Business

Boston’s 10 Biggest Business Stories of 2014

By Adam Vaccaro

December 23, 2014

13 minutes to read

The way the world does business is changing, and that’s showing here in Boston.

Innovation moves faster. It’s a time of transition in health care. Cities are growing. The “sharing economy’’ is getting richer—and still generating plenty of debate. Gambling is losing its stigma. And the way we think about labor is in flux.

All of these factors, and plenty of others, played a big role in telling the story of Boston business in 2014. Let’s run them down.

Honorable Mentions

Haystack was pretty ridiculous and energy headaches abound in Massachusetts.

Call it another Boston-New York sports rivalry if you like, but the industry-within-an-industry of single-day fantasy sports is developing into an arms race. DraftKings, out of Boston, and FanDuel in New York are striking up partnerships with sports teams and leagues. Meanwhile, the services are said to be rolling in—and doling out—cash like crazy.

These types of games differ from traditional fantasy sports in that users select players to represent their teams one day at a time, rather than over the course of a full season. This hasn’t been without controversy, as some critics have said the variance that comes with athletes’ performance on a day-to-day basis, not to mention the big cash payouts promised by the services, make single-day fantasy akin to sports gambling. But fewer people seem to be taking up that fight, as the companies develop partnerships across pro sports. And that comes at a time when some leaders from the sports world have begun to openly advocate for the legalization of sports betting.

As for Boston’s representative in the fast-growing games? DraftKings has raised more than $70 million in venture capital, and is rumored to be eyeing an IPO in the next couple of years.

Read: Even Tom Brady’s On Board the Single-Day Fantasy Sports Bandwagon

It was a hard push and it looked like it may happen: noncompete clauses may have been banned in Massachusetts. Gov. Deval Patrick’s proposed economic development bill would have done so, making it illegal in most cases for companies to contractually require employees to not work for or start a competitor for the first year or two after they leave their positions.

House and Senate versions of the bill did not address noncompetes at first, but the Senate bill eventually added an amendment representing a compromise, which put strict limits on how long noncompetes could last—six months—and would have banned them from being applied to hourly workers. By the time the legislature got through with the bill, however, noncompetes went unaddressed and the status quo was kept intact.

Among those pushing hardest to ban noncompetes have been leaders from the startup sector, who argue they represent a barrier to innovation by keeping employees who would start a new company, or be recruited to a startup, from doing so. Those in favor of keeping noncompetes say they protect trade secrets. It’s a compelling debate, but both lines of argument make the use of noncompetes by summer camps and parking garages seem all the more ridiculous.

Read: Why the Boston Chamber Fought Noncompete Reform

No industry quite defines Boston like health care. And 2014 was a year of change for it.

Partners HealthCare reached a deal with Attorney General Martha Coakley that would allow it to acquire South Shore Hospital in Weymouth and two hospitals north of Boston, setting the stage for the state’s largest health care provider to further its footprint in the region. The agreement is still pending court approval. Partners CEO Gary Gottlieb is leaving the company next year.

Way out west, in North Adams this spring, a city lost its hospital. That hit closer to home later in the year, when Radius Specialty Hospital announced it would close its Roxbury rehab facilities, and again when for-profit Steward Health Care Systems announced it would close Quincy Medical Center. Steward plans to shut the hospital down by Dec. 31, though it plans to keep the emergency room open for the time being.

More change may be on the horizon. For starters, teaching hospitals Tufts Medical Center and Boston Medical Center are discussing a merger.

Read: Quincy Reels at Hearing as Hospital Closure Nears

Wayfair cofounders Steve Conine, left, and Niraj Shah, at the Wayfair offices

Maybe it’s trailed other big innovation regions, but Greater Boston’s tech scene hasn’t quite lacked in IPOs in recent years. What it has been yearning for, however, is more companies that can generate a lot of buzz and serve as publicly facing, publicly traded success stories—the kind of companies that those in the tech industry call “anchors.’’

There are already a few of these up here, but a couple more came roaring to the forefront in early October when the ecommerce company Wayfair and the marketing software company HubSpot both went public. Boston-based Wayfair, which sells furniture and other sorts of home decor, is among the more successful consumer-facing tech companies to come out of the region in years. Cambridge-based HubSpot is by and large a business-to-business company, but has developed quite a bit of sizzle itself thanks in part to, well, its prowess in digital marketing.

While Boston’s tech sector has seen its share of success in recent years, and while the national portrait of Boston as an innovation community still looking for an identity after letting Facebook get away has grown tired and irrelevant, that week in October was still a big moment. As BetaBoston’s Dennis Keohane wrote at the time:

For a region determined to show the heavyweights in Silicon Valley and New York that this is a technology force to be reckoned with, having the executives of Wayfair and HubSpot ring the New York Stock Exchange bell one week apart, signaling that their companies were now publicly traded, was no small achievement.

