept at filtering out brand messaging, and brands are investing in areas where they can have a quantifiable defined return on investment.”
A survey by management consulting firm Booz & Company found that 83% of senior consumer packaged goods [CPG] executives planned to increase their company’s investments in shopper marketing. Integer says 75% of CPG companies dedicate at least 5% of their sales and marketing budget to shopper marketing.
That brings us to Canadian Tire Corp., Shoppers Drug Mart Corp., and Loblaws Cos. Ltd., stores in which Mr. Evans spent a morning with the Financial Post offering shopper marketing insights.
At a Canadian Tire on the east side of Toronto, he analyzed a blowout sale of Charmin on a stand at the front of the store. His prior shopper marketing research outside of Canada for Procter & Gamble resulted in a significant sales increase after a small aisle display of two unwrapped Charmin toilet tissue rolls (Ultra Soft and Ultra Strong) let customers torip off a square or two and touch the product.
“If a brand claims “ultra soft,” how real is that? In extreme cases people were making a hole in the packaging to feel how soft the Charmin was,” he said.
Shopper marketing involves everything from giving out detailed questionnaires to consumers to discover how and why they shop to accompanying them on shopping trips and quizzing them about what they are doing. It includes analysis of websites and mobile communication, flyers and loyalty promotions, packaging, store displays and in-store layout and service.
“Why does a shopper come into a store with 20 items on her list and leave with 30 items? Or 15 items?” Mr. Evans said. “That’s what we want to find out.”
Integer divides consumer shopping into three parts: “pretail,” primarily communication that consumers access at home, such as websites or flyers; “retail,” every aspect of the in-store experience; and “post-tail,” follow-up communication and brand experiences after leaving the store.
Integer’s research has revealed customers are cautious and like to plan, making “pretail” particularly important for retailers and brands; 51% of Canadian shoppers always shop with a list, compared with 43% in the United States; and 80% said coupons have an influence, in varying degrees, on their brand selection.
“If you have got information to give to consumers when they are in the ‘What am I going to buy?’ phase, it’s a good time to talk to them because they are focused on it as opposed to in a store,” he said. “If I have got two young kids and a sausage dog shopping with me, I have a limited time. I am not looking around much.”
Mr. Evans noted Canadian Tire’s flyer and store layout were focused on deals, which may encourage people to buy extra things. “Most of the shoppers are here on a mission for one or two things, but the job of Canadian Tire is to remind them to leave with as many things as possible.”
At Canadian Tire, Charlotte Curgenven-Appt, shopping with her young son in tow, came in for sale-priced candy but ended up adding cleaning products to her cart.
“I really don’t need anything else, but I’ll probably end up buying more,” she said. “I am here because I was looking in the flyer. Canadian Tire always has good sales.”
Mr. Evans’ verdict of the retailer was largely positive, though he believed it could improve its signage. “They should hang [signs] from the ceiling so people can see them from different vantage points of the store rather than on the end of each aisle,” he said.
He was also generally positive about Shoppers Drug Mart, its wide aisles and clear signage, but found its flyer of standard sale offers said too little about the experience in the store. Inside, he lamented the incongruous placement of a bin of purses in the middle of a hair product aisle.
“Is that helping at all?” he said. “Interrupting shoppers when they are sleep shopping is a good thing, but this should be here for a reason.”
Sleep shopping, he explained, is what most people do when they make a routine retail trip to a grocery store. At Shoppers Drug, that could mean putting a promotion for chocolate beside a cleaning aisle, he said. “I haven’t any interesting secondary placements like that here.”
Mr. Evans was more effusive about Loblaws, extolling its store layout, endcap sale promotions, clear signage and range of private label products. “They could also do more with the flyer, which also says little about why people should come to the store other than some deals here. Give me a story as well as giving me the prices. People are looking for inspiration.”
Getting into the nitty gritty of how consumers shop is a key focus of Mr. Evans as managing director of the new shopper marketing practice Integer Canada, part of the TBWA advertising network.
Shopper marketing is an area of fierce expansion and growing popularity at ad agencies. In August, DDB Canada launched Shopper DDB, an operation dedicated to the practice, and Toronto-based Philter recently announced a new joint venture, shopper marketing agency Mars|Philter.
“There is audience fragmentation in traditional media,” said Mr. Evans, noting the insights gleaned from shopper marketing help brands target consumers more effectively. “Consumers are getting really adept at filtering out brand messaging, and brands are investing in areas where they can have a quantifiable defined return on investment.”
A survey by management consulting firm Booz & Company found that 83% of senior consumer packaged goods [CPG] executives planned to increase their company’s investments in shopper marketing. Integer says 75% of CPG companies dedicate at least 5% of their sales and marketing budget to shopper marketing.
That brings us to Canadian Tire Corp., Shoppers Drug Mart Corp., and Loblaws Cos. Ltd., stores in which Mr. Evans spent a morning with the Financial Post offering shopper marketing insights.
At a Canadian Tire on the east side of Toronto, he analyzed a blowout sale of Charmin on a stand at the front of the store. His prior shopper marketing research outside of Canada for Procter & Gamble resulted in a significant sales increase after a small aisle display of two unwrapped Charmin toilet tissue rolls (Ultra Soft and Ultra Strong) let customers torip off a square or two and touch the product.
“If a brand claims “ultra soft,” how real is that? In extreme cases people were making a hole in the packaging to feel how soft the Charmin was,” he said.
