NYC Cabbies Who Resisted Credit Card Machines… Now Making More Money Because Of Them

from the resisting-technology dept

A rather common theme around here is how often various industries resist the use of new technologies, fearing that those technologies will somehow harm or even destroy the industry. And yet, before too long, the opposite turns out to be true. Remember how Jack Valenti declared the VCR to be the “Boston Strangler” to the movie industry? Just a few years later, revenue from VCR rentals and sales represented a massive part of the movie business’s yearly income. It happens over and over again. The NY Times has a different kind of example of the same basic thing. Two years ago, Mayor Bloomberg in NY pushed for taxis to be required to take credit cards. The cabbies resisted, complaining that it would cause all sorts of problems. They even went on strike over the issue.

And yet, two years later, having easy to use credit card readers in the back of every cab means that more people are taking cabs, because it’s easier, and they tend to tip more as well. Part of that is because the machines have “preset” tip suggestions that many riders use, which often result in higher tips than average. While the article still quotes a few angry cab drivers who insist that higher tips aren’t true, the reporter was able to review the receipts from a few cabs and found that the average tip was 18%, with the preset tip suggestions being used more than half the time. While it’s still early, it certainly seems like this was yet another overreaction to new technology that has actually ended up helping, rather than hurting.

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Comments on “NYC Cabbies Who Resisted Credit Card Machines… Now Making More Money Because Of Them”

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30 Comments
kryptonianjorel (profile) says:

Re: Wow, what a shock...

That was never the issue. This mandate was much more than a simple credit card reader, and I am upset that this wasn’t researched.

The cabbies were forced to have these new electronic systems installed into their cars, at a cost to them of $7000 over 3 years. They also had concerns of not having their vehicle for a week while the system was installed. The biggest concern was the integrated GPS that tracks their every move.

Only a small part was actually about the credit card transaction, they were worried about the CC fee, but there were bigger things to worry about…

Takashi says:

What the cab drivers aren’t telling you is that the credit card machines mean more of their work is really on the meter and on the books, instead of cash in their pockets. It also means that someone else is handling all their money for them (including the tips), and now their tips are likely reported on 1099s, which means more taxes to pay.

If you stopped cabs taking cash altogether, these guys would go broke! 🙂

CAS says:

As a former New Yorker

I’ve had many conversations with Taxi drivers about the tips they receive and the number they usually quoted me (before the credit cards came into play) was 10%. That sounds about right to me – most people I know just round up to the nearest dollar and maybe add a dollar if it’s already pretty close to the next dollar. Averaging to 10% sounds about right to me.

That said, it was definitely always about the taxes. My guess is that cab drivers pay about 30% in taxes which means that the increase in tips (the normal fare was already tracked) is mostly offset by the increase in taxes.

Seems like a wash to me.

Doctor Strange says:

I know that the Valenti quote is a common whipping-horse here at Techdirt, but if you actually read Valenti’s testimony it’s very interesting.

Was Jack a little nutty? Maybe so. But he certainly was unabashed in floating every possible argument in his organization’s favor. In some sense, his testimony reminds me of an attorney’s closing statement: it’s his job to make sure that all the facts and evidence are construed in the best possible light for his client, not to help the other side win or help the jury find a “balanced” verdict.

Did Valenti underestimate the value of the rental and home video markets? Absolutely. But WHY did he so grossly underestimate this? The implication at Techdirt is, of course, that Valenti was just a short-cited idiot, incapable of perceiving the vast new markets opened up by this technology. And this may be partially true, but I think there’s more going on.

Valenti, in his testimony, makes a number of predictions that, in hindsight, seem pretty reasonable, and it’s interesting that they didn’t come to pass (or they did, but in a different way). For example, he predicts that VCRs would rapidly advance far beyond the VHS standard:

In those days, first, there was only about an hour’s recording time on a cassette. Nobody could really collect cassettes because you couldn’t record long enough. Soon, they got up to 2 hours, 3 hours. Now, they are up to 6 hours. They are going to be up to 24 hours. Pretty soon, they will have a cassette that will record all year long, I suppose.

