RiskCast: Episode 2

Hi and welcome to the second episode of the Risk Management Magazine and Risk Management Monitor Blogs podcast. The Risk Cast, I'm Bill Coffin, publisher editorial director of Risk Management Magazine with me's my editorial staff, Emily Holbrook. Hello. We're going to work.

Hello. And Jared Wade. Hey, thanks for joining us. We've got a couple of interesting stories lined up here to talk about today.

I think what we like to go into first is a story that I started following this yesterday, but it's actually going on for a good portion of the month. On November 5th, there's unusual armor car heist happened in France, which immediately captured my imagination because I love crime stories and what I'm reading about, clever criminals and so many of them are not clever. But what happened is this guy, a Loomis armored car guard in France named Tony Newselin. Basically, he had been working for the company for 10 years, perfect employee, no reason to believe that he was up to anything.

Just normal day at work, whatever. He was the shift, I guess commander, whatever he was the top guard in the three men crew. They did all their errands. They stopped off at the bank of France last, last jump of the day.

I sent out the two guys in the car to do one last errand in the bank and then he just took off with the truck and left with about $17.17.2 million in unmarked Eurobills. So it was this massive heist. He just, he just vanished. And it was kind of funny because the authorities, he'd been kidnapped originally because he just, he just appeared in his car or anything.

Then the car was later found and then they realized that this guy, he had cleaned out his bank account, he had about 100,000 euros in his bank account. And then strangely he had also bought a, like a $250,000 Ferrari last year. So, and this is where a guy gets paid about $3,000 a month to be a security guard. So very unusual situation kind of arose.

He became this anti-heroist. He bought the Ferrari before he stole the money? Yeah, yeah, yeah. No, no, no, this is a weird thing.

Oh, he did that. Not the first rodeo problem. Right? Well, I mean, he gets paid crap, right?

He gets paid $3,000 a month, okay? So, it's about 750 a week to guard millions of millions of dollars in a big truck, right? Obviously, there's no way he legitimately came into the quarter mill, he needed to buy the Ferrari. He then somehow also had another $150,000 in a bank account.

He was sitting around, he cleaned that out before he took off. So the authorities quickly thought it was an inside job. It turned out was just him. So, apparently he's been planning for a long time.

People in France go nuts over this guy. They love this guy. They're websites dedicated to him. They're fan sites.

There's like a Facebook fan site came up and got 1,000 fans in the first day and people just went crazy for this dude. It all had kind of anti-climactic ending because yesterday he turned himself in Monaco after 11 days on the run. He came in and sort of in a state of confusion, the authorities weren't really sure why he turned himself in or whatever. He didn't have $17 million.

They recovered about $9 million a few days later after the high. But he's still about $3.5 million on account for it. He's not talking at all. He's very uncooperative if you want to give it up.

People in France are basically like, yeah, this is a great job. He's like, no, when they try him for this, he's probably only going to get about three years in jail. So, the prevailing attitude is, yeah, this guy ripped off millions from a bank. How was he only getting three years in jail?

Apparently the thing is that because he stole all this money without even threatening violence. He just drove off of it. It's a very nonviolent crime. They're charging him for theft, obviously.

They're also charging him for fraud. Because he reported, before he did the theft, he reported his Ferrari stolen. Apparently what happened is the guy has family and ties in the Balkans. Apparently he drove his Ferrari to Serbia, stash it there somewhere, reported his stolen, and then ripped off all the cash.

So they're going to hit him for fraud as well. But mainly just because they're looking for anything to throw at him so he does more than three years of jail time. Because what they're always going to start with is that, I mean, you can only imagine how bleak the feeling against bankers and financiers in this country. Apparently it's even worse in France.

So, people really worried that given the large amount of public sympathy this dude already has, if he gets off with only three years, people go, hmm, everybody will steal from it. He's paying a million dollars a year to sit in jail. It's like people are like, I can do that. Sure.

How much money does the bank out that they have recovered right now? About 3.5 million. Yeah, he's being uncooperative. He won't.

You know what? It's kind of like, remember that big arc theft in the Ava Gardener Museum of Boston? They're like 20 years ago. This guy stole 300 more time.

No, no, no. These guys stole like 300 million dollars worth of art. And the one guy who's the legend mastermind, he still has never said where he already is. And everybody's concerned that there's why because he plans to sell it once he gets out.

He stashed it and once he gets out of jail. Do you want the Ava Gardener Museum? Yeah, I probably got it wrong. Yeah, I'm a little wrong there.

I'm a great movie career. I didn't get to steal that art. Yes, yes. I think we're trying to worry about this.

You know what I mean? A copycat is sort of thing. But you know what immediately brings to mind from a risk management perspective is this. You've got a guy, even though I'm coming like we must do background checks and all these people.

He's been working for 10 years. Apparently had a spotless history. A bit of a loner, but he wasn't giving off crazy signals or anything like that. He's looking paid really a pittance when you get sort of the value of what he's being asked to not steal.

Every day you go to work as a number car driver, you're undergoing a morality check of am I right? Am I not going to drive off with this big pile of cash? And it wasn't big pile of cash. I mean the photos of the money they've received.

It was 50 stacks of bills. It took up a whole like, yeah, I would like fill this office with money. And it was a huge pile of money. This is a gigantic office.

It is sweeping views. It's cabbiness. It's sweeping views. I've already piled some money everywhere.