Shopper marketing involves everything from giving out detailed questionnaires to consumers to discover how and why they shop to accompanying them on shopping trips and quizzing them about what they are doing. It includes analysis of websites and mobile communication, flyers and loyalty promotions, packaging, store displays and in-store layout and service.
“Why does a shopper come into a store with 20 items on her list and leave with 30 items? Or 15 items?” Mr. Evans said. “That’s what we want to find out.”
Integer divides consumer shopping into three parts: “pretail,” primarily communication that consumers access at home, such as websites or flyers; “retail,” every aspect of the in-store experience; and “post-tail,” follow-up communication and brand experiences after leaving the store.
Integer’s research has revealed customers are cautious and like to plan, making “pretail” particularly important for retailers and brands; 51% of Canadian shoppers always shop with a list, compared with 43% in the United States; and 80% said coupons have an influence, in varying degrees, on their brand selection.
“If you have got information to give to consumers when they are in the ‘What am I going to buy?’ phase, it’s a good time to talk to them because they are focused on it as opposed to in a store,” he said. “If I have got two young kids and a sausage dog shopping with me, I have a limited time. I am not looking around much.”
Mr. Evans noted Canadian Tire’s flyer and store layout were focused on deals, which may encourage people to buy extra things. “Most of the shoppers are here on a mission for one or two things, but the job of Canadian Tire is to remind them to leave with as many things as possible.”
At Canadian Tire, Charlotte Curgenven-Appt, shopping with her young son in tow, came in for sale-priced candy but ended up adding cleaning products to her cart.
“I really don’t need anything else, but I’ll probably end up buying more,” she said. “I am here because I was looking in the flyer. Canadian Tire always has good sales.”
Mr. Evans’ verdict of the retailer was largely positive, though he believed it could improve its signage. “They should hang [signs] from the ceiling so people can see them from different vantage points of the store rather than on the end of each aisle,” he said.
He was also generally positive about Shoppers Drug Mart, its wide aisles and clear signage, but found its flyer of standard sale offers said too little about the experience in the store. Inside, he lamented the incongruous placement of a bin of purses in the middle of a hair product aisle.
“Is that helping at all?” he said. “Interrupting shoppers when they are sleep shopping is a good thing, but this should be here for a reason.”
Sleep shopping, he explained, is what most people do when they make a routine retail trip to a grocery store. At Shoppers Drug, that could mean putting a promotion for chocolate beside a cleaning aisle, he said. “I haven’t any interesting secondary placements like that here.”
Mr. Evans was more effusive about Loblaws, extolling its store layout, endcap sale promotions, clear signage and range of private label products. “They could also do more with the flyer, which also says little about why people should come to the store other than some deals here. Give me a story as well as giving me the prices. People are looking for inspiration.”
Wednesday, 2 November 2011
More than half a million ‘baby pensioners’ in Italy: report
Nov 1, 2011 – 3:54 PM ET
As Greek Prime Minister George Papandreou called a surprise referendum Monday, hoping to curry political favour with an outraged citizenry, Italy faces its own howling protests over plans to raise the retirement age.Italian Prime Minister Silvio Berlusconi submitted a “letter of intent” to the European Union summit last week promising, among other things, to balance the country’s budget by 2013 and increase the age of retirement to 67.
This will be no small task in Italy, which has more than 530,000 pensioners who retired under the age of 50 — sometimes with just 14 and a half years of service — according to a report from independent Italian business agency Confartigianato last week.
The large majority of these pensions (78.6%) are paid by INPDAP, the country’s public sector pension administrator, the report said.
The average so-called “baby pensioner” remains retired for 40.7 years, spending 48% of their life retired, Confartigianato said.
Social security spending on baby pensions totals €9.45-billion ($13.2-billion) a year, according to the report.
Cesare Fumagalli, the secretary general of Confartigianato, called the situation an “absurd iniquity” and suggested the need for a hike in the age of retirement.
Hundreds of Italians protested a €54-billion package of tax increases and spending cuts passed in September and physical violence even broke out in parliament last week.
Deputies from the Northern League, part of the ruling coalition, fought with members from the opposition FLI party of speaker Gianfranco Fini, grabbing each other by the throat as other party members rushed to break up the fight.
The clash last Wednesday came ahead of Mr. Berlusconi’s submission to the EU summit amid reports that the Prime Minister would agree to step down in exchange for the Northern League agreeing to increase the pension age to 67 by 2026.
Italy’s bond yields have recently increased to unsustainable levels, making borrowing prohibitive and requiring intervention from the European Central Bank to prevent further rises.
Reluctant investors have concerns about the country’s sluggish growth and €1.9-trillion ($2.6-trillion) debt, which is 120% of its gross domestic product and second only to Greece in the region.
Friday, 28 October 2011
Canada urged to end ‘pension apartheid’
very Canadian needs $2-million in RRSP contribution room to achieve parity with public-sector defined benefit pension plans, the C.D. Howe Institute says.
As things stand, the system punishes those with defined-contribution pensions in the private sector and those who rely on what little RRSP room is granted them, says James Pierlot, principal with Toronto-based Pierlot Pension Law.
The $2-million figure comes from the value of public-sector DB plans for top managers earning $150,000 late in their careers. Rather than limit RRSP contributions to 18% of a prior year’s earned income, Mr. Pierlot would give every Canadian the lifetime RRSP contribution room, adjusted to inflation.
