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"I wasn't brought up to run and hide when things get tough."-- General Motors CEO Rick Wagoner after announcing that GM will slash 30,000 jobs and close several facilities by 2008 to cut costs

With all the concern about ads shifting to the Web, guess who's buying up print ads? Google (GOOG). It expects to make $4 billion in online ad revenues this year, but execs say they aim to sell across radio, TV, and print, too. The first foray into "offline" media began in September, with Google buying ads in magazines such as Maximum PC, PC Magazine, and Budget Living. It divvied up the space and resold it to a few of the several hundred thousand advertisers that buy keywords next to Google Web searches. Now, Google is about to greatly expand the program. Scores of additional magazines have signed up and will soon be promoted as an option for advertisers, say participating marketers.

Google hopes to serve as a nexus between advertisers, publishers, and customers, in all forms of media. The plan is to use its buying clout to negotiate prices and, by offering bite-size space, pull in a new breed of marketers that have avoided pricey print ads. That may prove difficult: Some early participants -- from software makers to a debt-management company -- were disappointed with the ads, which are bunched as many as seven to a page. Google says the program is new and it is working out the kinks.

Despite all the hype surrounding the new Xbox 360 video game console, Microsoft (MSFT) won't make money on the machine itself. A tear-down analysis by market researcher iSuppli of the high-end Xbox 360, which contains a hard drive, found that the materials cost Microsoft $470 before assembly. Chips alone account for 72% of that. The console sells at retail for $399, for a loss of $71 per unit. Other items in the box, such as the power supply, cables, and controllers, add $55 more to Microsoft's cost, pushing its loss per unit to $126.

That's slightly higher than what Microsoft swallowed on the first Xbox console. ISuppli analyst Chris Crotty says efficiency gains eventually should shave $50 off chip costs, which, with other reductions over time, could get Microsoft closer to breakeven. A spokeswoman says Microsoft expects that including sales of its own game software, the Xbox line should start out "gross margin neutral" -- breakeven -- and turn a profit in 2007. Will this classic razor-and-blade strategy work? It hasn't so far: In the year ended on June 30, Microsoft's home entertainment division lost $391 million on sales of $3.3 billion.

Corrections and Clarifications

This chart incorrectly states that emerging-market international equity investments by U.S. pension funds, foundations, and other traditionally conservative investors rose to $1.035 trillion in 2004, or 16.2% of total investments. That should have referred to all international equity investment. The total for emerging markets alone was $93 billion, or 1.5% of the total.

Demand for Apple's (AAPL) iPod will be huge again this holiday season, no question. The only issue is supply -- and how much revenue Apple will forgo because of shortages that look unavoidable. Circuit City Stores (CC) says it expects shortages, and two smaller retailers say they're getting less than half of what they order each week. With demand expected to surge -- analysts figure Apple could sell upwards of 10 million iPods in the final quarter -- last-minute shoppers could be left with empty stockings.

Of most concern is the iPod Nano, which stores songs on scarce flash memory. On Oct. 11, Chief Operating Officer Tim Cook told analysts: "The demand for this product is staggering. At this point I can't project when supply will meet demand." So far, Apple is doing a better job of balancing supply and demand for itself than it is for its partners. While many stores don't have the hottest products, such as the black 4-gigabyte Nano, Apple is shipping all models within 24 hours from its online store. "It's frustrating at times" to work with Apple, says Charlie Tebele, president of retailer RCS Experience. "But as a businessman, I can only admire what they're able to get away with."

New Orleans is working to pull off a scaled-down Mardi Gras. And for the first time in 150 years, it may seek major corporate sponsorship. The City Council recently floated a plan to cut the revelry in half, to six days, starting Feb. 23. The mayor's Mardi Gras Advisory Committee is receptive to some corporate involvement, says Bill Grace, head of the committee. Bereft of funds and tourists, New Orleans may have no choice. Says Councilmember Eddie Sapir: "Where's the money going to come from?" Perhaps eyeing the cleanup angle, he suggested Mr. Clean, Tide, and Clorox for tie-ins. No word on whether Slim-Fast can pick up the tab for Fat Tuesday.

becker-posner-blog.com

WHY READ IT: To hear from Nobel laureate economist Gary Becker and federal appeals court judge Richard Posner. The free-marketeers post weekly on a single topic, from same-sex marriage to Katrina compensation.

POSTS: Posner, on high gas prices preventing shortages: "The social benefits of... `price gouging' appear to exceed the social costs by a large margin." Becker: "Countries should sell the right to immigrate...suppose the U.S. charges $50,000."

Warner Bros. Entertainment has just the answer to corporate raider Carl Icahn's attack on parent Time Warner (TWX): unleash the full power of Harry Potter. Warner's top execs, CEO Barry Meyer and President Alan Horn, worried that the boy wizard's franchise was a bit tame for fast-maturing kids. So they ramped up the special effects and the scares and turned Harry Potter and the Goblet of Fire into a PG-13 flick. It opened on Nov. 18 with a $102.3 million weekend gross.

Pottermania returns at a good time for Meyer and Horn, who took over the studio in 1999. To boost profits and stave off Icahn, they laid off 6% of the staff this fall and offered stars such as Brad Pitt profit slices in place of some up-front payments. Still, the new Potter cost $155 million to make, compared with $120 million for 2004's Harry Potter and the Prisoner of Azkaban. If Meyer, Horn, and Time Warner continue to conjure box-office magic, it may help to keep Lord Icahn at bay.

Last holiday season, harried shoppers fell in love with gift cards. This season, scammers are warming up to them, too. With sales of gift cards expected to approach $19 billion, up 7% from 2004, according to the National Retail Federation (NRF), they make a tempting target. The latest tricks take advantage of the casual way stores openly display cards at checkout counters -- and that the value is stored on a central database, not in the cards themselves. "Cloners" swipe, then replace, the cards after making exact replicas. That fools the store's computer into thinking they're the real thing. "Swappers" make copies of a card's bar code and leave the copycats in stores. Each time a copycat card gets activated (and the scammers call in to check), only the bogus card is credited by the database.

Retailers love cards, which allow them to collect money now and hand over goods later. So far, only a few stores report being stung, says Joe LaRocca, NRF's vice-president for loss prevention. But as more cases pop up, the NRF has created a gift card working group. A number of retailers, including Macy's (FD), Gap (GPS), and Best Buy (BBY), let consumers check their card balances online. Now stores also are taking defensive measures, such as limiting inquiries about a card, particularly if it's not activated.


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