fortune--2020-05-22--What to do if your employer stops matching your 401(k) contributions

Lululemon shares hit an all-time high on strength of ‘ work at home wear ’

The coronavirus crisis has dealt a devastating blow to many companies across the U.S.—for employees and employers alike. And as companies take stock of their options to cut costs, one avenue that has historically been on the chopping block is the 401(k) employer match.
Back in the 2008–09 financial crisis, roughly 18.5% of companies that offered a match either altered or suspended 401(k) matches, according to a 2009 report from the Plan Sponsor Council of America. Plenty of companies are already announcing 401(k) match changes, generally as part of a strategy to get through the downturn and minimize or avoid layoffs. However, according to Jean Young, a senior research associate with Vanguard Investment Strategy Group, more employers announced 401(k) match cuts or reductions in 2008–09 than actually implemented them, Young recently told Morningstar.
If your employer just cut your 401(k) match, here’s what experts say you should do.
Do the math
The first step some experts suggest you take is a pretty basic one: Do the math.
“Understand what this cut means. It’s starting with basic math: Figure out, ‘Okay, that match—how much was it actually?’ Sometimes we think in percentages but you don’t actually know what the dollar amount is,” Rhian Horgan, CEO and founder of retirement and financial planning platform Kindur, tells Fortune.
For example, if you make $50,000 a year and your employer matches 3% of your contributions, that’s $125 a month that you’ll be losing, Horgan notes. By calculating that amount in terms of dollars, she suggests it will be much easier to start building a plan that aligns with your retirement goals and can help you adjust your contribution rate.
Still, Dennis Notchick, a financial adviser based in San Diego, points out that the impact of cuts is going to hurt more if you’re closer to retirement than earlier in your career. “If you’re 25 or 30, you could sit there and crunch a calculator, but you’re 30 years out [from retirement],” he says. Making up the difference in contributions will likely be more important closer to retirement age.
Keep saving—in your 401(k) or elsewhere
Certainly, getting “free money” put into your 401(k) through an employer match is great. But at the end of the day, “it’s just an incentive for you to contribute your own dollars,” says Douglas Boneparth, president of Bone Fide Wealth in New York City. It’s likely employers will reinstate the 401(k) match eventually, and for those like Notchick, “Staying the course is important.”
However, your employer match (or lack thereof) “should have little bearing on the thought process about whether or not you can afford to save,” says Boneparth. That’s a key distinction: “Affording to save is different than simply getting a matching contribution,” he notes.
In hard times like these, many people may want to have access to liquidity—especially if they’re concerned about a cushion to fall back on if they lose their job or struggle paying rent.
Steadily contributing to your 401(k) should be important, but for Horgan, access to liquidity might be more important for younger retirement savers. And a 401(k), which you normally can’t access without a fee until you’re 59.5 years old, isn’t ideal for that.
“If you don’t already have a set of cash put aside that’s liquid, it may make sense for you to say, ‘I’m not going to contribute to the 401(k) for a little while, but I’m going to still save. I’m just gonna save in a different vehicle,’” notes Horgan. For some, the better option right now will be putting money into a savings account. “If you think there’s a chance you might lose your job, you might want to access the cash,” she says.
Revisiting your monthly budget and cash flow is “the biggest call to action right now that I can give anyone,” says Boneparth. From that vantage point, you can determine what changes you may need to make to your 401(k)—employer match or not.
Add to your contributions if possible
Knowing you’ll be missing that extra money each month could help you get creative in making it up: “Are there ways that you can look at your budget and find that savings, or a portion of it, to bridge that gap?” Horgan asks.
If you have a stable paycheck and are able to eke out savings from things like not going out to eat as much or not spending money on a gym membership, those savings could help make up some of the loss of your employer’s match—and could keep you on track for your retirement goals, says Horgan.
But more than making up the gap, one of the benefits of adding to your 401(k) contributions right now is the “buyer’s market” we’re in. With stocks having experienced hefty blows in recent months, many stocks are becoming cheaper. If it’s affordable, you can capitalize on market dips by “contributing more in the times when markets are lower” and buying up stocks cheap, says Boneparth. If you’ve got the wiggle room, “now’s the time to be opportunistic,” adds Notchick.
Pause contributions if you have to
Worst-case scenario, pausing contributing to your 401(k) is “100% okay,” argues Boneparth.
If the uncertainty of the economy or your job security is getting to you, “the first place you should go is to beefing up cash,” notes Boneparth. “It’s unfortunate that that might come at the expense of taking advantage of opportunities, meaning a lower market, but keep in mind: You can always back-end your contributions into your 401(k).” You can make “catch-up” contributions (putting additional funds) into your 401(k) if you’re 50 or older—plus, you don’t need to make IRA contributions until it’s time to file taxes in the next calendar year.
Think about an IRA
Some financial advisers note now might be a good time to look at an IRA, or an individual retirement account. If your 401(k) isn’t sweetened by the lure of a match, IRAs can generally present more flexibility: “If you’re in a 401(k), you’re stuck in a mutual fund, you’re stuck in an index. The positive to an IRA is you have more investment options,” Notchick points out. (Note that IRAs have different contribution limits than 401(k)s. For 2020, contributions for IRAs are capped at $6,000 a year—$7,000 if you’re 50 or older.)
Plus, if you’re under certain income limits (for 2020, anyone making more than $139,000 as an individual, or $206,000 for a married couple filing jointly), you may able to access a Roth IRA, meaning the contributions are taxed today and allowed to grow tax-free. If you’re at the start of your career, contributing to a Roth can help you down the line when you might be earning more and being taxed in a higher tax bracket. For those in their twenties and thirties, the Roth option is “probably the most powerful savings tool you have,” Horgan suggests.
Determine where you are in your retirement journey and plan accordingly
It’s common sense: Younger employees should plan differently than those close to retirement. That also holds when considering the hit an employer match cut might take to your retirement goals, experts say.
If you are later in your retirement planning journey, an employer match cut may prompt you to consider delaying retirement for a year or two to recoup the losses, or even adding some part-time income, Horgan says.
Notchick suggests if you are nearing that retirement age, it will be crucial to examine your budget and cash flow, and figure out where you can afford to save more in retirement or add extra contributions. “If you wanted to retire sooner, you’re going to have to pump more money into it because you’re losing that extra percentage that was from the company,” he says. A few hundred dollars less from your employer a month will likely have a bigger impact for someone who is 60 than someone who is 30.
But whether or not your employer just cut your 401(k) match, financial planners like Boneparth suggest it’s never a bad idea to revisit retirement goals.
“Most people don’t know what their retirement savings are able to do for them, so it’s always a good idea,” he says. However, “having said that, should you be so worried [about match cuts]? I want to say no, but it’s really going to depend on whether or not when the economy recovers, will that match come back?”
More must-read finance coverage from Fortune:
—Saving lives vs. saving the economy is a false tradeoff, economists say
—Real unemployment rate soars past 24.9%—and the U.S. has now lost 33.5 million jobs
—17% of unemployed workers aren’t looking for work—and that’s warping the official unemployment rate
—Does Apple’s stock buyback strategy make sense in this market?
—Goldman Sachs doubts there will be a Round 3 of PPP loans for small businesses
—Listen to Leadership Next, a Fortune podcast examining the evolving role of CEO
—WATCH: Why the banks were ready for the financial impact of coronavirus
Subscribe to How To Reopen, Fortune’s weekly newsletter on what it takes to reboot business in the midst of a pandemic


fortune--2020-05-21--Congress must loosen PPP loan restrictions to ensure America’s small businesses survive

