[include_top2.htm]
Google
Web www.barternews.com

February 18, 2003

Written by Bob Meyer, Editor of BarterNews

Offsets Are Big Business—A Case of Quid Pro Quo!

Reciprocal Trade At Highest Levels Of Government Used To Justify Spending Billions

We're reporting on this way of doing business to keep you abreast of the wide range of possibilities in the barter world. Inasmuch as we've published 10-page articles in BarterNews about compensatory arrangements, also known as offsets, this is just a brief look at this most interesting high-level way deals are done.

Offsets typically involve foreign military sales, and sales of "big ticket" high technology civilian products and services, i.e. fighter aircraft, communications equipment, guided missile systems, advanced telecommunications, and computer systems.

It's a legal and necessary part of doing business internationally these days. But actually it all began after World War II, based on the theory that co-production agreements were needed to help European countries rebuild military-industrial bases so they could resist communism.

Well, communism has died, and the European arms makers got back on their feet, but the "offsets" stayed, as the genie was out of the bottle and nations figured out how they could play the offset game.

Offsets are now such a fixture that major contractors have entire departments that focus on this effort, which includes "twisting the arms" of their suppliers into participating as well.

Today 120 countries around the globe now require offsets in military sales/purchases. And the biggest recipients of offsets are among the most sophisticated countries: Finland, Britain, Israel, Switzerland and the Netherlands.

Basically, when a country spends many millions (sometimes billions) to acquire military equipment, or other large scale products and services, they press the sellers to do things in return for getting their business. Things like creating work for their citizens by transferring sub-assembly jobs to their country...helping export their goods or foodstuffs...financing medical clinics, or building shipyards.

Such offset demands generally range from 20% to 100% of the invoice value of the sale. As can be imagined, these are sometimes enormous transactions and take decades to complete--it's a form of reciprocal trade at the highest level. For more information on this way of doing business, refer to our countertrade section by clicking here.


FCC Hears From Other Side

Under pressure from the nation's largest media companies, the FCC is currently proposing to relax or ax many of its restrictions on media ownership. The industry's major players insist that competition has eliminated the need for the TV ownership cap (a company can't own more than 35% of the nation's TV homes).

But the nation's eighth-largest multiple cable system owner, Mediacom Communications, told the FCC in a 98-page filing last week that many cable companies have been reduced to the status of serving the Big 6 (Viacom, AOL Time Warner, The Walt Disney Co, News Corp, Liberty Media, and General Electric) as pipelines for forced distribution of content selected by the programmers and as agents for collecting money from subscribers and passing it along to the programmers.

Mediacom says before the FCC allows the nation's major media companies to acquire any additional broadcast TV stations, the agency should adopt a wide-ranging series of regulations--including one that would allow cable operators to offer high-cost programming on an a la carte basis--to protect the rest of the industry.


What's The All-Time Trade?

One will get many answers to the question about the all-time trade. But if one of the criteria is the eventual cash out, here's one that surely qualifies.

Texas attorney Joseph Jamail traded his time and expertise to represent Pennzoil in its court battle with Texaco in the last 1980s. Jamail chose to barter his abilities for a percentage of the award, if he prevailed, versus that of collecting an hourly fee for his firm's services.

His belief and the size of the eventual victory, $3 billion, saw Jamail earning an estimated $420 million for his trading efforts.

Another Form of Payment

Jamail's bartering efforts turned into big money. But money, per se, isn't always the desired outcome as Stephen C. Neal, a bright young attorney of Chicago's Kirkand and Ellis, showed. In 1991 the then 42-year old attorney was considered by his peers to be among an elite group of lawyers nationally.

Yet, few people around the country had ever heard of him, or his firm. All that changed when Neal came to the defense of Charles Keating Jr., the 67-year-old former Lincoln Savings and Loan financier. Despite the fact that Keating didn't have the money to pay his attorney fees, huge law firms lined up to represent him. Why? Because of the notoriety such representation gives a firm and the individual attorneys.

