How Cable and Satellite TV Providers Stay Relevant

I am contemplating switching cable TV providers, and I was thinking about how most of the people I know still have basic cable type packages; while others have done what is called “cord cutting” by eliminating cable.

Those people who cancelled their cable subscriptions stream content over the internet through one of the ever-growing number of streaming device options or Smart TV platforms. They utilize amplified antennas to get broadcast channels locally to supplement their program options.

I was at the gym running on the elliptical machine last week when a commercial came on while I had ESPN on during my workout. It was for the NHL Center Ice package which provides access to over 40 out of market games per week and works out to about $150 paid out over four installments for the season.

The advertisement put an emphasis on the ability to stream games from tablets or other devices as well, since that has become a critical value add for certain consumer demographics when it comes to media products such as this NHL package.

However, the flip side of that situation popped an idea into my head: who has time to watch 40 out of market hockey games a week? I would venture to guess that not too many people could do so, while affording the cost of the package and working. This is where cable remains relevant, and in the paragraphs to follow I will qualify that statement.

The NHL Center Ice or Game Center app does not allow full access to game highlights or condensed game packages without a subscription to the package or without a link to your cable subscription. Those who do not want to pay for the package or have cut their cable service completely lose out on hockey coverage or access to hockey content. This same example can be used for other programming or content available through cable and protected by those cable or satellite providers from those who have decided to “cord cut”.

The NHL Network channel is available only through cable or with a subscription purchased and offers the best alternative for those with a busy lifestyle because you can get all the highlights just by flipping to that channel on your cable box. It provides the ability for more casual viewing of the games as well.

The cable companies also stay relevant because having a cable subscription active allows for the best access to content from live programming that would air on a delay on a streaming device or app, to the ability to “live stream” certain content.

The implications of the Disney – Fox mega media merger as well as the proposed merger of AT&T with Time Warner can and will have an impact on the access to content of all types. The access to content and “protection” and restriction to content is going to shape the media in the next 5 years.
The handwriting is already on the wall, so to speak, with Disney spending truckloads of money to design their own streaming app that they will charge a monthly membership fee to allow access to their content. The recent proposed merger with Fox will expand the amount of content that they can potentially add to this application and restrict from distribution to other outlets.

The individual Time Warner group channels such as CNN, TBS, and TNT have all developed their own streaming content apps to appeal to a wider audience of those who have cut the cord.

The membership payment type apps for streaming are expanding as well with HBO, Showtime, CBS All Access, and the Hallmark Channel app called Hallmark Now ; these apps are all charging fees for access to their exclusive content.

The future of streaming television is going to consist of paying for the content from a multitude of different subscription based app content providers. The cable subscription will offer a potential “value add” because it will allow for access to the streaming content while potentially circumventing some of those subscription fees.

The future of cable and satellite television is unclear at this point as well. The “al a carte” approach that has been a concept that has been enticing to certain viewers is gaining a resurgence. This concept, where each individual household would pay only for the channels they would watch consistently, is largely cost prohibitive within the current cable/satellite TV business model.

The carriage fees (which is the amount the networks charge the cable companies to carry the channel) on some of these channels are a major barrier to this proposed solution. A good example is if your family would watch CNN, ESPN, and Disney channel to provide a mix of news, sports, and family programs. In the current model, the carriage fee is divided among all the subscribers for a respective cable provider whether it is Comcast or Verizon Fios.

The “al a carte” model would create a formula with a lot less subscribers so the fees would go up and your cable bill will follow suit. I have seen sample models where the earlier example provided would break down like this: CNN would cost $35 per month, ESPN would cost between $60 and $65 per month, and Disney would cost between $25 to $35 per month. That means for three channels plus your free network channels, your cable bill would be upwards of $125 to $130.

The carriage fees would have to change or the providers would have to offer more packages to bundle down costs.

In the end, as we approach the New Year, the way we watch TV will continue to evolve. The growing consensus from the consumer perspective is to cut the cord with cable. However, the cable companies and the media companies are largely becoming the same entities with all of the mergers happening in the media landscape.

This translates into a combination of a cable subscription (at least one cable box in your home) and streaming devices or Smart TVs that can stream content. This combination will provide access to the most wide- ranging amount of programming and provide a good value to the consumer.

Follow Up: Seattle Arena Renovations Approved

The news that the Seattle City Council voted by a 7-1 count in favor of close to $600 million in funding for the renovation of Key Arena, ends a saga that spanned several years revolving around both politics and sports.

That saga involved a few very different proposals, and two big spending groups of business leaders: one led by Chris Hansen, and the other the Oak View Group which boasts Jerry Bruckheimer, among others. The lack of a suitable arena is what drove the Supersonics basketball team to move out of the city in 2008, and it also cost the city a potential slot in the NHL expansion process a couple of years ago.

The vote to approve these renovations to Key Arena casts a great deal of clarity on a situation that was once very fluid in Seattle. The vote comes one day after the MOU between the city and Hansen expired, effectively ending that bid from ever moving forward. The vote also means that the NHL may have an expansion announcement regarding Seattle shortly.

Hansen, as it was noted in my earlier coverage of this topic, spent millions of his own money to obtain land over a period of several years in an attempt to build an arena in the “stadium district” in the southern part of downtown Seattle. That plan also required the land around a roadway to be sold and the road grid to be changed to be able to have adequate space for the arena concept in the proposal.

