From the Knowledge@Wharton today blog.

Before he was the superstar writer/director of the summer’s big budget box office hit, The Avengers, Joss Whedon created the modestly-budgeted musical comedy, “Dr. Horrible’s Sing-Along Blog.” Whedon intended “Dr. Horrible” to serve as something of an experiment in new media production and distribution — at least in part. As Whedon told Knowledge@Wharton in early 2009, “It was equal parts that and the love of the silly….  We said we were going to roll it out for free and then put it on iTunes. We just steamrolled past everybody’s idea of how you market … these things.” The project was, as Whedon characterized it, “a bit of a lark.” But it was also a serious experiment to create and distribute content outside the conventional Hollywood machinery. “[I]f somebody isn’t out there creating a system wherein independent production can thrive, it will wither,” Whedon said.

“Dr. Horrible” stars Neil Patrick Harris as the titular lovelorn villain, Felicia Day as the object of his affection, and Nathan Fillion as his arch-nemesis and romantic rival, Captain Hammer. Originally released online over the span of a week in three roughly 15-minute segments, the original plan was to build audience buzz through the online release and then take the free version offline and make the three-part series available for purchase through iTunes. Shortly after becoming available on iTunes, however, all three episodes could be streamed for free (with advertising) on Hulu. Subsequently, “Dr. Horrible” was released on DVD (and later Blu-ray), could be viewed online through Netflix, and spawned a book, comic book, audio CD, and digital audio download. On Tuesday, the experiment comes full circle as Dr. Horrible debuts on the CW television network in the US.

As Whedon noted in 2009, “The movies, TV — everything is melding, everything is shifting. If you saw it on a movie screen, it’s going to be on your phone. That territory is moving … now in a destructive way because we’re losing residuals. But eventually it’s just going to be an inevitability that … the studios are going to have to rethink how they monetize [content].”

When Whedon spoke to Knowledge@Wharton in early 2009 — roughly six months after “Dr. Horrible” first appeared online — the project had returned “about twice” the original budget of roughly $200,000. At that early date, Whedon reported that iTunes had “been a great boon” and the DVD had “done quite well.” The streamed online video with advertising was the “smallest revenue.”

Despite the “old media” veneer of television, the airing on TV could provide a significant boost to the revenues from “Dr. Horrible.” As independent filmmaker Jon Foy told Knowledge@Wharton last year following the release of his low budget independent documentary, Resurrect Dead: The Mystery of the Toynbee Tiles, “In this world of independent documentary film, broadcast is still where the biggest share of money is. Fewer people buy DVDs. And we all know that fewer people are going to the theatres. More people are streaming [movies] on Hulu and Netflix. Everyone in the independent film world is scrambling to figure out how to monetize that.”

Back in 2009, Whedon was uncertain how his experiment would turn out. “This could just stand out as Camelot and disappear. Or it can be a model that is built on.” More than four years after its original release in the summer of 2008, “Dr. Horrible” is still going strong.

Now that the original 43-minutes of “Dr. Horrible” have played on multiple media, what’s next? Will we see more of Dr. Horrible in the future? Whedon was asked this question this past July at San Diego Comic-Con. As if to prepare the crowd for a letdown he began, “The thing you have to understand is…” He then abruptly cut off the rising disappointment with one word: “Yes.”

As Neil Patrick Harris’s Dr. Horrible states in the original series, “The world is a mess, and I just need to rule it.” Although his character failed to do so, the series that tells his story has progressively conquered nearly every domain of the media landscape – both old and new.

This post was previously posted in Knowledge@Wharton today blog: Old Media Turns to the New: Dr. Horrible Strikes Back

From the Knowledge@Wharton today blog.

If you experienced the blues after the long weekend today, you may be among the millions who don’t get enough sleep and cause workplace productivity losses of up to 30%, according to recent research.