To put this in retailing parlance, it's a kind of a loss leader. By representing a guy who gets your name in the paper everyday, your fame spreads--which the next clients will pay for!


Every barter company in the world is listed here click through to our global list of barter companies.


Ad Age Conference Message: No Free Lunch For TV Viewers

At the Advertising Age Madison+Vine Conference held at the Beverly Hills Hotel last week it was pointed out by Brodie Keast, Sr. VP of TiVo, that 50% to 70% of people watching TiVo recorded programming are skipping commercials. And the threat presented by this personal video recorder has marketers scratching their heads.

Some believe marketers should be able to figure out how to bring brands closer together. Others, however, insist anyone buying into the notion that branded entertainment will be the savior of the TV business is "drinking spiked Kool-Aid!" While product placement and product-integration in new shows rated discussion, it was clear that it's a new game today. Ultimately viewers will have to pay for TV if advertising drops as a result of commercial skipping.


If you haven't read the current issue of BarterNews, get yourself a copy now! Orders are shipped the same day we receive them. (Click on Order Form.)


Get New Money-Making Ideas, and Valuable Contacts!

You can obtain these ideas and contacts in every every available back-issue of BarterNews.



Here And There. . .
  • Follow-up on last week's lead story about "Hidden Value In One's Assets" and the importance of negotiating to retain a portion of the asset...

    Miramax Films, a subsidiary of Walt Disney, was one of the original backers of the Lord of the Rings trilogy, but they had to back out when corporate parent Disney blanched at the projected production costs of the series.

    However Miramax did remain as executive producer, and personally kept a piece of the financial action: Disney and the Weinstein brothers (Miramax Films Founders) each get 2.5% of every dollar collected from theaters, video sales and other revenue from the "Rings" films. Estimated revenue to the Weinsteins and Disney each could be more than $15 million from each of the films.

  • Have you signed up to receive a summary via e-mail of the Tuesday Report every week? If not, go to the top of this issue (right hand corner) to sign up!
  • Tattoos (temporary) on the foreheads of 20-somethings by a London ad agency, suggesting a new form of guerrilla advertising, was most impressive. Not in the new idea, but more in how they were able to glean an enormous amount of free and valuable publicity such as write-ups in the international press and top-rated TV venues.
  • Online sales of liquidated goods now accounts for approximately 10% of the $25 billion-plus liquidation market for retail goods, according to D&W Enterprises. But change is underway as big retailers (Sharper Image, RadioShack and Dell Computer)are now running their own liquidation sites on eBay.com.

    Even Amazon.com, the largest Internet retailer, is buying liquidated products to resell as part of its efforts to keep prices low. Another player is Overstock.com (a site with 70,000 items for sale), which buys unsold wares from retailers and manufacturers and then resells at deep discount.

  • Starbucks introduced an electronic gift card about a year ago and claims more than 5 million of their cards have been activated. Cards are available in amounts from $5 to $500...providing Starbucks with the use of that cash.


about us | about b meyer | from the desk of  | contact us | issues | back issues | consulting services | entrepreneurs package | Competitve Edge | FastStart | order | classified advertising | affiliates | banner ads | first time visitors | travel section | media section | trade exchange section | corporate barter section | countertrade section | secondary capital section real estate section | trade exchange news 2006 | trade exchange news 2005 | marketplace | community barter section | restaurant & entertainment section | USA barter companies | global barter companies | trade exchange owners | sponsors | tuesday report | 2011 Tuesday Reports | 2010 Tuesday Reports | 2009 Tuesday Reports | 2008 Tuesday Reports | 2007 Tuesday Reports | 2006 Tuesday Reports | 2005 Tuesday Reports | 2004 Tuesday Reports | 2003 Tuesday Reports | 2002 Tuesday Reports | 2001 Tuesday Reports | 2000 Tuesday Reports | 1999 Tuesday Reports