The need to redress the gap between pension “haves and have nots” has become urgent, Mr. Pierlot says. Indeed, a new book published by Wiley Canada – Pension Ponzi – makes the same point: It depicts a system of “pension apartheid” that favours 20% of workers with union negotiated public-sector DB plans at the expense of the rest who guarantee those pensions through their future taxes.
Most penalized are new Canadians, the self-employed, the chronically unemployed and those who have suffered market losses in RRSPs or prematurely withdrawn funds from them.
In an interview, Mr. Pierlot said his paper (titled Legal for Life) still calls for upfront tax deductions for RRSP contributions but no annual contribution limit. The only constraint would be coming up with the money. Plans would still be taxable once funds are withdrawn in retirement.
Eventually, registered retirement income funds (RRIFs) would decline to zero but would not be subjected to minimum annual withdrawal rules that may force seniors to sell at market bottoms.
An early draft advocated a “declining limit system.” So while the limit might fall from $2-million to $1.9-million the first year of a RRIF, and fall another $100,000 each year thereafter, someone with only $500,000 wouldn’t be forced to withdraw anything in the early years of a RRIF.
The paper does not discuss taxfree savings accounts, but Mr. Pierlot advocates a lifetime TFSA limit of $250,000 to $500,000. “The retirement system is intended for middleclass workers earning $50,000 to $150,000 a year,” he said, “Anyone earning less should not be in RRSPs but in TFSAs.”
His proposals were included in private-member’s bill C574, which passed first and second readings until the federal election intervened. The Retirement Income Bill of Rights was presented by Liberal pension critic Judy Sgro and supported by all parties except the Conservatives, Mr. Pierlot said.
“It said every Canadian shall have equal opportunity to accumulate pension income no matter how they are employed or where they were born. If it had passed, it would have forced changes to the Income Tax Act.”
Mr. Pierlot said he didn’t “cost” his ideas because Ottawa misrepresents RRSP and pension tax deductions as tax expenditures.
“They’re not,” he says. “Money goes into plans and accumulates tax-free but down the road, the government gets its tax with interest. Yes, it affects government cash flow in the short term, but it isn’t a tax-avoidance mechanism. It’s a tax deferral.”
Fred Vettese, chief actuary with Toronto-based Morneau Shepell, says Canadians “essentially have a lifetime limit already since unused RRSP contribution room can be carried forward indefinitely.” But it’s true average private-sector workers with RRSPs can’t replicate public-sector levels of retirement income.
“If we truly felt public-sector plans provide an appropriate level of retirement income, the author is right in suggesting a $2-million lifetime limit to level the playing field.”
But there would still be inequity, Mr. Vettese said, because contribution rates needed to generate so much income would impoverish average RRSP savers over a working lifetime.
jchevreau@nationalpost.com
As things stand, the system punishes those with defined-contribution pensions in the private sector and those who rely on what little RRSP room is granted them, says James Pierlot, principal with Toronto-based Pierlot Pension Law.
The $2-million figure comes from the value of public-sector DB plans for top managers earning $150,000 late in their careers. Rather than limit RRSP contributions to 18% of a prior year’s earned income, Mr. Pierlot would give every Canadian the lifetime RRSP contribution room, adjusted to inflation.
The need to redress the gap between pension “haves and have nots” has become urgent, Mr. Pierlot says. Indeed, a new book published by Wiley Canada – Pension Ponzi – makes the same point: It depicts a system of “pension apartheid” that favours 20% of workers with union negotiated public-sector DB plans at the expense of the rest who guarantee those pensions through their future taxes.
Most penalized are new Canadians, the self-employed, the chronically unemployed and those who have suffered market losses in RRSPs or prematurely withdrawn funds from them.
In an interview, Mr. Pierlot said his paper (titled Legal for Life) still calls for upfront tax deductions for RRSP contributions but no annual contribution limit. The only constraint would be coming up with the money. Plans would still be taxable once funds are withdrawn in retirement.
Eventually, registered retirement income funds (RRIFs) would decline to zero but would not be subjected to minimum annual withdrawal rules that may force seniors to sell at market bottoms.
An early draft advocated a “declining limit system.” So while the limit might fall from $2-million to $1.9-million the first year of a RRIF, and fall another $100,000 each year thereafter, someone with only $500,000 wouldn’t be forced to withdraw anything in the early years of a RRIF.
The paper does not discuss taxfree savings accounts, but Mr. Pierlot advocates a lifetime TFSA limit of $250,000 to $500,000. “The retirement system is intended for middleclass workers earning $50,000 to $150,000 a year,” he said, “Anyone earning less should not be in RRSPs but in TFSAs.”
His proposals were included in private-member’s bill C574, which passed first and second readings until the federal election intervened. The Retirement Income Bill of Rights was presented by Liberal pension critic Judy Sgro and supported by all parties except the Conservatives, Mr. Pierlot said.
“It said every Canadian shall have equal opportunity to accumulate pension income no matter how they are employed or where they were born. If it had passed, it would have forced changes to the Income Tax Act.”
Mr. Pierlot said he didn’t “cost” his ideas because Ottawa misrepresents RRSP and pension tax deductions as tax expenditures.
“They’re not,” he says. “Money goes into plans and accumulates tax-free but down the road, the government gets its tax with interest. Yes, it affects government cash flow in the short term, but it isn’t a tax-avoidance mechanism. It’s a tax deferral.”