Exactly. But the point is that it seems like the first thing you want to do is pay these guys more? Perhaps, you know, I just double their salary or something. I mean, did you say he was disgruntled or anything like that?

Was he a good source of that? Yeah, wasn't he a good source of that? Yeah, yeah. No, it's a good point.

Apparently, one of his coworkers said, I mean, very shortly before the robbery, he said, he said, they'll pay the bank, the bosses, we'll have them. But that's the only thing he said. And I guess he kind of made it known he was pissed off that he was not getting paid all that well. But I mean, honestly, it seems to be kind of a national pass on France to grip them at what you're getting paid for.

So maybe that wasn't seen as a clear indicator. He was about to make off with $17 million. So the moral then seems to be that you should probably pay your security guards a little more, or at least treat them better. Maybe some perks or something.

You think that would be common sense though, you know, to entrust your employee with that much of your money. You would pay them well to keep them happy. Yeah, but also speaks to a larger issue too. I think like there's been a lot of people in governmental capacities are everywhere that are looking at white collar crime.

And for something like stealing money, you know, that type of stuff from your corporation or from a bank or whatever, it's a white collar criminal rather than running off of the money truck. You know, then you do the same thing, you might even do less time. So, you know, there's no new legislation or regulations to kind of increase the penalties that people like that can face. Then you're in a MetLife prison, you know, and then you come out and you're $10 million richer.

Yeah, I would imagine this guy probably has some CEO that he knows of, or that's particularly incensed him that he knows his other guy's got $100 billion that he built from whatever company. So I should not take a truck full of $17 million. Well, that seems to be kind of a bit of what's smurring the whole hero worship of this guy in France because a lot of people are thinking that a lot of a lot of mess and bankers and the Wall Street folks who created the great big crash and all that sort of thing, these people have lost, or other just skids about fraud have stolen well more than this. And are getting off maybe not even being charged.

People who crash, well, I can't exist, I'm not being charged for anything. Some of them just lost their jobs. And some of them are still doing what they're doing, getting paid very, very handsomely for it. And I think that that really feels a lot of huge, much much the average folks in France.

So it's kind of a new situation. But it seems to also play to a larger sense of criminal worship going on over in France because the article that I read has indicated that there's a lot of people in France. It's not common for French people to really go nuts when some criminal like this sort of gets away with a crime and is seen as being clever. I mean, the French people like the fact that he did this without hurting anybody and basically had a gun to just drive off with you.

But that's not unique to France. I mean, American pop culture is based on hero worship of gangsters of all kinds. I mean, it's not really popular movie. And that's not about a guy who's really nice to kids on Christmas and stuff.

But that wasn't real to me. You talk about Jesse James and Dine Clyde and all that stuff. Yeah, right. Jesse James particularly was a super hero back in the old school gangsters.

I mean, we don't have those type of gangsters now, I guess, because they were only stealing it. They were only stealing $3,000. Bank robberies don't really... Well, not easy to have rocks.

I mean, not easy to have rocks in your head to steal a bank in the United States. I mean, the average bank robbery, we're talking about this the other day actually. The average bank robbery I guess in the US, nets you about $3,000, right? Because you clear out the drawers and you're out of there.

And you go to jail for like 20 years to go to France. Yeah, and the fans have like a more than 90% chance of catching you. And at least because you always hear stories of these guys. They do something stupid like the leave behind their wallet or a business card.

You know, some other device that says catch me please. I have your money. It's very, very strange. But I used to live out in Jamaica at Queens where I used to go to school at St.

John's University and we'd read the daily news and stuff. And it would seem like every day, or at least like three times a week, there'd be a bank robbery. Like just in Queens in the area. And so there was something I mean, I'm sure mostly people end up getting caught, but most times you're here about it would be successful.

You know, for a bad night or whatever that day. So I mean, you can't always... Depends on how it sounds. It's still a bad guy.

Probably a bad guy. I'm sure when you're stealing a bank, if you're robbing a bank, it's not like stealing a bank. Stealing a bank. Stealing a bank.

Stealing a bank. You're robbing a bank. And you're going to catch the bank robber later. So high, it's so easy to do that.

Take it. We'll get you in a minute. Obviously you have to see it. That's true.

But bank robbery is a sort of strike me as one of those things where a lot of bad guys know. They know it's a shirt. I think it's a victimless crime. They know the people aren't supposed to resist.

So they're probably not going to get shot while doing it. You know, I think I'm going to walk in. I don't even have a gun. Just put in the slip and say give me the money.

And they get it. It strikes me as one of those crimes that probably anybody could get away with if they only did it once. But the whole thing is, if you're going to be kind of person who's going to go and rob a bank, you're going to stop with this one bank. You're going to keep doing it because you can do it every time.

You can't steal this one. You can't steal this one. If you want to go to a diner, that's probably the way to go. You get more money from the customers walking in the wallet.

Exactly. Some kind of... Emily wouldn't know if she doesn't do it. Emily, have you seen a poll fiction?

Yeah, I have it. It's like when it first came out. Why do you have to line this podcast? You have to make this podcast.

I know what he was talking about. Just so we know, because we make a thousand references to this because we're fascinated by the fact that Emily does not watch movies. Only documentaries. It's probably a reference of one.

Now you're in. I'm very introvert. One last thing I just want to bring up about this whole Tony Musil in Capers. Is that any back to?

That's the same? Yeah, Tony Musil in. Sounds a little... Tony Cereal.

