A blog about business and economics.

May 7 2015 2:40 PM

Worried That Your Manicurist Is Being Exploited? Tipping More Probably Won’t Help.

The New York Times' deeply disturbing investigation into how many of the city's ubiquitous nail salons exploit their immigrant employees seems to have prompted a well-meaning but ultimately misguided reaction among some readers. As reporter Sarah Maslin Nir writes, manicurists in and around New York—typically young Korean, Chinese, or Hispanic women, many of whom speak little to no English and are undocumented immigrants—are regularly forced to work 10- to 12-hour shifts for $30 or $40 a day. Owners, typically Korean immigrants themselves, regularly charge new hires a $100 "fee" for their new job, then require them to work unpaid, except for tips, in a sort of apprenticeship until they are supposedly worthy of a wage. If you've ever wondered how getting one's nails polished and primped in Manhattan can cost just $10.50—less than the cost of a meal at Shake Shack—well, there it is.*

In retrospect, none of this should be especially surprising.1 As a rule, if you are paying an immigrant who can't speak English a vanishingly small sum in order to perform a labor-intensive service, there is a strong chance that something isn't above board in the transaction and that some degree of human trafficking or wage violations might be involved. But in any event, a number of people on Twitter are now urging their followers to do the seemingly obvious to assuage their guilt: If they must get their nails done, tip better.

Sadly, I don't think that tipping more generously is the solution here, most obviously because manicurists won't necessarily get to keep the money. Nir writes as much in the piece: "Salon workers describe a culture of subservience that extends far beyond the pampering of customers. Tips or wages are often skimmed or never delivered, or deducted as punishment for things like spilled bottles of polish." (Emphasis mine.) Now, if I were an unscrupulous nail salon owner, and I saw that there was suddenly a huge amount of money flowing into my business in the form of gratuities, I'd probably be tempted to do a bit more skimming. Maybe I'd let my workers keep a bit more cash in the end. Maybe not.

So how can customers go about getting their fingernails varnished ethically? Well, one approach would be to avoid businesses that are primarily staffed by vulnerable immigrants. There are downsides to this. First, it will obviously cost you more to go somewhere that employs less easily exploited staff. Second, it feels extremely xenophobic—you'd basically be vowing to avoid Korean businesses. Third, by not patronizing your former favorite salon, you're more or less guaranteeing that its employees earn even less.

And of course, it's not clear that your personal decision to boycott will make much of a difference. The New York Times has a lot of readers who are prone to liberal guilt. But New York City has even more people who like a bargain on personal grooming. Without some sort of organized effort to avoid whichever salons might be breaking the law, you're probably looking at an insurmountable collective-action problem.

Theoretically, that's why we have labor laws in the first place—because the market on its own isn't going to protect people who can't protect themselves. Unfortunately, as Nir writes, the people in charge of policing New York's workplaces are woefully under-resourced. To wit:  

Among the Labor Department’s 115 investigators statewide — 56 are based in New York City — 18 speak Spanish and 8 speak Chinese, essential tools for questioning immigrant workers to uncover whether they are being exploited. But just two speak Korean, according to the department. Department officials say all of their inspectors have access to interpreting services.

So if you're really feeling torn up about the fact that the woman painting your nails is being exploited, consider asking your state legislator to properly fund the state labor department so that it has enough manpower to look into these abuses. Remember, there are similar problems across all sorts of industries, especially restaurants. (The poor guy delivering your Chinese food through the rain? There's a strong chance he's living off nothing but tips, as well). Leaving your manicurist an extra $5 isn't going to solve them.

1 That isn't to minimize the NYT's awesome work on this piece. Lots of things that in hindsight should have been obvious aren't until somebody does the hard work of pointing them out.

*Correction May 7, 2015: In a sad fit of male ignorance, I incorrectly wrote that the cost of a mani-pedi in Manhattan was $10.50. That's a typical cost for a manicure. Getting both your toes and fingers done would cost more.