What to do if your employer stops matching your 401 ( k ) contributions

Saving small Main Street businesses has rightfully been a priority for Congress since discussions that led to the CARES Act began in March. Since then, $660 billion has been allocated to aid small businesses as part of the Paycheck Protection Program (PPP), but the first $349 billion vanished quickly and was mired in problems, and nearly two-thirds of the $310 billion intended to replenish the funds has already been allocated. As Congress hammers out phase 4 of the COVID-19 relief package, lawmakers disagree over whether additional funding and focus should be allocated to aid small businesses.
The hard reality is that of the 6 million small businesses in the country eligible for this relief, only 1.6 million were able to get a piece of the first allocation of PPP funds, according to the Washington Post. Meanwhile, an estimated 4.2 million small businesses will seek aid over the course of the pandemic, which means the total sum of the program will need to be closer to $1 trillion.
Questions also remain as to whether the program has met the needs of the majority of small Main Street businesses hit hardest by the effects of the pandemic. For loans to be fully forgiven under the PPP, businesses are required to spend 75% of it on payroll, and the rest can only be spent on expenses such as rent, mortgage interest, or utilities. On top of that, businesses are required to fully exhaust their loan within eight weeks of receiving initial payment. These restrictions have been too limiting for millions of businesses that have been forced to close and lay off employees, without knowing when, or if, they’ll be able to reopen. Many of these businesses have been hesitant to apply for a loan despite their desperate need for funds to stay afloat.
As state leaders outline plans for a phased reopening of local economies, a return to normalcy is not expected anytime soon. Brick-and-mortar businesses, which have been devastated by social distancing measures, continue to suffer from a near-complete paralysis of commercial activity. Starting in the second week of March, the rate and number of closed businesses increased 200%, according to Yelp data. As of April 19, more than 175,000 businesses in the U.S. that were open on March 1 have temporarily or permanently closed. Los Angeles was hit hardest with the largest number of closures, followed by New York, which has suffered the economic equivalent of eight Hurricane Sandys.
Some areas of the local economy are suffering more than others, according to our analysis. Since March 10, the nightlife category, which includes bars and breweries, has seen consumer interest—in the form of reviews, page views, and photos—plummet by 81%. Salons and other beauty businesses have seen a 77% decline. Restaurants, despite being allowed to remain open for delivery and takeout in most of the country, have seen consumer interest fall by 52%.
The prospects for restaurants, an industry that runs on razor-thin margins and is also the second-largest private sector employer in the U.S., seem particularly dire without dedicated relief and loosening of PPP restrictions. According to a recent National Bureau of Economic Research paper, restaurateurs believe they have a 30% chance of survival if the crisis lasts for four months, and just 15% if it lasts for six months.
While the PPP is critical to helping keep millions of businesses and workers afloat, Congress must act to ensure that more Main Street U.S. businesses can make it through the end of 2020. First, the loans must come with fewer restrictions that have applied a one-size-fits-all approach to businesses whose challenges vary immensely. This also means extending the timeline that businesses have to spend the money for their loan to be fully forgiven to 24 weeks—a change that has received support from the House of Representatives as part of the HEROES Act, the $3 trillion coronavirus relief bill it passed on Friday.
Congress must also loosen the rules on the type of expenses allowed. Covering payroll and rent has been the first priority for many businesses, but that’s proven too limiting for small businesses that are still under state-mandated closures, as well as those that have other overhead costs. This will increasingly be the case as they prepare to reopen and have to pay for protective wear and additional cleaning measures, while operating at what is expected to be a reduced capacity and lower revenues.
By removing the restrictions that have so far made small businesses, particularly restaurants, hesitant to apply, the demand for PPP loans is likely to increase significantly. To meet this demand, lawmakers must allocate additional funds to the program, setting aside funds for businesses with 50 or fewer employees, as well as those owned by minorities and women. Many of these businesses were shut out of loans when the first round of funds depleted since they lacked existing relationships with larger banks.
What we’ve learned since the first CARES Act was passed in March is that this crisis isn’t going away anytime soon. As stay-at-home measures begin to lift in some parts of the country, consumer demand for many types of small businesses that rely on foot traffic and human contact is not likely to go back to normal before the fall. Some businesses will continue to struggle through the rest of the year, possibly longer.
For generations, Main Street businesses have done their part to power the U.S. economy with many millions of employed Americans. They need help now more than ever. While the government has stepped up to offer economic relief, it must do more to ensure that America still has a Main Street when this is all over.
Jeremy Stoppelman is the cofounder and CEO of Yelp.
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fortune--2020-05-21--Universal Orlando sets target reopen date

Universal Orlando, following a coronavirus-prompted closure in mid-March, is preparing to open again—and soon.
The resort, home to the Wizarding World of Harry Potter and Universal’s Volcano Bay, has set a reopen date of June 5. On Thursday officials from Universal Orlando submitted the theme park’s proposal to the Orange County Economic Recovery Task Force, headed by Mayor Jerry Demings.
The task force unanimously voted in favor of Universal’s plan, according to The Hollywood Reporter, paving the way for one of the first reopenings of a major U.S. theme park in the wake of the novel coronavirus pandemic.
Universal Orlando employees will return to the park on June 1 for a test run. On June 3, a minimal number of guests will be invited to the park. The park will then open in a limited capacity to the public with social distancing measures in place. Masks and temperature checks for both employees and guests will also be required.
Other changes put in place to combat the virus include closed interactive play areas and mist zones, no valet parking, and paper single-use food menus. Cash will be accepted but minimized if possible.
Last Friday Florida Gov. Ron DeSantis outlined plans for Universal and its nearby competitor, Walt Disney World, to reopen. In addition to submitting plans to the state, the parks would “need to have an endorsement of the relative official in their locality—Orange County mayor, wherever you’re talking about,” he said.
With Mayor Demings’ task force approval, it appears Universal Orlando has the green light to go forward. Disney has yet to set a date for its own Florida park, but the company reopened Shanghai Disneyland—selling out limited tickets—earlier this month.
More must-read stories from Fortune:
—Drive-in theaters are back. These are the movies you can see, and where you can see them
—What to expect on network TV during the 2020–21 season
—3 reasons why Quibi is “losing the attention game”
—Another Star Trek series is coming to CBS All Access
—Snowpiercer showrunner, production designer: We didn’t want a “carbon copy” of the movie


fortune--2020-05-21--Lululemon shares hit an all-time high on strength of ‘work at home wear’

Lululemon Athletica Inc. notched an all-time high Thursday after shares climbed 92% from a low in March as Wall Street bet that those working from home would purchase more athleisure wear.
The company’s product categories are in the sweet spot right now, analysts say, including B. Riley FBR’s Susan Anderson. “Casual, active, and lounge-wear is what’s selling; pretty much everyone has said that,” she said in a phone interview Thursday.
Before the pandemic, Lululemon’s online sales rose 35% in its last full year, and Anderson expects the growth to have accelerated further this quarter. Meanwhile, many of the company’s physical stores remain closed in North America, with some markets beginning to reopen in accordance with local government mandates.
BMO Capital Markets analyst Simeon Siegel agreed Lululemon is an “at-home Covid winner.” But he questioned what that will mean longer term and said the potential risks are not being priced into the stock currently.
Stock prices today are dominated by themes, he said in an interview. And right now, people are making purchases in athleisure wear to “recalibrate to their current new norm.” But, do people need to buy more or less fashionable athleisure? Is there a need to have multiple outfits to sit at your desk, home alone? These are among the things Siegel wonders. “When people are working in groups, fashion plays a stronger role, but at home comfort is king.”
“It remains to be seen what the financial implications of the pandemic will be, but it seems reasonable to assume the audience of people willing to buy high-priced clothing is not going to get larger,” Siegel said. “The question is: does it stabilize or shrink?”
As for the company’s upcoming earnings report, Siegel too is expecting a “strong” online performance. Color around digital performance and initial store reopenings will be what moves the stock, he said.
Barclays analyst Adrienne Yih also told clients in a note that “with core customers working from home, we believe ‘work-at-home wear’ consists of comfortable and casual apparel, and Lulu fits the bill.” Based on her view that there will be an increase in people working from home after Covid-19, she boosted her estimates for next year.
Anderson and Yih have buy-equivalent ratings on the stock. Siegel rates it a market perform.
Lululemon will host an annual meeting on June 3. Fiscal first-quarter results are expected to be reported in the first half of June.


fortune--2020-05-21--Why many Facebook work-from-home employees will earn less

Many employees who take Facebook up on its new offer on Thursday to work permanently from home will end up earning less.
The salary reductions, which are based on the cost of living where the employees live, is a consequence of a huge shift by Facebook in letting some of its 48,000 workers do their jobs from home—permanently. The company made the move after having most of its employees work from home since March because of the coronavirus pandemic.
In a live-streamed town hall meeting during which he announced the initiative, CEO Mark Zuckerberg predicted that about half the company’s staff would work remotely within the next 10 years. “We’re going to be the most forward-leaning company on remote work at our scale,” he told employees.
On Jan. 1, Facebook will ask employees to tell them where they are working from and then begin adjusting their salaries accordingly, Zuckerberg said. The company plans to pay new hires salaries based on the market rates for their specific cities.
“That means if you live in a location where the cost of living is dramatically lower or the cost of labor is lower, then salaries do tend to be somewhat lower,” Zuckerberg said. “With a somewhat lower salary, you can often still have a better quality of life than you can have in some of the big cities.”
Facebook is anticipating that many employees will move to or be hired in cities where the cost of living is much lower than near San Francisco, where its headquarters are located, and in New York, where the company has a major hub. Both cities have sky-high real estate prices and rents, forcing Facebook and other tech companies to offer huge salaries.
In going big on work at home, Facebook joins several other companies that have recently given employees the option to work from home permanently. Those businesses include Twitter, Square, and Nationwide Insurance.
Facebook said it would enforce the new work-at-home policy mostly by the honor code, but that it plans random checks of employee VPN addresses—the tool used to securely access the company’s network remotely—to confirm their locations. Any employee that is caught lying will face “severe ramifications” as it could affect some of the company’s tax filings, Zuckerberg said, adding, “You may be breaking the law.”
In the coming weeks, Facebook said it plans to internally release a list of the functions that are eligible for permanent at-home work. But generally, the option will be available to employees who are experienced, have high marks in their performance evaluations, are part of a team that isn’t needed in the office, and who have their supervisors’ approval.
Employees who work on hardware development, some human resources functions, or sales partnerships, or who are content reviewers or data technicians, will be ineligible because their jobs depend on being physically present with others in an office. Lower-level employees will also have to work from the office as will new hires during their training period.
Zuckerberg also said the company plans to extend its recruiting efforts under this new remote-working plan. That includes opening new engineering hubs in Dallas, Atlanta, and Denver, where there will be “some kind of physical” meeting space for engineers, but not necessarily full offices, Zuckerberg said.
Facebook’s remote work plans will likely evolve over time as the company determines what works and doesn’t work. And while Zuckerberg said he hopes the option will help add flexibility for employees and lead to products that are better designed for at-home workers, he doesn’t want to spend a lot of extra money in the process. That means that the company will likely try to reduce what it spends on offices so that it has more money free to support employees who work from home.
“The reality is … I don’t think we’re going to wake up on Jan. 1, and no one has any more concerns about this,” Zuckerberg said. “We’re going to keep moving forward and learning and improving on this.”