Yeah, exactly. But what's the range is that he obviously came up with about $400,000 to buy a really nice Ferrari and have a ton of money in the bank afterwards. It would seem that he had been stealing from somebody beforehand. It's in their screening process may have been a little flawed.

This is not like some guy who was just like the model employee one day, most likely. And who snapped and drove off the new Maccash. He was just a legitimate legal side job that nobody knew about and he was really good at betting. No, apparently he was just a quiet guy.

He did his job and went home and went left. He would lift weights and then he didn't really do a whole lot. But he had most of the money stored in a storage unit. He had rented under an assumed name.

And like I said, he had cleaned up his personal finances before he actually took off and went to Monaco. So he actually had the whole thing planned out. It seems like maybe he had been stealing all along. Or something.

Because the authorities are not saying he was under investigation for any other crimes. I got to wonder was he slowly just taking a little bit of their over a long period of time to kind of test the defenses. Who would ever do that from their company? I would turn himself in then.

If this was like one of these plans. That's what I'm about for years. He was like the French DP Cooper. They had no clue where he was.

And actually there was a big French inter poll because they were really worried that if he was going to the Balkans. And once he got there, they would never see him again. You know, when the hills of Serbia were never going to find this guy. So I don't know.

Maybe he thought he was going to get caught and left a lot of money behind. And maybe he only planned on keeping 3.5 million. Who knows? Maybe he just had a mental breakdown.

But there's no way of knowing. I mean, when he came himself up in Monaco, the authorities said he appeared confused. And they weren't even sure if he knew where he was. So who knows what?

Maybe he just went on a bender for 3 days. He just walked in and hopped up on absinthe and said, you know what? Ain't it worth it. Turn on my cell phone.

Who knows? Either way. Watch your employees. They're all thieves.

That's my advice. Morgan especially. Please. I'm going to steal these microphones.

I'm not looking. That's our last podcast. That's right. Go.

Alright, so we're going to wrap up the second real quick. Take a short break and we'll be right back with more news and insight in the world of risk management. You're back. Jared, what do you got for us?

Well today, I believe it's today. The Pirates from Somalia. The second time I attacked the Mirsk Alabama. The second first time they were unsuccessful.

This time they were again unsuccessful because the ship used what is termed a Sonic Blaster. Sonic Blaster. Yes, a long-range and acoustic device as well as small arms fire to scare them off. Basically what it is is a loud sound making device that as soon as you hear it, you don't want to be around.

And they ran off. So it's the same shift that was attacked. And we have this in the upcoming December issue where we cover some of the risk issues of the past year. This is the same shift that was attacked early in the year.

And then they killed him. Then we send Navy SEALs in to kill them. Yes. Obama promptly got elected and then declared warren for Pirates and killed Navy SEALs inside the Pirates.

Yeah, they held the captain of that ship hostage for five days on a lifeboat at gunpoint until Navy SEALs. Yeah, yeah. Five days until Navy SEALs struck the shooters around and killed the three. The first one around the Pirates stormed the boat and the crew locked themselves in the engine room where they disabled the ship.

So the captain could drive to steer it. And then at that point they had to jump out and beat the crab out of the imparite and took him hostage. The rest of the pirates entered the captain hostage and there's a little back and forth and they were going to get back. And they gave us a pirate's head and gave us a guy and gave us a guy and we gave him the captain.

Pirates did. Pirates did. Ha ha. He was like, very jean's behind.

He won't be relying. And then went to a wayboat where they were there for like a day that ran out of gas and then went to a lifeboat set the Alabama drift. And then we're trying to get back to the shore where they could then, I guess, ransom the captain. That's when the captain showed up and gave him high speed, low distance, like boys.

So then the pirates come back and attacked the same ship. Yes, unbeknownst to them, I believe. They've been hit attacking the wrong ship. And they hit some French warship a little while ago.

They did, yes. Again, I'm not a success way. So basically the pirates were still running. They also just recently, I think they still are captive.

So people are just in the area on a yacht. They just kidnap them. So it's basically what it is. Any boat that goes to Somalia is subjected to the attack regardless of whether or not there's a warship or ship that has been proven to be the death of them.

A cat-mared couple sailed out. Doesn't matter. Because they can hold these people hostage and get money from them. And the coast of Somalia doesn't even seem to be much of an accurate indicator anymore.

For a long time, I guess, they'd stay away from 100 nautical miles of the coast. And it was 200 nautical miles. Not pretty much anywhere between the coast of Africa and the Maldi-Vilins. Yeah, there's a huge amount of territory.

These guys have been like deep water, or they call blue water attacks. Well, you've got to see that the mayor of Alabama was prepared this time. Yes, there was a last day. It's like a military force, armed force, on board.

Yeah, there were private contractors. Along with the sonic blast. Yeah, they had small arms. Which sounds just really cool.

It's better than shooting them. It's better than shooting them. I imagine it's great to be like... I'm glad it's not like a blast.

It's going to turn you away. Where do you get one of them? I just have to do this massive Death Star-type radio edition on the bow. If you heard of the stuff that I think stores are using, there's tones.

Yeah, ultrasonic things. Because they hit a certain frequency. Yeah, and I've heard of the computer. I've actually played it in so far.

I'm hearing it's held up enough that I can actually hear it. But I've heard that in certain malls, they'll play the stuff in the entryway where kids might be catering. Which also led to tours any younger employees from working in the perfumes section. Yeah, true.