Video Advertisement

May 6 2015 5:36 PM

Whole Foods Wants to Woo Millennials With a “Hip, Cool, Technology-Oriented Store”

The organic struggle is real and ongoing for Whole Foods, which has failed to woo customers to Wall Street’s satisfaction despite cutting its grocery prices. Whole Foods said Wednesday that sales at stores open roughly a year grew 3.6 percent in the second quarter, falling short of analyst expectations for 5.3 percent growth. Shares are down about 10 percent in extended trading, after closing basically unchanged, at $47.72, during the normal session.

Whole Foods’ whiff on same-store sales comes after it reported fairly strong results in the two preceding quarters. In February, Whole Foods posted a record $4.5 billion in total sales and same-store sales growth of 4.5 percent. That was shortly after the kickoff of the company's “values matter” branding campaign aimed at reversing its much-derided “whole paycheck” image. “We are encouraged by the pricing experiments we are running in several markets, and if results continue to be positive, we expect to expand our test to more markets during the year,” Whole Foods co-CEO John Mackey said at the time.

On the earnings call Wednesday, Whole Foods executives said they were “reaffirming” that the values matter campaign is working. They attributed the slowdown in same-store sales growth to several factors—reduced market share in cities including Chicago and Florida, increased competition, and tough weather. Mackey had a positive spin on that. “We’ve been so successful that we’ve bred a lot of competition,” he told investors. “Everyone’s jumping on the natural and organic brand wagon and frankly, a lot of that’s due to our success.”

In addition to quarterly results, Whole Foods also announced on Wednesday that it plans to introduce a “new, uniquely branded store concept” to court value-savvy, digitally oriented consumers such as millennials. Whole Foods plans to start opening some of those new stores in 2016 and says the “complementary brand” should have high growth potential. Execs wouldn’t reveal too many details about the upcoming brand/store on the call, but suggested that the new brand will appeal to consumers who haven’t gotten past their “whole paycheck” qualms.

“We think there are certain customers that the Whole Foods brand is attractive to, but there’s others that it’s less attractive to,” Mackey said, before pointing to millennials specifically. “We think a streamlined, hip, cool, technology-oriented store—a store unlike one anyone’s ever seen before ... is going to be pretty attractive to that particular generation. You can’t envision it yet because no one has. We’re creating it.”

May 6 2015 12:59 PM

Comcast’s Plan to Dominate the Cable Industry Failed, So It Might Start Being Nice to Customers Instead

A week and a half after its much-hated mega-merger with Time Warner Cable imploded, Comcast is ready to do better. On Tuesday, the company announced a comprehensive plan to repair at least one part of its ugly reputation: shoddy customer service. “It’s unacceptable some of the individual instances that have been, you know, well-documented,” Comcast CEO Brian Roberts said in a presentation. “And so it was a rallying cry, I think, inside the company, that we are going to top-to-bottom rethink the way we do business.”

Comcast plans to hire more than 5,500 people for customer-service jobs over the next few years and to invest in technology and training for those employees. The company will make its billing processes simpler and more transparent. It will create three customer support centers and triple the size of the team that handles queries coming in through social media. A “tech tracker” tool Comcast is piloting, which lets customers keep real-time tabs on when their technician will arrive, should be rolled out nationwide before the end of the year. And by the time the third quarter rolls around, Comcast says it aims to always be on time for customer appointments.

Should you believe it? As Colin Lecher points out at the Verge, “Comcast has a less than sterling track record when it comes to delivering on promises, especially when it comes to customer service.” On the other hand, Comcast just emerged from a very public chastening. Since Comcast began pursuing an acquisition of Time Warner Cable more than a year ago, its entire business strategy has hinged on becoming a cable and broadband monolith. Had the merger gone through, Comcast would have served about 30 million customers and controlled a formidable 57 percent of the market for broadband and 30 percent of the market for pay TV. Throughout the merger process, Comcast insisted that the deal would bring “substantial benefits to consumers.” But after several embarrassing public-relations debacles last year—including a repeat title as worst company in America—those vague assurances were hardly comforting.

