The coffee giant can’t quite accept its own customers’ tastes.
Greg Beato from the March 2010 issue
Last summer in Seattle, Starbucks opened 15th Avenue and Tea, an unbranded café featuring “small batch coffees sourced from individually owned farms” and a variety of fussy brewing methods designed to appeal to those connoisseurs who believe a cup of $4 coffee ought to be at least as complicated to make as a Big Mac. Live music is provided by a small-batch indie rock piano band sourced from a tiny town in Wisconsin. There’s an in-house “tea master,” and occasional outbreaks of poetry. Starbucks is 39 years old now, and like a lot of 39-year-olds, especially those who’ve experienced great success in their salad years but are beginning to wonder if they’ve lost their touch, it’s having a bit of an identity crisis.
In 2008, Starbucks closed 661 under-performing locations. In 2009 it shuttered an additional 300 stores and laid off 6,700 employees. In an attempt to position itself against newer, hipper rivals, the company started talking up its “heritage.” It resurrected a less polished version of its logo for use in certain branding situations. Presumably, its coffee is still brewed from coffee beans, but everything else in its new stores seems to have made a radical career switch. The bar at a London Starbucks is upholstered with scraps from an Italian shoe factory. The countertop at the Paris Starbucks is made out of recycled cell phones.
For all their ostensible authenticity, such adventures in interior design cannot match the truly radical act of installing espresso machines in bank lobbies. Like Seattle’s other great cultural export from the early 1990s, Nirvana, Starbucks has always been most vital, most interesting, most revolutionary when at its most commercial.
Granted, not everyone thinks of the chain as radical. Take Bryant Simon, a historian at Temple University. In his 2009 meditation on Starbucks, Everything But the Coffee, he offers the usual critiques of the company. It says it sells coffee, but it doesn’t. It says it’s a venue for conversation and civic discourse, but it isn’t. It sells overpriced coffee-like beverages and a safe, predictable, environment. It preys on needy, status-seeking consumers by offering them clean bathrooms, innovative products, and a soothing ambiance in myriad convenient locations. For Simon, Starbucks was designed to be an exclusive, elitist institution: When CEO Howard Schultz began adding locations in the late 1980s, he “made sure to put his stores in the direct path of lawyers and doctors, artists on trust funds and writers with day jobs as junk bond traders.”
If you’re thinking to yourself, damn, that’s totally unfair to writers with day jobs as unemployed writers, well, yes, that was Schultz’s evil scheme! He wanted to introduce fancy coffee to people who weren’t already drinking fancy coffee. So, Simon reports, “unlike an owner of one of the beat coffee shops in the 1950s, he didn’t set up in transitional neighborhoods or fringe places like, for instance, Chicago’s neobohemian Wicker Park.”
In the late 1980s, of course, there weren’t many cafés serving high-quality coffee anywhere. Coffee consumption per capita was at its lowest point since 1962, soft drinks had recently surpassed hot caffeine as the nation’s favorite beverage, and Coke was in the midst of a campaign advertising its utility as a breakfast drink. The few cafés that were selling espressos and capuccinos, however, were located precisely in places like Wicker Park.
In choosing to locate his outlets in busy downtown locations, Schultz was expanding the world of high-end coffee—diversifying it, in fact, by taking it beyond its insular, self-conscious subculture. The décor of his stores amplified this process. They had the clean and slick streamlining of a fast food restaurant but were more comfortably appointed. Instead of walls lined with old books, there were gleaming espresso machines for sale, packages of whole beans, ceramic cups. They felt a little like a Williams-Sonoma store crossed with an unusually tasteful airport lounge. They were cafés for people who would never set foot in a bohemian coffeehouse, people traditional coffeehouse entrepreneurs had completely ignored.
For less than the price of a Whopper, you could hang out in a sophisticated middlebrow lounge/office for hours on end. And they were popping up everywhere. Exclusive, elitist? Starbucks was exactly the opposite, introducing millions of people who didn’t know their arabica from their robusto to the pleasures of double espressos. Finally, good coffee had been liberated from the proprietary clutches of hipsters, campus intellectuals, and proto-foodies and shared with bank managers and real estate agents. In offices across America, it suddenly smelled like ’ffeine spirit.
For Schultz, this mainstream customer base was both a boon and a curse. In Pour Your Heart Into It, his 1997 account of Starbucks’ rise to global behemoth, he reveals a preoccupation with authenticity that echoed Kurt Cobain’s. In 1989, he initially balked at providing non-fat milk for customers—it wasn’t how the Italians did it. When word trickled up to him that rival stores in Santa Monica were doing big business in the summer months selling blended iced coffee drinks, he initially dismissed the idea as something that “sounded more like a fast-food shake than something a true coffee lover would enjoy.”