I can imagine the sonic blaster is not just some high pitch squeal that annoys... It's a higher-tearing frequency. But it's got to be something more. Why is it walking the streets of Manhattan when an ambulance or an ambulance or a car, you know, rolls by and they've got their sirens going.

It is gear splitting. It's really loud. I can only imagine if you had a cane in, specifically designed to focus on your head, just how comfortable it would be. You're still trying to drive a high-speed boat towards a tank, some freight ship, and the guys on top are already shooting at Bulliss.

And then they hit you with the sound thing. I'd be like, you know what? I'll do it tomorrow. I wonder how much of those things cost and if it's feasible for any ship to run around with them.

Yeah, as the Wired blog says on it, it says, sometimes the combination of the LRAD, which is the sonic boom-making thing. Fire hoses and a vase of maneuvers is not enough. Sometimes you need to be a small arm. Need some guns.

I can't think of the only thing that would turn anybody. Sure. And one of the pirate bosses, a guy known as Red Team. Red Team?

Thank you. Never brushed. Ever. Of course, because his normal name of clearance isn't scary now.

Not 20 long butters, and we're scaring him. 20 long butters. I just random names you'd like to throw out there. He's reporting that four of his colleagues were killed or injured.

During the second half I'm saying attack. Yeah, we're serious. I know he's not suing, but he is. He's really pissed.

He's quoted in the air times of saying, we will keep attacking on foreign vessels until illegal fishing and toxic dump is stopped. So they're doing this as a pirate form of a green piece? No, that's just one of those. It seems to be that's what he is proposing.

I think they're more in front of mine. Yeah, I think so. Well, the two things I've read that basically since the collapse of the Somali government, what's happened is that there's been no national body there to challenge international fishing and toxic waste, off the coast of the country. Most international fishing trawlers when they're operating with national waters either can't or they have very strict fishing quotas enforced by the country.

And the country can always take it to the United Nations if it's not locally enforced. Somalia has no such recourse. In my understanding, it's been 17 years of central government that the local fishing grounds have been decimated by large-scale international trawlers. So I have read a couple different blogs, that sort of thing that I'm not condoning piracy necessarily put, but there's at least some sentiment out there that some of the pirates are basically people who just can't get a job otherwise.

Now, having said that, it's kind of like saying, well, you know, I tell a crack a little bit of bad neighborhood and I can't get a decent job. It's something that's Nigeria with oil fields, when other international companies come in and take your natural resources and kind of pisses you off. You should imagine the same as our bank robber fellow who saw other people getting paid when he wasn't in the same work for the same company. It's just really different as the means to which you go to make to write that, suppose it wrong.

Well, having said all that, I would imagine that if something were to happen immoraculously, Somalia, you guys act together tomorrow and hold new government. I mean, I think it would change. I'd love to think the pirates will go crazy and go back to fishing because they're making so much more money at pirates now. I mean, there's no incentive for them to stop the pirates.

I mean, I mean, the piracy industry is huge. No, I know, but how much? They're driving SUVs rather than the capital. Well, I was talking to a fellow who runs the Ocean Marine Unit for Swiss Re just this week.

And he said that it's kind of hard to gauge a total amount of money. The piracy industry is generally generating because a lot of shipping companies don't report their losses. But there are recent cases where ships are being successfully rants them for like $3.5 million. And that's for the ship, its contents, and the crew.

And we're talking cash drops. They figure out these contrived ways to drop money out of an airplane, hire a French-owned car guy to drive from Serbia. And I imagine there's a larger conglomerate of people that there's going to. If you actually look at, we have a photo in the upcoming issue of one of these boats that engages in the attacks, and they're really small, and there's not that many people involved in the actual attack.

No, it's not like it looks like it looks like it's just an outboard motor and something you'd go to a weekend fishing trip on the lake. I mean, the equipment is nothing special. This one photo's got a ladder used to paint houses. And it's not a big operation.

And because traditionally, I think a little more, some ships are going to the small arms and contractors on board for security purposes. But generally they haven't done that for the past few years. So they don't even need that much of an arsenal. One RPG and a couple of machine guns.

Which is small-air about $5 a piece. It's so easy to get armed to that degree, right? I don't think they're really supposed to. I don't think they're rather most shipping.

They're not allowed to have arms on board. I don't have no bearing to back that up. That'd leave you right? Well, there's been arming ships, say like mounting weaponry, like a flat can or something on the deck of your boat.

And having small arms. I mean, most ships have smaller lockers because in your international waters there's no gun laws to restrict you. You need something to protect yourself. But I mean, for a lot of ships they don't want to carry weapons or even engage pirates because it's encouraged as violence.

If you shoot on the pirates, they're not going to typically run away. I mean, I imagine there's some sustained gunfire between these guys and the valamaker, right? I mean, so. Did the guy from Swiss Rehavanna say about that too?

Because I've read certain articles where some of that is influenced by insurance purposes, why there isn't more ships or arming themselves. Yeah, I think it's Tony Cowie. And he really knew a whole lot about the whole thing. And really, what he said is he was talking about the use of crews to security teams to deter it, really.

But he was just more looking at it from the point of view of the ransoming and just, well, one of these he mentioned, I thought was pretty fascinating, because the fact that given how far Somali pirates are now operating in deep blue water, right, they're so far off the coast now, to avoid them entirely is really not feasible because that section of African coastline is basically a major, major world trade route. And if you're going to avoid it entirely, you've got to go so far out of your way. Because you know about the tip of Africa. Right, you've got to cut these like the hardly in the ocean.