The Hansen proposal was not popular among several constituency groups and political groups in Seattle. It was opposed by the Port of Seattle because of the proximity to the port and the impact that game/event traffic could have on trucks and port operations. The city politicians also had no intention of selling him the land on Occidental, which became known as the “road abatement” clause in the proposal, which was an unpopular concept from the start. Hansen had a dream to bring the Supersonics back to Seattle, and it is hard not to feel badly for him that his proposal is dead, and the NBA could still be another 4 to 5 years away from coming back to Seattle.

It appears that with the Key Arena renovations, which is at Seattle Center up by the Space Needle, the city officials are banking on the central location as well as public transportation improvements to guide the way to a world class arena in their city. The renovations could be completed by October 2020, and appears that the NHL would be the anchor tenant initially for the newly renovated facility.

The NHL expanding to Seattle makes a great deal of sense because the city fills a void for the league in a region (Pacific Northwest) that is largely untapped for hockey. The team would have a natural rivalry with the Vancouver Canucks, which the league likes the ability to play up regional rivalry type games. Seattle also has a strong potential ownership group, great potential for corporate sponsorship, and is known for having loyal fans for their other professional teams.

Seattle would represent a large media and TV market for the NHL to tap into heading into their next media rights contract which would improve the value of that deal. It also would balance the NHL which currently has 31 teams: 16 in the East and 15 in the West, the addition of Seattle would even the conferences from an alignment standpoint.

The NHL could also relocate a team from another market to Seattle, as I have covered in the past, with the Arizona Coyotes and Calgary Flames both potentially looking to leave their current market over disputes involving their current respective arena leases.

The NBA, according to reports from NBC among others, is not actively entering into an expansion process. The current CBA agreement between the players union and the league ownership has a clause for potential expansion in 2022. That is where certain people within the Oak View Group involved in the Seattle arena renovations have indicated that the Sonics could return to the NBA.

The process to this point has been a long road, Seattle is one of the few major American cities to not have an updated or newly constructed arena for entertainment and sports. The vote today will provide major enhancements to a nostalgic building in the heart of the downtown area of the city.

The sports fans there could be welcoming NHL hockey to their city and that would become a destination for many hockey fans from outside the region as well. The return of the Sonics may not be far behind. In the end, the Oak View Group was better connected than the Hansen group, it had a proposal that utilized an existing arena rather than constructing something totally new, and the Key Arena proposal kept the historic roof as well as other elements intact which was very smart.

The arena will be renovated and will be incredible when it is completed if it is anywhere near the renderings I saw earlier today. The city will now wait and see if their investment will yield them the sports teams they desire. The addition of one team generates a greatly enhanced amount of revenue for the city and Oak View Group than just having concerts and shows at the venue. The addition of two teams would be a revenue machine and would make for happy residents as well.

Seattle just put the money on the table to become a premiere sports city, a move they were reluctant to make in the past, now it will be interesting to see how the NHL and NBA respond in the months ahead.

Organic Fertilizer Development Gains Steam

Several companies are either developing, or partnering with other groups to develop, an organic fertilizer that can handle a larger quantity of crop yields. This is in response to the anti-GMO, anti-genetic engineering sentiment that has been rapidly growing within the consumers in both America and Europe in recent years.

The push to develop an organic fertilizer that is capable of this production yield stems from other scientific studies of soil. Those studies demonstrated that farmland treated with organic materials for fertilization was in more favorable growing conditions (soil microbial abundance is the official metric) than the farmland treated with nitrogen based fertilizer products.

In a report from CNBC one such company, Abundant Farms, recently hired a new director of technology who has a background in developing prototypes of organic fertilizers. The plan is for the company to test some of these products in a “scaled up” prototype scenario in test market farms in designated areas in the United States as well as in Romania in Eastern Europe.

Romania is one of the top producers of corn and some other crops in the world and will provide an excellent test market for this new organic product for crop treatment. The country distributes their crop production throughout the European Union and the world.

Abundant Farms partners with governments and farmers to provide solutions that are environmentally friendly. This is a time period of increased consumer scrutiny of food ingredients and where as well as how food is sourced and produced; the timing of these developments in organic farming is highly relevant.

Melior Resources, a company with an international presence just announced a strategic partnership with an Australian based organic products company, SOFT. The terms of the agreement essentially translate to Melior buying and distributing organic fertilizer products which SOFT will create and scale up.

The first organic fertilizer product in the pipeline for this new strategic arrangement is derived from a substance called apatite, which is a mineral sourced in Australia, among other places. The apatite from a specific mine in Australia has different properties that are not found in other versions of the mineral from other parts of the world.

The apatite that Melior/SOFT will be utilizing has no cadmium and no lead which lends itself well for use in fertilizer. SOFT has a unique technology to refine raw apatite into organic fertilizer.

In addition, according to the joint press release, this particular apatite from the Goondicum mine in Australia has a slow release phosphate effect. This slow release characteristic makes it ideal for organic fertilizer because it is not harmful to waterways or areas surrounding where it would be utilized.

The joint venture between the two companies is for ten years and the results of the combined strengths of the two partners should yield beneficial products for the consumer relative to the pushback being given to GMO containing and genetically engineered products.

The subsequent increase in organic farming necessitates the demand for more options with organic fertilizers, especially products which can handle higher yields. The expansion in supply of organic corn, soybean, and sugar beet are critical to the future of organic farming.