Fred Vettese, chief actuary with Toronto-based Morneau Shepell, says Canadians “essentially have a lifetime limit already since unused RRSP contribution room can be carried forward indefinitely.” But it’s true average private-sector workers with RRSPs can’t replicate public-sector levels of retirement income.
“If we truly felt public-sector plans provide an appropriate level of retirement income, the author is right in suggesting a $2-million lifetime limit to level the playing field.”
But there would still be inequity, Mr. Vettese said, because contribution rates needed to generate so much income would impoverish average RRSP savers over a working lifetime.
jchevreau@nationalpost.com
Monday, 24 October 2011
Carney ready to take on the world’s banks
OTTAWA — As a young hockey player with dreams of making it big, Mark Carney liked to get revved up before a big game by listening to AC/DC’s “Hell’s Bells.”
“Coming on like a hurricane” and “take no prisoners”, as the lyrics go, pretty much sum up the Bank of Canada Governor now as he prepares to take on the world’s most powerful banks as head of the Financial Stability Board, the key driving force behind the reform of global financial regulation.
The still-athletic, 46-year-old is certain to get the job, according to sources who spoke to Reuters on condition of anonymity, although he must wait for G20 leaders to give him their formal blessing at a Nov 3-4 summit in Cannes, France.
Carney, fondly described as “un-Canadian” by one Ottawa official because of a blunt and confrontational style, will replace the Bank of Italy’s Mario Draghi, who takes over as president of the European Central Bank on Nov. 1.
Carney’s past as a Goldman Sachs investment banker has been a double-edged sword, as he fought to prove his loyalties lie with ordinary citizens, not his high-flying banker buddies. He clashed memorably with JPMorgan Chase & Co Chief Executive Jamie Dimon in Washington last month as the banker argued against new regulations for the financial sector.
At the same time, the financial markets savvy Carney won over 13 years at Goldman’s offices in London, Tokyo, New York and Toronto has propelled his meteoric rise from the finance ministry to his current job.
He heads a well-respected central bank that helped make Canada’s recession one of the weakest in the rich country group. No Canadian bank needed government help during the world financial crisis, and already by January, the country had recovered all the jobs it lost in the downturn.
The Bank of Canada would not comment until after a formal announcement on the FSB, but Carney is set to head the board at a time when bankers are pushing back against tougher capital requirements designed to strengthen financial institutions so taxpayers won’t have to rescue them in the next crisis.
The regulators say the new standards will help prevent another crippling crisis, or at least minimize the damage, and they insist the global economy itself is at risk if they get things wrong.
Bankers say the crackdown will crimp their lending and hit economic growth. They particularly oppose a capital surcharge on on the biggest 28 cross-border banks, including Carney’s former employer Goldman, HSBC, Deutsche Bank and JPMorgan Chase, the institutions that are considered too big to fail in today’s interconnected financial world.
Carney’s challenge will be to keep reforms moving on even as cracks and slippages appear, and to “name and shame” countries that don’t deliver on their promises.
FIGHTER WITH A HALO
In Reuters interviews, several people who interacted with Carney during his public service career stressed two traits that will help him: he’s a fighter who does not back down and he speaks the bankers’ language.
“I think he believes he has a halo over him. He’s pretty … confident, for lack of a better word,” said a Canadian academic who has met Carney at meetings and seminars. “You may not want to have dinner with that person but as head of the FSB I think it’s a good choice.”
Carney has the “chutzpah” needed, agrees Chris Ragan, a former special advisor at the Bank of Canada who has overlapped with Carney at the central bank and in government. “If he has a view that he holds strongly, he’s absolutely prepared to fight for that. He’s not a wallflower.”
The FSB brings together G20 central bankers, finance ministers and regulators to craft and coordinate financial regulation in what has so far been a pretty unglamorous job.
But that could change if, as expected, the G20 gives the board additional resources and independence from the Bank for International Settlements in Basel, Switzerland, boosting its clout and making it more like the International Monetary Fund and the World Bank.
“It needs to move beyond a very Mickey Mouse operation of just 20 people,” said Bessma Momani, a research fellow at the Centre for International Governance Innovation at Waterloo, Ontario and a panelist on FSB governance for the Washington-based Brookings Institution.
“With the systemic problems we’re dealing with we need something bigger and more substantial. We need a full-time person that is devoted and focused on the FSB mandate.” Carney intends to stay on as Bank of Canada governor, but if the revamped FSB requires a full-time chair he may have to abandon the bank before his seven-year mandate ends in 2015.
The only other serious contender for the job was Swiss National Bank’s Philipp Hildebrand, a friend of Carney’s from their Oxford student days. But a European official told Reuters he was certain Carney would win over his former classmate.
Finance Minister Jim Flaherty and banking regulator Julie Dickson, who sits on the FSB Steering Committee, have gone on the record saying Carney’s chances are good.
Formally, it is up to the FSB plenary to choose the chairman by consensus. But sources say the negotiations are largely done behind closed doors with little transparency.
NOT JUST SOME EGGHEAD
As head of the Bank of Canada, Carney has made it clear that despite his Goldman Sachs background – or perhaps because of it – he believes banks have acted in questionable ways and he is ready to confront them.
Of all his speeches, the ones to banker audiences on financial reform have been the most sharply worded.