It's going to add massive cost to shipping companies and add time and all sort of things. So it's kind of it's a problem. It had to be addressed. And really his notion was, I mean, security teams are tactical solutions, but really the solution is Somali has to get a government back.

And right now the country is fragmenting. It's got autonomous zones and Islamist insertants and Mogadishu and all that craziness. And this is obviously having a huge impact on insurance rates. I did an article for Race Management Magazine in January, February 2009 issue about the same topic.

And I was interviewing somebody, I think it was from always the one who maybe stated the fact that shipping insurance rates had skyrocketed from about $500 if you're sailing through the Gulf of Aden in 2007 to about $20,000 in 2008, just to take that same route. So it's really hurting companies and then hurting consumers too. And it does get captured or delayed some way. That's screwing up cargo lines and supply chains for everyone.

It's really like those big container ships. I mean, the total insurable value of this thing is just astronomical. You've got like billion dollar vessels, cruise through the water when you consider the contents and the whole cause. They really have to capture the stuff to do anything with the cargo.

No, they want anything to do. I mean, the whole essence of the ship and its crew. What I think that Kawhi-Saw is pretty interesting is how, I mean, what you see in Somali, it really is true piracy, which is what we think of traditionally as an armed group, actually attacks and takes over a ship. And for years and years, there were still incidences that were accounting as piracy, but typically it was more like people would get on board the ship and they would just rob the crew.

They would actually take their personal effects. They'd take stereos out of the cabin, they'd take your wallet, you know, that's what they'd just sort of steal petty cash off the boat. Yeah, yeah, right. It would be like a ship mugging and they'd just clean out that way and then you'd go on your way.

They wouldn't even try to crack into the cargo or take the ship. They didn't have the means, they didn't have where you're going to dump a great boat. But the situation in Somalia has created this perfect kind of set of conditions. And apparently it's not the first time in history that Somalia has been a hotbed of piracy.

It's just one of those places where the local geography and this trade gracias kind of makes this perfect opportunity for shipping to be easily disrupted in the area. So I seem like there's nothing good coming out of any time soon. It'll be interesting to see too as we move forward the more globalized society or you know, already have in these economic interests kind of coincide with these political risk angles. Whereas, you know, 10 years ago, 20 years ago, there's to be something, you know, UN and all these NGOs might take off as a cause to intervene and try to fix the Somali situation.

Now, you know, it'll be interesting to see how much global corporate organizations get involved in this and they're like, well, this is really screwing with our business. So we need to, you know, try to get some sort of activism that way. Well, at the very least, if you're running a ship through there, you own the shipping company might be in your best interest to have these measures and have security forces and have cannons and what have you. It's not something you necessarily had to lay out that sort of cause, but now maybe it is because it's pretty, you know, because it's your bottom line.

That's usually where you get things moving pretty quickly. Well, certainly something that's going to bear watching a whole lot more. I know we talked about piracy stuff in our last podcast and we want to beat the topic in the ground. But the last thing I wanted to leave you guys with is something I spoke to Swiss three earlier this week and they're actually kind of like a piracy season.

Like what's happening is that in this part of the world, the monsoon season is coming to an end. As it comes to an end, we're going to have six months of relatively calm weather in these waters. So when that happens, we can expect to see piracy attacks really increase in number. So we're probably going to see a lot more of it in the news.

And even, I mean, every major nation has got like warships in the area, China, India, United States, the European Union. I mean, they're all, Russia's got assets in the area. They're all trying to patrol. They just can't, even so they're so vast, like you just can't stop at all.

Yeah, they have drones flying overhead too. As you said, it's just too big an area to patrol. Yeah, well, I mean, the area that's getting hit most often is itself the size of a pretty sizable nation. No, so I mean, it's just these boachers are so tiny.

You sound like you have massive, massive galleons. Yeah, right, just sailing along. Oh, that's clearly pretty shiny depth at the helm. Yeah, it's not really hard to ever see.

But it is refreshing to actually have legitimate pirate name now though. We get red teeth. That's sold up teeth. Red teeth is the new patron saint of small eat piracy.

It's the new black grid. You're a black grid. Love it. Alright, we're going to take a quick break and come back again with more news and good stuff.

We're back. Okay, and we're back. Next up, Morgan, you guys have to share with us about what? Sure.

Hollywood. I really love watching Hollywood and watch itself shoot itself in the foot as new media comes along and it can't seem to adjust and does things more more to alienate its customers and lose revenue and doesn't seem to know what to do. I kind of like watching this part of an entire industry. It's sort of music.

It's mostly the guy in the print media business. It's a game from the rubber-necking standpoint. And it's thankfully not about print media. But, Hollywood is losing money hand over fist on CDs and DVD sales because, well, probably for a few reasons.

Most of the material that people are supposed to buy is terrible, I'm sure. Two people like to rent the stuff because, most likely, because most likely it's terrible. I mean, and you know, you have things like Netflix and Redbox. Redbox is those super market.

We see them in supermarkets and convenience stores as like the kiosks where you can get like a movie for like a dollar, like a dollar at night and just rent it at the supermarket. Sounds like a coke machine for movies. Basically. Yeah, just selling them by me just had one.