The LA Times produced an insightful report on the future of organic farming by taking a different perspective. The report states that the world could grow and sustain more widespread organic crop yields if our global society embraced two very important concepts: reduce food waste, and consume less meat.

This is due to the amount of land and resources required to maintain livestock for the consumption of meat. The rise in organic farming would have an environmental safety benefit because of the reduction in the use of chemical fertilizers, but organic farming is plagued by the “yield gap”.

The “yield gap” is the amount of land required to farm within organic standards. The practice of organic farming need more land because the yield level on an organic crop is smaller than a standard crop which uses nitrogen based fertilizer products. The rise in organic farming could have a potentially negative side effect when you consider the impact of deforestation to narrow the “yield gap”.

The concept of food waste is a “first world problem” but it is a significant contributor to the current food supply situation as well as a challenge to the future growth of organic crop production. The reduction in food waste can be achieved through greater awareness, through adjustments in food consumption, through more conscious food purchasing decisions, and by consistently checking your refrigerator by rotating food by expiration dates.

The ability to slash food waste is a grass roots approach, it is done at the family level which will extend to whole communities. The scientists in the LA Times feature are conducting multiple studies which examine the amount of crops and acreage are used for growing feed stock, compared to land used for growing food for human consumption. The analysis is then done to determine the conditions needed for organic farming yield targets to be attained considering demographic factors such as population growth.

One study concluded that the food waste globally would need to be cut in half from current levels, and that all the land used for feed stock would be needed for organic farming. The reduction of meat consumption to zero is an unrealistic outcome, so there are other studies targeting a 50% reduction in meat consumption by 2050.

Those are macro level changes over the long term, the micro level changes occur through more locally grown produce. The community farmers market approach is another viable method of expanding the organic foods approach.

Finally, the growth of organic fertilizers, and the commitment from the agriculture products industry to the development and scaled up production of high yield options for farmers will be a key in the movement toward more organic food in our global supply chain.

Follow Up: AT&T Plans To Buy Time Warner Hit Snag

In a follow up to a recent piece on this potential merger, the plans for AT&T to obtain Time Warner for $85 billion hit a snag on Wednesday. The government regulators involved have interceded and have stated that AT&T has to sell either CNN and other related network holdings within Turner Broadcasting , or sell their ownership stake in DirecTV in order for the deal to move forward.

This consolidation of ownership or control of so much content is the issue at hand for the federal regulators. The most honest assessment of this merger is that the control of content was always going to be an issue with this proposal.

The fact remains that AT&T would have too much control over both sides of the content pipeline in their proposed arrangement, that it can have drastic impact on price controls for the consumer.

The average viewer is now streaming more content than ever before, and AT&T has a master strategic plan to become a larger player in the streaming content side of the business. Their purchase of DirecTV started that process with the introduction of a streaming service for customers of that satellite service which has garnered fairly good reviews.

The more troubling aspect of the news today was the response by AT&T who have doubled down on their stance that they will fight any changes to the deal. They are bullishly against selling any assets and are essentially going to attempt to “push through” one of the largest telecommunications mergers in American history.

The pursuit of Time Warner by AT&T has been fraught with problems from the outset. In my view, I can understand why both sides want to get something done in the way of consolidation: Time Warner is struggling to keep their vast media empire relevant in a rapidly changing landscape where print media is dying, and television is becoming increasingly competitive. AT&T would gain a tremendous amount of content for their own service via DirecTV and would be able to charge other industry players for their content.

The major issue is that the merger would make AT&T too gigantic and put their hands into “too many pots” which is an anti-trust conflict in the purest form. AT&T could charge more for cellular phone service or for the apps for the content on the smart phones. AT&T could wield enormous influence over the carriage agreements of all the current Time Warner broadcasting mediums.

The divestiture of one of these assets as identified by the federal regulators is absolutely necessary when you consider the size of Time Warner and the diversification of AT&T. The “mega mergers” of recent years have all had some sort of pothole on the way to fruition.

However, in this case, we are left to consider this question: what if AT&T sells Turner Broadcasting and the deal still does not gain approval? What if the deal never is approved by the regulators?

I am not sure at this point who would be in position to purchase Turner Broadcasting while also maintaining approval from the regulators involved. The deal may never gain approval, that is a realistic possible outcome at this point. The most likely outcome would be that Time Warner is sold off in pieces to different competitors in each of the media spaces they operate within.

This is a developing situation and where it leads could have a massive impact on the consumer in the coming months. The growth of AT&T is alarming and the argument can be made that they should be stopped, it remains to be seen if that will take place.

Gray Area: The CVS – Aetna Merger

The area of mergers and acquisitions is a key area of focus here on Frank’s Forum and that is what makes the CVS pursuit of purchasing and consolidating Aetna such significant news. The merger would be the largest transaction of 2017 (and we have had some tremendous M&A activity this year) and the largest health insurance merger in American history.

The price tag is astounding: under the terms of the current proposal CVS would obtain Aetna for $66 billion. The implications are of tremendous concern for several entities: health insurers, PBMs (Pharmacy Benefit Managers), other pharmacy retailers, drug companies, and most importantly: the consumer.

