Gap shutting down Forth & Towne chain

Mon Feb 26, 1:46 PM ET

Retailer Gap Inc. (NYSE:GPS - news), seeking to focus on problems at its two main apparel chains, said on Monday it would shut down its newest chain, Forth & Towne, a move that will affect about 550 employees.

The company expects pretax expenses of $40 million for the closure of the 19 Forth & Towne stores in 10 U.S. markets. The expenses will be recognized over the first and second quarters.

Forth & Towne, designed to appeal to women between the ages of 35 and 50, was launched in August 2005. The stores featured larger, centrally located dressing rooms and were stocked with accessories, including handbags and shoes, to help women put together full outfits and drive impulse purchases.

"We made the tough decision to close the brand and focus our efforts on stabilizing the existing businesses," Robert Fisher, Gap chairman and interim chief executive, said in a statement.

The company said a thorough analysis found that Forth & Towne was not demonstrating enough potential to deliver "an acceptable long-term return on investment."

Forth & Towne was expected to compete with department stores, including Federated Department Stores Inc.'s (NYSE:FD - news) Macy's chain, and chain stores like Talbots Inc. (NYSE:TLB - news) and AnnTaylor Stores Corp. (NYSE:ANN - news), which sell to career women.

FOCUS ON PRIMARY BRANDS

Although analysts had recognized the underserved market that Forth & Towne was aiming for, some on Wall Street had criticized former Gap CEO Paul Pressler -- who left the company in January -- for focusing on new growth opportunities before fixing persistent problems at the company's two largest chains, Gap and Old Navy. Gap also operates the more upscale Banana Republic chain.

Gap is struggling to turn around a sales slump more than two years old that has seen once-loyal customers flee to rivals. Critics have cited fashion missteps, uninspired merchandise and confusing brand messages as reasons for Gap's problems.

"We believe the closure of Forth & Towne is immaterial to the Gap business overall but it demonstrates that Gap management is focused on right sizing operations to improve profitability and product focus," wrote analyst Richard Jaffe in a research note.

In November, Gap launched an online shoe venture, Piperlime.com, designed to compete with popular online footwear retailers like Zappos.com.

Gap shares were down 12 cents at $19.69 in midday trade on the New York Stock Exchange. The shares have traded between $15.92 and $21.17 over the past 52 weeks.

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February 26, 2007

E-Commerce Report

New Hot Properties: YouTube Celebrities

Shmuel Tennenhaus, creator of the popular Ask a Jew series on YouTube, says he has been contacted by other video sites.
By BOB TEDESCHI

No one would mistake the Ask a Jew guy for Lonelygirl15, but these days YouTube contributor Shmuel Tennenhaus is feeling like a hot commodity.

Mr. Tennenhaus, an aspiring comedy writer who gained a modest following on YouTube for his droll question-and-answer clips and other spots featuring his grandmother “Bubby,” is being wooed by the site’s competitors, including Metacafe, ManiaTV and others, with promises of guaranteed exposure, a share of advertising money, or both.

“It’s all very odd,” said Mr. Tennenhaus, speaking from Hallandale, Fla. His YouTube channel, Oneparkave, has logged roughly 32,000 visits and a few hundred subscribers since last fall. “My parents say I’m special, but I can’t imagine I’m the only guy they’re contacting.”

He has that right. The most popular YouTubers, who have generated millions of visits and tens of thousands of subscribers, say they have received overtures from multiple sites. And YouTube, meanwhile, appears ready to respond to the challenge.

“I think everybody that has a site has contacted me,” said Paul Robinett, whose YouTube persona Renetto has attracted 1.19 million views and more than 23,000 subscribers. Mr. Robinett, who is based in Columbus, Ohio, and frequently posts commentaries on YouTube-related issues, said: “They’re not throwing a ton of money around. It’s kind of chump change. And I haven’t responded because I know revenue-sharing is coming to YouTube.”