Comcast, like most big cable operators, is essentially a sprawling amalgamation of local monopolies. While there are plenty of other cable companies out there, for many consumers it’s likely to be the only passable provider. That’s presumably why Comcast and many of its peers have coasted on such bad customer service for so long—there’s not really a competitive incentive to improve. That Comcast is setting an explicit goal to show up on time to customer appointments is a crazy demonstration of just how powerful it is. Most companies can’t afford to not be on time. One big reason Uber and Lyft and Instacart and other on-demand service providers have taken off is that they’re fast and they’re reliable. Comcast is only now starting to respond to those pressures.

Unlike other industries that have been “disrupted” by tech companies, however, cable and broadband are hard to change. The infrastructure involved is such that a startup can't just go in and casually rework it the way Uber can roll into a new city and challenge the local taxi establishment. In that way, cable providers are sort of the ultimate incumbent. Still, there have been recent glimmers of change. In cable, Comcast is facing increased competition from cord-cutting services like Netflix and Apple TV. In broadband, Google is slowly building and expanding Fiber, its ultra-high-speed connection.

Asked at their presentation on Tuesday whether poor customer service was a factor in the collapse of the Time Warner Cable merger, Comcast executives demurred. That said, when the merger died, Comcast lost its shot to consolidate its control over American consumers. Now, it has to make nice with them instead.

May 6 2015 12:07 PM

How Bad Is the United States at Reducing Income Inequality?

A couple of months ago, I posted a chart that I thought nicely illustrated just how little the United States does to combat economic inequality compared with the rest of the developed work. Based on data from the Luxembourg Income Study Center, or LIS, it showed that market incomes—the money people earn from working and investing—aren't much more skewed stateside than elsewhere. Measured by the Gini coefficient, which rises toward one as incomes in a nation become more unequal, our overall distribution is similar to what's found in super-egalitarian Scandinavia, for instance. The difference is that other countries do far more to redistribute resources. And so, after the government gets done with taxes and transfers, U.S. inequality remains unusually high.

This week, LIS's Janet Gornick and Branko Milanovic released a short report complicating that conclusion a bit. If you look at people of all ages, they find, market income inequality indeed isn't much higher here than in Europe. And, as shown by their updated version of the original chart, we also appear to be extremely lax about redistribution. 



If you only look at individuals younger than 60, however, things change. Our Gini for market incomes is third highest on the list, and significantly larger than what's typical of Northern Europe. When it comes to redistribution, meanwhile, we're "squarely in the middle of the pack." We do relatively more than countries like Spain or Greece, but less than Germany or Denmark.



Why does nixing senior citizens from the analysis change the outcome so dramatically? Milanovic and Gornick note that Americans older than 60 are much more likely to have high market earnings compared with their peers overseas. In other words, they don't retire, possibly because Social Security benefits aren't exceptionally cushy. The fact that more of our elderly are working instead of living off the welfare state makes our market incomes look more even across the board, since we have fewer grandparents who are living their lives while earning nothing. When you cut all of those Americans who plan to die at their desks out of the calculation, and just focus on people in their prime working years, it becomes clearer that U.S. incomes really are unusually disparate.

In some ways, I think Gornick and Milanovic might be overstating the degree to which the U.S. actually redistributes income compared with its peers, in part because their measure of post-tax-and-transfer income doesn't include government health care benefits. For instance, Canada looks like it lowers its Gini by about the same percentage as we do. But given that our northern neighbors have a universal single payer system while we have a patchwork of programs that still leave many uninsured, it seems a little strange to argue that they aren't doing any more to reduce the effects of inequality.

That's mostly a quibble, though. The point to remember is that the U.S. economy creates an unusual amount of inequality on its own, but we don't go to unusual lengths to fix it.

May 5 2015 3:11 PM

JetBlue Is Adding a Big In-Flight Perk: Free High-Speed Wi-Fi

In-flight Wi-Fi may feel like a modern wonder, but it's also kind of terrible. It’s slow and flaky. Bandwidth limitations often result in passable Web surfing but no online streaming. It can be absurdly expensive. But starting later this year, Amazon and JetBlue are teaming up to offer travelers a much, much better deal: high-speed broadband Internet service on flights, for free.