fortune--2020-05-21--Moderna’s coronavirus vaccine expectations game

Good afternoon, readers.
On Monday, stock futures soared on news of positive early data for Moderna’s experimental coronavirus vaccine. And while, understandably, investors and the public are looking for even the smallest glimmer of good news these days, there are still plenty of questions to be answered about Moderna’s vaccine candidate, mRNA-1273.
For one thing, we haven’t seen a full dataset yet. Moderna’s announcement came via a press release saying that all 45 of its trial participants developed coronavirus antibodies after receiving various doses of mRNA-1273. This is what’s called interim data—shorthand for “more data still need to come in”—from a subset of study participants in a phase one trial. (For more details on exactly what Moderna announced, you can read my explainer here.)
That’s not to say it isn’t a positive development. And Moderna chairman Noubar Afeyan has insisted that the company would not make any data claims that diverge from reality. It will just take more time and larger future trials before we get a better picture of what’s happening with this vaccine.
One of the larger questions about, not just Moderna’s experimental vaccine, but any coronavirus vaccine candidate, is what the production of antibodies actually means for long-lasting immunity, and how strong that immunity will be. That will take months or even years to determine. For instance, is there a moderate rate of re-infection for patients who have recovered?
We’ll find out over the next year, and clearly everyone wants to see a vaccine work. But it’s going to take time to figure it out.
Read on for the day’s news, have a great (and safe) Memorial Day weekend, and see you again next week.
Sy Mukherjee
sayak.mukherjee@fortune.com
@the_sy_guy
DIGITAL HEALTH
Singapore is testing out what's basically a coronavirus Roomba. Here's one I didn't see coming—a company in Singapore is deploying a robot to a shopping mall to try and zap away coronavirus with powerful UVC light. The Sunburst UV Bot is a smart robot that can sense whether or not there are humans around (UVC light can be harmful to people), although it will only be used at the mall after closing time. Here's one catch—the thing costs nearly $50,000. (Reuters)
3 states to deploy Apple's and Google's contact tracing tech. Alabama, North Dakota, and South Carolina are poised to use contact tracing technologies developed by Apple and Google in the midst of the coronavirus pandemic. The contact tracing apps, which will be developed by government health departments, will utilize Google's and Apple's underlying tech, which uses Bluetooth in order to alert users who have been near someone who tests positive for COVID-19. Due to privacy concerns, the companies say no data would be stored on a central database, but rather on users' personal phone, making it a more decentralized system. (CNBC)
INDICATIONS
U.S. nabs rights to one third of AstraZeneca's COVID-19 vaccine candidate. The U.S. Department of Health and Human Services (HHS) has secured rights to 300 million doses of AstraZeneca's experimental coronavirus vaccine through a $1.2 billion investment meant to spur its development. “This contract with AstraZeneca is a major milestone in Operation Warp Speed’s work toward a safe, effective, widely available vaccine by 2021,” said HHS Secretary Alex Azar in a statement. Health experts have said a vaccine will be integral to reopening societies at large, and countries around the world are vying, up front, for the rights to access as many doses as possible should one of the candidates prove effective. (Fortune)
AstraZeneca, Merck gain FDA approval for advanced prostate cancer drug. AstraZeneca and Merck's cancer treatment Lynparza has received an added indication from the Food and Drug Administration (FDA) to treat patients with an advanced form of prostate cancer, the second leading cause of cancer death in American men. Lynparza is part of a class of cancer drugs called PARP inhibitors which have been approved to treat conditions such as ovarian cancer; what makes the prostate cancer label expansion significant is that the drug was shown to help patients live longer. (BioPharma Dive)
THE BIG PICTURE
Johnson & Johnson yanks baby powder from U.S. market. Johnson & Johnson is discontinuing sales of talc-based powders in U.S. and Canadian markets amid both a rash of lawsuits claiming that they're linked to cancer as well as a portfolio restructuring as demand slows during the coronavirus outbreak. J&J says the decision was based in part on "changes in consumer habits and fueled by misinformation around the safety of the product and a constant barrage of litigation advertising."(FiercePharma)
Experts warn of second coronavirus wave. A tracking model developed by the PolicyLab at Children’s Hospital of Philadelphia suggests that, while the risk of a second coronavirus wave would be significantly diminished should Americans maintain social distancing, certain states and regions are at elevated risk for a resurgence—particularly in the American South. Parts of Texas, Virginia, and Iowa have seen a spike in cases amid partial reopenings. (Washington Post)
REQUIRED READING
The health care industry's winners and losers in the midst of the pandemic, by Sy Mukherjee
This Fortune 500 company's reopening playbook is available for free, by Lee Clifford
Takeaways from the Seattle business community's Back to Work toolkit, by Erika Fry
How businesses should balance risk and opportunity during the crisis, by Brian O'Keefe
Sign up for other Fortune newsletters.


fortune--2020-05-21--Shareholders dunked on CEO pay at CVS and Intel. Stock performance may be next

Recent shareholder votes against executive compensation plans at CVS and Intel may signal poor future stock performance by those companies, a new report said.
Nonbinding shareholder votes on executive compensation plans are required under a securities rule known as “say on pay.” Companies almost always win the votes, perhaps because the outcome is purely advisory—CEOs get the same pay regardless of the outcome.
But in unusual cases like Intel and CVS in which companies have lost say-on-pay votes, the stock prices of those companies performed badly over the next year, according to a report on Thursday by Morgan Stanley. For example, the stock prices of companies that lost executive compensation votes last year trailed the return on the S&P 500 index by an average of 20%, repeating a pattern that has held every year since 2015, the authors of the report noted.
“We view say-on-pay as a strong indication of shareholder satisfaction not only around exec comp but on broader governance, execution, and the strategic direction of a company, making it a meaningful forward-looking indicator, in our view,” Morgan Stanley’s analysts wrote in the report.
At Intel this year, just under 50% of shareholders voted in favor of the compensation package for CEO Bob Swan and his top reports, down from 60% support last year and 94% support in 2018, Morgan Stanley noted. The company has struggled with competition from AMD and Nvidia in recent years and granted large pay packages to Swan and CFO George Davis. Swan received total compensation worth $67 million last year, up from $17 million the prior year, when he as chief financial officer.
The company noted that Swan’s pay was increased because he was named CEO in January 2019. Swan “received a new, competitive pay package designed to recognize his pivotal role during a critical time of business, cultural, and leadership change, and to provide strong pay-for-performance incentives,” Intel said in a statement. “Approximately 98% of Bob Swan’s total compensation is at-risk and performance based, including equity awards tied to increasing the stock price of the company.”
Intel released the vote results only last week, so it may be too early to see an impact on its stock price. So far this year, Intel has been doing better than the overall market, as its business has not been hit as hard by the coronavirus pandemic as industries like airlines and hotels. Intel’s stock price is up 4% this year versus a 9% decline in the S&P 500.
At CVS, only 24% of shareholders favored the executive pay package, down from 90% last year and 91% in 2018. CEO Larry Merlo’s pay hit $36 million last year, up 66% from the previous year and triple his pay from 2017, according to CVS’s proxy filing.
CVS also defended its CEO pay package. “We value our stockholders’ opinions and are considering the outcome of the vote as part of our ongoing evaluation of our executive compensation programs,” CVS said in a statement. “We have a strong record of stockholder engagement and have implemented changes over the years based on their feedback.”
CVS’s stock price is down 14% in 2020.
The nonbinding vote on executive pay was mandated by the 2010 Dodd-Frank Act, passed after the mortgage meltdown of 2007–2008. Starting in 2011, the Securities and Exchange Commission required public companies to allow shareholders to offer their view of annual compensation for top officers.
Most companies that have held annual meetings in 2020 and reported the results of say-on-pay votes won over shareholders by large margins. For example, 94% of Macy’s shareholders and 95% of Union Pacific shareholders supported executive pay plans. That’s typical of most years. The percentage of public companies losing the vote has never exceeded 2% in a single year, and 86% of companies have never lost a vote since the process began, according to a 2019 study by HR consulting firm Mercer.
Morgan Stanley says only five other companies have previously lost say-on-pay votes in 2020: Qualcomm, Iqvia Holdings, U.S. Silica, Altria, and Vornado Realty.


fortune--2020-05-21--Tom Brady’s Super Bowl journeys are getting the ESPN docuseries treatment

