Stupidity is contagious. It gets us all from time to time. Even respectable companies can catch it. As I do every week, let's take a look at five dumb financial events this week that may make your head spin.
1. Seeing red over Blu-ray
Pay up, Blu-ray fans. Netflix
Yes, Netflix proved it could defy gravity when it topped the 10-million subscriber mark earlier this year. Now it apparently thinks it can walk on water.
Blu-ray flicks cost more at the retail level, so it may seem completely reasonable for Netflix to pass on the higher costs to its consumers. However, I opted out of the Blu-ray plan last year when I saw it have a negative impact on title availability. If Netflix is going to charge more, diehard renters are going to expect broader availability. I don't think it's a game that Netflix wants to play when things were going so well in recent quarters.
2. So much for the morning commute
If you thought automakers were risky investments in a recession, they may be practically untouchable for you now. Ford
I get it. Auto sales are terrible. They fell by a sharp 37% in March. The industry needs to try new ways to get battered drivers to walk into a showroom with confidence to make a big-ticket purchase. However, isn't this going to bury the companies if layoff waves continue and the companies will be on the hook for months and months of payments?
This also could be problematic because it now becomes a game of limbo. Just as GM was announcing a plan to cover up to $500 a month for nine months, Ford offered a similar plan with a $700 monthly cap for an entire year. Just when you thought that automakers couldn't go deeper than 0% financing and thousands in rebates, there's now a new way to move cars, but on their dime.
3. Un-Shanghai melody
If you think music piracy is bad here, check out China. Supposedly 99% of the song files distributed digitally in the world's largest country are not legal purchases. This has prompted all of the major labels to work together with Google
This would normally appear to be a great deal for the labels. They don't have to worry about bandwidth costs. They will receive a cut of the ad revenue as opposed to nothing at all through rampant piracy. However, how much do you think a sponsor will pay to provide these ads to thrifty music fans? The labels won't be making a whole lot of money here. It may also disrupt the value proposition of digital music outside of China when other countries begin to wonder why they are overpaying for music just because they're honest.
If music is gradually becoming a loss leader, the labels that stay alive are the ones that realize that they need to have bigger stakes in merchandising and live shows that aren't prone to be marked down to an ad-supported freebie.
4. Hard times for Microsoft
Since netbooks really are tweeners -- the evolutionary step between a smartphone and a full-sized laptop computer -- it makes sense to give it a shot.
This could be troublesome for Microsoft. It was doing a fair job of vanquishing the cheaper Linux as the operating system of choice on low-priced netbooks. Things will get interesting if consumers can choose between Windows, Linux, and Android.
Choice isn't Microsoft's friend. It thrives in categories like operating systems and productivity software where it doesn't have a lot of competition. Now it has to fend off the cloud-computing revolution which makes end user computers agnostic to operating systems and immune to perpetual upgrades. No one probably misses Y2K as much as Microsoft.
5. Flunking out at Oxford
So much for those Tommy Bahama shirts putting shareholders in a tropical mood. Apparel specialist Oxford Industries
"The Company has paid dividends every quarter since it became publicly owned in 1960," reads the press release, without delving into the half-off sale. The new 5.8% yield may still be attractive to income investors, but I can't be the only one who will never trust a payout from a company that just whacked away at its dividend rate.
Let's beat the dumb drum:
Microsoft is a Motley Fool Inside Value pick. Google is a Motley Fool Rule Breakers recommendation. Netflix is a Motley Fool Stock Advisor selection. Try any of our Foolish newsletters today, free for 30 days.
Longtime Fool contributor Rick Munarriz is a fan of dumb and smart business moves. Investors can learn plenty from both. He does not own shares in any of the stocks in this story, save for Netflix. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.