Ozempic, Wegovy and other new weight-loss drugs have proved so good at helping users shed pounds, they’ve quickly become a multibillion-dollar industry.

The prescription-only medications have also been in consistently short supply, which is why they’ve grown increasingly popular — with scammers.

Online con artists are luring victims with discount offers of Ozempic and similar drugs with no prescription required. After they take the money, however, they deliver something their clients didn’t order — fake drugs, perhaps, or just the disappointment that comes when people realize they’ve been taken.

A new report by threat researchers at McAfee found 176,871 phishing emails and 449 malicious websites tied to offers of Ozempic, Wegovy and semaglutide, the generic name for these drugs, from January to April 2024. Phishing attempts were almost 200% higher during the period than they were from October to December, the internet security company reported.

In addition, the researchers found that scammers were creating fake profiles on Facebook so they could run weight-loss-drug swindles there. Others took hundreds of fake offers to Craigslist — including 207 of them in a single day in April.

Novo Nordisk originally developed the semaglutide it dubbed Ozempic as a treatment for Type 2 diabetes, but clinicians found that semaglutide could help people lose significant amounts of weight by suppressing appetite. The Food and Drug Administration approved Novo Nordisk’s Wegovy as a weight-loss drug in 2021; since then, it has approved an alternative drug, Eli Lilly’s Zepbound, which is based on its diabetes treatment Mounjaro.

Although Ozempic costs nearly $1,000 a month without insurance, the demand for these drugs has grown rapidly. Sales of Ozempic alone are projected to reach $11 billion this year, according to one analysis.

The combination of high prices and insufficient supply has proved irresistible to scammers.

Abhishek Karnik, head of threat research at McAfee, said the fraudsters typically have two types of victims: people who can’t get a prescription for Ozempic, and people who have a prescription but can’t find it at their local pharmacies.

The scams can be personalized and targeted at people who’ve shown some interest in weight-loss drugs, using information collected about them and their browsing habits, said Iskander Sanchez-Rola, director of privacy innovation for the internet security company Norton. The pitches may come through email or ads placed on search engines or websites, he said, including sites that are well-established and trustworthy.

“Anywhere a human can have their eyes on, they will be there,” Sanchez-Rola said of the scammers. Just because a website is legitimate, he added, that’s no guarantee that the ads there will be.

To pull off the scam, Karnik said, the fraudsters will often interact with the prospective buyer through a social media network or platform such as Telegram to win their trust. That could include offering over-the-top testimonials to their legitimacy and to the quality of the products. “You’ll have people claiming they had huge success with these drugs,” he said, “but none of it is true.”

Scam sellers may also pose as doctors or pharmacists, often from foreign countries, and claim they can sell Ozempic without having to examine you or see a prescription. That may seem sketchy, but many Americans have imported real medications such as insulin illicitly from Canada and Mexico for years because the prices are so much lower outside the U.S.

“One example on Facebook Marketplace included a ‘Doctor Melissa’ based in Canada who could provide Mounjaro and Ozempic without a prescription, with payment available through bitcoin, Zelle, Venmo and Cash App — all of which are nonstandard payment methods for prescription drugs and should be red flags for consumers,” McAfee said.

That sort of counterfeit shipment poses a significant health risk. For example, McAfee said, one person who used Ozempic to help manage her diabetes bought some injectors online after local pharmacies ran out, only to discover that the pens she received were filled with insulin. Had she not been tipped off by the flimsy packaging and different appearance, McAfee said, she could have injected herself with a fatal dose.

Another type of con, Sanchez-Rola said, is when the scammer will deliver a bottle of aspirin or some other drug you didn’t order, then make it so burdensome for you to obtain a refund that you give up.

How to detect Ozempic scams

The first rule, McAfee said, is never to buy one of these drugs without a prescription. After all, doing so is illegal in the United States.

Sticking to licensed pharmacies is wise too. You can check whether a California pharmacy is licensed at the State Board of Pharmacy website; for other states, consult the FDA’s website.

But scammers also target people who have prescriptions they can’t fill locally, as well as offering medications they tout as nonprescription alternatives that are just as good as Ozempic. And to make their products more attractive, they may use AI tools to produce eye-popping before-and-after images that are persuasively realistic.

Here are more red flags to look for before buying a weight-loss drug online:

Strikingly deep discounts. Fraud experts say that if a price looks too good to be true, it almost certainly is. Another thing to bear in mind, Sanchez-Rola said: “You didn’t find the best deal, the best deal found you, which is already a big red flag.”

Misleading claims. McAfee warns that overly rosy promises of results are a sign of a scam. Be especially wary if the site offers none of the usual disclaimers about side effects, possible negative reactions or details about how the product should be used.

Payment methods other than credit cards. Scammers prefer systems that act more like cash, such as Zelle, Cash App or gift cards, or are untraceable, such as cryptocurrency. Sanchez-Rola said sometimes scammers will also offer a credit card option that looks real, but it’s designed to display an error message when you try to use it so you’ll be forced to use a different, sketchier payment method.

A mix of 5-star and 1-star reviews. Sanchez-Rola said that fraudsters’ websites often try to bury the actual reviews posted by unhappy customers under a slew of bot-generated praise. If you see a lot of 5-star reviews that were posted within a short period of time, that’s a huge red flag, he said, especially if the reviews have no comments attached.

Deep discounts that expire soon. Con artists will try to override your reservations about a transaction by giving it a false sense of urgency.

Boilerplate company information. Scammers’ websites often provide phone numbers, addresses, contact information and descriptions that they copy from legitimate sites, Sanchez-Rola said. You should paste the phone number and other information into a Google search to see if they’re used by other, unrelated businesses — for example, he said, one scam site copied its physical address from an ice cream parlor, assuming that its customers wouldn’t bother to check.

Use security software that helps detect scams. McAfee and Norton, among other companies, offer programs that can alert you when you’re about to navigate to a suspicious website.

What to do if you’ve fallen for an Ozempic scam

If you’re fortunate enough to have used a credit card, you can dispute the charge and eventually obtain a refund. You can get similar results if you make your purchase using PayPal or Venmo with the buyer protection feature enabled.

If not — for example, if you used Zelle or paid with gift cards — you can at least report the fraud to try to protect other potential victims. The federal government has an online tool to help you find the right law enforcement agency to file your report with. You can also file a complaint with the FTC’s site and the FBI’s Internet Crime Complaint Center .

Beyond that, Sanchez-Rola said, if you were conned on a social network, you should report the fraudster’s profile to the network’s administrators. For example, Facebook explains how to report fraudulent Marketplace sellers in its help section, and TikTok walks through how to report a problematic account in its support section.

©2024 Los Angeles Times. Visit at latimes.com. Distributed by Tribune Content Agency, LLC.

Inflation is still running well above plan, and that means the Federal Reserve is keeping its finger firmly on the pause button. The central bank raised rates 11 times in 2022 and 2023, with the expectation that it would reverse course this year. But as inflation has stayed above 3%, it is standing pat. Following the Fed’s June 12 meeting, its fourth gathering of the year, Chairman Jerome Powell held steady again, announcing no change in interest rates. The Fed also signaled that it’s likely to cut rates only once this year, down from its previous estimate of three cuts.