Eventually, Schultz relented. And really, what greater punk-rock middle finger is there to purist prescriptions about what constitutes a true coffee drink than a blended ice beverage flavored with Pumpkin Spice powder?
Simon recounts the birth of the Frappuccino in Everything But the Coffee too, but while he acknowledges the grassroots origins, he quickly positions it as an item the chain is “pushing” on “caffeine-dependent women and men.” In his estimation, the company’s “consumer persuaders” and “mythmakers” are the ones with real power. They’re constantly selling false promises, implanting “subliminal messages” in store décor, and otherwise manipulating hapless consumers.
In reality, the chain’s customers have played a substantial role in determining the Starbucks experience. They asked for non-fat milk, and they got it. They asked for Frappuccino, and they got it. What they haven’t been so interested in is Starbucks’ efforts to carry on the European coffeehouse tradition of creative interaction and spirited public discourse.
Over the years, Starbucks has tried various ways to foster an intellectual environment. In 1996 it tried selling a paper version of Slate and failed. In 1999 it introduced its own magazine, Joe. “Life is interesting. Discuss,” its tagline encouraged, but whatever discussions Joe prompted could sustain only three issues. In 2000 Starbucks opened Circadia, an upscale venue in San Francisco that Fortune described as an attempt to “resurrect the feel of the 1960s coffee shops of Greenwich Village.” The poetry readings didn’t work because customers weren’t sure if they were allowed to chat during the proceedings. The majority of Starbucks patrons, it seems, are happy to leave the European coffeehouse tradition to other retailers.
At 15th Avenue and Tea, the quest to cultivate highbrow customers continues. There’s a wall covered with excerpts from Plato’s dialogues. Blended drinks are banned from the premises, and you can safely assume that Bearista Bears, the highly sought-after plush toys that Starbucks has been selling since 1997, won’t ever appear here either.
But if Starbucks really hopes to re-establish its authority as an innovative, forward-thinking trailblazer, it should perhaps use its next experimental venue to honor its heritage as the first chain to take gourmet coffee culture beyond the narrow boundaries of traditional coffeehouse values and aesthetics. Imagine a place with matching chairs, clean tables, beverages that look like ice cream sundaes, Norah Jones on the sound system, and absolutely no horrid paintings from local artists decorating the walls. A place, that is, exactly like Starbucks!
Because despite its ubiquity, despite its advancing years, Starbucks is still the most radical thing to hit the coffeehouse universe in the last 50 years.
Wednesday, March 10, 2010
Tuesday, February 16, 2010
What Bankrupted Greece? It Was The Olympics!
Here's an angle on the Greek financial crisis I hadn't considered: Victor Matheson, a member of the Sports Economist group blog, argues that one reason the Greeks wound up in such deep financial trouble is that they went deep in hock to pay for the Olympics:
Greece's federal government had historically been a profligate spender, but in order to join the euro currency zone, the government was forced to adopt austerity measures that reduced deficits from just over 9% of GDP in 1994 to just 3.1% of GDP in 1999, the year before Greece joined the euro.
But the Olympics broke the bank. Government deficits rose every year after 1999, peaking at 7.5% of GDP in 2004, the year of the Olympics, thanks in large part to the 9 billion euro price tag for the Games. For a relatively small country like Greece, the cost of hosting the Games equaled roughly 5% of the annual GDP of the country.
Of course, the Olympics didn't usher in an economic boom. Indeed, in 2005 Greece suffered an Olympic-sized hangover with GDP growth falling to its lowest level in a decade.
That would certainly follow the pattern of crazy civic development projects in which stadiums and museums are supposed to somehow substitute for everything that is missing in the local economy. But the governments in question don't usually end up in receivership.
Fun Olympic factoid of the day: the television news yesterday reported that the Whistler ski complex had essentially been developed in the hopes of the area someday scoring a winter Olympics. I have no idea if this is true, but it seems both plausible and deeply troubling.
Greece's federal government had historically been a profligate spender, but in order to join the euro currency zone, the government was forced to adopt austerity measures that reduced deficits from just over 9% of GDP in 1994 to just 3.1% of GDP in 1999, the year before Greece joined the euro.
But the Olympics broke the bank. Government deficits rose every year after 1999, peaking at 7.5% of GDP in 2004, the year of the Olympics, thanks in large part to the 9 billion euro price tag for the Games. For a relatively small country like Greece, the cost of hosting the Games equaled roughly 5% of the annual GDP of the country.
Of course, the Olympics didn't usher in an economic boom. Indeed, in 2005 Greece suffered an Olympic-sized hangover with GDP growth falling to its lowest level in a decade.
That would certainly follow the pattern of crazy civic development projects in which stadiums and museums are supposed to somehow substitute for everything that is missing in the local economy. But the governments in question don't usually end up in receivership.