Few performers will divulge what kind of money is being thrown around. But Metacafe pays $5 for every 1,000 views, with their most popular acts netting tens of thousands of dollars, figures that the site will mention when trying to persuade YouTube stars to defect.

In January, YouTube’s co-founder, Chad Hurley, said the company would in the coming months begin sharing advertising revenue with contributors. The company last week said it would not elaborate on that plan, or on the efforts of competitors to lure its contributors away.

But Mr. Robinett said he was contacted by a talent agency claiming YouTube plans to share about 20 percent of the advertising money gleaned from each video clip with the clip’s producer. Mr. Robinett said he could not confirm that claim with a YouTube executive.

YouTube is by far the most popular video site on the Web, with about 26 million visitors in December, according to comScore Media Metrix, an Internet statistics firm. Yahoo Video had 22 million, while the closest independent site, Heavy.com, had about 6.5 million visitors.

But YouTube has been stung by the departure of its most popular acts. Last fall, Lonelygirl15, an online show about the exploits of a fictitious teenager, left YouTube for Revver, which pays producers half of all advertising revenue. The comedy duo Smosh, another of YouTube’s biggest stars, moved to LiveVideo.com, where its videos begin and end with that site’s branding messages.

The Smosh stars did not return e-mail messages seeking comment, but David Peck, LiveVideo’s vice president of operations based in El Segundo, Calif., said: “Just as every TV network, film studio and record label in America has done for decades, we are proactively signing talent to bring their work to new audiences.”

Mr. Peck would not disclose the terms of its deals with contributors, but other popular YouTube contributors say LiveVideo has recruited them with promises of money in exchange for the right to show their videos exclusively for an introductory period.

James L. McQuivey, an analyst at Forrester Research, an Internet consultancy in Cambridge, Mass., said YouTube’s executives can expect hardball tactics from competitors, given the stakes.

“It’s not at all bad form to try to poach other users,” Mr. McQuivey said. “The people providing the best content are obviously valuable. The only problem is, no YouTube competitor can say, ‘We’ll get you millions of eyeballs in a week.’ ”

As a result, Mr. McQuivey said, YouTube’s competitors must offer cash. “And who’s going to pay them? Advertisers. But advertisers also want to see millions of eyeballs.”

Revver, with a monthly audience estimated by comScore at about 400,000, is big enough to attract advertisers, said Steven Starr, the company’s chief, speaking from Hollywood. But in luring Lonelygirl15’s producers to his site, he said he had offered nothing more than Revver offers any other contributor, nor did it demand exclusivity.

Other sites “are making noise around advancing guarantees to their talent, but we don’t do that,” Mr. Starr said. Because Revver earns ad revenue based on the number of clip views, he encourages producers to distribute their videos on as many sites as possible.

Allyson Campa, the vice president of marketing for Metacafe in Palo Alto, Calif., said the site, which shares advertising revenue with its producers, routinely recruits contributors from other video sites.

“We don’t have a specific strategy to poach specific creators, but we’ve certainly increased our emphasis on getting the word out and letting creators know we have a great system,” she said.

Paul Robinett shaving his head in the video “Look out London ... here I come.” As Renetto, he is remaining loyal to YouTube for now.

Ms. Campa added that Metacafe has not offered incentives to contributors to join the site, but that she “would not rule out” such an approach.

Drew Massey, the chief executive of ManiaTV, a video site based in Denver on which users create channels with homemade clips and professionally produced content, acknowledged that the site has recruited YouTube contributors with pledges to feature them on ManiaTV’s home page.

“I’m sure every site does it,” Mr. Massey said. “We’re not saying ‘Here’s a ton of money.’ It’s more like, ‘Check us out and get exposure if you’re really good.’ For producers, two things are important: fame and fortune. In that order.”

Indeed, some of YouTube’s stars say they don’t necessarily want money. Mr. Tennenhaus, who recently received an e-mail overture from ManiaTV, said: “It’s a no-brainer, especially since the e-mail didn’t talk about me doing exclusive content.”