“Mortgage rates, which have remained higher for longer, will likely remain in the high 6s until later this year,” says Lisa Sturtevant, chief economist at Bright MLS, a large listing service in the mid-Atlantic region. “Some homebuyers who have been sidelined by affordability challenges are going to wait until rates come down to buy. Increasingly, home sellers may have to do more negotiating to attract offers.”

The Federal Reserve and the housing market

Earlier in the inflationary cycle, the Fed had enacted increases of as much as three-quarters of a point. Now that inflation is down to 3.3% — still higher than its official target of 2%, but not terribly far off — that round of tightening appears to be over. However, until inflation drops down closer to that target, housing economists wonder when the anticipated rate cuts will begin.

“We still look for mortgage rates to drop to about 6.5% by the end of 2024,” says Mike Fratantoni, chief economist at the Mortgage Bankers Association.

In an effort to rein in inflation, the Fed boosted interest rates aggressively in 2022 and 2023, including a single jump of three-quarters of a percentage point. The hikes aimed to cool an economy that was on fire after rebounding from the coronavirus recession of 2020. That dramatic recovery has included a red-hot housing market characterized by record-high home prices and microscopic levels of inventory.

The Fed’s rate hikes have slowed the housing market. Home sales have dropped sharply. But home prices remain near record levels. Because home values are not driven solely by interest rates but by a complicated mix of factors, it’s hard to predict exactly how the Fed’s efforts will affect the housing market.

Higher rates are challenging for both homebuyers, who have to cope with steeper monthly payments, and sellers, who experience less demand and lower offers for their homes. After hitting 8% last fall, mortgage rates have dipped back down a bit. As of June 12, the average 30-year rate stood at 7.10%, according to Bankrate’s national survey of lenders.

How the Fed affects mortgage rates

The Federal Reserve does not set mortgage rates, and the central bank’s decisions don’t move mortgages as directly as they do other products, such as savings accounts and CD rates. Instead, mortgage rates tend to move in lockstep with 10-year Treasury yields.

Still, the Fed’s policies do set the overall tone for mortgage rates. Lenders and investors closely watch the central bank, and the mortgage market’s attempts to interpret the Fed’s actions affect how much you pay for your home loan. The Fed bumped rates seven times in 2022, a year that saw mortgage rates jump from 3.4% in January all the way to 7.12% in October. In 2023, mortgage rates went higher still, briefly touching 8%.

“Such increases diminish purchase affordability, making it even harder for lower-income and first-time buyers to purchase a home,” says Clare Losey, an economist with the Austin Board of Realtors in Texas.

What happens to the housing market if interest rates rise?

There’s no doubt that record-low mortgage rates helped fuel the housing boom of 2020 and 2021. Some think it was the single most important factor in pushing the residential real estate market into overdrive.

In the long term, home prices and home sales tend to be resilient to rising mortgage rates, housing economists say. That’s because individual life events that prompt a home purchase — the birth of a child, marriage, a job change — don’t always correspond conveniently with mortgage rate cycles.

History bears this out. In the 1980s, mortgage rates soared as high as 18%, yet Americans still bought homes. In the 1990s, rates of 8% to 9% were common, and Americans continued snapping up homes. During the housing bubble of 2004 to 2007, mortgage rates were high, yet prices soared.

So the current slowdown may be more of an overheated market’s return to normalcy rather than the signal of an incipient housing crash. “The combination of elevated mortgage rates and steep home-price growth over the past few years has greatly reduced affordability,” Fratantoni says.

But if mortgage rates pull back, affordability will become less of a factor. For instance, borrowing $320,000 at the mid-June rate of 7.10% translates to a monthly principal-and-interest payment of $2,151, according to Bankrate’s mortgage calculator. Borrowing the same amount at 8% translates to a monthly payment of $2,348. That’s a difference of nearly $200 per month.

A continued decline in mortgage rates could create a new challenge, though: It will likely draw new buyers into the market, a surge that could further intensify the ongoing shortage of homes for sale.

Next steps for borrowers

Here are some pro tips for dealing with elevated mortgage rates:

—Shop around for a mortgage: Savvy shopping can help you find a better-than-average rate. With the refinance boom considerably slowed, lenders are eager for your business. “Conducting an online search can save thousands of dollars by finding lenders offering a lower rate and more competitive fees,” says Greg McBride, Bankrate’s chief financial analyst.

—Be cautious about ARMs: Adjustable-rate mortgages may look tempting, but McBride says borrowers should steer clear. “Don’t fall into the trap of using an adjustable-rate mortgage as a crutch of affordability,” he says. “There is little in the way of upfront savings, an average of just one-half percentage point for the first five years, but the risk of higher rates in future years looms large. New adjustable mortgage products are structured to change every six months rather than every 12 months, which had previously been the norm.”

—Consider a home equity loan or HELOC: While mortgage refinancing is on the wane, many homeowners are turning to home equity lines of credit (HELOCs) to tap into their home equity. The rationale is simple: If you need $50,000 for a kitchen renovation and you have a mortgage for $300,000 at 3%, you probably don’t want to take out a new loan at 7%. Better to keep the 3% rate on the mortgage and take a HELOC — even if it costs 10%.

(Visit Bankrate online at bankrate.com.)

©2024 Bankrate.com. Distributed by Tribune Content Agency, LLC.

Inflation is cooling after a hot start to 2024, but it’s still higher than policymakers would like.

One culprit: The cost of auto insurance.

Consumer Price Index data released Wednesday showed U.S. inflation rose 3.3% year-over-year in May compared to a 3.4% bump in April. While some price increases that consumers feel most — food, gas, utilities — held flat or dropped month-over-month, other necessities, including housing and medical care, were still on the rise.

Motor vehicle insurance jumped a whopping 20.3% over last year.

After plummeting in 2020 as pandemic lockdowns kept drivers off the road — and insurance companies returned premiums to policyholders — the average cost of full car insurance has reached about $165 a month nationwide and $157 in Minnesota, according to personal finance website ValuePenguin. Industry experts point to a variety of reasons for the price increases, including rising repair costs for more complex cars, more frequent and serious crashes, severe weather and an uptick in consumer litigation.

“The reality is that auto insurers are in the business of providing financial security and a promise to their policyholders,” said Tony Cotto, director of auto and underwriting policy for the National Association of Mutual Insurance Companies. “And as the cost of fulfilling that promise goes up, so must the cost of the actual product, of the insurance contract.”

Auto repair and maintenance costs are up 7.2% compared to May 2023, according to the Bureau of Labor Statistics, continuing a brisk climb that began in 2021. Other costs associated with driving, including the costs of cars themselves, have declined: Wednesday’s federal inflation report showed a 9% year-over-year drop in the index for used cars and trucks.

Financing a vehicle purchase with a loan isn’t going to get cheaper in the immediate future — Federal Reserve officials this week opted to hold the federal funds rate at 5.25%-5.5% — but easing inflation could prompt a cut later this year. Officials had predicted three 2024 rate cuts but held off as inflation persisted early this year, meaning borrowing costs will stay higher for longer.