Fun Olympic factoid of the day: the television news yesterday reported that the Whistler ski complex had essentially been developed in the hopes of the area someday scoring a winter Olympics. I have no idea if this is true, but it seems both plausible and deeply troubling.
Sunday, January 17, 2010
Procter & Gamble to Test Online Store to Study Buying Habits
By ANJALI CORDEIRO And ELLEN BYRON
Procter & Gamble Co. plans to launch an online store that will sell key brands, aiming to study consumer buying habits as it counters moves by traditional retailers, which have reduced the variety of brands they carry.
P&G spokeswoman Tressie Long said the company sees the new online store as more of a "learning lab," where it can study consumers' online buying habits, rather than as a direct source of sales growth. P&G, which already sells its products online through the Web sites of such retailers as Wal-Mart Stores Inc., says it will share what it learns with retailers that carry its brands.
P&G's new "eStore" will start as a pilot using 5,000 consumers in coming days. The site will carry only P&G products but will be owned and operated by PFSweb, an e-commerce service provider. Pricing on the site will be at the discretion of PFSweb, P&G says.
Not every P&G product will be available via the site initially, although big brands including Tide, Pampers and Olay will be sold there. The new Web site, at pgestore.com, is not yet publicly accessible but will be up for use beyond the pilot program in the spring. There will be a flat $5 shipping fee for all orders.
Procter & Gamble has increasingly been looking for new avenues of growth as consumers have cut back. In recent months the company has said it will push to sell more of its products online,
Despite P&G's push into the online medium, sales at traditional retailers will remain key to its business. P&G gets about half a billion dollars in online sales, a fraction of its roughly $79 billion in annual sales. Researcher Nielsen estimates online sales of consumer packaged goods including food, beverage, health and beauty aids and household cleaners increased 20% to 25% between 2004 and 2008, hitting roughly $10 billion in 2008.
In separate news, Procter & Gamble plans to end its fragrance licensing agreement with Valentino Fashion Group, according to a person familiar with the matter. Puig Beauty & Fashion Group SL, the Spanish fashion and fragrance company, is expected to take over the license from P&G in February 2011, this person said.
P&G produces a number of fragrances for Valentino, which is owned by U.K. based private-equity fund Permira. But sales never reached the heights of P&G's other fragrance licenses, including those with Gucci and Dolce & Gabbana, which last year launched a makeup line.
A spokeswoman from P&G declined to comment. A spokesman from Puig couldn't be immediately reached for comment.
P&G wants to weed out underperforming brands to focus on its more competitive products. The company has been moving into luxury beauty products, including the expansion of skin care line SK-II and its acquisition of high-end men's grooming lines like The Art of Shaving.
Procter & Gamble Co. plans to launch an online store that will sell key brands, aiming to study consumer buying habits as it counters moves by traditional retailers, which have reduced the variety of brands they carry.
P&G spokeswoman Tressie Long said the company sees the new online store as more of a "learning lab," where it can study consumers' online buying habits, rather than as a direct source of sales growth. P&G, which already sells its products online through the Web sites of such retailers as Wal-Mart Stores Inc., says it will share what it learns with retailers that carry its brands.
P&G's new "eStore" will start as a pilot using 5,000 consumers in coming days. The site will carry only P&G products but will be owned and operated by PFSweb, an e-commerce service provider. Pricing on the site will be at the discretion of PFSweb, P&G says.
Not every P&G product will be available via the site initially, although big brands including Tide, Pampers and Olay will be sold there. The new Web site, at pgestore.com, is not yet publicly accessible but will be up for use beyond the pilot program in the spring. There will be a flat $5 shipping fee for all orders.
Procter & Gamble has increasingly been looking for new avenues of growth as consumers have cut back. In recent months the company has said it will push to sell more of its products online,
Despite P&G's push into the online medium, sales at traditional retailers will remain key to its business. P&G gets about half a billion dollars in online sales, a fraction of its roughly $79 billion in annual sales. Researcher Nielsen estimates online sales of consumer packaged goods including food, beverage, health and beauty aids and household cleaners increased 20% to 25% between 2004 and 2008, hitting roughly $10 billion in 2008.
In separate news, Procter & Gamble plans to end its fragrance licensing agreement with Valentino Fashion Group, according to a person familiar with the matter. Puig Beauty & Fashion Group SL, the Spanish fashion and fragrance company, is expected to take over the license from P&G in February 2011, this person said.
P&G produces a number of fragrances for Valentino, which is owned by U.K. based private-equity fund Permira. But sales never reached the heights of P&G's other fragrance licenses, including those with Gucci and Dolce & Gabbana, which last year launched a makeup line.
A spokeswoman from P&G declined to comment. A spokesman from Puig couldn't be immediately reached for comment.
P&G wants to weed out underperforming brands to focus on its more competitive products. The company has been moving into luxury beauty products, including the expansion of skin care line SK-II and its acquisition of high-end men's grooming lines like The Art of Shaving.