Tom Brady’s journey to each of his nine Super Bowls with the New England Patriots will be the subject of an ESPN series released next year.
Entitled “The Man in the Arena: Tom Brady,” the nine-episode series will include a look from Brady’s perspective at the six NFL titles and three Super Bowl defeats he was a part of. It should be a rare opportunity for up-close revelations from the usually private quarterback who left New England this year after 20 seasons and now is with the Tampa Bay Buccaneers.
The series will be produced by ESPN, 199 Productions (Brady’s production company) and Gotham Chopra of Religion of Sports.
“Through the series, we’re defining the key moments and challenges that were seemingly insurmountable, but through hard work and perseverance, became career-defining triumphs, in both victory and defeat,” Brady said.
Tom Brady holds the Vince Lombardi Trophy as head coach Bill Belichick (right) looks on after the New England Patriots defeated the Atlanta Falcons 34-28 in overtime during Super Bowl 51 at NRG Stadium on Feb. 5, 2017 in Houston. A nine-part ESPN documentary series, “The Man in the Arena: Tom Brady,” will air in 2021. Timothy A. Clary—AFP via Getty Images
Brady has won more Super Bowls than anyone and remains a bona fide NFL star at age 42. Unlike Peyton Manning, his contemporary for much of his career and the quarterback he is most often compared to, Brady normally has been reticent to provide behind-the-scenes information.
Connor Schell, ESPN’s executive vice president for content and one of the creators of the network’s 30 for 30 series, believes Brady has a fountain of memories worth the telling.
“To have personal firsthand accounts and an athlete at Tom’s level who doesn’t often give firsthand accounts can add up to a remarkable series,” Schell said.
Schell points to Chopra’s storytelling skill as a key factor in making Brady’s experiences compelling to fans — even the legions that have made the Patriots generally a despised franchise outside of the New England base.
“It is really a tribute to Gotham that he was able to earn that level of trust so Tom is willing to share his stories,” Schell said, noting that Chopra brought the project to ESPN. “We love these projects where these elements come together, and we’re able to give fans not just a good story but something they haven’t seen before.”
The episodes are expected to be grounded in Brady’s reflections and will include voices and outlooks other than his.
Schell added that ESPN is “thinking about how to evolve the genre and new ways to tell these stories and new hooks. And the access to Tom Brady is unique.”


fortune--2020-05-21--How Best Buy’s new concierge service is making in-store shopping safer

Shopping by appointment is no longer just for luxury stores.
Best Buy has adopted the practice at 700 of its 1,000 stores in the past month as part of its efforts to partially reopen locations closed because of the COVID-19 outbreak. Offering the appointment-only shopping option has helped the country’s largest electronics retailer salvage sales of items that require high-touch service and expertise from its sales staff, such as major appliances and home-office products.
Best Buy stores were open only for curbside pickup starting in late March, a choice made by the company even though it was deemed an essential retailer and stores could have stayed open. The impact is apparent in the company’s first-quarter results: Best Buy’s online sales, which include both curbside pickup and delivery, shot up 155% during this time.
Curbside pickup of online orders and the appointment-only concierge service were two major factors that helped the electronics chain avoid the worst of the sales slump experienced by many other retailers. Best Buy was able to retain about 81% of its sales volume during the last six weeks of the quarter, something one Wall Street analyst qualified as “amazing.” The Department of Commerce said sales at U.S. electronics stores overall fell 61% in April, underlining the importance of Best Buy’s e-commerce prowess.
“We’re seeing demand in complex sales, appliances for cooking at home, and areas like home theater for entertaining,” Best Buy chief executive Corie Barry told reporters on a briefing call about the concierge service.
The by-appointment shopping option was launched in April, with customers able to reserve 30-minute slots that can be extended. The shopper is paired with a Best Buy employee who stays with the customer throughout the visit. Customers schedule appointments by phone, online, or via Best Buy’s app, and Best Buy employees call before the visit to go over safety measures and learn more about what the shopper is interested in purchasing.
While that sounds like it could kill a lot of store traffic, Best Buy is betting that its e-commerce, bolstered with curbside pickup for people who need things in a hurry, will enable it to capture more common transactions, while the concierge service helps with more involved purchases, as a shopper enjoys the undivided attention of a Best Buy employee.
“What we’re seeing from customers is that they actually feel like they have more time to ask more questions, and our associates, more importantly, are offering more fulsome solutions,” Barry told Fortune on the call. “They are focused on one customer’s needs. This leaves lots of room for more complex conversations.”
For its quarter ended May 2, Best Buy’s revenue fell to $8.56 billion from $9.14 billion a year earlier. Comparable sales fell 5.7% in the U.S., its largest market. Stores were open as normal for roughly half the period. Lower sales of products like home-theater equipment and mobile phones offset demand for computing devices and games, the company said. Demand for items like kitchen appliances and home entertainment rose.
While it would be ideal to have all stores open, analysts say curbside pickup, which the company had already been testing and was able to roll out quickly, and now the concierge service should help Best Buy protect as much business as possible.
“As stores are beginning to reopen, initially on an appointment-only basis, we would expect these categories, which are the ‘higher touch’ categories, to rebound and drive incrementally increasing sales going forward,” said Moody’s analyst Charlie O’Shea in a research note.
More must-read stories from Fortune:
—Real unemployment rate soars past 24.9%—and the U.S. has now lost 33.5 million jobs
—Inside China’s reopening: 7 personal stories of life after lockdown
—Sheryl Sandberg: The pandemic is creating a “double double shift” for women
—Trump’s demand that China pay coronavirus reparations evokes an ugly history
—Now is the time to invest in preschool education. Here’s why
—PODCAST: How Marc Benioff is helping out during the coronavirus pandemic
—WATCH: Why the banks were ready for the financial impact of coronavirus
Subscribe to How to Reopen, Fortune’s weekly newsletter on what it takes to reboot business in the midst of a pandemic


fortune--2020-05-21--Facebook Workplace just hit a big milestone

Facebook’s Workplace software, which lets corporate employees chat and make video calls, has increased the number of paid users in the past seven months to 5 million, representing a 67% jump.
The growth, announced Thursday, underscores increasing interest in the nearly four-year-old service, which is similar to Slack’s workplace chat app and Microsoft’s Teams collaboration tool. In October, Facebook said its business software had 3 million paid users.
Workplace is particularly popular with large companies that employ thousands of blue-collar workers, who typically aren’t given corporate email addresses, according to analysts. Big customers include Walmart, Dominos, and Starbucks.
Like other consumer technology companies including Google and Amazon, Facebook believes it can make a big business in enterprise technology. Facebook’s Workplace software can cost companies $4 or $8 per employee depending on the plan. There’s also a free version that lacks certain security and IT monitoring features.
For now, revenue, which Facebook doesn’t disclose, is believed to be insignificant compared to the company’s overall annual sales of $70.7 billion.
Comparing the number of Workplace users with that of its competitors is difficult. The metrics companies disclose are inconsistent.
Facebook’s numbers, for example, take into account only paid active users and ignore free users. Meanwhile, Google said in March that its G Suite workplace apps had 2 billion monthly active users, which includes paid and free users combined. Slack said in October that it has 6 million “paid seats,” or the number of “engaged and active” users.
Julien Codorniou, vice president of Facebook’s Workplace unit, acknowledged that his company’s many past privacy blunders had initially hurt its effort to sell to corporations. But he emphasized that its service meets certain security standards and certifications that enterprise software companies typically adhere to.
“Customers would not look at us like ServiceNow, Box, or IBM,” said Codorniou, mentioning three other enterprise technology companies. “We had to build the credibility.”
Also on Wednesday, Facebook said it had introduced new features for Workplace including a language translation tool and a tool for automatically captioning what people say during videoconferencing. The company also added the new feature Rooms, which lets users make video calls and interact in different channels akin to Slack.
Additionally, Facebook said that it has updated Workplace to work better with Facebook’s Portal video calling device so that the Portal can be used as a corporate videoconferencing tool. But while Workplace is compatible with competing video services like Zoom and Blue Jeans, Codorniou said some competing devices, which would include Amazon’s Echo Show, are not.


fortune--2020-05-21--The Coronavirus Economy: The toilet paper startup in the right place at an unfortunate time