Sleep deficits seem to be a serious problem. Almost a third of all working adults get six or fewer hours of sleep each night, according to research from the Centers for Disease Control and Prevention. According to most sources, adults usually require between seven and nine hours of sleep a night to function optimally. Chronic sleep loss and sleep disorders are estimated to cost the nation as much as $16 billion in health care expenses and $50 billion in lost productivity, medical journal NIH Medline Plus says, citing studies from the National Centre on Sleep Disorders Research.

Wharton practice professor of management Stewart Friedman says the expectation in most workplaces is that employees should be fully alert during the entire span of their working day. Employers, of course, have formal “breaks” built into work schedules. “But often the span of expected work without rest is longer than employees can [manage to do while maintaining] 100% effort and focus,” he says.

More creative ways must be found to tackle sleep deficits hurting workplace productivity, because individuals vary in their need for rest, Friedman argues. “We would go a long way to increasing productivity if we made it legitimate and easy for people to take short periods of rest when they need to do so.”

In today’s highly connected world, sleep is a casualty also of text messages and emails that arrive at times when employees should be either relaxing or settling into bed for the night. “People feel this constant need to be connected,” noted Wharton management professor Nancy Rothbard in a recent Knowledge@Wharton article. “There’s no priority structure. Everything is urgent. Everything is red flagged.”

Studies show that inadequate sleep leads to deficits in cognitive performance, including the ability to think clearly and quickly, perform efficiently, remember things and drive safely, according to David Dinges, associate director of the Center for Sleep and Circadian Neurobiology at University of Pennsylvania School of Medicine, which has conducted studies on the subject for several federal agencies. Sleep deficits are also linked to higher rates of obesity, less effective emotional regulation, diabetes, heart disease and other issues, he adds.

Why do people lose sleep? The U.S. Department of Labor’s American Time Use Survey, which measures the amount of time people spend doing various activities, including paid work, childcare, volunteering and socialising, shows that people tend to give up sleep time for paid work, but not for unpaid work like household duties. Because they are compensated for their hours spent on the job, “people will get up earlier, go to work earlier and work longer for greater compensation — and in doing that they will lose sleep,” says Dinges.

Long commuting times only add to the problem by extending the work day further. Jet lag is also difficult to overcome for business travelers. “The disruption of the circadian system and the effect [jet lag] has on inadequate sleep often leaves them at a significant disadvantage relative to their local host,” says Dinges. Caffeine and other stimulants have limits on their effectiveness, he adds.

Recovering from a sleep deficit accumulated over five nights requires more than one weekend night of sleeping longer, notes Dinges, who is currently researching such “catch-up sleep.” Moreover, he finds that many people report that they cannot sleep two consecutive nights consisting of nine-hour stretches because their biological clock wakes them up — not to mention noise, light and other disturbances. (And those with small children will agree that there’s usually no hope of sleeping past 7 a.m. on the weekend.)

Epidemiological studies show that “very, very few people” can manage with four or five hours of sleep, although many claim that they can, says Dinges. People who consider themselves “committed” to their work like to brag that they don’t need eight hours of sleep, because sleep is associated with laziness in some people’s minds, he adds. Those who seem to thrive at their jobs despite sleep deficits often have more flexibility with regard to getting their work done, he points out. “People get by even with deteriorated performance from inadequate sleep by simply not being under [as much] pressure [as others].”

And while it may seem that well-compensated CEOs and other high-level executives get away with less sleep, Dinges points out that they often catch-up in limousines and in airplanes, and by consuming a lot of caffeine and other stimulants. Also, he finds that these individuals engage in “wake-promoting” activities, like standing at their desk or holding conversations. “At meetings, they are not the ones who have to sit and listen; they get to stand and talk,” he says. “If they had to sit and listen, they would find out they haven’t had adequate sleep.”

This post was previously posted in Knowledge@Wharton today blog: The Eye-opening Impact of Sleep Deficits

From the Knowledge@Wharton today blog.

It’s enough to give management at McDonald’s heartburn: On Monday, the company announced that its second quarter earnings fell 4.5%, reporting a profit of $1.35 billion compared with $1.41 billion a year earlier.  