Saturday, January 9, 2010
Banks vs. Credit Unions
Would a credit union be a better alternative for you? The Early Show's financial contributor Vera Gibbons compares banks and credit unions.
Broadcast TV in 2010: Death or Rebirth?
By Josef Adalian
Published: January 04, 2010
The nation's TV critics just spent the last two weeks raving about the small screen's creative triumphs over the past decade, with more than a few heralding a new golden age for the medium.
So why do the folks who run the industry -- particularly those who work at the big networks -- still feel so queasy heading into the '10s?
The short answer: While cable's renaissance means there are more networks with more "hit" shows than ever before, the windfall profits such success once guaranteed for the Big Four are harder than ever to reach.
The Age of Monster Hits like "Friends" and "Seinfeld" and "Law & Order" -- and the massive profits they once generated -- is over. Midrange success stories are the new 40 share. (See accompanying story about the movie industry: "Hollywood Cuts, Retools and Looks to the Future.")
No, network TV isn't on its deathbed, despite the rantings of some doomsayers. But the industry is still in for several more years of transition as executives look to radically remake the business model for broadcast TV.
Signs of change are everywhere:
-- News Corp.'s Chase Carey decision to go to the mat with Time Warner Cable over the New Year's holiday wasn't about pride. Networks like Fox simply can't thrive on advertising revenue alone anymore, particularly with some projections showing Madison Avenue will continue to cut back on network ad buys even as the overall economy improves.
-- Much of the pre-announcement hype over Apple's so-called "iSlate" has focused on its potential to bolster print. But the computer giant also has been talking to multiple networks about a monthly subscription service for TV shows. It's not hard to see TV programming being a big part of iSlate. Likewise, it's possible networks could use the internet to experiment with models where subscribers get first crack at big events -- anything to replace the dollars lost from shrinking syndication monies.
-- Despite the flak NBC has taken over its Jay Leno experiment, the Peacock may actually be the canary in the coal mine for broadcasters. The fact is, networks have no choice but to look for ways to reduce the number of hours they devote each week to high-cost scripted programming. Even reality TV -- once thought to be a panacea for the cost problems of networks -- has gotten more expensive and has ended up with the same rough success-to-failure ratio as comedy and drama. Don't be surprised to see more repeats in regular timeslots as networks finally concede that they can't afford 20 hours-plus of first-run fare every week.
-- Entire dayparts are disappearing or radically evolving. We've already seen the networks get out of the kids business. Daytime could be next, with two long-running soaps toast and more casualties highly likely soon.
-- The local-stations business, once a source of steady revenue for conglomerates such as NBC Universal and CBS, is now a drain on profits, thanks to a near-complete collapse of premium local advertising (there's a reason many stations now air informercials in the middle of the day, rather than just late at night).
There’s renewed talk the whole network-local affiliate relationship could be on the brink of crumbling as broadcasters seriously consider something they've mulled for years: transforming into cable networks.
And yet, while times are clearly still tough, they're also filled with opportunity. And as stomach-churning as 2010 promises to be for the TV business, indications are that broadcasters are -- ever so slowly -- starting to figure out how to adapt to the reshaped landscape of the business.
Consider: Lost in all the drama of "Will Fox pull the plug on Time Warner?" is the fact that nobody seemed to think News Corp. was crazy for demanding serious compensation for its signal.
At the start of the last decade, cable companies scoffed at the idea that they'd ever pay cash for free over-the-air TV. CBS broke ground with a few deals a while back, but they didn't produce serious money.
While Time Warner and Fox aren't yet revealing the terms of their pact, it's clear Fox got a record sum from a cable operator for its programming. Broadcasters' decades of dreaming about matching cable's dual revenue stream may soon be over -- and while it won't make up for dwindling syndication and ad revenues, it will help. A lot.
Likewise, major media companies' push to get paid for their content could yet result in another new revenue stream for broadcasters. The talks with Apple hint at this. Hulu's declaration that it may yet charge for some content is another sign of digital pennies slowly morphing into dimes, quarters and maybe even dollars.
The decline of the traditional 100-episodes-to-syndication-nirvana also may prove liberating to network programmers, and not so catastrophic for broadcast bean counters.
After all, freed from the burden of trying to produce as many episodes as quickly as possible in order to get to the back end ASAP, broadcasters could start to experiment more with the idea of limited-order series. Or shortened episode counts.
That could lead to even better shows. Maybe big talent that would never commit to the drudgery of virtual nonstop production for seven years -- the reality of a hit drama or comedy in the past -- might consider signing on for a three-year gig in which only 13 episodes are produced every 12 months.
It's a model that has allowed cable networks from FX to HBO to land major names who'd never do a network show.