Improbably, that never came true. In fact, only now with the advent of DVRs have 24+-hour recording capabilities come to home devices, and even then you only get the one device. You can’t just pop in a new “tape” (or hard drive) and get another 24 hours of recording time.

Valenti also assumes that home recording would be and remain popular. I don’t know if my experience is typical, but it turned out that home recording of programs on TV was a novelty that wore off quickly. It was a huge pain in the ass. You had to set the tape, set the timer (always a cryptic experience, even with later VCRs that had onscreen displays), label the tape, etc. I can count on one hand the number of times I actually used the “record” feature on a VCR after about 1985. This was not because recording something on TV isn’t something people want to do, but because no incarnation of the VCR ever made it particularly convenient. DVRs, of course, show that when it is convenient, people do it incessantly.

Valenti further assumed that technology to edit out commercials was surely right around the corner:

Being advertised today in all the video magazines, and if any of you take video magazines, here is a marvelous little device called the Killer. It eliminates those black and white commercials. You put the Killer onto your Sony and it automatically takes out the commercial. You don’t like the Killer, try the editor. The editor will do the same thing. It will wipe out commercials.

In fact, and again rather improbably, this technology either never worked well enough or never caught on. I remember taking the commercials out of the programs I recorded as a little kid. You had to actually sit there while the program was recording, hit pause as soon as a commercial came on, and then psychically know when the program was about to come back on and hit unpause. Even then, the program would come back from the non-commercial funny as the tape wound up to speed. Again, we have finally (about 25 years after Valenti’s testimony) developed DVR technology with a 30-second-skip button and a fast-forward button that rewinds just a little bit when you stop that makes skipping commercials really convenient.

Valenti’s statistics about the rental and home video market do not reflect what eventually happened. He cites a study (which he points out was not MPAA-funded) which stated that only a third of VCR owners had any prerecorded cassettes and less than half had ever rented one. Those figures would certainly change drastically.

In a portion of the testimony that will certainly make most readers here completely apoplectic, Valenti argues directly against the first-sale doctrine, opining that leaving it alone will force movie distributors to either offer cassettes for rental (under very limiting contracts with video stores) or sale, but not both (since distributors will otherwise have no way of getting a cut of rental income). Valenti, here, was mostly correct, except that what happened was for valuable movies that were expected to rent well, the tapes were offered at egregious prices ($100 or $150) initially for rental shops to buy, followed by a massive price drop later after the rentals had died down. So consumers’ choice to rent or buy was indeed constrained, at least temporarily when the movie first came out on video.

Surprisingly, Valenti never mentions tape copying as a threat. It’s unclear why, but if home recording was a pain, then tape copying was certainly worse. You needed not just one, but TWO expensive VCRs, enough knowhow to cable them together, and then the time to have one play back and the other record at the same time. Copying a two-hour movie would take two hours, and the copy’s quality wouldn’t be quite as good as the original. Even when VCRs became cheap-as-free, nobody I know ever spent much time copying tapes. By that time, Macrovision had also made commercial copying an even bigger pain.

It seems to me that the massive markets that Valenti failed to predict were actually enabled by limitations of the VCR technology, such that the VCR became less of a videocassette recorder and more of a playback-only device. Surprisingly, this lasted for decades until the introduction of DVD players, which mostly couldn’t record either (but nobody cared).

It took the invention of the DVR to make recording attractive and convenient, but DVRs are suitably limited in other ways: it is fairly inconvenient for most people to expand their DVRs to have virtually infinite capacities, and it is also inconvenient for people to transfer programs they have recorded onto their computers to share with their friends. Yes, I understand that both of these things are possible for hackers and computer enthusiasts with a lot of time and patience, but for most people these activities are still beyond the pale.

When Valenti stated that the VCR would be the “Boston Strangler,” he wasn’t referring to the gimpy videocassette player that we all, in hindsight, remember so fondly. He was referring to a technologically advanced device that would make high-quality recording, storage, and transfer of video programs convenient, attractive, and affordable. He thought this would come only a few months or years after the first VCRs, but he was about two decades early. With DVRs, computers, and the Internet, the hypothetical device he feared has now come to exist, and we will see how many markets it creates, and how many it strangles.