The potential combination of the second-largest retail drug chain and one of the largest health insurance providers in the nation is an alarming proposition. It has a feeling of a conflict of interest written all over it. The mainstream media and some other internet based news outlets have done an amazing job covering this emerging story and I encourage you to check out some of those related articles.

The thought process within some of the coverage in those outlets also corresponded with my first thoughts on this merger due to my understanding of the pharmaceutical network coverages through major insurance providers: higher costs for the consumer. This merger, should it clear all of the hurdles, would have tremendous implications on cost.

The consumer should have reservations because essentially this merger will translate to being given the following options: use a CVS location to fill your prescriptions for medications or use CVS mail order service for your prescriptions or end up paying a significant amount of additional money using a different option.

The retail brick and mortar locations of CVS are ubiquitous in certain areas of the country, but there will be some cases geographically where finding a CVS will be cumbersome for some consumers. That is a concern right off the top for the consumer.

The proposal clearly benefits CVS in providing them with a captive audience of consumers also has the ancillary benefit of fixing an issue most retailers are experiencing: reduced foot traffic in their stores.

Many retailers are dealing with reduced foot traffic due to a variety of factors, most notably the convenience of online shopping. This is a good segue to another driving force behind the CVS – Aetna proposed merger which is Amazon.

The online retail giant has been exploring for several weeks now whether to enter the prescription drug marketplace. Amazon has already been granted some preliminary licenses within this area, but I am not an expert on licensing requirements for prescription drug carriage across multiple states, for more information in that area I would suggest researching some of the great articles out there on the topic.

The industry experts insist that the hurdles for entry into the market are high for Amazon to attain. The ethical and procedural questions from a compliance standpoint will most certainly follow this new strategic direction for Amazon.

In addition, the recent legal changes to the policies regarding the dispensing of painkillers and opioid class narcotic drugs would be of particular scrutiny. The ramifications of Amazon carrying those types of products could potentially increase the rate of prescription drug addiction which the government is trying to curtail. Amazon has the two components needed to make this ultimately work: smart people and tons of money.

The convenience of filling your blood pressure medication from your Amazon Echo, your tablet, or your computer is enticing to some, and frightening to others. The “Amazon effect” has already impacted traditional retail channels, especially with their recent entry into the grocery channel with the purchase of Whole Foods, but where does it stop? Should Amazon be able to access prescription drug channels?

However, the case for a conflict of interest could also be made for CVS and Aetna. The merger of health insurance carriers and retail pharmacy chains also has been met with apprehension by some consumers as well. This type of arrangement essentially forces the consumer to use a particular pharmacy if they have insurance coverage from their job which is, in this case, through Aetna.

In fair balance, the other side of the argument would be made by those who have no problem with this merger by pointing out that many current arrangements are made between health insurance carriers, PBMs, and retail pharmacy chains. Some insurance carriers or their PBMs have relationships with Rite Aid, some with Walgreens, and some with CVS which create a “preferred provider” type of situation.

The implications for CVS to actually be the same company as Aetna run far deeper than just a strategic partnership. The potential for an approved bid for CVS to merge with Aetna, would have a domino effect on the retail drug business segment.

The nature of these situations and their impact on an industry segment would invariably begin the speculation of other similar potential mergers. Some examples could be Walgreens with United Health Group, Rite Aid with United or another smaller insurance carrier, and Jewel/Osco with Blue Cross Blue Shield.

The ramifications of a CVS merger with Aetna could change the way health insurance and prescription drug coverage is currently set up, it would have a dramatic impact on prescription formulary coverage, and result in potentially higher costs for the consumer.

The potential for Amazon to enter the prescription drug space is a whole other topic for debate on the potential for a wide range of potential ways that those products could be misallocated or abused.

The merger potential for the second largest retail pharmacy chains with one of the largest health insurance carriers compared to the largest online retailer getting involved in dispensing medications: in the words of the rock legend, Tom Petty, “I don’t know which one is worse”.

Follow Up: The GMO Labeling Debate Continues

The GMO labeling debate continues on, now almost eighteen months after the 2016 bill was signed to require food producers to disclose genetically engineered or genetically modified ingredients on the labels of consumer products.

The debate at this point centers around new legislation in Congress that the big lobbying groups, such as GMA (Grocery Manufacturers of America), are advocating for which will allow some loopholes to the disclosure of genetically altered ingredients.

This week in the news, the GMA suffered a setback when Nestle decided to join The Campbell Soup Company and withdraw from the GMA over the issue. Nestle and Campbell Soup disbanded their membership in the group over this contentious issue of GMO labeling.

Both Nestle and Campbell Soup favor more transparent disclosure of genetically modified or engineered ingredients. In a previous article I produced, the decision by The Campbell Soup Company to make a full disclosure of GMO ingredients before it was required by law brought significant traction and attention to the legislation that eventually gained passage in 2016.

The GMA group wants less transparency in the process, and the opinion of the Nestle and Campbell Soup is that direction will damage the relationship with the consumer more than just disclosing the presence of GMO ingredients up front. The average consumer today has far more information available to them and many shoppers are significantly more health conscious than in prior generations.

However, at the same time, some consumers do not care about GMO or genetically engineered ingredients in their food. Some consumers have a favorable view of GMO ingredients and feel they are safe. Many consumers are making purchasing decisions strictly based on price, and they cannot afford to stretch their budget to buy products that do not contain genetically engineered ingredients.