“This is not about the money,” Mr. Tennenhaus said. “Right now, it’s an unbelievable opportunity to showcase my stuff and get feedback from real people. For me it’s like going to college, and getting hands-on experience.”

Ben Going, creator of Boh3m3, another of YouTube’s most popular channels, started his YouTube series in part because he aspired to work with the “Jackass” team. Mr. Going, a waiter in Huntsville, Ala., who shoots videos from his bedroom, now says he hopes “video blogging might become some kind of career.”

“I’ve seen people mentioning that now that Google has given YouTube $1.6 billion, they’re going to share it with users,” Mr. Going said. “That’s not going to happen, but if the site keeps escalating, maybe in six months it’ll grow into something very profitable for everybody.”

That is what Mr. Robinett, a k a Renetto, is hoping. Mr. Robinett recently posted a video chastising YouTube stars who have bolted to other sites. He said the video was tongue in cheek, though many in the YouTube community missed the joke.

Loyalty does count for something, Mr. Robinett said. “If YouTube stays on top, would you like to be the loyal guy who stuck it out, or the one who ran from here to there to be popular?” he said.

Then again, Mr. Robinett added, no one has tested his loyalty with a truly lucrative offer.

“These companies don’t quite understand,” he said. “If they understood the power and influence that some of the bigger people bring to the table, they wouldn’t think twice about paying me and 10 other people $100,000 apiece to blog for three months. If they thought twice about doing that, they’d be nuts.”

Americans Still Lagging Behind Europeans in Mobile Web
A new study shows that 34% of all American internet users have accessed the Web using wireless connections, like Wi-Fi or 3G broadband.

Wi-Fi is a brand originally licensed by the Wi-Fi Alliance to describe the underlying technology of wireless local area networks (WLAN) based on the IEEE 802.11 specifications. It was developed to be used for mobile computing devices, such as laptops, in LANs, but is now increasingly used for more services, including Internet and VoIP phone access, gaming, and basic connectivity of consumer electronics such as televisions and DVD players, or digital cameras.

The use of wireless connections for Web-surfing has been steadily rising during the last two years, with a new study of American Life Project showing that 34% of all internet surfers have logged on wirelessly, either around the house, at their workplace, or some place else. That means that one third of internet users have checked their e-mails or simply browsed Web-pages using PDAs, Wi-Fi capable laptops or phones.

27% have accessed the internet using wireless networks installed in other places than home or work, while those who had accessed the Web wirelessly from home were only 19%. PDA users with wireless internet access were even less, only 13%.

The study, conducted between Nov. 30 and Dec. 30 2006 on a sample of 2,373 adults 18 and older, also showed that the dominant activity during the wireless internet-surfing is e-mail verification, followed by news-reading. 72% of wireless users checked email daily, compared to 63% of home broadband users and 54% of all internet users, while 46% got their news online on the typical day, compared to 38% of home broadband users and 31% of all internet users.

The differences between wireless and home broadband users are statistically significant and notable because most wireless users (80%) have broadband connections at home. The findings suggest that the “relentless connectivity” afforded by wireless access represents a different quality in online behavior.

The study also showed that 27% of adult internet users have logged onto the internet using a wireless device at some place other than their home or place of employment. Among those interviewed 20% had wireless networks installed at home and used them to access the Web. The percent of those who had accessed the Web while at work was surprisingly smaller, only 17%.

Most wireless surfers log on wirelessly from more than just one of the places asked about. In fact, 25% of internet users have gone online wirelessly from two of the three places; put differently, three-quarters of all those who have logged onto the internet using a wireless network have done this from more than one of the types of places queried.

Four in ten (39%) internet users have laptop computers and of these laptop users, 80% say their laptops can connect to the internet on a wireless network.

Most of the time, those with wireless enabled laptops connect to a wireless network at home, although most also have logged on from someplace other than work or home.

88% of all laptop users who have been interviewed have at one time logged on using a home wireless network’ while 57% have used a wireless network someplace other than home or work to connect to the internet. 36% have logged using a wireless network at work.