I thought it was a coke machine until I got closer and I got dressed on. I can't drink it. I'm not going to take it. There's no way this doesn't taste.

It's a little ball. It's a little ball. Anyway, that's sort of where the big money is and where people's movie interests at least have come. Hollywood has just great ideas saying, I guess the movie suggest like, we're losing money to Netflix people are not renting our brilliant DVDs so we need to figure out a way that we can bring up our revenues.

So why don't we do this? Why don't we take a 30 day window from the release of the DVD until the time that anyone can actually rent it. So it's going to be a whole month where you can get the purchase the DVD. Now, as I forgot to mention, the other big problem is piracy, of course.

Right. I'm not talking about the high-sees piracy. We're talking about the digital piracy in this case. Everything has to seem to have a tie right now.

Yeah, right. What they're basically saying as far as I can tell is you've got a problem with piracy and you've got a problem with products that people aren't really that keen on buying and you're basically saying, it's available in the world, folks. But you can't have it unless you pay $30 for it, which I think is just an invitation to go, why don't you just go pirate it? I think it more or less Hollywood is basically opening up a window where they're just telling people, more or less inviting people to pirate their movies.

Yeah, it's going to have an opposite effect. I mean, if you think about it, if you're a consumer of DVDs, you're used to getting them on their release date and particularly if you're used to getting them from internet-based channels like say Netflix or iTunes or what have you, you're already kind of used to doing things online when it comes to movies. Is it really going to be that far of a step for you to take to just go, well, if you're not going to give me what I want, I'm just going to go take it for free. The other trick is Netflix is actually going to sign on to this, most likely, which seems weird, but probably because they're going to get discounts on the movies to start with.

But I would think this is everything that kind of shoots Netflix business a little bit too. Would you now rent a movie that's inviting people to pirates for 30 days because they can't get any of the way to survive it? Of course, I'm not going to be bothering you on that much because I think Netflix is getting a whole lot of traction off of folks who have kind of given up on going to movie theaters in general and figuring, you know what, you know, there's a movie I want to watch. I mean, especially since the time between the actual release and DVD release seems to be getting shorter now.

I'm not used to being on average by six months now, seems to be maybe a short or four months for some of these. Well, a lot of Netflix sales, Netflix is not the three days of waiting. Netflix's primary sales are driven by older stuff. When I was on Netflix a while, I watched the old Hitchcock movies and I was like, oh sure.

So that's what most people are, I mean, that's the vast majority of their catalog is going to be backlog stuff. But what gets people in the door, I mean, is the new stuff. I used to go to, I'm sure I'm going to the first thing you're doing to the new releases and then maybe you backtrack to like, no, there's nothing new I want to see, let's go see something else. I just doesn't seem right to go, well, this is not just this disregard, this whole part of our business.

I'm like, you know, not sell it. Well, not that I think that the movie series have always been the best job in protecting their inventory, but I sympathize with their situation because, you know, the way the financial model of that whole industry works is that, you know, you have a huge amount of money invested in any given movie, right? And most movies don't really turn a profit. I mean, the big blockbuster is floating the cost of what nine or ten failed projects.

And TV sales often have been what turns a movie that's either marginally profitable or unprofitable into the black, you know. You know, there's some movies that are kind of famous, you know, box office failures, right? You know, there's critically that is flopped or they didn't weren't able to recoup their lavish production costs. And it was always the DVD sales that ultimately turned things around for.

So I can see why they want to kind of protect that revenue stream, but, you know, at the same time, I mean, you've got to be smart about it, you know, and alienating your customer base, especially customer base that can learn how to pick up stuff off a torrent so easily. Why push them to that? It's really what they're doing. It's holding on to an old model.

The only way of doing things is we make a movie, then we sell this movie on DVD and maybe we rent it. But if that way is not working, you've got an entire group of people, you know, your customers. It's the whole idea, lately, of, you know, if it's internet base, let's not give it to the customer what they want, which is killing a lot of things that are not willing to progress with at times. You're in this here.

Sorry. It's happening. You need to change with it because it's not going to go away just because you don't like it and you don't hold your breath until, you know, things change. Because when they change, you'll find out that you're left standing outside poor.

Right. And I think it's just going away from two. They expect to be able to continue this ownership model, whereas I will pay $20 to have a physical copy of said movie or music if you want to go there and just like it happened. My house was supposed to do it anytime I want.

Well, that's not really necessary anymore. Like, for instance, I just went this weekend to Ohio for my old roommates wedding and he happened to have a booklet of like 50 of my CDs. I want to work great CDs that I, and he's had for five years and moved away. He just got off in his car or whatever.

And I got my back and I was like, oh, this is awesome. But then I was like, I've actually kind of reacquired these somehow in different ways or like some of these songs that I really like. Like I can just listen to them on YouTube and, you know, there's not a need to own them. Whereas if I would have lost 50 CDs like 15 years ago, it would have been like catastrophic.

Yeah. Oh, yeah. I would never hear that music. And now it's not, I don't need to own it as much as I would have in the past.

I feel like the same way for movies. Like I own movies, but I don't watch them all that often. And I'm cool to be able to just get it on Netflix, your downloads, such as it. I mean, everybody's got on demand.

If you've got cable, you've got on demand options. If you've got, even, you can even purchase movies on demand, you know, not just talking about free stuff that's just playing on your everyday cable. You're lucky and turn on and see it. And you're, you know, everybody can record DVRs are pretty common.