Amazon and JetBlue announced Tuesday that flyers will get free access to “Fly-Fi,” JetBlue’s in-air broadband Internet service, when it comes out of beta later this year. While JetBlue previously offered free in-flight Wi-Fi for basic Web browsing, customers who wanted to stream had to pay $9 an hour to upgrade. Once Fly-Fi fully launches, it will be free for all customers—giving Amazon Prime members access to all the free streaming music and video that come with their subscriptions. A spokeswoman for Amazon did not directly answer whether travelers would be able to use Fly-Fi to access other streaming sites, like Netflix, but did say the connection is optimized for streaming Amazon material.

“We want to provide the best digital video experience to our customers and we’re excited that, with JetBlue, we will raise the bar in airline entertainment,” Michael Paull, Amazon’s vice president of digital video, said in a statement.

Amazon has spent the better part of the past year pouring billions into its signature Prime program. In 2014, the company added things like free music streaming and unlimited photo storage. It also raised the price of Prime for the first time since the program was introduced in 2005—to $99 from $79—but as my colleague Jordan Weissmann argued in Slate at the time, that was still a bargain. And the investments have seemed to pay off. Last year, Amazon said it grew Prime subscribers by 53 percent worldwide and 50 percent in the U.S.

Ironically, while Amazon has added freebies to its service, JetBlue has reduced them. Last fall, JetBlue announced that beginning in 2015, it would eliminate its longtime “first bag free” policy and shrink legroom on flights to make space for additional passengers. Similar things have happened across the industry, with seat sizes dwindling and air carriers parceling out new fees.

And that’s why the Amazon-JetBlue partnership seems like a pretty great deal for everyone involved. Customers get free, fast Internet service on their flights—a rarity when most airline Wi-Fi costs several dollars to several tens of dollars per day. Amazon gets a captive audience that it can market Prime to and encourage to check out its streaming video store. And JetBlue gets to advertise a big perk that might also distract flyers from lamenting their shrunken legroom.

May 5 2015 2:37 PM

Most Americans Think We Should Soak the Rich and Redistribute Wealth

Since 1998, Gallup has asked Americans whether they believe the government should "redistribute wealth by heavy taxes on the rich." This year, 52 percent agreed, tying the all-time high set in 2013. While there's plenty of disagreement about who exactly counts as "rich," a bare majority of the country seems to think we should be soaking them. (I couldn't agree more.)


The margin of error on the poll is +/- 4 percentage points, so, yes, it's possible that less than half the country is really in favor of steep taxes on the affluent.* But Gallup has now reached the same result twice running, and these findings are in line with the outcomes of similar surveys from Pew, which has found that 54 percent of Americans think the government should "raise taxes on the wealthy and corporations to expand programs for the poor," and that 58 percent say "upper-income Americans pay too little in taxes." Of course, I imagine these answers would look a bit different if the polls focused only on likely voters. In general, Gallup finds that poorer and younger survey takers are more on board with wealth redistribution than older, high-income respondents. In other words, demographic groups who reliably show up at the polls are a bit less fond of confiscatory tax schemes than the country writ large.


*Update May 5, 2015, 2:51 p.m:  I updated this post to note the margin of error in the poll. Leaving it out was a bit careless.

May 4 2015 7:27 PM

McDonald’s Is Pinning Its Future on Franchisees. First It Should Learn How to Keep Them Happy.

When Steve Easterbrook took over as McDonald’s chief executive in March, the chain was in crisis. Don Thompson, Easterbrook’s predecessor, had resigned in a blaze of spectacular failure: Five straight quarters of decline, the company’s worst monthly sales in more than a decade, a tainted meat scandal in China, a potentially disastrous employment ruling from the National Labor Relations Board, a terrifying makeover of Ronald McDonald, a well-meaning if largely misguided transparency campaign, and countless public-relations blowups caused by striking fast-food workers.

Two months later, McDonald’s crisis hasn’t abated. But on Monday, Easterbrook laid out his much-anticipated plan to turn the company around.