One in five (19%) of internet users have wireless networks at home, which is twice the number recorded when the Pew Internet Project asked this question in January 2005, when 10% of internet users had home wireless networks.

The study also revealed that 25% of those interviewed had a Web-browsing capable phone that worked with 3G networks. Among internet users with this type of phones, half (54%) have used it to get on the internet either at home, work, or someplace other than home or work.

Web-browsing on mobile phones seems to be a spare-time pleasure for the majority of the subjects, 47% of them having used mobile Web someplace other than home or work. The difference between those who used mobiles for internet at home and at work is very small, 28% having done that at work and 27% at home.

One in eight (13%) internet users have a PDA that can connect to the internet using a wireless network. Of these, most (82%) have used it to connect at home, work, or someplace other than home or work.

PDAs are used mainly by those who want quick and ubiquitous access to their e-mail, while Web-browsing comes second. 56% of those with a web-enabled PDA have used it to access the internet or email away from home or work; 49% have done this with their PDA at home; 38% have used their PDA to connect to the web or email at work.

But despite the fact that Americans use modern technologies to access the internet without wires, they still lag behind Europeans in the mobile Web domain. comScore networks reported in October 2006 that that 29 percent of European Internet users within France, Germany, Italy, Spain and the UK regularly access the Web from their mobile phones compared to only 19 percent in the U.S. Even if the more recent study shows that the proportion of mobile-Web users in US has increased, it’s still behind the one reported in Europe (which has not stagnated in the meantime).

Of the countries examined, the highest mobile Web penetration was seen in both Germany and Italy (34 percent for each), followed by France with 28 percent, Spain with 26 percent and the UK with 24 percent. The U.S. figure of 19 percent was the lowest of the set.

The comScore Mobile Tracking Study also showed than men were somewhat more likely to access the Web from their mobile phones than women. Across all six European countries, although the Internet penetration is split evenly between men and women, 55 percent of those who access the Web from their mobile phones are men.

comScore’s study also found Nokia to be the leading brand of phone for those who regularly access the mobile Web across five of the six countries examined, capturing share ranging from 50 percent in Italy to 22 percent in France. Only in the U.S., where Motorola has the greatest share (26 percent), is Nokia pushed into second place, with a 17 percent share.

The movie magic is gone

Hollywood, which once captured the nerve center of American life, doesn't matter much anymore.

By Neal Gabler
Neal Gabler is the author of many books, including "Walt Disney: The Triumph of the American Imagination" and "Life the Movie: How Entertainment Conquered Reality."

February 25, 2007

TONIGHT'S Oscars will be awarded, most likely, in the usual atmosphere of solemn self-congratulation and decorous chest-thumping. But for all the outward celebration, the truth is that the industry is in a state of ongoing disquiet.

It is hardly news that for years now the American motion picture industry has been in a slow downward spiral. Though by some accounts attendance was slightly up in 2006 over the previous year, the box-office tracking firm Exhibitors Relations reported that attendance actually declined yet again, reaching its lowest point in 10 years. And though defenders of the industry protest that foreign markets account for 40% of a film's revenue and that those proceeds are compensating for falling domestic box office, foreign receipts have been down too, and even DVD sales are plateauing. In short, the overall trends remain discouraging.

Even more worrisome than what could be just a cyclical dip is how people are regarding motion pictures and the moviegoing experience. A recent Zogby survey found that 45% of American moviegoers had decreased their attendance over the last five years, with the highest percentage of that decrease in the coveted 18- to 24-year-old bracket; at the same time, 21% of respondents said they never went to the movies. The two most-cited reasons for seeing fewer movies were rising ticket prices and the quality of the films (a perpetual culprit).

Another survey, this one conducted by PA Consulting for the Motion Picture Assn. of America, reached an even more chilling conclusion. Eighty-three percent of its respondents said they were satisfied with the content of the films they saw, but 60% nevertheless expected to spend less of their income on moviegoing in the future, citing dissatisfaction with the moviegoing experience and the emergence of better alternatives for their time and money.