A few months after becoming governor in February 2008, Carney earned the wrath of Canadian bank CEOs by suggesting they were hoarding cash and not lending enough to businesses.
That spat is long forgotten, but Carney locked horns with Dimon at a private bankers’ meeting in September and left abruptly, prompting headlines about a walkout. The Bank of Canada said the meeting was running late and he needed to get to another engagement.
And while bankers often disagree with him, they respect his mettle and intellect.
“He would have been less likely to take on Jamie Dimon if he didn’t know the way those guys think and if he wasn’t able to speak their language,” said Ragan. “They can’t say, hey you’re just some egghead that works in the government.”
A source who witnessed how Carney handled the confrontation confirmed Ragan’s hunch. “He comes across very well because he is a former private sector financial guy. He understands their perspective,” the source said.
Gordon Nixon, the chief executive of Canada’s biggest bank, the Royal Bank of Canada, is also a fan.
“I’m very fond of him,” Nixon told Reuters. “He’s not just respected and admired but he’s well liked as an individual… In these roles part of your responsibility is to build consensus and I think Mark brings a real personal strength to that requirement.”
Other central bank governors liked Carney enough to appoint him as chair of the very influential Basel committee on global financial stability, notes David Longworth, a deputy governor under Carney until May 2010.
“I think a chair of an international body is always important,” said Longworth. “That person helps to set the tone, they help to set the agenda. They, at times, have to be people who will convince others to come on board.”
THE DOWNSIDE
But Carney’s investment banker hustle and dominant personality have not gone over so well with some at the Bank of Canada, creating friction and bitterness.
Carney completely overhauled the senior ranks of the bank when he took the job, replacing four of five deputy governors who decide interest rates with him. On paper, decisions are made by consensus but privately, officials have reportedly joked that they always “agree” with their boss.
Carney does not suffer fools gladly and finds it hard to hide his annoyance if he dislikes a question. He has a reputation for losing his temper with bank staff, and has been known to yell at employees in front of others for minor missteps in outbursts that may include the “f” word.
In February 2009 when the bank’s growth projections were far more upbeat than those of any other forecasters, Liberal legislator John McCallum asked if his outlook went “out on something of an optimistic limb.”
“We don’t do optimism, we don’t do pessimism,” Carney snapped in reply. “We do realism at the Bank of Canada. We don’t do spin.”
Paul Masson, a University of Toronto economist who was special advisor at the bank as Carney took over observed that Carney was “less lenient” with long-winded staff meetings. Carney is focused and informed, so “doesn’t need to be told things several times,” Masson said.
Carney was so confident in his own abilities that he broke with custom and insisted on writing his own speeches, eschewing feedback, and scaled back internal briefings ahead of public appearances.
His communication skills proved less than ideal when in June 2008 a surprise freeze on interest rates exposed a rare disconnect with a market that had unanimously expected a rate cut. Bank economists and traders were perplexed by the sudden reticence to hint at intentions and put it down to Carney’s inexperience in central banking.
His personal life, by comparison, appears simple. He is married with four young daughters and rushes home from international meetings to see the girls before bedtime or attend their soccer matches.
He still has time to run most mornings and last May finished the Ottawa marathon in three hours and 48 minutes.
IT’S AN ASSET, EH?
Being from Canada is an asset for Carney at the FSB, says Canada’s banking regulator Julie Dickson, noting that international organizations often look to politically neutral countries to broker deals between the Americans and Europeans. Canada has the added bonus of getting regulation right.
“We don’t go in with a lot of baggage, we’ve had time to reflect as well. When you’re in the middle of the crisis as Europe is right now, I think it’s a little harder to step back,” Dickson said.
Nixon agrees, “Given the way the world has unfolded, I would say that being from Canada is not a negative. I think the world looks at the Canadian marketplace and the governance within the Canadian marketplace in a very positive vein.”
Including Carney, Ottawa has three top officials leading committees involved in the global reform process. Dickson chairs the FSB committee on improving supervision and Tiff Macklem, the No. 2 at the Bank of Canada, heads the standards and implementation committee, which is in charge of peer reviews and the “naming and shaming” that may be needed.
Canadian bankers, who have long complained that tougher domestic rules put them at a disadvantage, also welcome the idea of one of their own at the top.
“It would be great for him … but also good for Canada to have somebody in that role,” said Nixon.
“Coming on like a hurricane” and “take no prisoners”, as the lyrics go, pretty much sum up the Bank of Canada Governor now as he prepares to take on the world’s most powerful banks as head of the Financial Stability Board, the key driving force behind the reform of global financial regulation.
The still-athletic, 46-year-old is certain to get the job, according to sources who spoke to Reuters on condition of anonymity, although he must wait for G20 leaders to give him their formal blessing at a Nov 3-4 summit in Cannes, France.
Carney, fondly described as “un-Canadian” by one Ottawa official because of a blunt and confrontational style, will replace the Bank of Italy’s Mario Draghi, who takes over as president of the European Central Bank on Nov. 1.
Carney’s past as a Goldman Sachs investment banker has been a double-edged sword, as he fought to prove his loyalties lie with ordinary citizens, not his high-flying banker buddies. He clashed memorably with JPMorgan Chase & Co Chief Executive Jamie Dimon in Washington last month as the banker argued against new regulations for the financial sector.
At the same time, the financial markets savvy Carney won over 13 years at Goldman’s offices in London, Tokyo, New York and Toronto has propelled his meteoric rise from the finance ministry to his current job.