Read: Historic Week for Wayfair, HubSpot, Greater Boston Tech Scene

Cranes remain up in the air. In Boston, big projects continue to get underway, from Eastie to Allston to Downtown to (of course) the Seaport, and beyond. The city is also bracing itself for projections that show its population will top 700,000 by 2030, which could further tighten the housing crunch already facing the region. Mayor Marty Walsh this fall unveiled a plan to bring 59,000 housing units to the city in time for 2030, including a bunch of new college housing.

The widespread development extends beyond city bounds. One much-watched development just north of Boston sprang to life this year, as Somerville’s long-contested, long-hyped Assembly Row launched its “grand opening season’’ in May. Over the next several months, the first new T stop in more than two decades opened at the mixed-use development along the banks of the Mystic River; ground broke on the massive forthcoming Partners HealthCare headquarters space at the site; and the finishing touches were put on Assembly’s first office building, which also nailed down a tenant in a North Shore software company.

The pendulum can swing both ways, though. Another big development project just outside the city collapsed in 2014, as Quincy Center’s 55-acre redevelopment project saw its master developer pull out, per City Hall demands, after financing fell through. The first phase of development had already gotten underway, leaving the city with a big hole sitting downtown. The hole, at least, seems likely to be filled, as a new development group unveiled a housing and retail plan for the block in November.

Read: Everyone in Boston Wants More Student Housing—Including Students

Aereo CEO Chet Kanoija outside the U.S. Supreme Court

Aereo, it should be noted in any discussion of the once-promising streaming TV service, had fewer than 80,000 users. Here in Boston, where it kept its biggest office, it had 12,000. These aren’t numbers that set the world on fire. However, the case for its own legality in front of the U.S. Supreme Court represented not just a flashpoint for the future of streaming TV but for the so-called sharing economy at large.

Aereo allowed users to access an antenna stored in a remote location to watch and record over-the-air broadcasts on their computers. That was found to be in violation of copyright law by the Supreme Court in June. By the end of the year, the company that had raised nearly $100 million had just about folded.

Read: How the Aereo Decision Resembles Uber, Airbnb Regulatory Efforts

Boston Mayor Marty Walsh has supported the bid to host the 2024 Olympics.

We’ll know next month whether Boston’s Olympic ambitions will remain near the top of the list for at least a couple more years. But the bid to host the Summer Games went from far-flung fantasy to distinct reality in June after the United States Olympic Committee put the Hub on the shortlist for a possible U.S. bid for 2024.

If Boston were to get the nod from the USOC in January—it’s competing with Los Angeles, San Francisco, and Washington, D.C.—it would then compete against bids from across the world. The bid represents the possibility of a multi-billion dollar development initiative in Boston. The business honchos leading the effort say Olympics operations could be paid for with $4.5 billion, which they say would be privately funded, and another $5 billion or so in public funding would go toward necessary infrastructure improvements.

Not everybody’s on board with the idea, and it has set off a public debate as opponents have expressed skepticism that the Olympics—which don’t have a great track record in staying on budget or in bringing much in the way of direct economic return—are the best way to move Boston forward. Much of the debate has centered on whether there should have been a more public process in deciding whether Boston should have entered the ring to host the 2024 Games in the first place.

Read: What the Heck Is Happening With the Boston Olympic Bid?

It’s a battle being fought across the world, and Boston is not sitting it out. Uber is the highest-valued startup since Facebook, with—roughly estimated—10 times the controversy. Its UberX platform, and similar services such as Lyft, allow for anybody with a car to apply to be a driver for the service. If the company gives that driver the green light (provided they pass a company background check and their car meets the company’s standards), then voila: that person can use the company’s app to pick up customers and get them from place to place. Uber says UberX has provided millions of rides in Boston, and many of its customers assert that the service is easy to use and generally cheaper than a cab.

Uber, Lyft, and other services have angered the taxi industry, which faces much stricter regulations. Some cabbies, as well as union and industry reps, have loudly protested Uber. And municipal and state governments are struggling to understand whether and how to regulate these rideshare companies. Some places have outright banned the services, while in others—like Washington, D.C.—regulations have been reached that are very favorable to the companies.

In the Boston area, the answers to these questions are still being worked out. Cambridge considered imposing regulations in June that would have made it difficult, if not impossible, for rideshare companies to operate at all there, but Uber users packed a public hearing to urge the city’s licensing commission to reconsider. It did, and has been pretty quiet since.