To get its business back on track, McDonald’s is handing more control to its “incredible network of dedicated franchisees,” the company said. Over the next three years, McDonald’s plans to accelerate its refranchising—that is, turning company-owned stores into franchised ones. By the end of 2018, it plans to convert 3,500 restaurants into franchises such that 90 percent of its locations will be franchised globally (up from a current 81 percent). Previously, McDonald’s had planned to refranchise at least 1,500 restaurants by the end of 2016. Easterbrook has reorganized the company’s operations into four main segments: the U.S.; international lead markets (Australia, Canada, France, Germany, and the U.K.); high-growth markets (China, Italy, Poland, Russia, South Korea, Spain, Switzerland, and the Netherlands); and foundational markets (about 100 different countries).

On a conference call, Easterbook explained that in addition to bringing financial benefits—like more stable cash flow—he expected refranchising to be “incredibly liberating” as well. “We’re a franchiser, and that has always been part of the essence of what’s made McDonald’s successful,” he said. From 2006 to 2011, Easterbrook led McDonald’s U.K. operations, heading up more than 1,200 restaurants. During that time, he helped the chain move from 35 percent franchised in the region to 65 percent franchised. “The local rush of ownership really did underpin and infuse a system that was looking to be lit up,” Easterbook told investors on Monday. “So I’ve a strong philosophical commitment behind franchising, I think it’s incredibly important to our business.”

Easterbrook’s somewhat rosy outlook comes at a time when tensions between McDonald’s and its franchisees are running high. In April, a survey of U.S. franchisees from Janney Capital Markets gave McDonald’s its most dismal six-month outlook in 11 years—somewhere between “poor” and “fair.” “McDonald’s system is broken,” one franchisee wrote in response to the survey. “They talk menu reduction to help our people, simplify our menu for customers—but add products to help sales and it does not work. We continue to fall and fall.” Added another, “leadership is out of touch with the financial realities that owner/operators are facing.” McDonald’s countered that the report didn’t accurately capture franchisee sentiment, since it surveyed less than 1 percent of them.

Franchisees have plenty of reason to sense a disconnect. It’s true that, under Easterbrook, McDonald’s has emphasized whittling down its menu to ease the burden on franchisees and their staff. At the same time, it’s also begun piloting new items. “Create your taste,” a concept that lets customers personalize their burgers, is scheduled to be tested in 2,000 out of roughly 14,000 U.S. stores this year. The company has also rolled out an artisan chicken sandwich and is testing all-day breakfast at 94 restaurants in the San Diego area. Menu issues aside, McDonald’s also angered franchisees and employees alike in April when it announced plans to increase hourly pay in the U.S. Employees were upset because the pay raise applied only to workers at company-owned stores, a small minority of McDonald’s domestic locations. Franchisees, for their part, resented that the wage increase at company stores might put pressure on them to do similarly.

On top of all that, Easterbrook barely mentioned what McDonald’s plans to do to address possibly its biggest challenge: customers’ worsening perceptions of its food. On the call with investors, he talked about making “big moves” and having “wonderful opportunities” with personalizing and customizing food, but few new details on when or how that would happen. That might explain why Wall Street wasn’t sold—shares of McDonald’s closed down 1.7 percent on Monday, to $96.13. On the other hand, Easterbrook seemed quite earnest when he told investors, repeatedly, that he intends to carefully reassess all the company’s decisions, and that he recognizes it’s time for a change. “The message is clear. We’re not on our game,” Easterbrook said in a video-taped statement. “The numbers don’t lie.”

May 4 2015 4:47 PM

Thanks to Warren Buffett, Omaha Is Getting Less Reliant on Coal 

Buffett-palooza concluded on Sunday. During the annual shareholder meeting of Warren Buffett’s Berkshire Hathaway, which has evolved into a kind of Woodstock of capitalism, thousands of people converge on Omaha, Nebraska, to celebrate the philosophy (and returns) generated by the folksy billionaire.

In coming years, visitors might notice something else when they come to Omaha: cleaner air. And they can thank Buffett for that, too. While Buffett famously avoids faddish investment and new technology—longtime holdings include Geico, WellsFargo, See’s Candies, even newspapers—his firm has quietly become a force in energy in recent years. And last week, on the eve of the annual meeting, one of his subsidiaries announced a deal that will help Omaha’s utility make a dramatic move away from coal and toward emissions-free wind power.