“We are strongly committed to returning inflation to our 2% goal in support of a strong economy that benefits everyone,” Fed Chair Jerome Powell said at a news conference Wednesday. “We are maintaining our restrictive stance of monetary policy in order to keep demand in line with supply and reduce inflationary pressures.”

Some of what auto policyholders are seeing now is a correction from the height of the pandemic, when prices were unusually low, said Rick Gorvett, a professor in the department of mathematics and economics at Bryant University.

“There’s a (cycle) to insurance, and we have periods where rates increase — not usually quite this much — but if you take the entire cycle, an up and a down portion of the cycle, you get a very reasonable kind of annual increase,” he said.

“I think the auto insurance sector is due for a reckoning, and I think eventually people are not going to be willing to tolerate this anymore,” Baydoun said, noting consumer pressure has recently pushed companies including Target and McDonald’s to lower prices.

“They’re going to want very, very clear explanations for why their rates are going up by the exorbitant levels that they are.”

In the meantime, consumers can save money by shopping around with different companies, bundling home and auto insurance or — cautiously — dropping specific coverage areas such as rental car reimbursement, said Leslie Kasperowicz, managing editor at Insurance.com.

While the cost of auto insurance is unlikely to fall significantly — and the pressure on consumers will linger as policyholders renew at different times — industry watchers say they don’t anticipate additional price spikes.

“The insurance companies are starting to see things level off in terms of what their loss ratios look like, which is how much they pay out versus how much how much they make in premiums,” Kasperowicz said. “So I think we’re going to still see it climbing for a while, and then it will level off.”

©2024 StarTribune. Visit at startribune.com. Distributed by Tribune Content Agency, LLC.

Boeing Co. said it’s inspecting undelivered 787 Dreamliners after discovering that fasteners were incorrectly installed on a section of the carbon-composite aircraft, underscoring the heightened scrutiny on quality lapses at the embattled manufacturer.

The issue is the latest to come to light as U.S. regulators ramp up oversight of Boeing following a near-catastrophe with another jet model, the 737 Max, earlier this year. The U.S. Federal Aviation Administration is also probing the 787 quality defect, the agency said.

The FAA has “multiple active investigations” into the planemaker underway following a rise in reports from whistleblowers and through its safety hotline, FAA chief Michael Whitaker said at a Senate hearing on Thursday.

“You expect to see an increase in reports when you have a safe place for employees to report, so that’s what we want to see,” Whitaker told reporters after the hearing. “We would be a little concerned if we weren’t seeing an increase in numbers.”

The fastener misstep underscores how Boeing continues to unearth manufacturing errors as it works to tighten up quality standards after a door plug blew off a 737 Max mid-flight in January. U.S. investigators have said the panel was missing four bolts meant to hold it in place, a revelation that unleashed withering scrutiny of the planemaker from regulators, airlines and the public.

The company hasn’t halted deliveries of the 787 as it determines whether any repairs will be needed to fix the incorrectly torqued fasteners, which connect the mid-section of the carbon-composite barrels to interior strengthening components. The FAA said in a statement that the problem doesn’t pose an immediate flight-safety issue.

“Our 787 team is checking fasteners in the side-of-body area of some undelivered 787 Dreamliner airplanes to ensure they meet our engineering specifications,” Boeing said in a statement Thursday. “The in-service fleet can continue to safely operate. We are taking the time necessary to ensure all airplanes meet our delivery standards prior to delivery.”

Boeing said it discovered the manufacturing glitch through its quality management system, and that it alerted the FAA. The discovery, first reported on Thursday by Reuters, is the latest in a spate of errors to come to light as the manufacturer encourages workers to flag issues and addresses damage to its safety culture exposed by the latest crisis. Whitaker said he intends to visit the North Charleston plant where the Dreamliner is manufactured on Friday.

Max deliveries

Whitaker during the hearing said the FAA won’t lift a cap on output for the 737 Max model it imposed earlier this year until he’s satisfied the company’s steps to bolster quality and safety have taken root.

Boeing’s 737 output in recent months has been a fraction of the 38 jets per month allowed by the agency. But there are signs that the pace of work is starting to pick up, as executives have predicted.

The U.S. planemaker appears to have delivered 11 Max aircraft so far in June, up from four at the same point in May, Deutsche Bank analyst Scott Deuschle said in a note to clients on Thursday. Boeing’s only other delivery for the month is a 787 Dreamliner, he said.

More oversight

During the Senate hearing, Whitaker faulted the agency for not having “much better visibility” into the company prior to the Jan. 5 accident.

A prior approach to oversight was too focused on paperwork audits rather than on-the-ground inspections, he said. That policy has since changed, he said.

The FAA will monitor a series of factory measures in real-time, including some designed to flag work performed out of sequence. It will also track worker training and measures the company implements to monitor workers tools — a common source of so-called “foreign object debris” left in planes.

Progress on those fronts will determine when the cap on 737 production is removed, Whitaker said.

©2024 Bloomberg L.P. Visit bloomberg.com. Distributed by Tribune Content Agency, LLC.

WASHINGTON — A handful of lawmakers say they plan to press the issue of the threat to humans posed by generative artificial intelligence after a recent bipartisan Senate report largely sidestepped the matter.

“There’s been no action taken yet, no regulatory action taken yet, at least here in the United States, that would restrict the types of actions that could lead to existential, or health, or other serious consequences,” Sen. Mitt Romney, R-Utah, said in an interview. “And that’s something we’d like to see happen.”

Romney joined Sens. Jack Reed, D-R.I., Jerry Moran, R-Kan., and Angus King, I-Maine, in April to propose a framework that would establish federal oversight of so-called frontier AI models to guard against biological, chemical, cyber and nuclear threats.

Frontier AI models include ChatGPT by OpenAI, Claude 3 by Anthropic PBC and Gemini Ultra by Google LLC, which are capable of generating human-like responses when prompted, based on training with vast quantities of data.

The lawmakers said in a document explaining their proposal that it calls for a federal agency or coordinating body that would enforce new safeguards, “which would apply to only the very largest and most advanced models.”

“Such safeguards would be reevaluated on a recurring basis to anticipate evolving threat landscapes and technology,” they said.

AI systems’ potential threats were highlighted by a group of scientists, tech industry executives and academics in a May 2023 open letter advising that “mitigating the risk of extinction from AI should be a global priority alongside other societal-scale risks such as pandemics and nuclear war.” The signatories included top executives from OpenAI, Microsoft Corp., Google, Anthropic and others.

Rep. Ted Lieu, D-Calif., who holds a computer science degree and was one of the signatories of that letter, said he remains concerned about the existential risks.

He said that he and Rep. Sara Jacobs, D-Calif., sought to address one aspect in the fiscal 2025 defense policy bill advanced by the House Armed Services Committee last month. The provision would require a human to be in the loop on any decision involving the launch of a nuclear weapon, to prevent autonomous AI systems from causing World War III.