Then there's the promise of technological revolution. Just as James Cameron's "Avatar" offers the hope of keeping moviegoing an in-theater experience, TV soon could get a 3D boost as well.
The big buzz at this week's Consumer Electronics Show is all about 3D TV, which is months -- not years -- away from becoming a reality. It won't be cheap, but there are thousands of hours of programming that could suddenly become a lot more valuable if converted to 3D. Bottom line: It's another source of potential profits to a business that needs as many as it can find.
As the Awful Aughts fade into memory, it would be nice to be able to predict smooth sailing ahead for broadcasters. It would also be naive.
But that doesn't mean there's not reason to hope that, like a TV icon from a simpler time, the networks might just make it after all.
Published: January 04, 2010
The nation's TV critics just spent the last two weeks raving about the small screen's creative triumphs over the past decade, with more than a few heralding a new golden age for the medium.
So why do the folks who run the industry -- particularly those who work at the big networks -- still feel so queasy heading into the '10s?
The short answer: While cable's renaissance means there are more networks with more "hit" shows than ever before, the windfall profits such success once guaranteed for the Big Four are harder than ever to reach.
The Age of Monster Hits like "Friends" and "Seinfeld" and "Law & Order" -- and the massive profits they once generated -- is over. Midrange success stories are the new 40 share. (See accompanying story about the movie industry: "Hollywood Cuts, Retools and Looks to the Future.")
No, network TV isn't on its deathbed, despite the rantings of some doomsayers. But the industry is still in for several more years of transition as executives look to radically remake the business model for broadcast TV.
Signs of change are everywhere:
-- News Corp.'s Chase Carey decision to go to the mat with Time Warner Cable over the New Year's holiday wasn't about pride. Networks like Fox simply can't thrive on advertising revenue alone anymore, particularly with some projections showing Madison Avenue will continue to cut back on network ad buys even as the overall economy improves.
-- Much of the pre-announcement hype over Apple's so-called "iSlate" has focused on its potential to bolster print. But the computer giant also has been talking to multiple networks about a monthly subscription service for TV shows. It's not hard to see TV programming being a big part of iSlate. Likewise, it's possible networks could use the internet to experiment with models where subscribers get first crack at big events -- anything to replace the dollars lost from shrinking syndication monies.
-- Despite the flak NBC has taken over its Jay Leno experiment, the Peacock may actually be the canary in the coal mine for broadcasters. The fact is, networks have no choice but to look for ways to reduce the number of hours they devote each week to high-cost scripted programming. Even reality TV -- once thought to be a panacea for the cost problems of networks -- has gotten more expensive and has ended up with the same rough success-to-failure ratio as comedy and drama. Don't be surprised to see more repeats in regular timeslots as networks finally concede that they can't afford 20 hours-plus of first-run fare every week.
-- Entire dayparts are disappearing or radically evolving. We've already seen the networks get out of the kids business. Daytime could be next, with two long-running soaps toast and more casualties highly likely soon.
-- The local-stations business, once a source of steady revenue for conglomerates such as NBC Universal and CBS, is now a drain on profits, thanks to a near-complete collapse of premium local advertising (there's a reason many stations now air informercials in the middle of the day, rather than just late at night).
There’s renewed talk the whole network-local affiliate relationship could be on the brink of crumbling as broadcasters seriously consider something they've mulled for years: transforming into cable networks.
And yet, while times are clearly still tough, they're also filled with opportunity. And as stomach-churning as 2010 promises to be for the TV business, indications are that broadcasters are -- ever so slowly -- starting to figure out how to adapt to the reshaped landscape of the business.
Consider: Lost in all the drama of "Will Fox pull the plug on Time Warner?" is the fact that nobody seemed to think News Corp. was crazy for demanding serious compensation for its signal.
At the start of the last decade, cable companies scoffed at the idea that they'd ever pay cash for free over-the-air TV. CBS broke ground with a few deals a while back, but they didn't produce serious money.
While Time Warner and Fox aren't yet revealing the terms of their pact, it's clear Fox got a record sum from a cable operator for its programming. Broadcasters' decades of dreaming about matching cable's dual revenue stream may soon be over -- and while it won't make up for dwindling syndication and ad revenues, it will help. A lot.
Likewise, major media companies' push to get paid for their content could yet result in another new revenue stream for broadcasters. The talks with Apple hint at this. Hulu's declaration that it may yet charge for some content is another sign of digital pennies slowly morphing into dimes, quarters and maybe even dollars.
The decline of the traditional 100-episodes-to-syndication-nirvana also may prove liberating to network programmers, and not so catastrophic for broadcast bean counters.
After all, freed from the burden of trying to produce as many episodes as quickly as possible in order to get to the back end ASAP, broadcasters could start to experiment more with the idea of limited-order series. Or shortened episode counts.