In Boston, city councillors and an advisory committee to the mayor are considering regulations that may involve things like paying livery fees and sharing data with the city. And at the state level, Gov. Deval Patrick, who leaves office very soon, is looking to impose some rather loose regulations of his own. Central to much of the regulatory discussion is rider safety—an issue that came into further question in Boston toward the end of the year due to a string of sexual assaults on women who called for rideshare services.

Uber has also faced scrutiny this year for an executive’s suggestion that the company could run smear campaigns against critical journalists; for an undefined service charge for rides to Logan Airport; for its use of surge pricing; for how it classifies its drivers as independent contractors; and for how its drivers are insured.

Read: Uber, Lyft, Cabbies Spar Over Boston Regulations

The Massachusetts casino industry got itself off the ground in February when the Massachusetts Gaming Commission awarded a slots parlor license to Penn National Gaming, which broke ground in Plainville shortly thereafter. Before the year was out, the gaming board had also awarded full casino licenses to MGM, which plans to build in Springfield, and for Wynn Resorts, whose plans are in Everett.

Those licenses alone would make for a pretty big story, but then there was everything else. Gaming Commission Chairman Stephen Crosby recused himself from all discussion of the Eastern Massachusetts license that ultimately went to Wynn, due to perceived conflicts of interest. Wynn feuded with Boston Mayor Marty Walsh, as the two sides could not reach an agreement on mitigation payments to the city. Revere saw the Wynn proposal selected over the Mohegan Sun pitch at Suffolk Downs. Oh, and there was a ballot question—one of four with business and personal finance implications—at the midterm election asking whether or not to just up and do away with the law allowing for casinos in the first place. (It failed by a wide margin.)

There’s still plenty to come. The Plainville slots parlor is scheduled to open in June. Two cities, Revere and Somerville, are suing the gaming board in light of indictments handed down to landowners of the proposed Wynn property shortly after the Everett license was awarded. And Wynn itself is reportedly under investigation from the feds; the gaming commission says it is keeping an eye on that process.

Meanwhile, the process to award the third full casino license in southeast Massachusetts is underway, with a decision tentatively scheduled for fall of next year. The gaming board, though, has struggled to attract applicants for this site—in part due to the Mashpee Wampanoag Tribe’s plans to build its own casino in Taunton and the threat of in-market competition that would represent.

Read: Is the New England Casino Market Becoming Too Saturated?

Market Basket employees and customers protested throughout the summer.

If you’ve lived in the area for a while, you knew the storied history of the rivaling Demoulas factions—the stuff of legal lore in the 1990s—had never really seen the book closed despite the continued growth of their shared family business. And in some respects, the events of this summer at Market Basketdid serve as a climax to the multi-decade feud between the leaders of the two factions, Arthur T. Demoulas and his cousin Arthur S. Demoulas.

Focusing on the two Arthurs, though, obscures that the summer was about more than that. It was a show of force for employees, starting with management-level employees in company headquarters who were able to get most of Market Basket’s workforce in alignment to throw the company into a tailspin following the June 23 firing of Arthur T. as CEO. And it was about loyal customers and vendors who joined workers in rallies that drew 300, then 2,000, then as many as 10,000 people, demanding the CEO’s reinstatement.

Some say the area between Arthur T. and Arthur S. was more gray than the public generally perceived, and they’re right to do so. It was Arthur S., after all, who was found to have been defrauded out of company shares by Arthur T.’s side of the family in that fabled legal battle. And it was far from inappropriate for the company’s board of directors, aligned with Arthur S. in the year prior to Arthur T.’s firing, to question business deals Arthur T. made with his family members as CEO.

But that only mattered so much when headquarters workers, warehouse workers, and truckers put their jobs on the line this summer; when employees at stores actively encouraged their customers to shop elsewhere; and when those customers began posting receipts from their shopping trips to other grocery stores on Market Basket windows.

Many Market Basket employees have been with the company for decades, and they felt not only that the business model they knew for so long had rewarded them, but that they had played a role in building it. Good Arthur and Bad Arthur? Just labels. The evidence suggested that one aimed to cash out and change the way the company was run. The other had earned employees’ loyalty at the helm of a company they loved. That loyalty manifested itself in a movement comprised of both management and rank-and-file workers that figures to be studied in business school for years.

After weeks of negotiations, Arthur T. and his siblings reached a deal to buy out their rivals’ shares of Market Basket just shy of Labor Day. Arthur T. was restored to power, and stores returned to normal within a couple of weeks. Three new stores opened before the end of the year.

As for Arthur S. and his family? Cash out they did, to the tune of more than $1.5 billion. The sale was finalized in December—shortly after employees received their year-end bonuses.

Read: Arthur T. Demoulas, Family to Buy Out Market Basket