The other force at play here is that depending on the type of grocery item on the list, the non-GMO versions are either difficult to find or do not exist. The second most important attribute to shoppers in grocery channel surveys after price/value is time/convenience. The average shopper has a very busy lifestyle and most people have what they would term “time sensitivity” and that is a huge component in some shoppers just doing the “grab and go” without reading labels.

It should be noted that the majority of Americans have a negative opinion of GMO and genetically altered or engineered ingredients in food products. It has become an issue where the consumer is making purchasing decisions based on that one factor, which makes the labeling transparency crucial.

Some food companies have noted sluggish sales of certain product categories and are rapidly designing alternative versions that are either organic, gluten free, soy free, or GMO-free.

The current legislation regarding GMO labeling has a few different options for the food producing company with regard to the design of their label deck. The first option is to highlight the ingredient(s) that are genetically modified and then put a disclaimer below the ingredients list that the highlighted items are made with genetic engineering.

The second option is to place an asterisk next to the ingredient(s) that are modified or genetically altered and then below the ingredient list have a similar disclaimer as option one: made with genetic engineering/modification.

The third option is to not highlight or asterisk any individual ingredients on the label and put some type of bold or highlighted statement reading: this product contains ingredients made with genetic engineering.

Then what is known in the industry as “option four” which is going to become more prevalent on packaging and label decks for companies who want to be less transparent about their ingredient statement. This option allows the food producer to put the disclaimer of the genetically altered or engineered ingredients on a document that can only be found if the consumer scans the QR code on the package.

The lobbying and special interest groups for the GMO free or those against the use of genetically engineered ingredients in our food products have several issues with this option for disclosure.

The first point of contention being the obvious one, the consumer has limited time and yet they are going to have to scan a QR code on individual packages and then read the disclosure statement to determine whether or not it is genetically modified, that is an unrealistic expectation.

The other major point of concern is the elderly, the economically disadvantaged, and those with other physical handicaps do not have access to the technology needed to scan the QR code to find this information.

The option four labeling is also being used on items that the average consumer would not anticipate being genetically engineered: such as grapes, certain types of juice products, and bottled spices. This option, just at face value, seems dishonest to the consumer as well.

The role of the QR codes in the labeling of food products and disclosures in any future legislation remains to be determined. It is definitely going to be one point of contention moving forward.

The labeling of food products and GMOs took another on another aspect in the news this week, with a major news organization publishing a story based on the results of a study published in JAMA where scientists analyzed the effects of the pesticide called Roundup.

The study found that people living in Southern California in recent years have had an increased level of glyphosate in their system which is the active ingredient in that pesticide product (see my earlier article on the effects of this product and the food supply) it is increased about 500%.

The study in Great Britain of the effects of glyphosate on rats demonstrated an increased level of liver disease and liver cancer. This is something that the scientists will monitor in California with their study participants. In fair balance, it is not known whether the increased levels in Southern California are due to the ingestion of foods with higher levels of GMOs, or if the participants breathed in particles of the pesticide from nearby farms.

The use of pesticides, herbicides, and genetic engineering has altered our food and our crops. It is trending in lockstep with an increased rate of illness in Americans from higher rates of cancer, to autoimmune diseases, autism, Parkinson’s disease, and dementia.
The American public should have the right to know if the products they buy to feed themselves and their families contain ingredients that are genetically modified or altered. It should be up to the consumer to make their own choices based on having all the facts in front of them.

The debate on GMO labeling and whether or not genetically modified foods are safe will continue on, and what is left is for you to decide which side you will be on.

Inconceivable: MLB Realignment Proposal Gets Leaked

The award -winning publication, Baseball America, ran a story on Wednesday with a leaked proposal being considered by Major League Baseball that would realign the divisions, shorten the regular season, and add more playoff teams. The theory being that the reduction in travel costs will offset the revenue lost from the shortened schedule.

The proposal would eliminate the American League and National League as baseball fans have grown accustomed to throughout the history of the sport. The new realignment would group the teams geographically without allegiances to the current divisional groupings.

The new realignment concept would include expansion of the league by two teams to bring the total number of teams to 32; allowing the realigned proposal to divide the teams evenly. The new plan would create four divisions with eight teams each, and the two teams mentioned in the expansion component are Montreal and Portland, Oregon.

I have covered the expansion plans for all the major sports leagues for about four years now. I completed a huge series of articles on expansion about two years ago which considered several factors for different potential markets for new teams in each sport. These two cities are not surprising as top expansion destinations for baseball to consider at this point.

The support to bring back the Montreal Expos has been growing in the past few years and they have a potential ownership group and a few different sites identified for a downtown ballpark which I covered in a piece I wrote last year. Montreal makes sense because they have a built-in fan base from their first iteration that MLB can draw from and grow. The trepidation that some will have, and it is understandable, is that the city had a team and lost it already, that same type of fan apathy can happen again. That situation would be obviously very unideal for the league.

Portland came in “second place” in the race to get the relocated Expos in the early 2000s. The city has some solid demographic evidence to support a team and some potentially problematic detracting factors (media market size, weak potential corporate sponsorship) and they have no current stadium to support a team.

However, according to this report and some other research, the ownership group in Portland can still access a state grant for funding for a portion of the new stadium which was approved for the pursuit of the Expos relocation and still has not expired.