He heads a well-respected central bank that helped make Canada’s recession one of the weakest in the rich country group. No Canadian bank needed government help during the world financial crisis, and already by January, the country had recovered all the jobs it lost in the downturn.
The Bank of Canada would not comment until after a formal announcement on the FSB, but Carney is set to head the board at a time when bankers are pushing back against tougher capital requirements designed to strengthen financial institutions so taxpayers won’t have to rescue them in the next crisis.
The regulators say the new standards will help prevent another crippling crisis, or at least minimize the damage, and they insist the global economy itself is at risk if they get things wrong.
Bankers say the crackdown will crimp their lending and hit economic growth. They particularly oppose a capital surcharge on on the biggest 28 cross-border banks, including Carney’s former employer Goldman, HSBC, Deutsche Bank and JPMorgan Chase, the institutions that are considered too big to fail in today’s interconnected financial world.
Carney’s challenge will be to keep reforms moving on even as cracks and slippages appear, and to “name and shame” countries that don’t deliver on their promises.
FIGHTER WITH A HALO
In Reuters interviews, several people who interacted with Carney during his public service career stressed two traits that will help him: he’s a fighter who does not back down and he speaks the bankers’ language.
“I think he believes he has a halo over him. He’s pretty … confident, for lack of a better word,” said a Canadian academic who has met Carney at meetings and seminars. “You may not want to have dinner with that person but as head of the FSB I think it’s a good choice.”
Carney has the “chutzpah” needed, agrees Chris Ragan, a former special advisor at the Bank of Canada who has overlapped with Carney at the central bank and in government. “If he has a view that he holds strongly, he’s absolutely prepared to fight for that. He’s not a wallflower.”
The FSB brings together G20 central bankers, finance ministers and regulators to craft and coordinate financial regulation in what has so far been a pretty unglamorous job.
But that could change if, as expected, the G20 gives the board additional resources and independence from the Bank for International Settlements in Basel, Switzerland, boosting its clout and making it more like the International Monetary Fund and the World Bank.
“It needs to move beyond a very Mickey Mouse operation of just 20 people,” said Bessma Momani, a research fellow at the Centre for International Governance Innovation at Waterloo, Ontario and a panelist on FSB governance for the Washington-based Brookings Institution.
“With the systemic problems we’re dealing with we need something bigger and more substantial. We need a full-time person that is devoted and focused on the FSB mandate.” Carney intends to stay on as Bank of Canada governor, but if the revamped FSB requires a full-time chair he may have to abandon the bank before his seven-year mandate ends in 2015.
The only other serious contender for the job was Swiss National Bank’s Philipp Hildebrand, a friend of Carney’s from their Oxford student days. But a European official told Reuters he was certain Carney would win over his former classmate.
Finance Minister Jim Flaherty and banking regulator Julie Dickson, who sits on the FSB Steering Committee, have gone on the record saying Carney’s chances are good.
Formally, it is up to the FSB plenary to choose the chairman by consensus. But sources say the negotiations are largely done behind closed doors with little transparency.
NOT JUST SOME EGGHEAD
As head of the Bank of Canada, Carney has made it clear that despite his Goldman Sachs background – or perhaps because of it – he believes banks have acted in questionable ways and he is ready to confront them.
Of all his speeches, the ones to banker audiences on financial reform have been the most sharply worded.
A few months after becoming governor in February 2008, Carney earned the wrath of Canadian bank CEOs by suggesting they were hoarding cash and not lending enough to businesses.
That spat is long forgotten, but Carney locked horns with Dimon at a private bankers’ meeting in September and left abruptly, prompting headlines about a walkout. The Bank of Canada said the meeting was running late and he needed to get to another engagement.
And while bankers often disagree with him, they respect his mettle and intellect.
“He would have been less likely to take on Jamie Dimon if he didn’t know the way those guys think and if he wasn’t able to speak their language,” said Ragan. “They can’t say, hey you’re just some egghead that works in the government.”
A source who witnessed how Carney handled the confrontation confirmed Ragan’s hunch. “He comes across very well because he is a former private sector financial guy. He understands their perspective,” the source said.
Gordon Nixon, the chief executive of Canada’s biggest bank, the Royal Bank of Canada, is also a fan.
“I’m very fond of him,” Nixon told Reuters. “He’s not just respected and admired but he’s well liked as an individual… In these roles part of your responsibility is to build consensus and I think Mark brings a real personal strength to that requirement.”
Other central bank governors liked Carney enough to appoint him as chair of the very influential Basel committee on global financial stability, notes David Longworth, a deputy governor under Carney until May 2010.
“I think a chair of an international body is always important,” said Longworth. “That person helps to set the tone, they help to set the agenda. They, at times, have to be people who will convince others to come on board.”
THE DOWNSIDE
But Carney’s investment banker hustle and dominant personality have not gone over so well with some at the Bank of Canada, creating friction and bitterness.
Carney completely overhauled the senior ranks of the bank when he took the job, replacing four of five deputy governors who decide interest rates with him. On paper, decisions are made by consensus but privately, officials have reportedly joked that they always “agree” with their boss.
Carney does not suffer fools gladly and finds it hard to hide his annoyance if he dislikes a question. He has a reputation for losing his temper with bank staff, and has been known to yell at employees in front of others for minor missteps in outbursts that may include the “f” word.
