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May 22, 2001

Delta "Back To Barter" In Another Warrant Deal

They scored big once, and they're looking to do it again! That succinctly is the story on Delta Air Lines' recent agreement to post more fares and routes through Cheap Tickets in exchange for an equity warrant in the seller of discounted travel.

(Delta first scored in a similar arrangement with Priceline.com--at one time holding warrants that had a greater value than Delta Air Lines! Subsequently, Delta earned over $500 million when it sold the stock about a year ago.)


"We're both in a capital-strained industry. It's very useful to barter like this."

--George Holland, VP Marketing
Broadview Networks Holding

NUI Corp. which owns telecommunications and utility companies, said its NUI Telecom unit and Broadview Networks Holdings have agreed to share phone lines and marketing departments so each can gain revenue through a barter arrangement.

NUI Telecom will offer high-speed internet access through Broadview Networks' digital subscriber line, or DSL, service. Broadview, a New York-based company offering local phone service in the northeast, will use NUI Telecom's marketing department to attract new customers.

Revenue from the agreement could net NUI Telecom as much as $25 million and Broadview could gain $17 million, the companies said in a statement. The companies are non-competitive, with closely held Broadview selling local phone service and NUI concentrating on heavy long-distance users.


Drug Companies Continually "Barter" For Doctors' Attention

The ubiquitous ads on TV, which advertise everything under the sun from the drug companies to consumers, amount to $2.5 billion a year. Far more staggering, however, is the $4.04 billion the industry barters to get the attention of the physicians!

Yes, wooing doctors--by providing them everything from gourmet meals, to Christmas trees, Valentine's Day flowers, books, CDs, manicures, pedicures, car washes, bottles of wine, free gasoline, and various trips --is a proven way to get their attention, so as to inform them about a particular new drug.

The AMA (American Medical Association) says such items are of minimal value and permissible, as long as they are related to the physician's work and primarily entail a benefit to patients.


Here And There. . .

  • Trade exchanges often like to think of themselves as a "mini-Visa," which is the nation's largest payment system. It's a enviable target as Visa, which held its third annual Visa Government Forum last week, has built an incredible system.

    It includes more than 14,000 financial institutions nationwide, which process (through VisaNet) over $810 billion in annual transaction volume. American consumers carry more than 353 million Visa-branded smart, credit, commercial, stored value, and check cards accepted at 22 million locations worldwide.

  • Budget hotels proved to be the only segment of the hotel industry where occupancy rose in March from a year earlier. People are opting for minimalist service, with no pampering, cuddling or complimentary gifts, as the economy slows. If the economy enters a "minor recession," limited service should stay popular, as well as the barter availabilities within the travel industry.

  • Talk about changing times...years ago attorney's didn't advertise, and few were members of trade exchanges. Today a good trade exchange has numerous fine attorneys.

    The larger law firms (with 400 or more attorneys) are even appointing Chief Marketing Officers to handle a wide array of tasks including public relations, strategic planning, and branding. The CMOs command top-dollar pay, as much as $400,000 a year, and have backgrounds in journalism, advertising, or legal marketing.

  • The Business Council, a group of 257 chief executives and officers at large U.S. companies, reports that despite the economic downturn, virtually all of the CEOs said tech spending accelerated in the past few years and improved their productivity. Only ten percent are accelerating their investments and a third have pulled back; yet most said the current pace of productivity growth will be maintained.

  • A Seattle law firm, Bendich, Stobaugh & Strong, which represented temporary workers in a lawsuit against Microsoft is entitled to the fees earned from their barter agreement with the workers, according to a U.S. District Judge.

    The law firm agreed to do the work, shouldering the costs, in exchange for 28%of the settlement, if there was one. When Microsoft agreed to pay $96.8 million to settle the case, the firm earned $27 million!

  • The Boston Consulting Group's annual study of online retailers indicates the growth slowed significantly in 2000. The study concludes that mail-order catalog companies selling on the Internet are proving to be the only consistently profitable players in the business.

    (Mail-order companies already had the order fulfillment infrastructure as well as cost advantages from previously using private label merchandise.)

    The average mail-order catalog company had an operating profit from its internet-retailing efforts that was 12% of online sales. In contrast, web "pure-play" retailers had an average operating loss of 94% of sales, while online stores of bricks-and-mortar retailers had an average operating loss of 36% of sales.

  • The high-class investment bank, Goldman Sachs Group, is bartering with a group of about a dozen regional brokerage firms to distribute its investment research and securities issues to Middle America.

    The regional brokerage firms won't pay Goldman a formal fee for receiving such research or securities offerings, instead they will execute trades through Hull Group and Spear Leeds & Kellogg, two market makers owned by Goldman.

  • Cruise operators say they're in the vacation business, not the cruise business, and while there's plenty of room for growth, they're having a difficult time keeping their ships filled with passengers.

    To attract more first-timers the industry is shortening the length of many cruises and expanding the number of ports available for boarding ships. Slashing prices is one way to fill empty cabins...and we're seeing more availabilities on barter as well.

 

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