Drew (profile) says:

Re: Re:

Although I see some of your points you seem to have had an aversion to using the VCR. I would say it was maybe your generation (having no idea which one that is) however I know many baby boomer’s who avidly recorded shows, typically just on one tape and then watching them at their convenience. Further every “generation” I have spoken with and interacted with used the VCR for such limited activities. The first VCR’s were clunky and expensive, and several tapes had to be used just to record a few shows; once they were advanced enough and cheap enough almost everyone had one and not only to watch pre-recorded movies distributed by the industry but as a recorder for when some show was on and they had to do something else.

One parting thought, just because a piece of technology was difficult to use by you does not mean everyone else felt the same way. (vice-versa as well)

Doctor Strange says:

Re: Re: Re:

Although I see some of your points you seem to have had an aversion to using the VCR.

I had or have no aversion to it other than to note that for me, the practicalities of recording things regularly outweighed the benefits of doing so.

The first VCR’s were clunky and expensive, and several tapes had to be used just to record a few shows;

Although they got slightly less clunky and much less expensive, VHS tapes never went much beyond 2 hours on SP and 6-8 hours on SLP/EP (with concomitant degradation in quality). This is somewhat shocking given that the first VCR I used in 1982 or 1983 was equally capable to the one I bought for about $50 in the mid 2000s.

One parting thought, just because a piece of technology was difficult to use by you does not mean everyone else felt the same way. (vice-versa as well)

And a parting thought here, thanks for being a monumental asshole. I guess I wasn’t clear when I said:

I don’t know if my experience is typical

but I appreciate your unfair and ham-fisted attempt to paint me as some kind of technophobe or technology illiterate.

Luci says:

Re: Re: Re: Re:

Actually, you sorta did that for yourself when you go on and on about how the DVR is something akin to the great revolution in recording. Sorry, I never had an issue using a VCR, and don’t know anyone younger than 40 who ever has. So no, your experience isn’t typical, far as I can tell, but your over-reaction to another’s post is.

Javarod (profile) says:

Re: Re: Re:2 Re:

Holds up his hand, “Me too, i did for the longest time record my shows when i wasn’t home, but after a while it got to be a pain, having to change the tape when it was full, which if quality was important, was quite often. Or if you wanted each episode on a tape, or if you wanted each show. Somewhere around the nineties i gave up (around the end of ST:TNG), if you worked a lot, had odd hours, etc, after a while i found m’self not wanting to be bothered with more work on top of work, taking care of my apartment, shopping, etc, it already seemed like the day was too short, and adding even a few more minutes work just to make sure that i didn’t miss shows that i might be home for, or home for a re-run, quickly became more trouble than its worth.

R. Miles (profile) says:

Re: Re:

Doctor Strange, while your post was insightful (I already knew the context), you’re missing the bigger picture.

The guy could definitely talk (and persuade), but all his talking did *nothing* but to instill “fear” to protect against innovation.

I suggest you re-read his statement(s) again and clearly see what he’s truly doing.

The “Boston Strangler” comment was over the top to do nothing more than keep people going into theaters.

Now that you’ve read his statements, notice anything missing? Here, let me help you: *never* does he talk about how his industry will innovate.

*NEVER*

That’s a problem, and I don’t believe Techdirt (or other sites) using the quote is unjustified.

It’s no different than the RIAA spewing fear rhetoric by wasted *NO* time in adapting the MP3 model for *their* use.

When was the last time RIAA innovated? More importantly, what technology *hasn’t* the RIAA used for their greed pooling?

They didn’t invent the CD, LP, tape cassette, or hell, even the piano. But they sure do love reaping the revenues of each of these technologies.

Mike Masnick (profile) says:

Re: Re:

I know that the Valenti quote is a common whipping-horse here at Techdirt, but if you actually read Valenti’s testimony it’s very interesting.