You know, not just people. You go with a little thing now, every single cable system has got a DVR option. I'm sure you might have to pay 10 bucks a month or something like that. But I personally have more movie access to more movies.

Yeah. Click of a button than I ever did. I'm not going to go out and buy a DVD regardless. But if there was something I really wanted to see and you're not giving it to me, like I said, there's all the ways.

Yeah. And I don't get the 3D window. Like, I don't like, I don't watch a lot of movies, but if there is one that just came out on DVD that I really wanted to see, I'm not going to be dying to buy all week 30 days to get it, you know. And I don't think about this.

The movie's out for 30 days. How long does the buzz last for a movie that everybody's got to see? A month goes by. There's something else that's out now.

And I have a feeling you just might lose those sales altogether. There's so many movies that they'll come out and go, I'd like to see that. And then life happens, you forget. And it's interesting.

You know, it's not in the theaters and you don't miss it because, well, it's just a movie. We're getting a little old though. We got to remember that too. I mean, they're making most of their money off 13 to 25 year olds who do have that social pressure of their friends that if they haven't seen the hangover yet and it's still six months on, then they're kind of a loser.

Well, that's, if they're worried about that demographic, that demographic is probably more apt to download something. Yeah, absolutely. And pirate it than any others. I mean, the only people that have enough money to purchase things.

If you're the people, you're the consumers, you got to groom. Are the people who don't have any money for kids? I don't have any mom and dad's allowance. Maybe you don't part-time job.

You alienate them from the start? Well, good luck having that industry last very long. It's only going to be so long before their parents stop buying them. I have DVDs I bought a year ago that I never opened.

They're still in the plastic. Yeah. It seems to be an outdated business model. Is it only one studio or is it like?

The article I looked at didn't say, I mean, they kept using Hollywood. I'm sure it's more than one studio because really it would make sense that they don't have to kind of come together just to make that window happen. It's sort of just out of touch. You're saying something about the Sony TV.

That's a broad TV, right? Well, the thing is, even while at the same time they're doing things that are dumb, they try to get involved with things like, let's see if we can be innovative for a second and do something that kind of ties everything together. Maybe we can be unique, but it's turned out to be stupid. For instance, Sony's got a $1,000, Robby, a television for sale, HD, Blu-ray, all that bit, right?

Which does look really good by the way. I know the picture is. It's sort of a home with a nice big TV with all the high-down visuals. It makes a good TV.

But their idea, I guess a little promo idea was that they were going to offer. If you bought this television, you'd get the opportunity to rent the movie, Claudio with a chance of meatballs. There's a three-day kids movie cartoon. My kids never failed to remind me about it every day.

You get to rent that movie? Rent, remember, being an apple bird, for the low, low price of $24.95. What? A 30 days in advance of its release.

That is stupid text. Which just seems like you're just wasting your breath writing that advertisement because I can't see anybody but the least informed consumer actually doing that. The only thing I can see them thinking this would work was frankly groups like my family. We don't really do the theater all that often.

We do have a movie night at home because once you have a Blu-ray player and nice TV set, you're kind of like a home. Yeah, exactly. Maybe they're kind of making well, you know, you pay 40 bucks to go out to the theater for tickets for everybody and for snacks. That's what we're thinking.

Well, what's 25? Just to do it at home. 25 just seems like a weird price point for that. Like, wouldn't you want to, you know, I don't understand.

They said, rent it for five, rent it for ten. Yeah, right. Not rent it for the cost of what the DVD is going to sell for when it finally does come out. Which we're going to make you buy again, by the way, because renting is only a rental that's not a purchase.

Well, you know, certainly I think that Jerry brought up, which was a really fascinating point, which is the notion of the shift in perceived value from the actual physical thing you can hang on to. I mean, I remember you told me this is to a CD and you go, okay, this is $15 right here, right? Yeah. So, you know, the value proposition is no longer hang on physical material, but having accessed intellectual property, really, right?

And if you're looking at it like that, then Hollywood has completely failed to pick up on the lesson the music industry learned when they went, all right, you know what? They adopted the iTunes model, let's sell a song for a buck. I mean, yeah, all right, you may have cost you $100 million to produce it on a transformer or something, right? But the truth is, however much the movie cost to make has no bearing on how much the consumer is willing to pay to get access to it.

Okay, if you want to pay five bucks for a movie, you're going to pay five bucks for a movie or you're going to download it for free. It doesn't matter if the movie was a $10,000 thing like a parent owned by activity or a gold covered, no extravagant project by Transformers 2, people are going to pay for it, they feel they want to pay for it. And Transformers 2 is not worth $5. Just like that.

Frankly neither is a parent owned by activity, but that's not right. Frankly, the whole situation with Sawloff was out of the pilot, we just got back to making decent movies frankly. That's all the podcast. Well, initially, the intrinsic value, come on, Transformers 2 is probably a terrible movie from all accounts.

All reviews are said, it's terrible, and they spent a lot of money and they made a lot of money. But those people, I think they're the box office drawer, that's just from the special effects experience. And as big as your television may get in your house, it's not the same as the movie theater. So then you start to notice that the plot is abysmal and you're never going to want to watch it again.

If you've got nothing to sell me, essentially, except for some CGI that I could probably do if I took some courses. Obviously it's more complicated than that. It's actually not that much complicated. There's a movie floating around YouTube right now.