Omaha’s electricity needs are supplied by the Omaha Public Power District, a 69-year-old municipal-owned utility that provides cheap electricity to about 800,000 of the state’s 1.8 million people. It keeps things relatively simple. OPPD has four so-called base-load power plants, which provide the bulk of its electricity: The Fort Calhoun nuclear power plant (capacity: 482 megawatts), a giant coal-powered plant in Nebraska City with capacity of more than 1.3 gigawatts, the 641-megawatt North Omaha station, which uses coal and gas, and a small plant that runs on natural gas and methane. OPPD also maintains three natural-gas-powered plants that can be turned on when demand rises, and has been dipping its toe into wind power in recent years. At the end of 2014, according to its annual report, renewable sources accounted for about 12 percent of its energy sales.

Historically, coal has provided about half of OPPD’s electricity—higher than the national average. But that’s changing. Last summer, OPPD announced a plan to cut the percentage of electricity provided by coal plants to 31 percent by 2018, and to 15 percent by 2023. That’s not quite a boycott of coal. But it is far more ambitious than many other utilities in more progressive states.

OPPD plans to achieve this goal by using a playbook that is becoming standard in the utility industry. By 2016, it plans to retire some of the giant units that burn coal at its North Omaha station, and install better emissions controls on those that remain. Then, by 2023, it will transform the remaining burners at that plant so that they use natural gas instead of coal. The Nebraska City plant will keep burning coal, but the utility plans to undertake efficiency and demand management efforts that will lessen the need to use that plant’s output.

At the same time, OPPD will significantly increase the amount of wind power it uses. Which is where Buffett comes in. Berkshire Hathaway has built up a huge portfolio of energy assets in recent years, ranging from traditional utilities to natural gas pipeline companies. BHE Renewables, a subsidiary that was set up in 2011, has plunged $10 billion into large-scale renewable projects, like massive solar fields in California and wind farms in Texas and Illinois.

Last week, BHE Renewables moved to become a player in Buffett’s backyard. It announced it would start building a 400-megawatt wind farm in Holt County, Nebraska, about 180 miles northwest of Buffett’s home base of Omaha. Upon completion, OPPD has committed to buy the output of the Grand Prairie Farm, which will be the biggest in the state. That move alone will double the amount of the utility’s renewables. And combined with the measures listed above, it will substantially change OPPD’s electricity mix by 2018: to one-third nuclear, one-third renewables, and about 31 percent coal. In the following years, as noted, OPPD says it will further reduce its reliance on coal to 15 percent by using natural gas at one of its existing plants.

These efforts go far beyond what most utilities are doing. But it’s more the result of Midwestern practicality than West Coast Messianism. Renewable energy is no longer a luxury product—especially when someone with a low cost of capital like Warren Buffett can build massive wind farms on the prairie. OPPD notes that as a result of its plan, which will reduce its operations’ carbon dioxide emissions by nearly 50 percent by 2033, “rates should increase no more than 2 percent.” 

May 4 2015 2:35 PM

Lenovo Just Released a New Laptop That Beats Apple’s MacBook on Basically Everything

In March, Apple announced its new MacBook, a sleek 2-pound marvel with a retina display and a single USB‑C port for both charging and peripherals. There's already been a lot of debate about whether a laptop with one port and a disappointing processor is ready for prime time, but one thing nearly every review agrees on is that the device is "a wonder of engineering." So it seems kind of important that Lenovo just casually released a competitor that is lighter, has tons of standard ports, and has a bigger screen (that can also be a touchscreen).

Lenovo first announced the LaVie Z laptop in January and promised that it would be 1.72 pounds. The company missed the mark on that a little bit, since the device is debuting at 1.87, but given that the new MacBook weighs 2.03 pounds, it's still impressive. Lenovo says that the laptop is so light because of its magnesium-lithium alloy body. (The material is about half as dense as aluminum.) The LaVie Z has two USB 3.0 ports, one HDMI-out port, and an SD card reader.

To pack it all in, the Lenovo laptop is thicker than the MacBook. Apple's offering is 0.52 inches at its thickest, whereas the LaVie Z is 0.67 inches at its thickest point. But still. An extra tenth of an inch for normal ports seems like a trade-off most people would be willing to make. The LaVie Z also has a 2.40GHz Intel Core i7 processor, a much more standard processor than the Intel Core M in the MacBook, which is designed for ultra-portability and is generally viewed as a negative aspect of the MacBook.