Lieu, co-chair of the bipartisan House Task Force on Artificial Intelligence, said in an interview that he and others have tried to address further risks. But he and his colleagues are still trying to grasp the depths of these perils, such as AI spitting out instructions to build a better chemical or a biological weapon.

“That is an issue we’re looking at now,” Lieu said. “How you want to prevent that is a whole different sort of issue that can get very complicated, so we’re still gathering data and trying to explore.”

There are several proposals to control and supervise advanced AI systems, though none have been fast-tracked in Congress.

In August 2023, Sens. Richard Blumenthal, D-Conn., and Josh Hawley, R-Mo., proposed a licensing regime for advanced AI models that would be managed by a federal agency. Companies developing such AI models would be required to register with the agency, which would have authority to audit the models and issue licenses.

Policymaking pace

Experts studying technology and policy say that Congress and federal agencies should act before tech companies turn out AI systems with even more advanced capabilities.

“Policymakers should begin to put in place today a regulatory framework to prepare for this future,” when highly capable systems are widely available around the world, Paul Scharre, executive vice president at the Center for a New American Security, wrote in a recent report. “Building an anticipatory regulatory framework is essential because of the disconnect in speeds between AI progress and the policymaking process, the difficulty in predicting the capabilities of new AI systems for specific tasks, and the speed with which AI models proliferate today, absent regulation.

“Waiting to regulate frontier AI systems until concrete harms materialize will almost certainly result in regulation being too late,” said Scharre, a former Pentagon official who helped prepare the Defense Department’s policies on the use of autonomous weapons systems.

Senate Majority Leader Charles E. Schumer, D-N.Y., who led a monthslong effort of briefings with dozens of tech industry executives, civil society groups and experts, last month issued a bipartisan policy road map on AI legislation.

The road map and associated material mentioned existential risks just once — it noted some participants in one briefing were “quite concerned about the possibilities for AI systems to cause severe harm,” while others were more optimistic.

The report directed various congressional committees to address legislation on AI through their normal legislative processes.

One reason the risks may be downplayed is that some in the tech industry say fears of existential risks from AI are overblown.

IBM, for example, has urged lawmakers to stay away from licensing and federal oversight for advanced AI systems.

Chris Padilla, IBM’s vice president for government and regulatory affairs, last week recounted for reporters the stance of Chief Privacy and Trust Officer Christina Montgomery, who told participants at a Schumer briefing that she didn’t think AI is an existential risk to humanity and that the U.S. doesn’t need a government licensing regime.

IBM has advocated an open-source approach, which would allow experts and developers around the world to see how AI models are designed and built and what data is ingested by them, Padilla said.

A large community of AI developers peering into algorithms that power the AI systems can potentially identify dangers and threats better than a single company scrutinizing its own product, Padilla said. That approach differs widely, however, from OpenAI and Microsoft, which uses OpenAI’s models, that are advocating proprietary AI systems that are not subject to public scrutiny.

Padilla and Daniela Combe, vice president for emerging technologies at IBM, compared the company’s open-source approach to the widespread use of Linux operating system that runs on IBM’s mainframe computers. Microsoft declined to comment on the idea.

Instead of licensing and regulatory oversight of AI models, the government should hold developers and users of AI systems legally liable for harms they cause, Padilla said. “The main way that our CEO suggested this happen is through legal liability, basically, through the courts,” he said.

Padilla spoke to reporters before as many as 100 IBM executives traveled last week to Washington to meet with lawmakers on AI legislation. IBM and its subsidiaries spent $5.6 million lobbying Congress last year on a variety of issues that included AI, according to data from OpenSecrets.org.

The issue isn’t likely to be resolved soon, as Padilla and others say legislation this year is doubtful.

At least one key lawmaker agreed. Asked whether his AI proposal is likely to turn into legislation and pass this year, Romney said it may not.

“It’s unlikely this year because we move as slow as molasses,” he said. “Particularly in an election year.”

___

©2024 CQ-Roll Call, Inc., All Rights Reserved. Visit cqrollcall.com. Distributed by Tribune Content Agency, LLC.

When Amazon introduced its cashierless checkout system — aptly called Just Walk Out — the tech was seen as the latest prong in Amazon’s mission to transform brick-and-mortar stores and become a dominant competitor in the grocery industry.

Roughly seven years later, Amazon is taking that technology out of its grocery stores, and the revolution it had hoped to bring has yet to materialize.

Amazon says it is still committed to its grocery efforts — which these days include sales from Amazon.com, Amazon Fresh grocery stores, Amazon Go convenience stores and Whole Foods Market. But analysts are divided on how to interpret recent changes in Amazon’s grocery strategy.

On top of removing the Just Walk Out technology from Fresh grocery stores, Amazon closed some stores, paused expansion for new locations and reformatted others. It laid off some workers in its grocery division, shelved its idea for drive-up pickup sites and experimented with a new subscription model for online shoppers.

Is Amazon’s grocery business approaching its expiration date?

“In the world of nonperishable, nonedibles, Amazon is very dominant,” said Sucharita Kodali, an analyst from Forrester who has followed Amazon’s grocery efforts since they started. “In fresh foods, Amazon is not a significant player.”

“If I were Kroger, I would not spend a lot of time focusing on Amazon as a competitive threat.”

At the company’s annual shareholders meeting last month, CEO Andy Jassy listed grocery as one of the many businesses Amazon is passionate about growing. Chief Financial Officer Brian Olsavsky told reporters earlier this year the company was “pleased” with its growth in physical stores.

“You’ll see us continue to iterate in grocery because we believe when we find the right mix of offerings for customers, we can meaningfully improve their shopping experience,” Tony Hoggett, Amazon senior vice president of worldwide grocery stores, said in a statement to The Seattle Times.

But the changes over the past several months have left many analysts and academics skeptical of how Amazon is going to succeed in a competitive, low-margin business — and some questioning how long the company should keep trying.

“As an observer who’s watched the company for years, and knows the economics of the grocery industry, I can’t say it makes sense,” Kodali said. And Amazon’s recent changes to its grocery business “suggest that they don’t think it makes sense either.”

From books to groceries

Amazon quietly entered the grocery business nearly two decades ago when it launched an online delivery service for nonperishable goods — with ambitions to expand to sell just about everything.

In an announcement on its website, according to a 2006 article from CNET, Amazon told its customers: “Because we only carry products when we can offer great prices and free shipping, we don’t carry everything (yet!)”

Since then, Amazon has begun selling perishable goods online and introduced Go convenience stores, Fresh grocery stores and Fresh Pickup sites, where shoppers would pick up online orders. It closed the last of its two Fresh Pickup sites earlier this year.

In 2016, Amazon made a splash with the introduction of its Just Walk Out technology in a convenience store in Seattle’s South Lake Union neighborhood. The tech relies on a complex system of cameras, sensors and computer vision to track items as customers shop and automatically charge them for what they walk out with, skipping the need for going through a checkout line.

In 2017, Amazon cemented its brick-and-mortar grocery presence when it acquired Whole Foods in a $13.7 billion deal.

Jake Dollarhide, an analyst and co-founder of Longbow Asset Management who has followed Amazon’s grocery business closely, said the acquisition sent shock waves through the industry.

