Daniel Cullinane CPA

25 Plaza 5 25th fl Jersey City NJ                                          phone 732-516-1648 fax 732-516-9778

MBA Taxation

Daniel Cullinane CPA

2500 Plaza 5 25th fl  Jersey City NJ 07311                                                          phone 732-516-1648  fax 732-516-9778

                 MBA TAXATION                                                                                                         

Copyright ©​ Daniel Cullinane CPA.

​Blockbuster was once one of the largest retailers in the world. It helped move the consumers’ ability to watch movies from the theater to the home, via stores that offered videotapes of mainline films for rent. Eventually, it was buried by Netflix and other companies that offered DVDs via mail, and then the emergence of streaming. Two blockbuster stores survived as of this week. One will close later this month, and that leaves only one left in the world.

Blockbuster was founded in 1985. At its peak, in 2004, it had over 9,000 stores. About half of those were in the United States. Blockbuster’s employee count in the same year was 84,000, which is nearly triple what Google parent Alphabet has today. Blockbuster’s primary products were VHS and Betamax tapes rented to customers who did not want to invest in large, expensive video libraries of the clunky videotape boxes.

Like McDonald’s, Blockbuster owned some of its own locations and others were owned by franchisees. At the start of March, there were two franchises left. All the company-owned stores had been gone for years. One is in Perth, Australia. The second is in Bend, Oregon. The management of the Bend store found out the Perth store would close when it received a call from an Australian radio station, which broke the news. According to the Bend Bulletin, Sandi Harding, the store’s general manager said, “I had no idea. I wondered which one of us was going to hold out the longest.”

As the videotape rental business was eroding, Blockbuster was thrown several financial lifelines. The final was from satellite TV company Dish Network. Dish bought the company in 2011 after it declared bankruptcy in 2010. But most of the damage done by Netflix and smaller kiosk movie rental based Redbox was too severe. Blockbuster had entered the DVD via mail business, and eventually made a desperate move into streaming media. It was years too late when it began each of these initiatives. Dish planned to keep most of the 1,700 remaining stores it bought open. Financial losses were too massive for the plan to work. By the end of 2014, there were only a few hundred locations left.

The Bend store has two unique features that are the reason it has survived. The Bulletin reports that owners Ken and Debbie Tisher have owned the franchise since 2000 and have no intention to close it. The store also has a large collection of Russell Crowe memorabilia, which draws customers. These include costumes of some of the Australian actor’s most well-known films, such as “Robin Hood,” “Cinderella Man,” “Les Misérables” and “American Gangster.”

Blockbuster’s collapse was one of the biggest among all American retailers. Its troubles foreshadowed those of companies like Sears, Barnes & Noble and Toys “R” Us — the retail apocalypse as it is known. Overtaken by e-commerce, they had no way to survive as anything close to what they were during their best years. Or, in some cases, to survive at all.

For more, see retailers closing the most stores.

​RECESSION

​MARCH NEWSLETTER 1

​DONE

Facebook’s reputation took a long dive over the past year, staggering under an avalanche of controversies, a new Harris Poll survey in partnership with Axios has found.

Why it matters: Other tech giants, including Google and Apple, have seen their reputations decline as well. But Facebook’s drop in the Axios Harris Poll 100, a new partnership between Axios and Harris Poll, is in a class of its own — suggesting that the social network may be uniquely vulnerable to a loss of public confidence.My take: Facebook’s turn in the barrel. As for Apple, I said everything I have to say about its diminished reputation quotient last year.

From The rise and sudden fall of Apple’s brand reputation:In 2009, two years after Steve Jobs unveiled the iPhone, Apple was ranked No. 14 in the Harris Poll’s annual RQ (reputation quotient) survey. By 2012, it was No. 1 and it remained one of top 5 U.S. brands for four out of the next five years.But something about the Apple brand soured last year, according to Harris. Between 2017 and 2018 the company Jobs co-founded fell from 5th place to 29th, the biggest one-year fall from grace in percentage terms of any U.S. company except Johnson & Johnson.

From: I have a theory.The survey period—Dec. 11, 2017 to Jan. 12, 2018—was hardly a valley for Apple news. The problem, I think, was the news itself:

Apple prices new iPhones at $1,000-plus
Apple opens new $5 billion-plus corporate headquarters
Apple enjoys a $163 billion repatriation tax windfall
Apple is surrounded by the usual fog of fear, uncertainty and doubt
If I didn’t know better, I’d think that Apple came across to the 25,800 U.S. adults Harris surveyed as too rich and too greedy.


PROBLEMS

​China’s trade data came out today. It showed exports fell 20% in February, which one expert called a “trade recession.” Since it is the world’s second-largest country by gross domestic product, the data show that the world’s economic slowdown has started to spread aggressively.

The stunning drop took economists by surprise. Most expected a decrease in the number, but not one nearly as large. The trade war with the United States, which shows no sign of ending, likely means that the hammering of China’s economy will continue over the foreseeable future. And there are many signs that businesses in the United States that export to and import from China also have started to have sales trouble.

China has been one of the fastest-growing economies in the world, despite its size. Based on GDP, it sits in second place behind the United States. While the American economy has grown by about 2.5% in the years since the Great Recession, China’s has accelerated by 7% a year. Since exports are the engine of China’s economy, that growth could skid very quickly. Even the government expects the expansion to slow as low as 6% this year. That figure is quickly being called optimistic.

China’s GDP last year was $13.4 trillion, according to the International Monetary Fund. America’s was $20.5 trillion. At the current rate, China will move ahead of the United States in a decade. Both economies dwarf any others in the world. Japan’s ranks third based on GDP at $5.0 billion.

While the American economy is largely driven by consumer spending, China’s relies more heavily on global demand for its factory output. The output has not been one without consequences. China has several of the 25 most polluted cities in the world. The output has started to be clobbered by two factors. The first is trade tensions with the United States. The other is a general slowing in the world’s economy. The head of The European Central Bank recently said that the region was in deepening trouble economically. With GDP growth of only 1.8% last year, it would not take much for that number to go below zero.

China’s population and government are so used to rapid growth that a recession may not mean a drop in growth at all. A slowing to 5% or lower would be shocking. China’s GDP expansion has not been below that figure since 1990. At 5%, China’s job engine, which has created a middle class out of what was once a rural population, would undermine China’s new economic model. Since some experts think that China’s government fakes its GDP data, the country’s economic growth already could be well below official figures. An immediate effect might be an inability to keep its rapidly growing military, which has made it a world power beyond economics. The country was, according to 24/7 Wall St., in second place among those that spend the most on war.

Global trade can be a virtual or vicious circle. When GDP growth in most of the world is strong, China’s factories pump out hundreds of billions of dollars of exports a year. When the entire global economy slows, China’s expansion core is damaged. China may be in the “trade recession” today. That could become a full recession quickly.