The LaVie Z also comes in two models, the more expensive of which has a touchscreen and a versatile hinge so the laptop can fold backward in half to create a tabletlike device. Apple wins on pixel density (226 pixels per inch compared with 220), but both Lenovo models have a 13.3-inch screen compared with the MacBook's 12-inches. The LaVie Z is currently shipping for $1,500 or $1,700 depending on which model you get, compared with the MacBook, which is priced at $1,300 or $1,600. (The higher-end model has a faster processor and more hard drive storage.)

Lenovo only estimates six hours of battery life for the LaVie Z (the convertible model with the touch screen may get up to nine hours), and since laptop batteries tend to perform slightly worse than what companies say, it doesn't sound like the LaVie Z's strong point is battery life. Apple estimates nine hours for its new MacBooks.

Apple's whole approach has also always been about ease-of-use and aesthetic more than hard specs, but the fact that a big Windows manufacturer is on pace with so many of the things that were supposed to make the MacBook special is significant. I also haven't tested the LaVie Z in person, so it could be a crappy computer, who knows. But one thing is clear: Even if the MacBook is a superior product, it's not way out in front like the MacBook Air was. The Lenovo LaVie Z shows that it will quickly be dogged by lightweight competitors. Apple can't bank on the MacBook the way it is.

May 4 2015 1:39 PM

Apple Is Reportedly Trying to Convince Record Labels to Kill Spotify’s Free Streaming Service

Are you one of the 45 million people in this world who listens to Spotify's free streaming service, tolerating the occasional advertisement in order to save $10 a month on entertainment? Yes? Well, dear music fan, it seems Tim Cook and Apple are out to ruin your fun. The Verge reports today that, as Apple gears up to debut its own music streaming platform, the company is urging record labels to stop its rivals from offering free, ad-supported tiers to users, "which will dramatically reduce the competition for Apple’s upcoming offering." The back-room dealing seems to set off some antitrust concerns among Department of Justice officials, who “have already interviewed high-ranking music industry executives about Apple’s business habits.”

Music sales at Apple's iTunes Store have fallen in recent years as fans have started moving over to streaming services that offer up an unlimited buffet of songs. The company has been slow to respond to the change in listening habits, but is finally preparing to relaunch Beats Music, the streaming platform it acquired last May in a $3 billion deal that also brought it the popular headphone brand founded by Dr. Dre and Jimmy Iovine. Unlike Spotify, however, the new-and-improved Beats is not expected to offer a free tier, which means that winning over listeners is almost certainly going to be an uphill battle. Initially, Apple seemed to think its sheer size and residual clout within the industry would let it negotiate a special deal with the record companies, which it lobbied to let it sell streaming subscriptions for $7.99, rather than the standard $9.99. That would have let it compete against Spotify's premium service on price. But, according to Billboard, the labels quashed the idea.

It's unclear from the Verge's report whether Apple's attempt to kill off freemium is a last-ditch attempt to even the playing field against Spotify, now that it can't offer its subscriptions at a discount, or if it suggested lowering the price of paid streaming to $7.99 while simultaneously killing off the freemium model. Either way, it seems unlikely to prevail. First, the labels still own a significant financial stake in Spotify, which makes it seem a tad, well, unlikely that they'd try to even the playing field at all for Apple. And while artists like Taylor Swift have made some very noisy stands against free streaming, and some executives are starting to consider ideas like forcing Spotify to cap how much music listeners can enjoy before paying, industry insiders still seem to agree some kind of unpaid service is a necessary counterweight to piracy, not to mention as a way to win new subscribers. To quote a source who talked with Billboard, "People don't think you can just turn it off."  

Still, even if Apple fails to limit the ways consumers can listen to music, the news that it's trying isn't encouraging. Recall that the company was already found guilty once before of conspiring with publishers to raise e-book prices as Steve Jobs attempted to fight Amazon on its home turf. We may be in the Tim Cook era now. But it seems old, anti-competitive habits die hard in Cupertino.