Amazon’s stock went up and shares for Walmart, Costco and Kroger tumbled as investors and competitors prepared for the e-commerce giant to disrupt the traditional grocery retail market.

That initial reaction turned out to be a huge overestimate, Dollarhide said, and it was the last time Amazon’s grocery moves jolted the industry so significantly.

“Some people would call their foray into groceries a mistake, and that would be fair, to an extent,” Dollarhide said. “They’ve had more closures, resets and renovations than they’ve actually introduced concepts at this point.”

In 2022, Dollarhide told CNBC Amazon’s grocery business was an“expensive hobby.” Today, he said, that’s still the case. “Nothing has changed since Day 1 for Amazon groceries. Everything remains in flux.”

Amazon and Whole Foods still capture just a small part of the $8 trillion grocery industry.

Amazon, on the other hand, accounted for 2.8% of total spending. More than half of that came from in-store purchases at Whole Foods.

Though Amazon’s online grocery sales have grown year over year since 2020, the e-commerce giant still fell behind Walmart last year, according to data from Insider Intelligence and eMarketer. Walmart reported $49 billion in e-commerce grocery sales in 2023, while Amazon recorded $36 billion.

“The grocery effort, in our minds, is subpar,” said Scott Mushkin, founder and CEO of research firm R5 Capital. Amazon is a leader in logistics and distribution, Mushkin said. He is bullish on almost every part of the company — except grocery. Amazon needs to make radical strategy changes there if it wants to succeed, he said.

“There’s nothing new — this is kind of the bottom line — there’s nothing new that they’re putting forward in the grocery space,” Mushkin said.

Since Amazon’s acquisition seven years ago, Whole Foods has added nearly 70 stores in the U.S., the U.K. and Canada, and the company says 75 new locations are in the pipeline. After opening Amazon Fresh in 2020, the company quickly expanded to 44 stores in two years. It has since closed three in the U.S., including a store in Seattle’s Capitol Hill neighborhood, and paused its expansion of Fresh locations last year.

Amazon still operates four Fresh grocery stores in Seattle and said earlier this month it plans to open “several” new locations around the country starting this summer.

A new format

Amazon sees a role for itself in the grocery industry.

Rather than multiple stops at multiple stores, Amazon says it can offer shoppers all their grocery needs through one familiar brand — whether on the app, online or in store.

“We continue to be optimistic about what we’re doing in grocery,” Jassy said on a call with investors in April. “We have lots of ways that we can continue to help customers satisfy their grocery needs.”

Company executives first acknowledged Amazon was reevaluating its grocery strategy early last year.

In February 2023, Jassy said Amazon had paused expansion of its Go convenience stores and Fresh grocery stores as it worked to “find the right format that resonates with customers … and where we like the economics.”

Over a year into that experiment, Amazon has made several changes. In addition to closing stores, Amazon introduced a new layout for Fresh and debuted a new, smaller format for some Whole Foods locations. In Fresh stores, it is swapping the Just Walk Out system for Dash carts — smart grocery carts. It lowered prices at Fresh and created a new delivery subscription for customers who also signed up for Amazon Prime.

The changes are a mix of good and bad, according to more than 10 analysts and academics who spoke with The Seattle Times.

Closing stores is never a good sign. New store formats and a new subscription model are usually positive indicators. And, for a company like Amazon, removing and replacing technology is often seen as the price of innovation.

“All of these are very consistent with how Amazon operates,” said Dan Romanoff, an analyst with Morningstar. “They get an idea in their head and they kind of tinker with it until they get it working. They’re always pulling a bunch of levers and tightening little screws here and there until they’re happy with it.”

Each change is just another screw tightening, Romanoff said.

Because Amazon’s investors are used to the company taking big risks — and hopeful that those risks will pay off in the same way its e-commerce and cloud businesses did — Romanoff said Amazon has a leg up on the competition.

It’s not clear exactly how much Amazon is profiting from grocery sales, but it is a small share of the tech and e-commerce giant’s business. Physical stores — including Amazon Fresh, Amazon Go and Whole Foods — brought in $5 billion in revenue last quarter. Amazon’s online stores — including sales from Amazon.com and online grocery orders placed for pickup — brought in $54 billion.

“I don’t think Amazon is on the clock because of investors,” he said. “They’ve got plenty of runway.”

Mixed results

Amazon isn’t alone in trying to navigate a tricky physical retail landscape.

Mehmet Altug, a business professor at George Mason University, said some of the changes aren’t unique to Amazon.

Major retailers across industries closed nearly 5,000 stores in 2023, marking a 28% increase in store closures year over year, according to a January report from Coresight Research. It pinned the increased closures on “muted consumer demand” and rising interest rates.

Expecting Amazon to “go in the other direction … it’s unrealistic,” Altug said.

Similarly, Uttara Ananthakrishnan, a professor at Carnegie Mellon University, said Amazon’s switch from Just Walk Out tech to Dash carts is not a sign of Amazon’s failure, but rather an indication that grocery shoppers are reluctant to change their habits, even if the high-tech solution could offer more convenience.

She considers the grocery industry the “last frontier” for technological change.

“If Amazon hasn’t had that much success … you can see how difficult the industry is,” Ananthakrishnan said. “If there is any tech company who will make a big splash, it’s likely going to be Amazon.”

Amazon has said it isn’t backing away from its Just Walk Out technology and plans to sell it to more than 120 third-party businesses by the end of this year, doubling the number of non-Amazon enterprises that use it. Some retailers already leasing the technology, including T-Mobile Park and Climate Pledge Arena, told The Seattle Times that Amazon’s change won’t impact how the technology is used in its venues.

Even without Just Walk Out — which Amazon says is well-suited for smaller shopping trips — Amazon Fresh stores will still be high-tech.

The company is expanding its use of Dash carts, which use the same computer vision systems as Just Walk Out to track a customer’s spending in real time. After shopping, customers walk through a designated Dash cart lane that automatically charges their account for the items they leave with.

“While a lot has changed in the 10 years since we started the journey to reimagine the physical shopping experience, one thing has remained constant: Shoppers still don’t like waiting in lines,” Dilip Kumar, vice president of AWS applications, wrote in an April blog post.

Outside Amazon’s Fresh grocery store in the Central District on a sunny Thursday afternoon, weeks after the company announced changes to its Just Walk Out tech, shoppers said they hadn’t heard or noticed any difference. That’s likely because they didn’t use the technology; seven shoppers who spoke with The Seattle Times said they did not use Just Walk Out technology or Dash carts.

Ziyada Ibrahim, a junior at Garfield High School, said she never used the tech because it made her feel like she was stealing. She never needs the smart carts, either, because she’s usually stopping in just for sushi or pizza and a drink.

Michelle Bae, a 28-year-old from Mountlake Terrace, said she never took the time to figure out how to use Just Walk Out. Even though it is meant to save time in the long run, she said she wasn’t interested in learning to navigate it for quick trips during a lunch break or on her way home from work.