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As we all know, there has been a massive rush to get toilet paper in light of the outbreak of COVID-19. The shelves once lined back-to-back with traditional brands are consistently empty in some grocery stores, leaving consumers to turn to alternative options.
If there was ever a time for a startup looking to disrupt the toilet paper business, this would be it.
No.2, a bamboo toilet paper brand that looks tailor-made for Instagram, says it saw a 5,210% month-over-month surge in sales on Amazon for the month of March (compared with February 2020), and sales through the company’s own site—which provides direct-to-consumer and subscription services—rose 3,239% over the same stretch. “The situation is awful, but the interesting twist is that we are seeing consumers once afraid to take the plunge into this eco-friendly world becoming converts,” says a spokesperson for the Los Angeles–based brand.
Fortune spoke with founder Samira Far for a new series, The Coronavirus Economy, to ask about how the outbreak has affected her business and her thoughts on the future, and to get a sense of how she has been handling this news, both emotionally and financially.
Samira Far founded No.2, a bamboo toilet paper brand. “Our hope is that there is a silver lining [to the pandemic]: a shift to more sustainable toilet paper brands,” she tells Fortune. Courtesy of No.2
The following interview has been lightly edited and condensed for clarity.
Fortune: Tell me a bit about your background. Toilet paper isn’t the most obvious choice for a starting a new business, but it certainly has long-term potential. What inspired the launch of No.2, especially its particular stylized aesthetic?
Far: I guess you could say I am an entrepreneur to my core with an insatiable need to look for experiential improvements. Prior to my toilet paper venture, I founded Bellacures, a high-end nail salon franchise with several locations. I sold the company in 2017.
I took a little break following the exit of Bellacures. In 2018, I was looking for my next project and product to improve on. I had a list of thoughts and theories floating around in my head and started to do some research. In my research I decided the toilet paper industry is not only dated and dusty, literally, but also major brands were only competing on softness factors—not other important points like reliability, additive-free options, plastic-free packaging, etc. I got really excited to bring a typically mundane product to life in a new way using my love for creative prints, obsession for good branding and quality products as inspiration.
After immersing myself in the world of toilet paper, I quickly learned, to put it simply, that toilet paper consumes a lot of trees. Global toilet paper production is devastating forests. The more I researched, the more the numbers and statistics shocked me, and I became fascinated by the fact that one small decision like what we wipe with can have such a huge environmental impact. It was at that moment I knew No.2 also had to also be a sustainable solution.
Now, I am on a mission to change the way people think about toilet paper—how you buy it, and what you can expect in terms of both quality and sustainability.
What did it take to launch the business?
I like to always start with a road map/business plan that I use to help guide a giant to-do list for myself, and then I gathered talented people around me to bring the vision for No.2 to life.
No.2, a bamboo toilet paper brand that looks tailor-made for Instagram. Courtesy of No.2
When did you realize the pandemic might affect your company? What did you make of all the panic buying and rush on grocery stores—especially for toilet paper?
In the very early days of this pandemic I remember hearing about people hoarding toilet paper and grocery stores being wiped and thinking it was bizarre. I didn’t think much of it until we started getting an influx of orders around March 8. By March 12, I saw a huge spike and knew we had to start getting a plan together. The next day I realized it was likely we could sell out that week. We sold out on Amazon on March 14 and on our site on the 19th.
(For more, read “The case of the missing toilet paper: How the coronavirus exposed U.S. supply chain flaws.”)
We still don’t know why the panic buying included hoarding toilet paper. Yet, with shelves in stores being empty, people went looking for alternative options, and this situation became a great educator. Many have become aware of other options for toilet paper: tree-made versus recycled paper versus bamboo. Our hope is that there is a silver lining: a shift to more sustainable toilet paper brands.
What has demand been like in the weeks since the pandemic took hold in the United States?
Our website sales skyrocketed 3,239% and Amazon sales soared to 5,210% compared with previous months.
When we started seeing a flood of new orders come in, the first thing we did was make sure we put aside enough inventory to service our existing subscription customers. We had enough inventory to stay in stock longer than most, but eventually sold out and started taking preorders. We were back in stock on May 4 and restocked on Amazon on May 18. We went into production at 15 times the volume we normally produce.
Given that we’re going to be living a socially distanced life for some time, and that how we shop at grocery stores will remain altered for months (or possibly years) to come, do you expect consumer purchasing habits and preferences to shift?
I think people enjoy the ease of a delivery service, especially for bulk items that you have to carry from the store to the car and from the car to the house. Will 100% of the people getting deliveries stick to deliveries? Probably not. Yet, I think we’re still very much in this pandemic, and we don’t know what the new normal will be until we’re on the other side.
On a personal note, how have you been faring amid all this?
This is a huge historical event we’re living through. It’s dark, chaotic, and life-changing. I do not know a single person unaffected by this situation, everyone in their own unique ways. I made a decision in the beginning to stay focused on being strong and prepared while remaining curious, creative, and hopeful. It has helped me get through the hurdles.


fortune--2020-05-21--More stimulus? Mnuchin says there is ‘strong likelihood we will need another bill’

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Treasury Secretary Steven Mnuchin said Congress will very likely need to pass more stimulus legislation for the U.S. economy, as the nation struggles to recover from the coronavirus outbreak.
“I think there is a strong likelihood we will need another bill,” he said Thursday at an online event hosted by The Hill newspaper—but he also reiterated the Trump administration’s position that more stimulus isn’t needed immediately.
“We’re going to step back for a few weeks and think very carefully if we need to spend more money and how we’re going to do that,” he said. He said he had spoken to House Speaker Nancy Pelosi last week about implementation of the $2.2 trillion stimulus Congress passed in late March.
The House passed an additional $3 trillion stimulus last week but Republicans in control of the Senate have said they won’t consider it. President Donald Trump and Senate Majority Leader Mitch McConnell have said they instead want to evaluate the effect of some $5 trillion already aimed at the economy by Congress and the Federal Reserve.
Meanwhile, the economy continues to deteriorate as Americans practice social distancing to curb the spread of the virus.
Another 2.4 million people filed for unemployment benefits last week, the Labor Department reported, bringing the total to nearly 39 million since March. The two-month total is roughly equivalent to all of the initial claims filed during the Great Recession.
Pelosi and many Democrats have said state governments and hospitals in particular are in dire need of more federal assistance.
Several Senate Republicans have signed on to a $500 billion package of state and local aid, including Senator Susan Collins of Maine, who faces a tough re-election fight in November.
Another endangered Republican, Colorado Senator Cory Gardner, has criticized plans to adjourn the Senate for a Memorial Day recess without further action to respond to the virus.
“When we come back to those negotiations as we undoubtedly will, it’s very important we move from rescue to reopening,” Larry Kudlow, the White House’s top economic adviser, said Thursday during an event hosted by the Washington Post.
‘Durable recovery’
“I do not believe that more government spending is going to give us a strong and durable recovery—that’s been tried before,” he said.
Kudlow said options under consideration in the White House include a payroll tax cut, capital gains tax exclusion and easing regulations—all part of Trump’s broader economic agenda. He said extending unemployment insurance isn’t under consideration because “many Americans want to go back to work.”
Mnuchin said he expects that in the second quarter ending in June, the economy will “bottom-out” and by the end of the year, the GDP increase will be “gigantic.”
So far, the Treasury chief has spent more than $500 billion helping small businesses, sent cash directly to American families and given federal aid to airline workers, but there is plenty of firepower left from the current rounds of stimulus.
He has only spent $37.5 billion of the half-trillion dollar pot of money for direct loans to companies and to launch multiple Federal Reserve emergency lending facilities.


fortune--2020-05-21--The health care industry’s winners and losers in the midst of the pandemic