In February 2009 when the bank’s growth projections were far more upbeat than those of any other forecasters, Liberal legislator John McCallum asked if his outlook went “out on something of an optimistic limb.”
“We don’t do optimism, we don’t do pessimism,” Carney snapped in reply. “We do realism at the Bank of Canada. We don’t do spin.”
Paul Masson, a University of Toronto economist who was special advisor at the bank as Carney took over observed that Carney was “less lenient” with long-winded staff meetings. Carney is focused and informed, so “doesn’t need to be told things several times,” Masson said.
Carney was so confident in his own abilities that he broke with custom and insisted on writing his own speeches, eschewing feedback, and scaled back internal briefings ahead of public appearances.
His communication skills proved less than ideal when in June 2008 a surprise freeze on interest rates exposed a rare disconnect with a market that had unanimously expected a rate cut. Bank economists and traders were perplexed by the sudden reticence to hint at intentions and put it down to Carney’s inexperience in central banking.
His personal life, by comparison, appears simple. He is married with four young daughters and rushes home from international meetings to see the girls before bedtime or attend their soccer matches.
He still has time to run most mornings and last May finished the Ottawa marathon in three hours and 48 minutes.
IT’S AN ASSET, EH?
Being from Canada is an asset for Carney at the FSB, says Canada’s banking regulator Julie Dickson, noting that international organizations often look to politically neutral countries to broker deals between the Americans and Europeans. Canada has the added bonus of getting regulation right.
“We don’t go in with a lot of baggage, we’ve had time to reflect as well. When you’re in the middle of the crisis as Europe is right now, I think it’s a little harder to step back,” Dickson said.
Nixon agrees, “Given the way the world has unfolded, I would say that being from Canada is not a negative. I think the world looks at the Canadian marketplace and the governance within the Canadian marketplace in a very positive vein.”
Including Carney, Ottawa has three top officials leading committees involved in the global reform process. Dickson chairs the FSB committee on improving supervision and Tiff Macklem, the No. 2 at the Bank of Canada, heads the standards and implementation committee, which is in charge of peer reviews and the “naming and shaming” that may be needed.
Canadian bankers, who have long complained that tougher domestic rules put them at a disadvantage, also welcome the idea of one of their own at the top.
“It would be great for him … but also good for Canada to have somebody in that role,” said Nixon.
Where are TV viewers slipping away to?
Who knew the mild-mannered chief of Rogers Communications Inc.’s television product development would gravitate to a band of criminal bikers? David Purdy, whose viewing tastes are partial to Entourage, certainly didn’t.
“I’ve only recently discovered a show called Sons of Anarchy,” the executive says, referring to the FX series about an outlaw motorcycle club in northern California now on its fourth season on Super Channel. Like many viewers nowadays, he’s looking to binge on episode upon episode on weekends and weeknights until caught up.
“That’s the way people are consuming content now,” he says.
Mr. Purdy’s company, one of Canada’s biggest cable and Internet providers, is working quickly these days to secure rights to back catalogues to popular TV series, either for online or video-on-demand. It is part of a strategy to evolve the television product to keep up with customers’ viewing behaviour – something that’s shifting markedly this year away from traditional TV.
The initial wave of ratings and data is rolling in from the new broadcast schedule this fall. It is the first in which all the country’s big broadcasters are no longer independent networks but divisions of larger telecommunications conglomerates – recent moves by competitors of Rogers (which owns CityTV) mimicking its model of owning both the content and pipes that deliver it.
Early results indicate, perhaps not surprisingly, that Shaw Communications Inc. and BCE Inc., who paid $2-billion and $3.2-billion, respectively, for the country’s two biggest broadcasters in Canwest Global and CTV Inc., have inherited the same issues plaguing television before each network was acquired: fragmenting audiences.
Overall weekly viewership among key demographics has softened year over year, BBM Canada says. Prime-time viewership – all important for ad buyers – is flat or down across conventional networks as well.
Audiences, it appears, are splitting attention more than ever between old-fashioned network TV, specialty channels and, increasingly, video-on-demand and online viewing windows. “It is safe to say that the trend we’ve seen over the last several years continues,” one Bay Street media analyst said.
That trend is pushing Rogers and the other integrated carriers to create new products for online and mobile devices they can sell to both advertisers and their customers.
So far this broadcast year, which runs from about midSeptember to spring, adults over 18 are watching on average 28 hours of television a week. That is down from an average of 29.4 hours for the full 2010-11 broadcast year. The key 25-to-54 demographic has fallen to 23.8 hours from 25.
The story for prime-time network television is the same as the broader picture: thinning audiences. Between Sept. 20 and Oct. 9 in the 25-to-54 segment, CTV’s main network, Rogers’ CityTV, Global and CBC all saw viewer slippage in the 8 p.m.-to-11 p.m. slot. (The exception is CTV Two, Bell Media’s secondary network rebranded from A Channel, for which ratings have surged as result of Bell’s efforts to boost performance.)
Canadian networks are not alone in reporting smaller audiences. In the United States, early data from Nielsen Holdings NV shows an average of 14.3 million adults between 18 and 49 years of age tuned into prime-time shows last month, representing a drop of 4.1%.
So, where are viewers slipping away to? In part at least, to more specialty channels. U.S. networks such as Discovery, Time Warner’s CW and Comcast Corp.’s USA Network have helped push viewership there up 4% in prime time, to 22.1 million people.