That could lead to even better shows. Maybe big talent that would never commit to the drudgery of virtual nonstop production for seven years -- the reality of a hit drama or comedy in the past -- might consider signing on for a three-year gig in which only 13 episodes are produced every 12 months.
It's a model that has allowed cable networks from FX to HBO to land major names who'd never do a network show.
Then there's the promise of technological revolution. Just as James Cameron's "Avatar" offers the hope of keeping moviegoing an in-theater experience, TV soon could get a 3D boost as well.
The big buzz at this week's Consumer Electronics Show is all about 3D TV, which is months -- not years -- away from becoming a reality. It won't be cheap, but there are thousands of hours of programming that could suddenly become a lot more valuable if converted to 3D. Bottom line: It's another source of potential profits to a business that needs as many as it can find.
As the Awful Aughts fade into memory, it would be nice to be able to predict smooth sailing ahead for broadcasters. It would also be naive.
But that doesn't mean there's not reason to hope that, like a TV icon from a simpler time, the networks might just make it after all.
Monday, January 4, 2010
H&R Block Beware!
IRS to Boost Oversight of Paid Tax Preparers
By MARTIN VAUGHAN And MARY PILON
WASHINGTON—The Internal Revenue Service said it intends to regulate the legions of American tax-preparation companies, the first time the agency has sought to oversee these businesses. The move could affect how tax returns are prepared for tens of millions of people.
Under the new rules, employees of chain tax-preparation firms including H&R Block Inc. and Jackson Hewitt Tax Service Inc. will be required to pay a registration fee to the IRS, pass a "competency" exam and have 15 hours of education a year. Previously these employees weren't required to meet federal standards.
The requirements also will apply to hundreds of thousands of independent preparers and mom-and-pop storefronts that offer tax preparation as one of several services. About 60% of U.S. taxpayers use tax preparers, according to the IRS. That number includes certified public accountants, or CPAs, who are already subject to professional standards and aren't covered by the new rules.
The plan will take several years to implement and won't be in effect when taxpayers prepare their 2009 taxes for this April, the IRS said. But starting in 2011, all paid tax preparers will have to register with the IRS and include a unique identification number on any returns they prepare. Preparers will be given three years to pass a competency exam in either individual or small-business taxation.
"This is something that is long overdue," IRS Commissioner Doug Shulman said Monday. Until now, there have been "no national, professional standards for one of largest financial transactions individuals have each year," he said.
The IRS's move comes as Washington has looked to toughen regulatory oversight across the board, particularly in financial markets. Congress has toughened rules applying to credit-card firms. The White House is pushing an overhaul of financial regulation that would cover previously untouched or lightly regulated areas, like derivatives and hedge funds.
Some of the nation's largest tax preparers either welcomed or pushed for the new rules, seeing an advantage in regulations that could weed out some of their smallest competitors.
"We welcome the spotlight," said Kathryn Fulton, senior vice president for government relations at H&R Block, which said its business will be helped by forcing competitors to meet standards the firm already follows. "We think this should apply across the board," she said.
The testing and education requirements will apply to the preparer who actually signs the returns—a potential loophole that could allow chains such as H&R Block to avoid meeting requirements for preparers who work under a supervisor.
Intuit Inc., the maker of TurboTax, was among those lobbying for stricter oversight. Last year, 21 million tax returns were filed with the software, according to Julie Miller, an Intuit spokeswoman. Intuit staffs its hotlines primarily with CPAs and enrolled agents, workers who aren't accountants, but who are tested and certified by the IRS.
Journal Community
* discuss
“ This is a classic case of bandaging a scratch on the finger while allowing the severed artery to bleed. How about fixing the tax code so we don't need tax preparers? ”
—Nicholas Micskey
Tax-preparation software isn't covered by the plan unveiled by Monday, but the IRS could move to craft federal standards in this area. Mr. Shulman said the IRS will form a task force to examine the software industry's record on issues from accuracy to taxpayer-data security.
Like CPAs, volunteer tax preparers, such as those that help low-income taxpayers at free clinics, won't be subject to testing or education requirements.
For consumers, the new standards have the potential to raise tax-preparation fees, if tax preparers incur new costs to follow the regulations.
The regulations are primarily aimed at smaller firms, often branding themselves as generic "tax preparers" or "tax consultants." Government auditors, in undercover visits to firms, found high levels of inaccuracies and distortions on returns.
In 2006, the Better Business Bureau received 1,473 complaints against tax preparers, which ranked them 120 out of about 3,800 industry categories. In 2008, the number of tax-preparation complaints jumped to 2,276, ranking the industry 80th. Often, the complaints concerned errors that caused consumers to pay fees to resolve the problem.
"We want to make this into a profession, not just a part-time thing you set up on the kitchen table for six weeks during the tax season," said Frank Degen, an enrolled agent based in Setauket, N.Y. Enrolled agents have also been pushing for higher standards. "The good people have nothing to fear; it's the charlatans that hopefully will be rousted out."