It isn’t exactly a secret that the American health care system is a messy hodgepodge of industries with often inscrutable—and adversarial—relationships with one another.
Hospitals, physicians, drugmakers, private insurers, public insurers, middlemen such as drug distributors and pharmacy benefits managers, and others must, by nature, work together to deliver care and make this labyrinthian system workable for consumers and patients.
But the reality is that the end goals and profit incentives can diverge significantly among different segments. That’s just the status quo in the U.S. Add a global pandemic, and you’ve got a perfect storm of industry competition that favors certain segments while devastating others. It makes winners and losers out of intricately linked sectors.
Those disparities have shifted significantly during the coronavirus pandemic.
Loser: Hospitals and doctors
In April, the health care industry lost 1.4 million jobs. That may not sound like a shocking figure given that the U.S. unemployment rate soared to 14.7% in that same month with more than 20 million Americans losing their jobs. Economists expect even more pain in the months to come with mass uncertainty and public health–motivated lockdowns which have shuttered businesses across multiple sectors.
But the job losses within health care are striking—especially given that, prior to the COVID-19 pandemic, health care had been a consistent source of new employment. The federal Bureau of Labor Statistics had projected that health care occupation growth would climb “14% from 2018 to 2028, much faster than the average for all occupations, adding about 1.9 million new jobs.”
You might think that in the midst of a pandemic, hospitals and doctors would see a windfall. But that hasn’t been the case. And that largely has to do with a steep drop in demand—and capacity or ability to provide—the elective medical procedures which make up so much of the sector’s revenues. Many dental offices are closed; outpatient procedures have been placed on the back burner as the medical system has grappled with an influx of COVID-19 patients and closed off premises to prevent coronavirus transmission.
“Across all health care services, which do not include pharmaceutical drugs, expenditures were down 12% in March 2020 relative to last year, with particularly sharp drops in expenditures on dental services (–27%) and medical laboratories (–28%),” writes the nonpartisan Kaiser Family Foundation in a report published Tuesday. Physicians have, consequently, been facing similar pressures, according to industry surveys.
Elective procedures can bring in over $700 more per patient admission than an emergency room stay, according to another study conducted by George Washington University, and the effect has been harsh on large health systems such as Tenet Healthcare and HCA Healthcare. Some have resorted to furloughs or layoffs in the midst of the crunch.
But here’s one exception: the telehealth industry. As patients forgo brick-and-mortal hospitals in favor of virtual doctor visits, telemedicine giants such as American Well are seizing the moment by ramping up support for doctors in their networks who are losing business. The federal government has also given such companies, and their participating physicians, a boost—including by hiking up the number of telehealth services eligible for enhanced government payments.
Winner: Health insurers
The decline in demand for so-called elective procedures at hospitals—which, by the way, aren’t necessarily superfluous as they may encompass everything from hip replacements to cancer biopsies—has helped fuel an unexpected windfall for health insurers.
This is yet another strange financial shift wrought by the pandemic. Two weeks ago, insurance giants UnitedHealthcare, Cigna, and Humana announced that they’d be offering discounts to certain members for health care services and prescription drug costs, including waiving cost-sharing for elderly people in private Medicare Advantage plans and setting caps on out-of-pocket costs for those who have lost their jobs.
This is largely driven by a glut in the demand for ordinary health care services as people don’t want to trek to the hospital if they fear contracting the coronavirus. But the windfall may prove temporary as certain procedures resume.
Furthermore, a massive spike in unemployment—which is driving millions away from their employer-sponsored health coverage and into programs like COBRA and the Affordable Care Act—is lifting membership numbers for these insurers.
A mixed bag: Drugmakers
The biopharmaceutical industry is, by nature, one of the most unpredictable entities in the health system. A promising early-stage clinical trial can end in tears; hundreds of millions may go into developing a suite of technology that simply doesn’t pan out.
In this moment, drugmakers, a traditionally loathed element of the medical industry, have a chance to shine.
There are currently more than 115 treatments and more than 55 vaccine candidates in development for the coronavirus and the disease it causes, COVID-19, according to AgencyIQ.
The trouble is that there will be immense pressure from the public and governments to price any treatment or vaccine fairly for consumers. That means that developing such drugs may not be a massive revenue boost for the firms in the midst of the battle.
But the nuances abound. For instance, Gilead’s remdesivir, the first emergency authorized COVID-19 treatment, hasn’t done wonders for the company’s stock, with shares down about 12% since remdesivir’s Food and Drug Administration authorization.
Some investors seem to be spooked by the high manufacturing costs and financial pressures the treatment will face, although that could change should the experimental treatment prove to cut COVID-19 death rates rather than just time spent in the hospital. Others may be encouraged by the underlying science that gave way to remdesivir, reenforcing their faith in the company.
On the flip side, you have Moderna, the upstart biotech which announced encouraging preliminary results for its COVID-19 vaccine candidate, mRNA-1273. Moderna’s stock soared on that announcement, though results from later-stage clinical trials could rock the boat. One hope from a business standpoint? Even if a vaccine were to be cheap for consumers, insurers (public or private) may have to cover the costs, depending on how things play out.
Ultimately, a first-to-market advantage for a coronavirus therapeutic or vaccine could prove critical given the number of companies rushing into the space.
More coronavirus coverage from Fortune:
—The Rebuild Program: A project to help small businesses reopen amid a pandemic
—What France’s “patient zero” doctor wants you to know about COVID-19
—McConnell focuses Senate on conservative judge appointments rather than the coronavirus
—Photo essay: What life looks like in Europe as the continent starts to reopen
—Trump’s demand that China pay coronavirus reparations evokes an ugly history
—To reopen safely, the private and public sectors need to ramp up collaboration
—Uber’s food delivery helps cushion the blow of COVID-19 on rides business
—PODCAST: How Marc Benioff is helping out during the coronavirus pandemic
—WATCH: Fortune’s top 10 heroes of the coronavirus pandemic
Subscribe to How to Reopen, Fortune’s weekly newsletter on what it takes to reboot business in the midst of a pandemic.


fortune--2020-05-21--Why Spotify’s Joe Rogan deal could change the podcast business forever

When Spotify CEO Daniel Ek announced the $340 million acquisition of podcast companies Gimlet and Anchor in February 2019, he declared that Spotify’s mission was to become to the world’s leading audio—not just music—platform. In a blog post titled “Audio-First,” he wrote of the “incredible growth potential” for podcasts despite the business being a relatively small one.
A year later, it’s still modest. The global podcasting market in 2020 is expected to grow 30%, surpassing $1 billion for the first time, according to Deloitte. Recorded music, by contrast, is projected to reach $21 billion; radio comes in at $42 billion. But Spotify won’t be bothered. Despite the minimal returns, podcasts offer the Swedish company something it could never have with music: original content. By acquiring content-creating companies like Gimlet—and later Parcast and Bill Simmons’s The Ringer—Spotify could leverage podcasts to increase subscribers and advertising sales. That strategy culminated this week with an exclusive multiyear deal, reportedly worth $100 million, with the world’s biggest podcast star: Joe Rogan.
Rogan’s podcast, The Joe Rogan Experience, is massive. It consistently ranks near the top of Apple’s podcast charts, perched at No. 2 as of Wednesday. He is the highest-profile individual podcaster not affiliated with a media organization. Rogan last year said the show was being downloaded about 190 million times a month. Spotify will hope that when Rogan’s podcast arrives on its app this fall, the exclusive nature of the show will bring millions of listeners from other platforms to Spotify.
Such an arrangement is a fundamental shift in the way people consume podcasts. There are dozens of podcast apps available on Android’s Google Play and Apple’s App Store, and Apple’s default Podcast app that comes pre-installed on Apple devices remains the most used. Generally, any podcast can be downloaded and listened to on any app. Now, the industry’s biggest name is available on just one: Spotify.
Before, the basic business model for podcasting was to distribute shows on as many platforms as possible. Podcasters could then appeal to more advertisers and generate additional profits from crowdfunding and merchandise sales. Spotify and Rogan’s exclusive licensing deal now suggests that the industry could change in two significant ways:
Subscription-supported podcasts—finally?
First is a future in which major podcasts are subscription-based, rather than available on an open marketplace. This isn’t a new concept: Venture-backed startup Luminary positioned itself as the “Netflix of podcasts” last year, launching with more than 40 exclusive shows without ads for $8 a month. The company raised nearly $100 million and courted some of the industry’s top stars, like NPR’s Guy Raz of How I Built This fame. But the company’s launch accompanied negative press over its advertising model. Industry stalwarts like Spotify’s Gimlet, the New York Times, and eventually Rogan himself, withheld popular shows. In January, Luminary lowered its subscription fee to $5 a month. And earlier in May, Bloomberg reported that Luminary has signed up just 80,000 subscribers and was losing money every month.
Spotify also offers a premium, ad-free subscription. The big difference, of course, is that it includes a vast library of recorded music and curated playlists. A $10 monthly fee will get you podcasts as well as music paired with Spotify’s popular discovery algorithms. With Spotify’s roster of in-house podcast companies, Spotify can continue to funnel exclusive shows to the service, increasing the demand for subscriptions. While Spotify has said free, ad-supported users can still access its original shows, as well as Rogan’s, there’s nothing stopping them from making a premium subscription a requirement in the future. Compared to Luminary, Spotify recently announced it reached more than 130 million paying subscribers—a much more enticing figure to podcast publishers.
Licensing the way forward
Rogan’s deal also shows that licensing agreements may be a way forward for podcasters. Similar to musical artists, television shows, and movies, we might see a future in which more and more podcasters exclusively license their content to particular services, similar to how TV shows move from Netflix to Hulu to Amazon, and so on.
Rogan’s deal with Spotify is an anomaly: As music writer Ted Gioia pointed out, a musician would need to generate 23 billion streams on the service at the standard $.00437 rate per stream to match the $100 million agreement with Rogan. “In other words,” Gioia wrote, “Spotify values Rogan more than any musician in the history of the world.”
Most podcasters can’t expect to earn such a high fee. But it’s safe to assume some are realizing how lucrative a hit podcast can be under this type of exclusive licensing deal. Spotify, having spent well over half a billion dollars on podcast acquisitions and licensing, has made its intentions clear: It wants to own the podcasting market and may have more of these deals up its sleeve. But others—Google, Amazon, Apple, to name a few—may choose to compete.
News of Rogan’s deal sent shock waves through the podcasting community, and it will leave indie podcast app developers wondering what’s next. “What Joe Rogan is going to find out—after it’s too late—is that moving an existing, open, free show behind a proprietary wall results in massive audience loss,” tweeted Marco Arment, creator of the popular podcast app Overcast. “I hope he at least leaves his public feed up so he can return to it when his Spotify exclusivity fails.”
More time will be needed before the true impact of Spotify’s podcast spending spree can be assessed. But what’s already clear is that the company is taking podcasting very seriously. A first-of-its-kind, $100 million deal with the industry’s biggest star seems destined to change the business.
More must-read stories from Fortune:
—Drive-in theaters are back. These are the movies you can see, and where you can see them
—What to expect on network TV during the 2020–21 season
—3 reasons why Quibi is “losing the attention game”
—Another Star Trek series is coming to CBS All Access
—Snowpiercer showrunner, production designer: We didn’t want a “carbon copy” of the movie


fortune--2020-05-21--‘No concessions, no dialogue:’ China expected to tighten its control over Hong Kong with new securit