By this reckoning, no matter how much films may improve, their prospects are not likely to — which suggests that something has fundamentally changed in our relationship to the movies. The long, long romance may finally be losing its bloom, and that is why Hollywood should be concerned.

What is happening may be a matter of metaphysics. Virtually from their inception, the movies have been America's primary popular art, the "Democratic Art," as they were once called, managing to strike the American nerve continuously for decades. During the 1920s, nearly the entire population of the country attended the movies weekly, but even when attendance sank in the 1950s under the assault of television and the industry was virtually on life support, the movies still managed to occupy the center of American life.

Movie stars have been our brightest icons. A big movie like "The Godfather," "Titanic" or "Lord of the Rings" entered the national conversation and changed the national consciousness. Movies were the barometers of the American psyche. More than any other form, they defined us, and to this day, the rest of the world knows us as much for our films as for any other export.

Today, movies just don't seem to matter in the same way — not to the general public and not to the high culture either, where a Pauline Kael review in the New Yorker could once ignite an intellectual firestorm. There aren't any firestorms now, and there is no director who seems to have his finger on the national pulse the way that Steven Spielberg or George Lucas did in the 1970s and 1980s. People don't talk about movies the way they once did. It would seem absurd to say, as Kael once did, that she knew whether she would like someone by the films he or she liked. Once at the center, movies increasingly sit on the cultural margins.

This is both a symptom and a cause of their distress. Two years ago, writing in these pages, I described an ever-growing culture of knowingness, especially among young people, in which being regarded as part of an informational elite — an elite that knew which celebrities were dating each other, which had had plastic surgery, who was in rehab, etc. — was more gratifying than the conventional pleasures of moviegoing.

In this culture, the intrinsic value of a movie, or of most conventional entertainments, has diminished. Their job now is essentially to provide stars for People, Us, "Entertainment Tonight" and the supermarket tabloids, which exhibit the new "movies" — the stars' life sagas.

Traditional movies have a very difficult time competing against these real-life stories, whether it is the shenanigans of TomKat or Brangelina, Anna Nicole Smith's death or Britney Spears' latest breakdown. These are the features that now dominate water-cooler chat. There may have been a time when these stories generated publicity for the movies. Now, however, the movies are more likely to generate publicity for the stories, which have a life, and an entertainment value, of their own

But in the two years since, another phenomenon has battered the motion picture industry, attacking one of the very fundamentals of moviegoing: the movies' communal appeal. Before demographics became the marketing mantra, the movies were the art of the middle. They provided a common experience and language — a sense of unity. In the dark we were one.

Now, however, when people prefer to identify themselves as members of ever-smaller cohorts — ethnic, political, demographic, regional, religious — the movies can no longer be the art of the middle. The industry itself has been contributing to this process for years by targeting its films more narrowly, especially to younger viewers. In effect, the conservative impulse of our politics that has promoted the individual rather than the community has helped undermine movies' communitarian appeal.

All of this has been hastened by the fact that there is now an instrument to take advantage of the social stratifications. To the extent that the Internet is a niche machine, dividing its users into tiny, self-defined categories, it is providing a challenge to the movies that not even television did, because the Internet addresses a change in consciousness while television simply addressed a change in delivery of content. Television never questioned the very nature of conventional entertainment. The Internet, on the other hand, not only creates niche communities — of young people, beer aficionados, news junkies, Britney Spears fanatics — that seem to obviate the need for the larger community, it plays to another powerful force in modern America and one that also undermines the movies: narcissism.

It is certainly no secret that so much of modern media is dedicated to empowering audiences that no longer want to be passive. Already, video games generate more income than movies by centralizing the user and turning him into the protagonist. Popular websites such as Facebook, MySpace and YouTube, in which the user is effectively made into a star and in which content is democratized, get far more hits than movies get audiences. MySpace has more than 100 million users worldwide, and Fortune magazine reported that 54 million of them spend, on average, 124 minutes on the site for each visit, while 11.6 million users spend 72 minutes a visit on Facebook. YouTube's most popular videos attract more than 40 million hits, which is substantially larger than the audience for all but a very, very few movies.