Tom Ochsenschlager, a CPA and vice president at the American Institute of Certified Public Accountants, said the IRS has taken on a huge task in becoming "the consumer protection agency for tax preparers." He added: "Enforcing this is going to be a major undertaking."
Mr. Ochsenschlager worried the new regulations could confuse some consumers, because they aren't as tough as those required to become a CPA.
The IRS's Mr. Shulman said the agency will develop a public database through which consumers will be able to determine whether preparers have registered and passed the exam. The IRS said it also will explore whether to try to combat the growing use of refund-anticipation loans, in which firms offer upfront cash to customers expected to receive an IRS refund.
By MARTIN VAUGHAN And MARY PILON
WASHINGTON—The Internal Revenue Service said it intends to regulate the legions of American tax-preparation companies, the first time the agency has sought to oversee these businesses. The move could affect how tax returns are prepared for tens of millions of people.
Under the new rules, employees of chain tax-preparation firms including H&R Block Inc. and Jackson Hewitt Tax Service Inc. will be required to pay a registration fee to the IRS, pass a "competency" exam and have 15 hours of education a year. Previously these employees weren't required to meet federal standards.
The requirements also will apply to hundreds of thousands of independent preparers and mom-and-pop storefronts that offer tax preparation as one of several services. About 60% of U.S. taxpayers use tax preparers, according to the IRS. That number includes certified public accountants, or CPAs, who are already subject to professional standards and aren't covered by the new rules.
The plan will take several years to implement and won't be in effect when taxpayers prepare their 2009 taxes for this April, the IRS said. But starting in 2011, all paid tax preparers will have to register with the IRS and include a unique identification number on any returns they prepare. Preparers will be given three years to pass a competency exam in either individual or small-business taxation.
"This is something that is long overdue," IRS Commissioner Doug Shulman said Monday. Until now, there have been "no national, professional standards for one of largest financial transactions individuals have each year," he said.
The IRS's move comes as Washington has looked to toughen regulatory oversight across the board, particularly in financial markets. Congress has toughened rules applying to credit-card firms. The White House is pushing an overhaul of financial regulation that would cover previously untouched or lightly regulated areas, like derivatives and hedge funds.
Some of the nation's largest tax preparers either welcomed or pushed for the new rules, seeing an advantage in regulations that could weed out some of their smallest competitors.
"We welcome the spotlight," said Kathryn Fulton, senior vice president for government relations at H&R Block, which said its business will be helped by forcing competitors to meet standards the firm already follows. "We think this should apply across the board," she said.
The testing and education requirements will apply to the preparer who actually signs the returns—a potential loophole that could allow chains such as H&R Block to avoid meeting requirements for preparers who work under a supervisor.
Intuit Inc., the maker of TurboTax, was among those lobbying for stricter oversight. Last year, 21 million tax returns were filed with the software, according to Julie Miller, an Intuit spokeswoman. Intuit staffs its hotlines primarily with CPAs and enrolled agents, workers who aren't accountants, but who are tested and certified by the IRS.
Journal Community
* discuss
“ This is a classic case of bandaging a scratch on the finger while allowing the severed artery to bleed. How about fixing the tax code so we don't need tax preparers? ”
—Nicholas Micskey
Tax-preparation software isn't covered by the plan unveiled by Monday, but the IRS could move to craft federal standards in this area. Mr. Shulman said the IRS will form a task force to examine the software industry's record on issues from accuracy to taxpayer-data security.
Like CPAs, volunteer tax preparers, such as those that help low-income taxpayers at free clinics, won't be subject to testing or education requirements.
For consumers, the new standards have the potential to raise tax-preparation fees, if tax preparers incur new costs to follow the regulations.
The regulations are primarily aimed at smaller firms, often branding themselves as generic "tax preparers" or "tax consultants." Government auditors, in undercover visits to firms, found high levels of inaccuracies and distortions on returns.
In 2006, the Better Business Bureau received 1,473 complaints against tax preparers, which ranked them 120 out of about 3,800 industry categories. In 2008, the number of tax-preparation complaints jumped to 2,276, ranking the industry 80th. Often, the complaints concerned errors that caused consumers to pay fees to resolve the problem.
"We want to make this into a profession, not just a part-time thing you set up on the kitchen table for six weeks during the tax season," said Frank Degen, an enrolled agent based in Setauket, N.Y. Enrolled agents have also been pushing for higher standards. "The good people have nothing to fear; it's the charlatans that hopefully will be rousted out."
Tom Ochsenschlager, a CPA and vice president at the American Institute of Certified Public Accountants, said the IRS has taken on a huge task in becoming "the consumer protection agency for tax preparers." He added: "Enforcing this is going to be a major undertaking."