Jan Harkness, 76, who was visiting from Medford, Ore., said she tried Just Walk Out once but ended up getting charged for an item purchased by another customer who had walked out in front of her. Amazon refunded the charge but now Harkness prefers to scan her own items and keep an eye on the receipt.

Asked about Just Walk Out, Wei Zheng, who is in her mid-40s and lives in the Mount Baker neighborhood, asked what that was.

Zheng comes to the Amazon Fresh store when she has a return to make, but said she wouldn’t use it as her primary grocery shopping trip. The store doesn’t have some of what she’s looking for, particularly traditional Asian foods. But, she said, it’s on the bus line.

Most of the shoppers who spoke with The Seattle Times felt the same way: They like the store for its proximity to work or home and said they often find good deals, but said Amazon Fresh was a quick stop, rather than a destination for their weekly grocery trip.

“The variety is not as good but as a Prime member it is a deal,” Zheng said. “I would not come here just to buy groceries.”

Harkness described the overall experience as “better than a 7-Eleven.”

Mushkin, from R5 Capital, recently visited an Amazon Fresh store in Irvine, Calif., where the company had boasted of changes to improve the shopping experience. He saw slight upgrades — like placing flowers by the entrance and working on the lighting — but said the store still felt very “clinical.”

He was also alarmed by the product placement: Ice cream was next to health care products; frozen pizza was next to baby food; laundry detergent was next to frozen meals.

“As far as the store format goes, they’re just missing the mark,” Mushkin said.

Customers are often looking for three things from a retailer, Mushkin said: Save my time, enhance my time, save my money. Amazon was probably aiming to save shoppers’ time with its Just Walk Out technology, he continued, but “the time being saved was not enough.”

David Bishop, a partner at the analytics firm Brick Meets Click, focused on Amazon’s new subscription model for online grocery shoppers. In April, Amazon said Prime members could pay$9.99 per month for free grocery delivery on orders over $35.

Bishop saw the new promotion as a sign Amazon hadn’t been able to use its grocery business to convert shoppers to Prime subscribers — one of the main goals of most of Amazon’s far-reaching offerings, from Prime Video to health care.

“Maybe grocery isn’t as powerful for Amazon as they had hoped,” he said.

“Give it five more years”

Kodali, the analyst from Forrester, saw a shift in Amazon’s approach to grocery when Jassy took over as CEO in 2021.

Under Jeff Bezos’ leadership, Amazon made a big announcement about its grocery or apparel business every few months, she said. In the three years since the leadership change, Amazon has closed its brick-and-mortar bookstores and 4-star shops, where it sold electronics, toys and home goods. It also backed away from Amazon Style, the company’s experiment with physical clothing stores. Jassy also oversaw several cost-cutting efforts, including shutting down some experimental tech projects, subleasing and closing some warehouses and laying off several thousand workers.

Jassy doesn’t seem to have the “appetite” for capital-intensive experiments, like grocery, Kodali said.

“I suspect he recognizes that they’ve made all these efforts [and are] supposed to have made all these learnings,” Kodali said. “And the learnings should be ‘it’s really hard for Amazon to crack these categories.’”

Kodali wouldn’t be surprised if Amazon sells Whole Foods in the next few years.

In response to questions from The Seattle Times, an Amazon spokesperson said the company has “no intention of divesting Whole Foods Market.” The company said it has streamlined costs broadly to focus on long-term strategic investments where it believes Amazon can move the needle for customers. Grocery is one of those investments, Amazon said.

While some analysts expect Amazon to keep trying its hand at grocery — arguing that it takes time to disrupt an industry with low profit margins and a customer base that is resistant to changing shopping habits — Dollarhide, from Longbow Asset Management, also predicts Amazon will “pivot” in the next few years.

Like Kodali, he wouldn’t be surprised if Amazon sells Whole Foods, or folds its Amazon Fresh brand into the existing Whole Foods model. He also predicted Amazon could shift from trying to compete with grocery stores like Safeway and Kroger to trying to build a brick-and-mortar “everything store,” like Walmart and Target.

“Give it five more years,” Dollarhide said. “At some point, you’re throwing billions at a low-profit business that could be going into cloud, going into e-commerce, going into AI.”

©2024 The Seattle Times. Visit seattletimes.com. Distributed by Tribune Content Agency, LLC.

SRPD officers were dispatched to the transit mall a little after 3 p.m., the department said, in response to calls about a fight and stabbing. They arrived to find the 15-year-old bleeding badly from the arm, with additional stab wounds to his torso. Officers applied a tourniquet to the boy’s arm, and responding medical personnel transported him to a local hospital.

According to SRPD, detectives from the Gang Crimes Team learned that the 15-year-old, a 17-year-old boy and Edgar Garcia Riveros, 19, attacked a 24-year-old male victim at the transit mall in an attempt to rob him. The victim defended himself with a 4-inch kitchen knife he’d held in his pocket.

Riveros was booked at the Sonoma County jail, the 17-year-old at Juvenile Hall. As of Friday evening, the 15-year-old was still receiving medical care.

All three have been charged with attempted robbery and gang participation, with an additional gang enhancement.

Santa Rosa Police Department asks anyone with information regarding this investigation to contact its Gang Crimes Team at 707-543-4021.

You can reach Phil Barber at 707-521-5263 or phil.barber@pressdemocrat.com. On X (Twitter) @Skinny_Post.

(c)2024 The Press Democrat (Santa Rosa, Calif.) Distributed by Tribune Content Agency, LLC.

Steven and Katherine Wolf missed out on the ultra-low mortgage rates of the pandemic. By the time the couple secured solid jobs and could buy a home, borrowing costs more than doubled.

Rather than wait, the former renters jumped into homeownership in fall 2022. They also stretched, buying a Bakersfield, California, home that carried an uncomfortable monthly payment.

Steven Wolf figured the pain would be fleeting. Within a year rates would drop enough to allow them to refinance and put hundreds of dollars back into their pockets.

That hasn’t happened and isn’t expected to soon. In fact, rates are higher.

“We did this with the expectation that we would only have to weather this high payment for a chunk of time,” the 37-year old English teacher said. “Now that chunk of time is looking like it might actually be permanent.”

Across the country, many buyers employed similar strategies after rates surged in 2022 — at times encouraged by real estate agents and mortgage brokers who earn a commission on each deal. The tactic could still work, but as interest rates stay higher for longer, some Americans express varying degrees of regret as their finances buckle.

A woman in Twinsburg, Ohio, said she’s taken a second job. A man in Oregon said putting money away for retirement is a “distant thought.”

Some said they’re now selling their home or will need to soon. Chelsea Bolinger purchased a house in Highland Ranch, Colo. The 35-year-old tech worker called the experience “horrible.”

“I only bought it because the loan company really pushed that interest rates were going to go down,” Bolinger said.

In Wolf’s case, he said his family’s monthly housing costs jumped nearly $1,500 when they ditched their second-floor apartment and bought a Bakersfield house for $421,000, in part because he and his wife wanted a yard for their two children.

Unable to knock down his monthly payment through refinancing, the family is making little progress paying off other debts and Wolf is working an extra period.

His wife, a speech language pathologist, has picked up weekend shifts she wouldn’t have if rates had dropped.

