Explaining Southern California's economy

Hollywood needs Netflix, but Netflix is struggling

Netflix Reports Third Quarter Earnings

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Netflix disappointed Wall Street with its second-quarter earnings. It's trying to get out of the business of delivering DVDs by mail while it grows in online streaming.

In a world where people watching movies and TV shows online is a trend that's absolutely taking off, you'd expect that the biggest name in the streaming space, Netflix, would be doing quite well. And you'd be justified — but also quite wrong.

First, the streaming part. This is from The Wrap, referencing a recent report from the Digital Entertainment Group and looping in Netflix's major business-model change:

The five-fold spike in subscription streaming is largely due to Netflix’s shift away from CDs. Spending on subscription streaming hit $548.6 million in the first half of 2012, up from $85 million in the first six months of 2011. [my emphasis]

How could Netflix lose with increases of that magnitude being posted? Easy: All that demand for streaming means Netflix is going to have to spend and spend hugely to feed the demand. Wall Street is concerned about this — as well it should be given that the former darling of the Silicon Valley tech world just saw second quarter earnings call by a whopping 91 percent. USAToday does the numbers:

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LA Auto Show: Telling the luxury technology story at Cadillac

Cadillac has a new in-car infortainment system, called Cue, that it's rolling out for the 2012 model year. At the 2011 LA Auto Show, it was one of the minor examples I saw of a major trend in the car business: bringing technology into vehicles.

An important thing to note now is that while just a few years back, luxury customers might have been more interested in whether their car seats were hand-stitched, heated, and massaged to a butter-soft texture by elves, they now want to know that their $50,000 automobile will be able to keep pace with the technological innovations that we're seeing almost montly in consumers products.

If a sub-$20,000 Chevy Cruze can talk to the interwebs and play MP3s, the Cadillac had better be able to, as well.

When it comes to tech, luxury cars aren't immune from the discussion anymore. And we all know how important the luxury market is in LA.

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Wait! Maybe Yahoo will move to LA!

A while back, I suggested that Yahoo, the beleaguered technology colossus, should close up shop in Silicon Valley and move all its operations to Southern California. (It already has an office in Santa Monica.) Now CNN's Juilanne Pepitone reports that something along those lines might be in play. Could Disney buy Yahoo? Here's the lowdown:

While Disney hasn't thrown its name into the ring, one analyst thinks it and its big-media rivals should consider a Yahoo buyout.

"The big guys -- Apple, Google -- aren't interested. And either way, it would make more sense for a traditional media company to buy Yahoo," says James Dobson, stock analyst at The Benchmark Group.

That's because traditional media companies are struggling with how to monetize their online presence. They're still working through the transition from old to new media, and they face stiff competition from upstart online publications.

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Visual Aid: Where the jobs aren't in California

This chart, from the just-released UCLA Anderson Forecast, tells a very clear story about both why California's economy is so bad and what it needs to do to make it better (Sorry I can't make the actual chart a bit more clear!). We're creating jobs in health care, tourism, and scientific and technical services. We're losing jobs in construction, retail, and government. Everything else is pretty much flat.

Here's what that means. California needs to play to its strengths and be strategic about its future. We have a good shot at being the global leader in keeping people heathy longer and in caring for not just our own aging population, but the aging populations of other countries, especially China.

People still like beaches, sunshine, and Disneyland. Probably the Golden Gate and wine country, too.

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