The last time MLB expanded was in the late 1990s and the valuations on those teams have gone through the roof relative to their initial expansion entry fees. The formula for the expansion fee for the two teams added in this proposal would apply the average franchise valuation and factor in the increased value based on revenue models as well as the average value increase over the past twenty years.

The new expansion fees will provide significant revenue to each owner and would be incentive enough for them to add two new members to the ranks. The newly proposed alignment would put teams like the New York Mets and New York Yankees in the same division. The format would put the Chicago Cubs and Chicago White Sox in the same division, and would break up certain rivalries that the average fan has grown to enjoy.

The Mets would be in a division without any of the other members of their current division, the NL East, and the Minnesota Twins would play all of their road games in the Eastern time zone. The questions will almost certainly arise around the designated hitter rule with the dissolution being proposed of the two league structure in place currently.

The purists are going to have several issues with this proposal including the marked increase in the number of playoff teams. The realigned league would have 12 playoff teams: the four division winners, and eight “wild card” teams that would play each other to determine who plays the four division winners in the Division Series, then the final four teams would compete to determine the World Series participants.

The shortened regular season would lead to more playoff games which would invariably increase the value of the television and media rights deals that MLB would seek to broker with their broadcast partners in the future.

The debate will most certainly be spirited regarding the expanded playoffs and the value of “making the playoffs” only to play a winner takes all one game elimination wild card game. The other side will defend the decision with the rationale that the league will have two more teams, and the expanded number of postseason slots should keep more teams in contention. This will translate into better interest in late season games in more markets which should help attendance levels in late season games with a reduced regular season.

The detractors to this proposal will inevitably feel that the elimination of the divisions we have grown traditionally accustomed to (i.e. AL East, NL West) in favor of a completely different / highly geographic setup which eliminates some historic rivalries will damage the television ratings for the sport.

In my view, baseball is different than the other major sports because it does not have the same national appeal. The television ratings for MLB have proven that it is a regional sport and while the nationally televised “Game of the Week” is nice, that game does not generate ratings the way a national broadcast for the NBA or NFL “Game of the Week”.

The argument could be made that this new proposal will become too specifically focused which could hurt the interest in the sport. A good example is who is going to care about a Baltimore Orioles versus New York Mets game outside of those two markets? Not that many people.

The new proposal is also going to face resistance from certain team owners especially in the western regions and some of the small market teams which will be placed into divisions with several larger market teams. The team owners in the eastern regions and the southern areas will most likely support this type of proposal because it will drastically reduce their travel costs, which is becoming a growing concern for team owners across Major League Baseball.

The league has other issues though that this proposal, or one of similar type, will not repair. The pace of play situation is a huge problem for the sport. The league has been looking at ways to speed up the length of games because millennials and younger people are not interested in anything that takes three to four hours out of their life to do. The average length of a game went down a couple of years ago and this season is up over three hours and five minutes. That needs to get resolved or else they will have a more difficult time maintaining fan interest in the future.

The long- term viability of certain franchises, namely the Oakland A’s and Tampa Bay Rays needs to be clarified before they expand and add two new teams to the league. Those two franchises are struggling to generate attendance and revenue and their respective owners are trying to get new stadiums built for them thinking that will solve all of their issues.

The proposal is radical, it is inconceivable to me that they would alter and eliminate the National League and American League and dissolve the current division structure and playoff structure. Then, I think of the changes to the league structures when they moved Houston to the American League which made necessary an interleague series all year long because of the unbalanced number of teams. The MLB offices did that to slowly dissolve the lines between the two leagues, to prepare the fans for something else in the future: one league.

The debate will continue as the months move forward. It should be noted that MLB knew what it was doing when it “leaked” this proposal. This was a calculated move to soften the ground around making these types of changes. It is a test sample, this does not mean this proposal for realignment is set in stone.

Conversely, the league has certain issues that you might consider giving them credit for recognizing: the cost of travel for a whole roster of players and support staff is getting very expensive, the amount of games in different time zones is draining the players, and the season is a six month grind with not enough off days (this proposal would give one day off a week to players and allow for travel the next day rather than overnight flights which can be a safety issue).

Major League Baseball has some issues that they must resolve and they are also trying to adapt to a changing landscape for the viewing of sports content and for maintaining fan interest in a world full of other distractions. This proposal seems radical, bizarre, and doomed to a baseball purist like myself.

However, we must all realize that this was just a test, the real changes are coming down the road, and I cannot imagine how inconceivable the actual realignment will be when it rolls out in the future.

The Next Battleground: Gene-Editing & Food Products

The vigorous pushback that GMO (genetically modified) or genetically engineered ingredients in our food supply have received is a topic that I have covered here on Frank’s Forum as well as for other news websites for about four years.

My position regarding this issue is well documented as being against the use of genetically modified organisms or genetically engineered ingredients in our food. I have also detailed the problems inherently built into our food supply chain with genetically modified seeds. This scenario has fostered conditions where it is very difficult in the agricultural realities of today to avoid GMOs or genetic engineering in certain staple crops: corn, soybean, wheat, and sugar beet.

In those cases, I am a staunch proponent of the need for clear labeling practices for food production companies to notify the consumer of whether or not the item in question is made with genetically modified/engineered ingredients. I believe in the movement and the slogan fostered by another group, we have “a right to know if it is GMO”.