Mr. Ochsenschlager worried the new regulations could confuse some consumers, because they aren't as tough as those required to become a CPA.
The IRS's Mr. Shulman said the agency will develop a public database through which consumers will be able to determine whether preparers have registered and passed the exam. The IRS said it also will explore whether to try to combat the growing use of refund-anticipation loans, in which firms offer upfront cash to customers expected to receive an IRS refund.
Sunday, January 3, 2010
SK Telecom gets IBM cloud computing platform
IBM has built South Korea's first cloud computing environment for SK Telecom. The cloud environment gives developers the software and hardware needed to develop applications that will allow SK Telecom to offer up to 20 new services to their customers by the end of 2009, such as sports news feeds and a photo service.
The IBM-built cloud environment will allow SK Telecom and its business partners to more quickly develop, test and publish new end-user services. The new cloud environment delivers the following business and technology benefits: all the servers, storage and middleware required for application development on a secure, stable environment; low up front costs and reduced investment risks of mobile content developers; and faster time to market and decreased barriers to entry of new services.
"Our efforts to develop services with IBM and other partners reflect the latest trends in Web 2.0, which will ultimately enhance our customers' experience," said Jong-tae Ihm, senior VP and head of SK Telecom's data network office. "Together with venture capital firms our aim is to create new business opportunities by rapidly commercializing the ideas of content developers, further advancing the development of the information and communication technology industry."
SK Telecom also operates an R&D test bed for developing and testing cloud computing technologies. By the end of 2009 the SK Telecom plans to accommodate more than 20 services for NATE, SK Telecom's WAP portal and in the coming years says it hopes to extend its entire IT infrastructure to the cloud model. This will in turn enhance the competitiveness of the cloud industry and foster business partnerships and cooperation.
"With this new environment SK Telecom will lead in innovation by offering IT infrastructure for software developers through a Platform-as-a-Service model," said Kang-yoon Lee, head of IBM's Cloud Computing Center in Korea. "We believe this project will be a model example in how enterprises in Korea and worldwide can leverage the cloud environment to support business requirements in continual change."
For this project IBM Korea worked jointly with SK Telecom to develop the entire cloud environment—from concept planning to hardware and software selection and implementation. The cloud includes 80 systems, comprised of both System x and blade servers, Xen virtualization technology and IBM middleware and service management technology. Service management is a key to any successful enterprise cloud computing project as it orchestrates hundreds—even thousands—of services in a workload-optimized fashion, maximizing efficiency of the overall system. SK Telecom is using IBM's Tivoli Service Automation Manager to enable software to be leased and installed seamlessly, and virtual machines provisioned accordingly. In planning the cloud architecture, SK Telecom also used implementation services and operation process consulting from IBM Global Technology Services through to implementation services and operation process consulting.
The IBM-built cloud environment will allow SK Telecom and its business partners to more quickly develop, test and publish new end-user services. The new cloud environment delivers the following business and technology benefits: all the servers, storage and middleware required for application development on a secure, stable environment; low up front costs and reduced investment risks of mobile content developers; and faster time to market and decreased barriers to entry of new services.
"Our efforts to develop services with IBM and other partners reflect the latest trends in Web 2.0, which will ultimately enhance our customers' experience," said Jong-tae Ihm, senior VP and head of SK Telecom's data network office. "Together with venture capital firms our aim is to create new business opportunities by rapidly commercializing the ideas of content developers, further advancing the development of the information and communication technology industry."
SK Telecom also operates an R&D test bed for developing and testing cloud computing technologies. By the end of 2009 the SK Telecom plans to accommodate more than 20 services for NATE, SK Telecom's WAP portal and in the coming years says it hopes to extend its entire IT infrastructure to the cloud model. This will in turn enhance the competitiveness of the cloud industry and foster business partnerships and cooperation.
"With this new environment SK Telecom will lead in innovation by offering IT infrastructure for software developers through a Platform-as-a-Service model," said Kang-yoon Lee, head of IBM's Cloud Computing Center in Korea. "We believe this project will be a model example in how enterprises in Korea and worldwide can leverage the cloud environment to support business requirements in continual change."
For this project IBM Korea worked jointly with SK Telecom to develop the entire cloud environment—from concept planning to hardware and software selection and implementation. The cloud includes 80 systems, comprised of both System x and blade servers, Xen virtualization technology and IBM middleware and service management technology. Service management is a key to any successful enterprise cloud computing project as it orchestrates hundreds—even thousands—of services in a workload-optimized fashion, maximizing efficiency of the overall system. SK Telecom is using IBM's Tivoli Service Automation Manager to enable software to be leased and installed seamlessly, and virtual machines provisioned accordingly. In planning the cloud architecture, SK Telecom also used implementation services and operation process consulting from IBM Global Technology Services through to implementation services and operation process consulting.
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