In Canada, the experience is the same, said Barb Williams, Shaw’s senior vice-president of content.
“To the extent that there is any weakening at all in conventional we are showing wonderful strength in specialty,” she said. Shaw, which bought Global while the network was under court protection from creditors last year, owns 19 specialty channels, including History Television, HGTV and The Food Network.
A spokesman for Bell Media, which now owns the biggest stable of specialties in the country since acquiring CTV in April, including The Comedy Network, BNN and Bravo!, said numbers in specialty are “essentially flat for total viewers.”
Specialties have cheaper ad rates than conventional channels but nonetheless are acceptable viewer destinations for the media units of Rogers, Bell and Shaw, which still cannot charge nearly as much for ads online.
Ad agencies, which still rely heavily on TV for the bulk of their buy, are paying close attention, yet say they are largely unfazed by the early figures.
“I’ve been in this business a long, long time and I will tell you that at the end of the quarter … we’re going to find that, you know what, the top 20 or 30 programming overall is going to basically look the same in terms of audiences,” said Dennis Dinga, director of broadcast investment at media agency Universal McCann Canada.
Back at Rogers, however, it appears Mr. Purdy isn’t waiting.
“We’re trying to move ahead as quickly as possible,” on new online video packages, he said. Asked why, he responded, “There’s a segment of the base that doesn’t necessarily subscribe to traditional platforms anymore.”
“I’ve only recently discovered a show called Sons of Anarchy,” the executive says, referring to the FX series about an outlaw motorcycle club in northern California now on its fourth season on Super Channel. Like many viewers nowadays, he’s looking to binge on episode upon episode on weekends and weeknights until caught up.
“That’s the way people are consuming content now,” he says.
Mr. Purdy’s company, one of Canada’s biggest cable and Internet providers, is working quickly these days to secure rights to back catalogues to popular TV series, either for online or video-on-demand. It is part of a strategy to evolve the television product to keep up with customers’ viewing behaviour – something that’s shifting markedly this year away from traditional TV.
The initial wave of ratings and data is rolling in from the new broadcast schedule this fall. It is the first in which all the country’s big broadcasters are no longer independent networks but divisions of larger telecommunications conglomerates – recent moves by competitors of Rogers (which owns CityTV) mimicking its model of owning both the content and pipes that deliver it.
Early results indicate, perhaps not surprisingly, that Shaw Communications Inc. and BCE Inc., who paid $2-billion and $3.2-billion, respectively, for the country’s two biggest broadcasters in Canwest Global and CTV Inc., have inherited the same issues plaguing television before each network was acquired: fragmenting audiences.
Overall weekly viewership among key demographics has softened year over year, BBM Canada says. Prime-time viewership – all important for ad buyers – is flat or down across conventional networks as well.
Jonathon Rivait/National Post
That trend is pushing Rogers and the other integrated carriers to create new products for online and mobile devices they can sell to both advertisers and their customers.
So far this broadcast year, which runs from about midSeptember to spring, adults over 18 are watching on average 28 hours of television a week. That is down from an average of 29.4 hours for the full 2010-11 broadcast year. The key 25-to-54 demographic has fallen to 23.8 hours from 25.
The story for prime-time network television is the same as the broader picture: thinning audiences. Between Sept. 20 and Oct. 9 in the 25-to-54 segment, CTV’s main network, Rogers’ CityTV, Global and CBC all saw viewer slippage in the 8 p.m.-to-11 p.m. slot. (The exception is CTV Two, Bell Media’s secondary network rebranded from A Channel, for which ratings have surged as result of Bell’s efforts to boost performance.)
Canadian networks are not alone in reporting smaller audiences. In the United States, early data from Nielsen Holdings NV shows an average of 14.3 million adults between 18 and 49 years of age tuned into prime-time shows last month, representing a drop of 4.1%.
So, where are viewers slipping away to? In part at least, to more specialty channels. U.S. networks such as Discovery, Time Warner’s CW and Comcast Corp.’s USA Network have helped push viewership there up 4% in prime time, to 22.1 million people.
In Canada, the experience is the same, said Barb Williams, Shaw’s senior vice-president of content.
“To the extent that there is any weakening at all in conventional we are showing wonderful strength in specialty,” she said. Shaw, which bought Global while the network was under court protection from creditors last year, owns 19 specialty channels, including History Television, HGTV and The Food Network.
A spokesman for Bell Media, which now owns the biggest stable of specialties in the country since acquiring CTV in April, including The Comedy Network, BNN and Bravo!, said numbers in specialty are “essentially flat for total viewers.”
Specialties have cheaper ad rates than conventional channels but nonetheless are acceptable viewer destinations for the media units of Rogers, Bell and Shaw, which still cannot charge nearly as much for ads online.
Ad agencies, which still rely heavily on TV for the bulk of their buy, are paying close attention, yet say they are largely unfazed by the early figures.
“I’ve been in this business a long, long time and I will tell you that at the end of the quarter … we’re going to find that, you know what, the top 20 or 30 programming overall is going to basically look the same in terms of audiences,” said Dennis Dinga, director of broadcast investment at media agency Universal McCann Canada.
Back at Rogers, however, it appears Mr. Purdy isn’t waiting.
“We’re trying to move ahead as quickly as possible,” on new online video packages, he said. Asked why, he responded, “There’s a segment of the base that doesn’t necessarily subscribe to traditional platforms anymore.”
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