I was researching a set of different resources last week in the library for a GMO related piece, and I stumbled upon some research on genetic editing, or gene-editing, used in crops. This particular data set was on a study using genetic editing in corn for commercial use and not for human consumption.

The process of gene-editing inserts desired traits into the genetic pathways of crops and livestock. This trend is alarming to some, and intriguing to others; it certainly presents an ethical set of questions.
The intent, according to some published reports, is for gene-editing to be used in the human food supply in the future. The large corporate players in the industry have already made statements to the media indicating that their expectation is for gene-editing to be integrated into food production.

This raises some very important ethical questions about the alteration of the DNA of food which is grown in the earth. It raises serious questions about the line of division between man and God.

The process of genetic editing in food is also generating a new oracle within certain circles as “GMO 2.0” ; an inference to this scientific method being simply a continuation or new version of GMO ingredients in food. The use of the CRISPR method allows large chemical companies such as Dow/DuPont the capability to splice the genetic makeup of the food source.

The agricultural science and seed suppliers have become increasingly enmeshed over the course of the last two to three years due to mergers and acquisitions activity. The repercussions of that activity translate to molding scientific advances into what could be marketed to generate profits. This is a dangerous trend particularly when it is connected to the food supply.

These same agricultural/chemical giants: Dow/DuPont, Monsanto, Syngenta, Bayer, and others are “softening the ground” (all irony aside) with campaigns designed to almost condition the consumer to accept genetically edited products. They seek to avoid the public backlash that GMOs and products with genetically engineered ingredients have faced within the marketplace.

The key to that campaign objective is to position the genetic editing as more closely related to science and the scientific makeup of the crop or produce involved. The splice at the DNA level is going to be marketed as “more natural” than the process of GMO – which has an overwhelmingly negative public perception surrounding it.

This method of direct to consumer marketing is certainly nothing new, and is an increasingly common trend in marketing. The obstacles that face the agricultural titans mentioned earlier is that the public has access to so much information now than it did twenty or thirty years ago when the genetic engineering experiments began.

The other fact that is neglected in all of this, is that the process of CRISPR and genetic editing still modifies the DNA and the chemical structure of the crop in question. The process still alters what God created with something that mankind engineered. The questions will persist that if they are moving toward genetic editing to clone a “super crop” – where does it end?

The inevitable and controversial topic of cloning will take a renewed position within the national dialogue in America. The question of human cloning will be soon to follow. The debate will again be brought to the surface and the concept of genetic editing will have higher stakes than just the food supply.

In the end analysis, the responsibility shifts back to us to educate ourselves on the concept of genetic editing, and there are numerous sources of information on this subject. The central question will remain: should man be involved in the alteration of the DNA of something that was created long before we had any technology available? Should mankind use science to change what God created?

Those answers will not be concluded easily but those are the issues we will confront in the months ahead. The battle lines are drawn: which side wiil you be on?

Bring Hope To The Isolated: Puerto Rico Hurricane Relief

Hurricane Maria brought fierce destruction to the island of Puerto Rico, a U.S. territory home to about 3.4 million people. The island has no power, and the situation there is worsening by the day. Our fellow Americans are at risk of malnutrition, dehydration, disease, and death from the conditions at this point.

The images of the destruction in Puerto Rico are disturbing. The situation is almost apocalyptic. The power grid is down, the generators need gasoline to run, gasoline is scarce, the ATM machines are running out of cash if they even work, and water is scarce. Those effected need to bring in enough water to bathe and also it takes about one gallon of water to flush a toilet which needs to be brought in to apartments in high-rise buildings that could be twenty floors up.

I put myself in their shoes, in that situation, and I have to try to do something besides just sending in some money, which is a good start. However, this is a much larger effort and something has to be done. The federal government has to get some emergency funds allocated since FEMA is so stretched from the other recent hurricanes in Texas and Florida, and that has to be a top priority.

I have seen certain drives for fundraising or for gathering gifts-in-kind (supplies) taking place in New York City, Atlanta, Washington D.C., and other cities. We need more of those types of events from a grassroots level.

I know it can be difficult to determine how to trust that the charity will allocate your money to the actual relief effort in Puerto Rico. I know that the island territory feels isolated and cut off from the world. These people are our sisters and brothers. They are fellow Americans, and we must act to help them.

Here are some charitable organizations that have active operations there:
Convoy of Hope : www.convoyofhope.org
Samaritan’s Purse: www.samaritanspurse.org
Salvation Army: www.salvationarmyusa.org
Food For The Poor: www.foodforthepoor.org

These organizations are highly reliable and transparent. Please donate whatever you can to help in the efforts of relief for what is a dire situation in Puerto Rico.

Some other ways that you, your family, or your community can give:
1. Organize a local fundraiser and send the funds to these charities
2. Collect donations at your workplace, job site, or office these charities will provide written letters of receipt for your donation
3. Start a fundraiser or supply collection (food drive) at your local church or community center or with an organization you may be involved with
4. Contact your local representatives in Congress and ask them what I call the two questions: What are you doing Senator X or Rep. Y to help with aid to Puerto Rico? What can I do to help aid in this effort?
5. Contact your local organizations: Lions Club, Knights of Columbus, Rotary, Elks Club…and find out if they have a fundraiser you can help with.
6. Get your friends from school together or work together on social media and decide on an event you can create and promote locally and then send those proceeds to the relief effort.
7. Pray for the people there and pray for guidance on how to best serve and help them in this time of great need.