But these sites are arguably not only diverting viewers who might be attending the movies, they are replacing one of the movies' functions: If stars' lives are superseding movie narratives, audiences are superseding the stars. Who needs Brad Pitt if you can be your own hero on a video game, make your own video on YouTube or feature yourself on Facebook?

The promise of an alternative life — the vicarious thrill of escape — has always been one of the movies' greatest blandishments. In the theater we could all imagine ourselves to be Cary Grant or Bette Davis. Now with avatars — essentially masks that one can use to represent oneself on the Internet — anyone can be Cary Grant or Bette Davis without having to imagine it. In effect, we have become our own movies.

Film no doubt will withstand these assaults. The industry, with its synergies, will probably find a way to profit from stars' lives and from our own star-like lives.

But it is much more difficult to survive a change in consciousness than a change in taste or technology, and that is what the movies face now — a challenge to the basic psychological satisfactions that the movies have traditionally provided.

Where the movies once supplied plots, there are alternative plots everywhere. Where the movies once supplied community, there is less hunger for it. And though we still love the frisson that stars provide, we like our own frisson too. How the movies cope with these threats will go some way toward determining whether they remain vital or will be usurped. But the problem for the industry, even on its biggest night, is that the answer is likely to lie less in the executives' hands than in our heads.

BitTorrent Opens Online Store

Paid music and movie download service launches today.

Jeremy Kirk, IDG News Service

Monday, February 26, 2007 08:00 AM PST

BitTorrent rolled out a paid music and movie download service today, leveraging its fast distribution system infamous for the massive piracy it facilitated when it debuted in 2001.

The BitTorrent Entertainment Network -- launched with movies such as "Superman Returns," TV shows including "24" and PC games -- will be a new entrant challenging other download services such as Apple's iTunes Store and Amazon.com's Unbox. BitTorrent's service is stocked with 5,000 movies, TV shows, PC games and music.

BitTorrent, based in San Francisco, has reached agreements with more than 35 entertainment companies including 20th Century Fox, Viacom's MTV Networks and Metro-Goldwyn-Mayer Studios to offer their content using its peer-to-peer (P-to-P) technology.

New Tactics

The technology uses information files called "torrents" that allows users with compatible client software to download files from other users' computers, reducing the infrastructure needed by a company to run a download service.

Although widely used for illegal file sharing, companies have struggled to employ P-to-P for viable commercial businesses while also protecting digital content from piracy.

BitTorrent will use digital rights management (DRM) technology from Microsoft that will prevent protected content from being redistributed on the Internet or played on a different PC, according to The New York Times. Content will play through Windows Media Player 11, Microsoft's multimedia application. Some content, however, will not have DRM, BitTorrent said.

DRM is loathed by some users, but music and movie companies insist it's integral to protecting their content from illegal file trading.

Pricing, Selection

TV shows on BitTorrent are purchased for ownership, but movies will expire after either 30 days or 24 hours after a user starts watching. TV downloads will cost $1.99, while movie rentals will range from $2.99 to $3.99.

By comparison, TV shows cost $1.99 on Unbox, and movies -- that can be owned and played on two PCs and two portable music players -- cost up to $14.99.

Similarly, the iTunes Store sells to own, with TV episodes priced at $1.99 and movies ranging from $9.99 to $14.99.

Change in Tune

The download service puts BitTorrent, founded as a company in 2004, in good standing after music and movie industry trade groups sought to cripple it. Under pressure, in November 2005 BitTorrent removed links to torrents from its search engine that pointed to copyright content. However, illegal file sharing still flourishes using BitTorrent's technology.

The company's co-founder, Bram Cohen, open sourced BitTorrent's software, and it has been incorporated into numerous different download clients. Also, search engines designed to find torrents linking to copyright material continue to operate despite efforts to shut them.