I’ve read it many times. Actually had a nice long discussion yesterday with someone who knew Valenti well, talking about that talk and others. Though I’m not sure quite what point you are making. I did want to address two things which actually highlight the problem more.

In fact, and again rather improbably, this technology either never worked well enough or never caught on.

Actually “commercial skip” features *did* become popular in late generation VCRs. They could automatically detect and skip commercials and it was a pretty popular feature. The reason it didn’t “catch on” more widely was that it came out soon before DVRs became popular.

So why don’t DVRs have such automatic skip? Oh, right, because the MPAA and the TV broadcasters sued the first DVR maker to include it: ReplayTV and threatened TiVo if it included it as well (NBC’s investment in TiVo also resulted in pressure). Even though the tech was widely available in VCRs at the time, the industry forced it out of DVRs via lawsuits and moral panics — some from Valenti himself!

It took the invention of the DVR to make recording attractive and convenient, but DVRs are suitably limited in other ways: it is fairly inconvenient for most people to expand their DVRs to have virtually infinite capacities, and it is also inconvenient for people to transfer programs they have recorded onto their computers to share with their friends.

Same point here: Why are these limited? Because when ReplayTV started making these features available, moral panics and lawsuits ensued, pushing Replay (effectively) out of business.

So, your description, unwittingly, is an example of how Valenti and others like him helped to stomp out important innovation yet again due to fear rather than understanding.

When Valenti stated that the VCR would be the “Boston Strangler,” he wasn’t referring to the gimpy videocassette player that we all, in hindsight, remember so fondly. He was referring to a technologically advanced device that would make high-quality recording, storage, and transfer of video programs convenient, attractive, and affordable. He thought this would come only a few months or years after the first VCRs, but he was about two decades early. With DVRs, computers, and the Internet, the hypothetical device he feared has now come to exist, and we will see how many markets it creates, and how many it strangles.

Just last week, we showed how the TV industry is finally realizing that it was *wrong* about the DVR, just like the movie industry was *wrong* about the VCR. Blocking tech just because you’re too clueless to figure out how to monetize it isn’t exactly a strong endorsement for Valenti’s position.

nasch (profile) says:

Re: Re:

It took the invention of the DVR to make recording attractive and convenient, but DVRs are suitably limited in other ways: it is fairly inconvenient for most people to expand their DVRs to have virtually infinite capacities, and it is also inconvenient for people to transfer programs they have recorded onto their computers to share with their friends. Yes, I understand that both of these things are possible for hackers and computer enthusiasts with a lot of time and patience, but for most people these activities are still beyond the pale.

1. Buy external hard drive
2. Plug in external hard drive

That isn’t so hard, is it? OK the sharing with friends part is more involved I’ll admit. But I promise there are many people (like millions) who don’t consider themselves hackers and are quite capable of doing this.

With DVRs, computers, and the Internet, the hypothetical device he feared has now come to exist, and we will see how many markets it creates, and how many it strangles.

“Strangle” is just the wrong word. Markets change with new technology. Some players adapt and others do not, but it isn’t the new technology that kills companies, it’s their failure to adapt. And when a new technology kills an old market, it’s always because it started a new, better one. Where better is defined as something customers want more.

Javarod (profile) says:

Laughs, “This is news? Five years or so ago, i was one of the few drivers at Allstate Cab who took credit cards. It was volutary, but you had to give the company a 10% processing fee, so most of the drivers didn’t want them. I looked at it as an oppurtunity to get more calls, and more than once, i became the only car that could take a call, because no one else logged in took credit cards. Sure, it cost me 10%, but i pay the company that, lease and gas, and keep everything else, so being able to get more calls puts more money in my pocket, so why not accept credit cards? Heck, in NY, its easier and offers more features, including the aforementioned tip recommendation feature, built in card swipe, and so on (back then we did it manually and phoned dispatch to get an approval number), which makes it quick and easy. Frankly i can’t see why they resisted, especially with Visa pushing for increased credit card use (with policies such as not requiring a signature on card swiped transactions under $25).

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