It's called the White Box or something like that. Pretty much just this nine minute sci-fi clip, it's kind of first person action kind of like Cloverfield or something like that. It's basically just this little short story of some guy, it's obviously shot like in the Netherlands or something like that. And the idea is some guy's in a lab, he grabs this little cube, hits a button on it and starts to chain reaction outside.

He's his warm hole, creating the sky, and he's being chased by these guys with power armor. It's a big science fiction action spectacle, right? It's really cool, nine minutes on, you look at the special effects, they're not as sophisticated as you see in Hollywood Blackbuster. But I mean, they're really, really good, okay?

And what happened is this guy made this movie for like 130 euros and buying his friends a pizza. I mean, he made it on virtually nothing. And now Hollywood's knocking on his door. Hey, you want to do some stuff for us?

I mean, the cost to produce these things can be very, very low. And so Hollywood really needs to reevaluate from terms of just a return on investment. Is there a smart way for me making the profits they need to make? Well, I think he was in the relationship to music, I mean, I don't know how it relates to movies, but with a lot of this intellectual property that has now got a huge digital component, maybe the selling of that recording of its music is not your key selling point anymore.

Maybe you just kind of let it go after a certain point and musicians make money on concerts and TV. Movies make money on the box office. People are still going to want to go and sit in the dark with a bunch of friends and have a communal experience on the giant screen. And especially if you buy Mac screens and 3D movies, that's adding value to the movie experience, which is something you can't get at home without spending it on or like doing so.

Absolutely. I mean, Universal looks at it as like a bi-pop-forming effecture, and they get into that game, and they buy these theaters from Lowe's or whatnot. I mean, we live in New York, so if you go to the theaters around here, they're really, really nice. I mean, it's impressive to go.

If you're going to go see some garbage like Transformers 2, that's where you want to see it. I mean, I know smaller cities throughout the nation. Maybe they don't have those beautiful theaters with great leather seats and the amazing sound. That's a really nice, like, set of flexes.

I'm sure they do understand, like, you know, if you're going to have to run into a small... I have one right in my neighborhood that's a small little rinky dink place, the husses and stuff, you know, second one movies. You can make these things in like, houses, you know, like symphonies or whatever, you know, type of stadiums that if someone wanted to get into that game and try to expand on that, then maybe that's the way to go instead of trying to put the brakes on this old model and try to just ring every little less penny out of this sponge that's this outdated model. I mean, I look at things even like Blu-ray, and I'm like, yeah, that'll be gone in three years, I'm not buying one.

You know, like, you know, like, no way, that's going to stick around. So quickly, there really is, there's no telling that, you know, I mean, in our lifetime, it went... there was laser discs at one point. And then VHS and Beta was a problem, or, you know, like, there's a lot of formats that have gone through, and I'm only in my mid 30s.

We've already seen six formats for movies. You raised a really good point. Blu-ray straight up killed my family buying movies anymore, because we had an extended DVD collection, right? And even though the Blu-ray player is backwards compatible, complete DVDs, I mean, honestly, the picture really is that much better on Blu-ray versus a DVD player.

We resisted, it's like a year and a half, whatever, and when they was walking the TV store, and we saw a Blu-ray picture and we were just thunderstrucked. It really, it's really good at lunch, okay? So we had to Blu-ray, but we realized, you know what? I am not going to go back and v-bye every movie I own on Blu-ray, just get the better picture, okay?

If I need to see that badly, I'll just Netflix. It's okay. I mean, I've already used to watching movies on my iPod, which has got to be screensized on a postage stamp. They're not getting, you know, they're good luck trying to get me to pony up hundreds of dollars to rebind movies.

I've already bought two or sometimes even three times. I mean, come on. How many times do I have to buy Pulp Fiction until I can say fine? I'm done.

You know, I own it. Just leave me alone. And if you can use your not-consumers in a vacuum, because these consumers went through this with music, you know, and bought their collections off record, then cassette, then CD, and whatever comes next. So it's not...

And there might be a next with music, but I mean, digital seems like at least somewhat of an end game in the sense that this is this tiny file that I put on this big giant box, and even to the point where it's an iPod and I can carry around, thousands of them with me. So you would imagine digital movie is going to be a little longer to get there, but eventually it's going to go that way too. So why am I buying this plastic that I'm just going to have sitting around my house? What's pretty easy is where innovation goes.

And there are... Do you see people trying to address all this? No, we're leaving Emily in the dust because she hasn't gone to movie theater and probably ever. Who's ET in the last movie?

Yeah. You're saying she's even born before ET came out. No, I was out. ET was out.

I couldn't go to it because you know... I was like 22, come on. No, but what you're seeing now is there's some independent filmmakers, especially if they're just shooting straight on video or something, and they're releasing films directly to peer to peer networks. I mean, if you get an application that they're called Vuez, V-U-S-E, I guess it is.

Vuez, right. And you could use it to delete download movies or you could use it to access what's known as the Vuez Network, with actually have legitimate content being distributed to peer to peer. It's kind of like a YouTube situation, but just all being done with peer to peer network. And their entire movies being uploaded there initially, and it's actually where they're putting out their original content.

I mean, it's not like this way of transferring data has to be used for those purposes, which actually could be used economically. And as far as staying to the old theater model, like you said, Derek's got a really good point. I mean, why not just buy the theaters? I mean, the theaters themselves don't make a lot of money to make their money off of all the food they sell.