In the event that you have relatives, friends, associates, or colleagues in Puerto Rico and you have not heard from them; please call this number: 202-778-0710 and keep trying because it might be busy. This number will allow you to get the latest information and check on the status of your loved ones there on that ravaged island.

In my own life, I have visited Puerto Rico on a cruise during my honeymoon. I have very fond memories of the cobblestone streets of Old San Juan, the Fort (El Morro), and the white sand beaches. Those places are decimated, the people there are living in very dangerous conditions. They could survive the storm and die of malnutrition or starvation. The children on that island are the most vulnerable as are the elderly.

I ask you to put yourself in their shoes, and search your soul. We are all capable of doing something, and the time for action is now. Please help the people of Puerto Rico. Thank you and God bless you and God be with the people of Puerto Rico.

“Straight Talk” T-Mobile & Sprint Merger Talks Intensify

The reports out of Wall Street on Tuesday were that two wireless telecommunications giants, T-Mobile and Sprint, were in negotiations on a potential merger. The reporting from CNBC has been great on this topic, and according to that trusted news source, there has been no exchange ratio determined to this point.

That is an indication that talks are still in an early stage but CNBC also added that the negotiations on the term sheet had begun. The period of term sheet negotiations can lag for a while or move relatively quickly depending on the parties involved in the potential merger. I have covered mergers where the meetings to figure out the parameters of the term sheet could get contentious, obviously much of that is centered around the valuation of given assets in the deal.

These two particular companies have discussed joining forces at least a few times in the past several years. The difference between those prior attempts and this potential merger opportunity is that the current proposal is expected to be an all stock transaction. The prior attempts at merging the two companies involved cash which brings in other variables around valuations of certain other operational components.

The main reason that these two mobile phone service providers are seeking to merge is one of the usual reasons: cost synergy. That rationale has come up often in my prior writing on M&A activity, and this deal stands to provide billions of dollars of cost savings due to the synergies involved in these businesses.

T-Mobile and their parent company, Deutsche Telecom, would become the lead party in the combined company. This translates to the average person to mean that if the two companies did link up – the combined company would be known as T-Mobile. It is too early to know, and it is unclear whether it will change, that they will keep the two names in the marketplace operating essentially as different brands with the same parent owner.

Sprint and their parent company, Softbank, expressed interest to work a deal with T-Mobile again earlier this year. The sources around the negotiations state that the understanding is that the CEO of T-Mobile, John Legere, would lead the combined company.

However, it is also being reported that the top guy at Softbank, Masayoshi Sun, wants a position of significant input into the daily operations of the potential combined entity. This scenario, in my experience covering mergers, always presents a whole other set of complications to the deal being completed.

In addition, it should be noted that the personnel involved in researching this type of transaction at T-Mobile has not begun their review of the balance sheet at Sprint. This review could (and very often does) change the terms of the structure of the deal. It also could become a factor in T-Mobile backing out of the process if it is determined that the current financial picture at Sprint is not advantageous for M&A activity.

Furthermore, the other variable which cannot be underscored is the anti-trust situation. The regulatory aspect from the federal government entities involved in a merger of this magnitude can frequently create several hurdles that could sidetrack a potential deal to the point that it never materializes.

In this case, we are dealing with a significant alignment of the third largest and fourth largest mobile telecommunication companies in the United States. The scrutiny from the federal anti-trust regulatory authorities is going to be significant. That level of scrutiny usually causes one side of the potential merger to disband the process. The possibility that T-Mobile could bow to the pressure exerted by federal regulators and pull the plug on this deal is one potential outcome of this situation.

The motivating factor for both T-Mobile and Sprint is a common one: remain competitive with the top two players in the industry, Verizon and AT&T. Those two behemoths keep getting larger and more diversified in their holdings with Verizon recently acquiring Yahoo and AT&T obtaining more media companies to go along with their blockbuster merger with DirecTV.

The pricing, network coverage, and service options (AT&T bundles services with DirecTV packages, Verizon bundles cell phone plans with FIOS TV packages) makes for competitive disadvantages for T-Mobile and Sprint. It is my belief that if T-Mobile and Sprint joined forces that the branding message would be crafted around their focus on mobile devices and the fact that they are not involved in other businesses in media.

It is very early in the process for this potential merger, anything could break one way or another with regard to the probability of it being carried to fruition. The fact remains that beyond all the “straight talk” the companies are engaging in at this point with the term sheet, is that this merger has several boundaries to overcome.

The stock valuations on the term sheet, the fact that both holding companies do not totally own all of the companies they are trying to consolidate, the role of John Legere versus Mr. Sun and his “seat at the table” demands, the balance sheet health of Sprint, and the anti-trust pressures; are all factors that could derail this deal off the tracks at any point.

The average consumer should keep tabs on this merger because it could further limit the competition and the competitive balance in the cell phone marketplace. This could lead to unfair or burdensome cost increases to the consumer and a lack of choice in their carrier. It effects an area that hits close to home to a great majority of the American public: their cell phone.

In the end analysis, it is going to come down to the same set of factors that most M&A activity revolves around: is the cost savings from the synergies obtained from consolidation worth the effort, headache, and manpower hours needed to complete the merger. The next few months will provide many of those answers as T-Mobile and Sprint move forward in this long process that merits the attention of the consumer.