McDonald’s is the world’s largest hamburger chain — it has 33,000 stores operating in 119 countries — and is viewed as a bellwether for the global fast food industry. Until recently, it also was seen by analysts as recession resistant, given the nature of its offerings — value-priced meals. What went wrong? According to Larry Hrebiniak, an emeritus professor of management at Wharton, the firm is suffering from the same conditions that “are plaguing other companies around the globe: a weakening global economy, especially in Europe; a stronger dollar worldwide, which in McDonald’s case cut an estimated seven cents a share from earnings; rising commodity costs; and increasingly frugal customers, not only in Europe but in Asia, Africa and the Middle East as well.”

Given those factors, and the likelihood that the recession will continue, the company does have cause for concern, Hrebiniak notes. However, he adds that sales in the U.S. during the same period were up 3.6%, and “investors are still hot for what McDonald’s is doing, with some Wall Street analysts espousing a ‘buy’ rating for the dividends-producing machine. Other food chains are also feeling the pressure, and McDonald’s is holding fast against the vast majority of them. The company shouldn’t relax, but it shouldn’t panic, either.”

The chain has made recent efforts to appeal to a wider array of customers, an article in The Wall Street Journal points out. In early summer, McDonald’s introduced a new Cherry Berry Chiller smoothie, and it launched a “favorites under 400 calories” campaign to attract more health-conscious consumers. And for the cost conscious, it plans to introduce value menus in Japan and Australia, while keeping prices as low as possible in other regions.

It also has expanded its specialty coffee drink offerings to lure customers away from higher-priced coffee houses, like Starbucks. According to one analyst, higher margin specialty drinks now account for 10% of McDonald’s sales in the U.S.

But Hrebiniak is not so certain that McDonald’s should stray very far from its roots in an attempt to capture more consumers. “What it should do is basically stick to its knitting and continue to do what it has always done best — control costs and provide low-priced meals that customers enjoy. A real danger would exist if the company tried to expand products in an attempt to be all things to all people. Selling high-priced coffees and exotic drinks may be exciting in the short term, even profitable, but the danger over the longer haul is that too many new, exotic products may eventually detract from the McDonald’s brand and put the company in increased competition with other established, well-known companies, such as Starbucks. Product variety is nice, but excessive product diversification also holds dangers.”

Meanwhile, the appeal of McDonald’s popular, longstanding offerings like its Big Mac probably won’t wane any time soon. Hrebiniak himself notes that he plans to eat one today.

This blog was previously posted in Knowledge@Wharton today blog: A Big Mac Setback

From the Knowledge@Wharton today blog.

With the introduction earlier this week of the Surface tablet, most observers seem to agree that Microsoft got a lot of things right, launching a well-designed product with features lacking in its chief competitor — Apple’s iPad — including a cover that functions as a keyboard and the ability to run desktop software programs.

But the presentation also left many unanswered questions, including the exact price, release date and battery life of the device. Perhaps more importantly, it is still unclear what the Surface offers beyond hardware — and if Microsoft can leverage successful offerings such as its Xbox gaming system and Office productivity suite to create a vibrant ecosystem to rival that of the iPad.

“At first glimpse, Microsoft appears to have gotten a lot right with the Surface tablet,” Wharton new media director Kendall Whitehouse says. “Including an integrated keyboard with the Surface is a great idea. More importantly, however, is that the Surface runs Windows 8. In this regard, Microsoft has leapt ahead of the competition. This is the eventual direction for tablet and mobile products: To close the gap between the mobile/tablet environment and the desktop/laptop environment.”

Whitehouse adds that making Windows 8 the operating system for the Surface is a “big bet” for Microsoft. “But I admire their courage in going ‘all in’ with their new OS. And, if they can pull this off by successfully implementing a consistent user experience across desktop, laptop, tablet and mobile phone devices, they could be back in the game in a big way.”