‘No concessions, no dialogue:’ China expected to tighten its control over Hong Kong with new security law

Chinese authorities were planning to write a new national security law into Hong Kong’s charter, local media reported, in what would be a dramatic escalation of Beijing’s efforts to rein in dissent in the city.
China’s lawmakers were preparing to soon pass measures that would curb separation, sedition, foreign interference and terrorism in the former British colony, media including the South China Morning Post reported Thursday, citing unidentified people. Hong Kong representatives were slated to be briefed Thursday before a formal announcement in Beijing, according to the news site HK01, which was the first to report the plan.
The newly appointed director of China’s cabinet-level Hong Kong and Macau Affairs Office, Xia Baolong, was set to outline Beijing’s latest directives to numerous city officials, HKO1 reported. The National People’s Congress will hold a news briefing at 9:40 p.m. Thursday, ahead of its opening session Friday.
“This is them saying, ‘I am calling the shots. I am setting the parameters. Resistance is futile,’” said Joseph Cheng, a retired political science professor and veteran pro-democracy activist. “It’s part of their approach of no concessions, no dialogue.”
Protesters sought to muster rallies across the city before the announcement, according to posts in forums popular among demonstrators. One poster circulated described the moment as a “battle of life and death.”
Earlier, pro-Beijing figures including local NPC deputies Chan Man-ki and Ng Chau-pei had said they would propose such measures by bypassing the city’s Legislative Council. The laws — including banning treason, sedition and secession — are vigorously opposed by pro-democracy politicians and have sparked mass protests in the past.
Although national security laws are required to be passed by Article 23 of the Basic Law, Hong Kong’s mini-constitution, successive governments have failed to pass them, with one effort in 2003 resulting in widespread street demonstrations. This new strategy could potentially allow authorities to skip the local legislative process, although the mechanics of how that would remained unclear.
A spokesman for the Hong Kong government and a spokeswoman for Chief Executive Carrie Lam’s office declined to comment on Thursday.
The Hong Kong dollar abruptly weakened after the HK01 report. The currency slid as much as 0.05%, the most since April 9, to 7.7539 versus the greenback.
“The market is taking this news negatively for Hong Kong given the likely return of violent protest activities, higher risk for the U.S. to remove certain preferential terms for Hong Kong, such as the special tariff status, and risk-off sentiment,” said Becky Liu, head of China macro strategy at Standard Chartered Bank Ltd.
Flash Point
The city’s officials and China have since last year repeatedly slammed violent protests as “near-terrorist acts,” with the commissioner of police warning in recent months that Hong Kong “may be heading into an era of terrorism” and that there was a need to prevent it.
An attempt to impose security laws now could reignite the unrest that hammered the city’s economy last year and serve as a flash point amid broader U.S.-China tensions. The demonstrations only dwindled when the global pandemic put a stop to mass gatherings.
“It’s worrying, but I’m not surprised,” said Claudia Mo, an opposition lawmaker. “It really depends on how impatient Beijing has become with Hong Kong. The powers that be up north know perfectly well that such a move might just be considered savage, and there might be some heavy price to pay internationally.”
The proposal from the Hong Kong NPC delegates suggests passing the same security laws by using Article 18, which permits the national legislature to pass laws relating to defense or foreign affairs if, among other things, it believes there is “turmoil within the Hong Kong Special Administrative Region which endangers national unity or security and is beyond the control of the government” or a state of emergency. Laws passed using this method include ones on Chinese nationality, territorial boundaries and diplomatic and consular privileges and immunities.
The legislation would still require several procedural steps including approval by the NPC’s decision-making Standing Committee, which could come as early as next month, the SCMP said. The move comes before citywide elections in September in which opposition members hoped to gain a majority of the Legislative Council.
Scuffles broke out in the Legislative Council this month as pro-democracy lawmakers sought to block Beijing-backed bills, including one criminalizing disrespect for the national anthem. Some protesters have called for demonstrators to surround the legislature to block the second reading of the bill on May 27, almost 11 months after some demonstrators broke into and ransacked the chamber.
The new measure would be compatible with Hong Kong law and wouldn’t impact the city’s guarantee of an independent judiciary, the Hong Kong Economic Times reported, citing a person it didn’t identify. The law would only affect a “small number” of people, the Economic Times said.
Hong Kong Chief Executive Lam, whose legislation allowing extraditions to the mainland ignited unprecedented unrest in the city last year, said this week that she viewed the national security laws as an “important constitutional requirement for the government.” She said they were needed in light of the “violence and near terrorist acts” of the protests.
Danny Gittings, an academic who wrote the “Introduction to the Hong Kong Basic Law,” said a chief executive could only implement such laws by proclamation if the wording is identical to the Chinese national law. The anthem measure, which was similarly imposed in 2017, still hasn’t been passed by the Legislative Council.
“Even if it’s not a law enforceable in Hong Kong, it could still have a strong symbolic impact,” Gittings said.


fortune--2020-05-21--Tobacco giants are getting into the coronavirus vaccine race

British American Tobacco (BAT), the company that manufactures global cigarette brands such as Lucky Strike, Pall Mall, Newport, and Camel cigarettes, among others, made a curious announcement last week: Its biotech subsidiary Kentucky BioProcessing is potentially advancing a coronavirus vaccine candidate into human clinical trials.
BAT says that it’s using tobacco plants in the manufacturing process of its experimental COVID-19 vaccine, but that doesn’t mean cigarettes or nicotine products will help prevent coronavirus infection. In fact, it is the exact opposite.
The company believes that using tobacco plants during the creation of the vaccine can speed up vaccine production, lowering development time from months to about six weeks. The company’s goal, should it get regulatory go-ahead, is to eventually produce anywhere from 1 million to 3 million doses of a coronavirus vaccine per week using this process. Philip Morris International is also exploring the use of tobacco plants for a potential vaccine.
On the flip side, there is an increasing body of evidence that smoking raises the amount of an enzyme called angiotensin-converting enzyme 2 (ACE2) present in human lungs—which is a problem since the novel coronavirus binds to ACE2. This is one possible factor fueling the gender disparities we’ve seen in cases of COVID-19, with men—who are more likely to be smokers—being hit harder than women.
There are also downstream effects of smoking that can raise the risks of coronavirus infection or lead to more severe COVID-19 cases. Smoking is linked to hypertension and heart disease, which are both serious risk factors for contracting the pathogen.
While there’s still much to be learned about how tobacco plants can impact vaccine production, the evidence is clear that consuming tobacco won’t inoculate anyone from the coronavirus.
More coronavirus coverage from Fortune:
—The Rebuild Program: A project to help small businesses reopen amid a pandemic
—What France’s “patient zero” doctor wants you to know about COVID-19
—McConnell focuses Senate on conservative judge appointments rather than coronavirus
—Photo essay: What life looks like in Europe as the continent starts to reopen
—Trump’s demand that China pay coronavirus reparations evokes an ugly history
—To reopen safely, the private and public sectors need to ramp up collaboration
—Uber’s food delivery helps cushion the blow of COVID-19 on rides business
—PODCAST: How Marc Benioff is helping out during the coronavirus pandemic
—WATCH: Fortune’s top 10 heroes of the coronavirus pandemic
Subscribe to How to Reopen, Fortune’s weekly newsletter on what it takes to reboot business in the midst of a pandemic


fortune--2020-05-21--Social distancing in the skies, temperature checks on the ground: Welcome to the new era of air trav

Social distancing in the skies, temperature checks on the ground: Welcome to the new era of air travel

