CIT Gets a Reprieve; Guitar Hero Guys Strike Again
BY Max Chafkin
Who needs a government bail-out? One day before it planned to file for bankruptcy protection, the small business lender CIT Group received a $3 billion emergency loan from its major bondholders, The New York Times reports. CIT had hoped that the government would step in with a loan, but when those talks collapsed, the company turned to its bondholders. CIT isn't out of the woods yet, but the loan is expected to give the company the time it needs to set up a debt-for-equity exchange with the bondholders that would relieve its debt load. And that's good news for the companies that use the lender to borrow money against their receivables.
Unleashing your inner rock star. Last October, Inc. brought you the story of Harmonix, the company behind the insanely popular Guitar Hero and Rock Band video games. The company's seemingly overnight success was actually the end result of a more than decade-long struggle to bring the joy of a blazing guitar-solo to non-musicians everywhere. Today, the company, which was acquired by MTV in 2006, is developing a plan to let unknown bands upload and sell video-game versions of their own songs on the Rock Band Network, a platform for Rock Band gamers. Indie artists can set their own price for their songs, ranging from 50 cents to $3 per song, and receive 30 percent of any resulting sales. Garage bands everywhere rejoice!
Which companies do best online? Well for starters, Starbucks, Dell, eBay, and Google. Tech analyst Charlene Li and Wetpaint founder Ben Elowitz have released a report that ranks brands based on how well they use social media technologies, like wikis, forums, social networks, and Twitter. The report, which comes via Techcrunch, says that companies that engaged with social media technologies grew revenues by 18 percent over the past 12 months. Companies that did not engage suffered a drop of 6 percent.
AOL preps for single life. Sometimes the big guys reminisce about their start-up days and let that nostalgia find its way into business plans. According to The Associated Press, that seems to be what's going on with AOL as it readies for the break from Time Warner later this year. CEO Tim Armstrong, a former Google executive, has announced plans to run fewer advertisements on some of AOL's sites--an interesting move for a company that relies heavily on ad sales. The move has proved viable in some cases already, such as when the company reduced the number of ads on MapQuest, and the rise in traffic made up for the fewer ads. "We are on a long journey and sometimes you do have to make short-term trade-offs for that long-term gain," said one executive. After a first quarter during which AOL's revenue dropped 23 percent to $867 million, those trade-offs will be of monumental importance in the quarters to come.
How to avoid leaks in an era of blogs and layoffs. The Wall Street Journal has an article in today's paper about the propensity of embarrassing layoff announcements to get leaked onto the web. Yahoo, for instance, suffered a particularly cold-hearted disclosure in which firing managers were instructed not to engage in small talk with the employees they were dismissing and to keep firings to a maximum of 15 minutes. Another company saw its layoff announcement make its way to the Internet just minutes after it was released internally, despite efforts to keep the move a secret. The Journal says that some companies have responded with threats and investigations, but a better tactic may be to head off the gossip hounds and simply release memos internally and externally at the same time.
Do good students make good entrepreneurs? You'd think good students would make good business-owners, but that isn't necessarily the case, according to the findings of Chad Moutray, chief economist of the SBA's Office of Advocacy. His recent working paper studied the '93 graduating class to determine if those who are now self-employeed were better students. But surprisingly, those who earned "mostly As" are 2 percent less likely than their peers to own their own businesses, although the results do differ slightly by major. The margin is so slight, too, that the Times conjectures grades may not matter at all.