“That would have been more Saturdays together with the kids,” Wolf said.

In theory, the strategy Wolf and others employed is supposed to work like this.

Buy now — when rates are high and demand low — and you’ll more easily snag a home than if you waited until rates drop and reignite extreme bidding wars.

By acting now, a home’s purchase price will be lower. The monthly payment will be high, but that will go down once rates decline and you refinance.

As some say: Marry the house. Date the rate.

Personal finance, of course, is complicated.

When refinancing, you pay loan fees and other closing costs, which can exceed several thousands of dollars. Consumers must weigh those upfront costs against any savings on the monthly payment.

Holden Lewis, a mortgage expert with NerdWallet, said it typically makes financial sense to refinance once rates drop at least three quarters of a percentage point from where you bought.

According to the Mortgage Bankers Assn., the average rate on a 30-year fixed mortgage should drop to 5.9% by the fourth quarter of 2025, compared with 6.9% currently.

Buying now can be smart, but people should only do so if they are comfortable with the current payment, Lewis said. Expert predictions of falling rates have been proved wrong time and time again. Other home costs — such as HOA fees and insurance — tend to go up.

Even if rates fall, there’s no guarantee you’ll save. Your credit score could drop and lenders will charge you more.

Amy Ramirez is among the many Americans who say they have no regrets.

She and her wife, Noelle, bought a home in Rancho Cucamonga in March. They can comfortably afford it and love the additional space compared with the property they sold in Los Angeles.

Ramirez isn’t expecting rates to drop soon and thinks buying when they did reduced the likelihood of bidding wars on their turnkey, four bedroom house with a swimming pool and mountain view.

“It is just great,” said Ramirez, who, along with Noelle, runs a s’mores shop in West Covina.

High mortgage rates aren’t only affecting consumers, but are also slamming many in the real estate industry as transactions decline.

Some lenders have responded with “Buy Now, Refinance Later” programs that offer reduced refinance fees if you take out a mortgage with the company to buy a home, then use them to refinance within a certain period of time.

Lewis said consumers should check whether the purchase mortgage in such a program carries higher fees or interest rates and also understand that when it comes time to refinance, other lenders may offer lower rates that would save far more than any reduction in fees from the original lender.

As of now, experts said there’s little sign that the inability to refinance will cause a bust similar to the collapse of the 2000s housing bubble.

Then, rising mortgage rates and falling home prices prevented many Americans from executing their plan to refinance out of risky loans before monthly payments adjusted upward from initial teaser rates. Stuck with those high payments, people entered foreclosure en masse, causing home prices to plunge.

Now, home prices are rising and struggling borrowers can probably sell to pay off their mortgage.

Even if prices were to fall, today’s tighter underwriting standards mean people should be better equipped to afford their mortgages than last time, while lenders offer struggling borrowers more options to adjust payments so they don’t lose their home.

“You are going to get very few foreclosures,” said Laurie Goodman, founder of the Housing Finance Policy Center at the Urban Institute think tank. “You are not going to get into that vicious cycle.”

In hindsight, Wolf said, he wished he had sought advice from someone without a financial stake in his home purchase, because he didn’t understand how to properly calculate the risk that his loan officer’s prediction — rates below 6% by summer 2023 — wouldn’t come true.

“I’m not a financial professional,” Wolf said. “I am an English teacher.”

A spokesperson with Wolf’s mortgage company, PrimeLending, said that the company could not comment on individual clients, but that it evaluates a borrower’s ability to repay based on current interest rates and that it “does not make guarantees” on how borrowing costs will change.

“The mortgage market is inherently unpredictable, and while we provide information based on current trends and expert analysis, these are not assurances,” the spokesperson, Mandy Jordan, said in an email.

Going forward, the Wolfs are looking to move to Baltimore after getting better job offers there.

Because their high monthly payment is more than what they could rent their house out for, they’ve listed it for sale and don’t expect to get their down payment back.

The other day, Wolf said he spoke with his loan officer who encouraged him to buy right away in Baltimore so they don’t get priced out and gave a new prediction for when rates would drop.

He also offered to do their loan, according to Wolf.

©2024 Los Angeles Times. Visit at latimes.com. Distributed by Tribune Content Agency, LLC.

Ever found yourself laughing at your computer or phone screen while reading a review for a rudimentary product on Amazon?

Perhaps for the “Wolf Moon Shirt” that went viral in 2009 or the banana slicer, a product for which there was no demand (“For decades I have been trying to come up with an ideal way to slice a banana,” reads a top review).

Maybe for the lift-a-flap book Where Is Baby’s Belly Button? (One popular review for which is titled “DO NOT buy this book, you can SEE the ending right on the cover!”) Or the sugar-free gummy bears that reviewers said severely upset their stomachs. (“Cheaper than a colonoscopy!” wrote one.)

Temple Fox School of Business professors Sunil Wattal, associate dean of research and doctoral programs, and Susan Mudambi set out to find out what impact these pseudo reviews have on consumers’ online shopping habits. Working with professors from the University of Virginia and the University of New Hampshire, they published their findings in a recent study, “Not Just for Fun: The Effect of Pseudo-Reviews on Consumer Behavior.”

“It was just a fun study to work on because we laughed a lot,” said Mudambi, professor emeritus of marketing. “Researchers usually don’t laugh a lot about our research projects.”

For the study, more than 250 people read real Amazon reviews, which were either pseudo-positive, pseudo-negative, genuine-positive, and genuine-negative, and reported how likely they were to buy the item based on the review. Then, another 180 participants looked at product reviews that were either all genuine or all pseudo.

All participants were recruited through Amazon Mechanical Turk, an online service often used in academic research, and compensated for their time. They read reviews for products that had been selected by the researchers based on their popularity, measured by the number of reviews.

The researchers found that pseudo reviews can both increase and decrease sales depending on the context. While a genuine negative review might dissuade you from buying a product, a pseudo negative review could prompt you to purchase for the laughs.

Here’s what the researchers want you to know about pseudo reviews.

The following interview has been edited and condensed for clarity.

Q: What inspired you to look into reviews?

Mudambi: We started on this almost 10 years ago. There were just thousands of reviews on this silly T-shirt of three wolves baying at the moon. It went viral for a while. It got us thinking: Why are people going to the effort of reviewing something in a humorous fashion?

Wattal: People have been reviewing for a long time now, but the fact is that these were not really reviews. It was just people trying to be funny. They were popular, and they were being read. The fact that the platform even allowed these reviews, we found that aspect fascinating.

Q: What are the motivations behind these exaggerated reviews?

Mudambi: Erin, can I ask you, have you ever written a review on Amazon?

Q: I actually don’t think I have.

Mudambi: And have you ever read reviews on Amazon?

Q: Oh yes, all the time.

Mudambi: I have a class of 40 students and everyone will raise their hand that they have read reviews. Generally, 0 to one have actually written a review. So it’s kind of a bigger question: Who writes these reviews that we rely on? And for funny reviews, it’s a smaller subset, but the motivation might be similar: That they’re trying to make a name for themselves. Or else they just have way too much time on their hands.