Flying hasn’t been an option for many people during the coronavirus lockdowns of recent months, but the experience is increasingly back on travelers’ calendars.
Daily passenger throughput at American airports cleared the 250,000 mark in recent days—less than a tenth of the throughput a year earlier, but still a marked uptick from the 90,000 daily travelers recorded in mid-April. In Europe, countries such as Italy and Germany will reopen their borders to visitors from some countries next month.
But air passengers should not expect a swift return to the normality they once knew. Much as was the case in the wake of 9/11 and 2001’s failed “shoe bomb” attack, the flying experience is about to get a whole lot more tedious—and, this time, less predictable too. So here’s what to expect.
New airport procedures
Airports have always been full of queues—now those queues will be spaced out, as airports try to maintain social distancing. As is the case in many shops these days, a plexiglass screen will separate you from check-in staff, who may be wearing masks and gloves.
Other measures will differ depending on local regulations, but here’s a typical selection: not being allowed to enter the terminal without a mask (Berlin); not being allowed to enter the terminal unless you yourself are flying (London); and not being allowed to show up at all if you feel ill (Atlanta).
It’s increasingly likely that you will encounter some form of health screening at departure or on arrival. London Heathrow is now conducting temperature checks on arriving passengers, and the TSA could start doing the same across the U.S. next week. Emirates has been trialing COVID-19 blood tests on passengers ahead of boarding (it claimed results were available in 10 minutes), and Hong Kong has been testing all arriving passengers for a month and a half now.
The quarantine question
Hong Kong doesn’t just test arrivals for COVID-19—it also puts most of them into a compulsory two-week quarantine, enforced with a tracking wristband. (Got a visa that’s valid for 14 days or less? You won’t even be let in.) If your saliva-based test comes back negative after your initial night at a holding center, you get to spend those two weeks at home or at some other designated location. If it’s positive, welcome to two weeks in a quarantine center.
In Austria, passengers arriving at Vienna Airport get to choose between an automatic 14-day quarantine and a COVID-19 test, which will cost them just over $200 (results are available in a few hours). The airport’s management is clear that this is not a scalable procedure and is intended only for those who need to travel with urgency and believe they are uninfected.
The airline industry is not keen on quarantines. Last week, the International Air Transport Association (IATA) said that such measures would “further damage confidence in air travel” at a time when passenger numbers are already way down and many airlines face the very real prospect of bankruptcy. The industry body said it had surveyed recent air travelers and found more than two-thirds would not even contemplate a trip if it meant a two-week quarantine.
“Even in the best of circumstances this crisis will cost many jobs and rob the economy of years of aviation-stimulated growth,” said IATA CEO Alexandre de Juniac in a statement. “To protect aviation’s ability to be a catalyst for the economic recovery, we must not make that prognosis worse by making travel impracticable with quarantine measures.”
Masks? The rules aren’t clear
The industry’s unwillingness to overly hassle passengers is also evident in the way it is handling onboard mask rules.
In early May, the big U.S. airlines all announced that both crew and passengers would have to wear masks during flights. Within a week, it emerged that—although masks are a clear way to reduce the spread of infection—American Airlines was quietly advising its employees not to strictly enforce the rule on passengers while in the air.
This lack of clarity is not just a U.S. problem. At the end of April, Germany’s Lufthansa Group issued a statement saying it was introducing a “mandatory mouth-nose cover,” before going on to describe this rule as both a recommendation, a request, and an obligation—all within the space of four paragraphs.
So which is it? “The airlines of the Lufthansa Group are asking all passengers to wear a mouth-nose cover onboard their flights,” says a spokesman. “For the time being, this has been accepted very well by our customers.”
Delta seemed a little clearer in an email it sent passengers this week: “Safer travel starts as you check in, where you will be required to wear a mask until you reach your destination. Our employees will be wearing them as well—just ask for one if you don’t have your own.”
Social distancing in the skies?
The issue of seat-blocking is another gray area. For a while, it looked like airlines might enforce their initial idea of blocking middle seats in aisles, to keep passengers farther apart. But, as demonstrated on social media by an appalled United passenger a couple weeks back, the policy is not as clear-cut as it initially seemed, and some flights still seem tightly packed.
I wanted to update that I did hear from @united tonight. They reached out and were extremely gracious. No need to rehash the whole discussion, but here is what they said about their new policy: https://t.co/G2FrLdm78S — Ethan Weiss (@ethanjweiss) May 12, 2020
Again, the idea of leaving middle seats empty is one that is meeting strong resistance from many in the industry (though Delta’s email this week says it is instituting the rule). As Ryanair CEO Michael O’Leary pointed out last month, an airline on thin margins simply won’t be able to run its business sustainably with planes at two-thirds capacity—and in any case, the idea does not work.
“It’s almost impossible to do social distancing in an airplane, even leaving the middle seats vacant, because the guy sitting behind you is barely half a meter away, and literally breathing down your neck,” says aviation analyst Shukor Yusof, of Singapore-based Endau Analytics.
But there are some ways in which risks can be minimized. Ryanair may not be blocking middle seats, but—when it reintroduces 40% of its flights on July 1—it will ban toilet queues, meaning passengers will need to ask the crew for permission to use the restroom. The European budget airline will, like most of its peers, also do a lot of surface disinfection. And it is “encouraging” passengers to wear masks onboard.
What about the air circulation?
Both Ryanair and Lufthansa are keen to stress that the air circulating in their cabins passes through filters similar to those used in hospital wards and operating theaters. In-flight air circulation also tends to run vertically rather than horizontally, which should lessen the risk further.
Aviointeriors’ Janus Seat concept, which makes it easier to shield passengers from one another. Aviointeriors
That said, there are some ideas out there for creating new breath barriers between passengers. For example, an Italian aerospace supplier called Aviointeriors came up with two new products in the past few months: a system called the Janus Seat that reverses the middle seat in a row to face backward, so passengers can more easily be separated by a transparent barrier; and a somewhat simpler shielding system called Glassafe that can be installed on existing seats.
Aviointeriors CEO Paolo Drago tells Fortune that his company is talking to around 20 airlines about its new wares—mostly Glassafe, though it is preparing a couple of Janus Seat prototypes to send to potential customers.
As Yusof notes, “Any new additions to an aircraft involve money,” and airlines are already in financial distress. However, Drago points out that some carriers are still upgrading their fleets to improve fuel efficiency—and when that happens, “they have the choice between a traditional seat or the new concept” when they order or lease new planes.
Expect the unexpected
We all take for granted the ability to book a ticket way in advance of the trip, when we know we have a vacation or conference coming up. But at least for the next while, that may not be a smart idea.
For a start, airlines are in a precarious financial position right now. The coronavirus pandemic has already claimed the scalps of multiple debt-laden carriers—Virgin Australia and Norwegian Air and its subsidiaries—and Boeing CEO Dave Calhoun recently horrified his U.S. customers by predicting out loud that one of them would probably go bust this year.
Countries are also only tentatively emerging from lockdown, and if things don’t go well and infection rates spike again, they might reimpose border controls or introduce heavy quarantine measures that weren’t in place before.
So if you book now for a trip toward the end of the year, you might be taking a leap of faith regarding both the viability of the airline and your ability to spend your trip somewhere more pleasant than a quarantine center.
“Airlines can’t do much when borders have been shut,” says Yusof. “The aviation industry in the past has been susceptible to uncertainties brought about by weather, terrorism, oil prices, and now government proclamations. It’s tough to book anything at the moment, as airlines don’t have any idea when and where they can fly.”
Ultimately, Yusof predicts, the old normal will take a long while to return. “Even if prices were to be slashed—which I’m not expecting—it would be difficult to lure people back into the aircraft in the same volume as pre-COVID-19,” he said. “When people are comfortable and satisfied and assured (with a vaccine), then the recovery will start in earnest. Until then, it will be very, very gradual.”
More coronavirus coverage from Fortune :
—The Rebuild Program: A project to help small businesses reopen amid a pandemic
—What France’s “patient zero” doctor wants you to know about COVID-19
—McConnell focuses Senate on conservative judge appointments rather than coronavirus
—Photo essay: What life looks like in Europe as the continent starts to reopen
—Trump’s demand that China pay coronavirus reparations evokes an ugly history
—To reopen safely, the private and public sectors need to ramp up collaboration
—Uber’s food delivery helps cushion the blow of COVID-19 on rides business
—PODCAST: How Marc Benioff is helping out during the coronavirus pandemic
—WATCH: Fortune’s top 10 heroes of the coronavirus pandemic
Subscribe to How To Reopen, Fortune’s weekly newsletter on what it takes to reboot business in the midst of a pandemic


fortune--2020-05-21--Lori Loughlin and Mossimo Giannulli agree to plead guilty in college admissions scandal and serve pr

Lori Loughlin and Mossimo Giannulli agree to plead guilty in college admissions scandal and serve prison time

“Full House” actress Lori Loughlin and her fashion designer husband, Mossimo Giannulli, agreed to serve prison time as part of a plea deal in the college admissions bribery case, according to court papers filed Thursday.
Loughlin has agreed to serve two months behind bars and Giannulli has agreed to serve five months under the deal that must be approved by the judge. They are scheduled to plead guilty Friday via video conference.
Loughlin and Giannulli were scheduled to go to trial in October on charges that they paid $500,000 in bribes to get their daughters into the University of Southern California as crew team recruits, even though neither of them played the sport.
The famous couple had insisted they were innocent and said they believed their payments were legitimate donations. Earlier this month, the judge rejected their bid to dismiss the case over allegations of misconduct by FBI agents investigating the scam.
They agreed to plead guilty to conspiracy to commit wire and mail fraud in a plea agreement filed in Boston’s federal court. Prosecutors have agreed to dismiss charges of money laundering and federal programs bribery that were added after the case was filed.
“Under the plea agreements filed today, these defendants will serve prison terms reflecting their respective roles in a conspiracy to corrupt the college admissions process and which are consistent with prior sentences in this case,” U.S. Attorney Andrew Lelling said in an emailed statement. “We will continue to pursue accountability for undermining the integrity of college admissions.”
An attorney for the couple declined to comment.
Loughlin and Giannulli were among 50 people arrested last year in the case dubbed “Operation Varsity Blues” that rocked the word of higher education. They are the 23rd and 24th parents to plead guilty in the case.
The case uncovered a scheme in which wealthy parents paid huge sums to secure students’ admission at elite schools as fake athletic recruits or have someone cheat on their entrance exams, authorities said.
Others who have pleaded guilty in the case include “Desperate Housewives” actress Felicity Huffman. She served nearly two weeks in prison late last year after she admitted to paying $15,000 to have someone correct her daughter’s entrance exam answers.