The move is also reflective of a growing trend in the tech sector, with companies focusing more on offering a full range of hardware and software similar to the Apple ecosystem, says Wharton marketing professor Eric Bradlow. “Every portal is trying to get into the device game,” he notes. “They are worried that someone else taking over the device market will create a friction cost so that the other portals are ‘harder’ to use. I treat Microsoft the same way. They are trying to develop a portal that will keep the Windows 8 platform and the Microsoft suite of products top of mind.”

According to Wharton operations and information management professor Eric Clemons, the iPad is “nearly perfect” as an entertainment device. But it is lacking in the area of productivity, which is where the Surface may be able to make inroads with consumers.

“Providing the Surface with twice the memory of an iPad was a nice move. Adding a USB port was even smarter. Providing Office was smarter still,” Clemons notes. “Until now, when I travel, I need three devices: I need an iPhone. I need a MacBook Pro. And I need an iPad for the plane ride itself. Now I can get away with only two devices, at least on shorter trips…. And a Surface would allow me to write real documents, send real e-mails and view my camera photographs — I mean from a real camera, a Nikon Digital SLR, not a camera phone picture.”

Clemons suggests that sales of the Macbook Air and the iPad could be threatened by the Surface “except that I expected this some time ago from a Microsoft platform, and I bet Apple did, too. So look for an iPad … that runs Office and has a USB port very soon.”

This post previously appeared in the Knowledge@Wharton today blog: Digging Below the Surface of Microsoft’s Tablet Strategy

Vic Edwards

Read virtually any newspaper at the moment, and you’ll be told how China could be about to witness a sharp economic contraction, which could impact on Australia’s AAA credit rating.

New figures show China’s export demand has moderated and orders in construction and real estate have contracted. That has compounded fears China is mirroring a slowdown in the global economy.

Many commentators have indicated that China will have a hard economic landing. My view is that this is wrong, and China is more likely to have a soft or cushioned landing provided that the USA does not slip into a steep recession or depression.

A sharp slowdown in China would cause problems in Australia because of its large exports in minerals, pushing Australia’s current account into deficit.

The ratings agency Standard & Poor’s has warned that Australia’s AAA credit rating could be at risk – and losing ­Australia’s top sovereign debt rating would threaten banks ability to borrow offshore. These concerns have seen the Australian dollar falling almost one US cent, and the ASX trading below 4,000.

I attended the Fitch Ratings Credit Forum, and found its assessment of China’s future outlook was much more pessimistic than my view. I am optimistic about the future for China, and while the rate of growth may slow down, any threat to Australia’s credit rating is unlikely to come from the booming Middle Kingdom.

The Chinese purchasing managers’ index fell to 55.2 in May from 56.1 in April, according to new figures from the China Federation of Logistics and Purchasing. A reading above 50 still indicates expansion.

On my visits to China over the past few weeks it has become clear that China is successfully making the transition from an export oriented nation to one that is much more based on domestic consumption. Certainly, this will cause a drop in its growth rate from 11% per annum to around 8%, but this is still a favourable outcome.

The change to a domestic economy is one that is good for Australia, with China still importing many raw materials. A factor not accounted for in most of the recent analytics of China is the fact that the enormous effort in developing infrastructure has been greatly misinterpreted. Western analysts and some of the investment banks have pointed to what seems to be excess capacity in having empty office blocks and highways leading to nowhere.

However the massive construction projects that are going on in the second tier cities such as Qingdao, Tianjin, Changsha and Chengdu are pulling people back from Beijing and Shanghai and providing a future base for decentralisation. New very fast trains are now permitting rapid and cheap transport. This is a real plus for China’s future. It will decongest the cities of Beijing and Shanghai and lead to future growth and development of the poorer western regions. Throughout my latest visit, I have seen that the investment in infrastructure is paying off.

Vic Edwards is a Visiting Fellow in Banking and Finance at the Australian School of Business.

The blog of Knowledge@Australian School of Business, the online business journal of the Australian School of Business at the University of New South Wales. Knowledge@Australian School of Business covers research in Finance, Strategic Management, Marketing, Leadership, Social Impact, Population Ageing and eight other knowledge research categories.