Q: Is it always obvious it’s a pseudo review?

Wattal: These kind of reviews are clearly exaggerations. Nobody would really think that you’d get that level of gastric distress on a couple of gummy bears or that you’d get superpowers by drinking milk or getting a T-shirt. There are some gray areas, but for the most part, people will be able to tell these are just somebody being goofy.

Q: How do these reviews impact consumers’ decisions?

Mudambi: We find that a lot of time with the negative pseudo reviews, some people are more likely to buy the product because it’s so funny or controversial. Because once again, a negative funny review isn’t really a negative review in the same way as a genuine review. You’re saying, ‘This T-shirt, I’m giving it one star because every time I go out and wear it I’m attacked by people who want to go out with me or to kiss me.’ Is that really a negative review?

Wattal: The effect of the rating of the review is kind of tempered by the humor. If it’s a positive pseudo review compared to a positive genuine review, the effect is much less.

Q: What are your biggest takeaways for consumers?

Mudambi: Consumers should beware of any review that is too positive or too negative. My other takeaway is if you’re looking for some benign humor, online reviews are a good place to go. But don’t take yourself or the products or the reviews too seriously.

Wattal: Don’t take anything at face value. On the other hand, it’s an opportunity. If you’re looking for a gift for your friend and something is viral with all these fake reviews, you might as well buy that. Chances are it’ll generate a good laugh at a party.

___

©2024 The Philadelphia Inquirer, LLC. Visit at inquirer.com. Distributed by Tribune Content Agency, LLC.

When Netflix announced last month that it had acquired the rights to two NFL football games to stream on Christmas Day, TV news agents were buzzing.

If the streaming behemoth is getting into sports — after saying for so long that it wouldn’t — could live news shows be far behind as the Los Gatos, California, streaming giant diversifies its programming roster?

Think of the ease of a button on the Netflix home screen that could take users to a breaking story, such as last week’s guilty verdict in former President Donald Trump’s hush money trial in New York. Or consider how Netflix, which has 270 million users worldwide, could send out an alert to get viewers to watch coverage of the State of the Union address or a presidential debate.

Nielsen data for April shows that Netflix is the second most-watched source for television viewing, accounting for 7.6% of all TV consumption behind YouTube’s 9.6%. Live news would give users another reason to log in at a time when they are looking to consolidate the number of streaming services they pay for each month.

Also, it would expand on what Netflix is doing with live broadcasts in other genres, such as the company’s star-studded “The Roast of Tom Brady” and the Netflix Slam tennis tournament.

Last year, Netflix added a subscriber tier where users who sit through sponsor messages pay a lower monthly fee. Live content such as the NFL and the WWE’s weekly “Raw” show (coming to Netflix next year) will have commercials, bringing Netflix ad revenue in addition to subscriber fees. The company demonstrated its commitment to capturing a share of the TV ad market with its first glitzy, in-person upfront sales presentation in New York last month.

Live news is an effective way to get audiences to sit through ads. After diving into sports, news could be a logical next step for the company as it seeks to become viewers’ one-stop shop for TV viewing.

It would certainly be a welcome development for people who represent on-air news talent. The traditional TV networks that pay their clients handsomely are losing audience and revenue. Some agents fear significant downsizing and cost-cutting after the 2024 presidential election in November and nothing would lift their spirits more than having a new, deep-pocketed bidder enter the playing field.

It’s not happening anytime soon.

The company has internally discussed the opportunities in news, just as it has for many formats on traditional TV that attract audiences. But when asked about any plans along those lines, a Netflix representative cited a recent interview with Netflix Chief Executive Ted Sarandos in which he said the platform has no plans to pursue breaking news.

But what the TV industry has learned about Netflix is that it can quickly change its mind.

“Netflix also said they were never going to do sports, right?” said Bill Hague, executive vice president for Magid, a media consulting company. “And they said they were never going to do advertising and they’ve done that. These are not firm lines in the sand.”

Still, veterans of the TV news business have some advice for Netflix: don’t do it.

“I think it would be ill-advised for Netflix to get into live news,” said Andrew Heyward, a former president of CBS News who now is a strategic adviser to local TV stations. “There are excellent players doing it now who are struggling.”

One reason is that news is not quite like sports. League media rights fees have escalated in recent years, because live game telecasts are the most reliable way to attract large audiences for appointment viewing. The buyers of those rights have some degree of certainty of what they are getting when they sign the deal. Not so with news.

“In sports you know where the cameras are beforehand and everything is exclusive,” Heyward said. “The big difference between sports and news is having to pay to be prepared for the unexpected. It’s a very unattractive financial proposition.”

News is not only unpredictable but expensive to produce and perishable after it goes on the air. Breaking coverage is not exclusive to a single outlet. Live feeds of events are now ubiquitous in the streaming and social media era.

Internet-connected televisions give consumers the news through free, ad-supported streaming channels, such as CBS News 24/7 or NBC News Now, without charging for a subscription.

As Heyward noted, there isn’t enough demand for the news content already available.

Cable news remains highly profitable, but cord-cutting is slowly depriving them of the subscriber fees that have sustained the businesses for decades. Younger consumers are bypassing traditional TV and not developing the habit of news viewing (although many network news programs are repeated on their favorite platform, YouTube).

News sources across the media — from newspapers to podcasts — are suffering significant audience declines and downsizing after the heady years of the Trump White House.

Some legacy media executives likely have daydreams about exiting the news business as the path to profitability becomes more challenging. Last year, Walt Disney Co. Chief Executive Bob Iger publicly said the company’s linear TV networks, which includes ABC News, were not core to the company’s business and he could envision spinning them off.

He later backtracked and said ABC was not for sale.

The stir caused by Iger’s remarks demonstrates how news is ingrained in the culture of the broadcast business. In the early decades of the TV, it was acceptable for news to be a financial loss leader. The news divisions were considered a public service necessary to maintain the networks’ right to use the nation’s airwaves for free.

They also built stature for their parent companies. Affiliate stations still depend on the national broadcast networks for news to supplement their own local coverage. News provides a brand identity for networks, right down to the logo painted on production trucks that show up for live shoots on a neighborhood corner.

Networks became more cost conscious about news when the business matured and shareholders demanded better financial performance.

Veteran news executives doubt Netflix would want to take on the pressures of entering a crowded, competitive field that invites scrutiny, requires transparency and often creates controversy. “It’s a big expense and it’s a headache,” said one former broadcast network chief.

Netflix would be better off licensing programs produced by an existing news organization that already has a news-gathering infrastructure in place, several TV executives said. (Netflix carried original shows from CNN before Warner Bros. Discovery moved them over to its streaming service Max, which now offers a streaming feed of the channel).

While news is not on Netflix’s agenda now, Magid’s Hague expects the company to respond if the need arises.

“If you’re going to try to reduce subscriber churn and increase lifetime value of your service you have to really provide a very complete meal to your consumers,” said Hague. “I think they’re playing with what’s the right mix — and that mix will always change.”

©2024 Los Angeles Times. Visit latimes.com. Distributed by Tribune Content Agency, LLC.