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Learning by Proxy

Immigration, Power and Disney | Learning by Proxy

There is a lot happening on this planet. Due to the attention that COVID-19 is getting, there are many things that politicians are able to get away with. When the dust settles all this will matter. This is the fourth edition of ‘Learning by Proxy’

Politics

Using the distraction of COVID-19 as a cover, Pakistan took 1000’s of terrorists off their terror list. That list is an eyewash and does not mean much anyway. But still.

Pakistan has removed thousands of names from its terrorist watch list in what the country says is an effort to meet its obligations ahead of a new round of assessments by a global anti-money-laundering watchdog.

The so-called proscribed persons list, which is maintained by Pakistan’s National Counter Terrorism Authority, or NACTA, is intended in part to help financial institutions avoid doing business with or processing transactions of suspected terrorists.

https://www.wsj.com/articles/pakistan-removes-thousands-of-names-from-terrorist-watch-list-11587393001

The Donald

At the other end of the world, Trump is using the current situation to force a ban on immigration into the US. For now, he could only as far as to stop the issuance of any Green Card for the next 60 days. 

A major category of people who are banned is those seeking green cards through a family member of an American — a parent, an adult child or a sibling.

The order temporarily bars green card holders from sponsoring a spouse or child for permanent residency.

It also stops individuals from receiving green cards to enter the U.S. through other means, such as employment or the EB-1 “extraordinary ability” category.

https://www.nbcnews.com/politics/white-house/trump-s-immigration-ban-raises-more-questions-answers-here-s-n1188946

Canada is rejoicing!


Economics

Power

One of the biggest problems that India has been faced with over the past couple of years has been – Electricity. And contrary to your expectation, we have too much of it. The electricity business has two players – Production companies and distribution companies (known as Discoms). Over the past 5 years, production has heavily ramped up in India with the addition of several renewable power plants. While production is centralised and easy to scale; distribution is a tricky business and there needs to be enough demand for the supply coming in. Setting up distribution in villages is not a profitable undertaking given that their consumption is low but the cost of infrastructure is high.

Anyway, more to the point. Distribution companies have contracts with producers to draw from them and pay a fixed price for the energy. At the same time, they depend on contracts that they have with large buyers – industries, to draw a certain amount from them. COVID-19 has triggered Force Majeure and they are not able to sell the power coming to them. Ironically, they stand powerless and losses are mounting. 

Following the lockdown and revenue from a major chunk of industries and businesses—call them, milch cow—touching almost nil, discoms have been pushed to the brink. Forget clearing the past dues, going forward they won’t have money to pay for the power they buy for catering to essential services such as healthcare viz hospitals, isolation wards/quarantine facilities, ventilators and so on. Can discoms invoke force majeure to avoid making payment? That may not stand legal scrutiny.

https://www.financialexpress.com/opinion/corona-pushes-discoms-to-the-brink/1925283/

But light seems to be at the end of the tunnel

The Power ministry’s proposed amendments to the Electricity Act of 2003 have received a thumbs up from the industry with players welcoming the proposed push for cost-reflective tariff, simplification of tariff structure and reduction of cross-subsidies.

Companies and industry experts applauded the proposed amendments for creation of Electricity Contract Enforcement Authority with powers of the civil court, the single selection committee for appointments to the appellate tribunal and regulatory commissions and ensuring payment security mechanism in the sector.

https://energy.economictimes.indiatimes.com/news/power/power-industry-gives-thumbs-up-to-proposed-electricity-act-amendments/75285907

At the same time, questions are being asked if this situation can be used to pursue clean energy more effectively. They do not have the troubles that coal-powered plants face. 

Oil

Also, do you know what happens when there is no more space left to store oil that is being produced? 

The world found out that even oil, yes oil; for which the US has turned the middle east into its national battleground, can end up selling at a negative price. Flights are not flying; Trains are not plying; Cars are not driving, and; the world is producing oil as if nothing has changed.

The consequences to this are quite political, this will be greatly destabilising to the middle east and all of the kingdoms that have been able to thrive because of the oil money. On the other hand, terror funding might see a decline.


Business

Disney

When the daughter of Roy Disney, the older brother of Walt and the Co-founder of ‘The Walt Disney Company’ skewers the company for laying off 100,000 workers while at the same time paying the top executives salaries and bonuses equivalent to USD 1.5 Billion, there has to be some soul searching that the Board needs to do. She says the 100,000 could have been paid for 3 months if the executive had avoided taking the salaries and bonuses. Bob Iger, Chairman of the Board received USD 62 Million in 2018. He could forego awards but instead decided to forego only the salary and not the bonus. She used the words – ‘What the F***?’ in the thread. Just incredible!

Co-Working

Or how Masayoshi Son chose to squander the Vision Fund.

When the WeWork debacle let loose last year, the Indian entity that is run under franchise by the Embassy Group proudly proclaimed their plans were separate and they would make it though. Now it looks like they will make sure a few startups perish in the process. 

Earlier this month, WeWork India, which is run by Bengaluru-based real estate company Embassy Group, said its existing customers need to pay only 30% of the rent throughout the lockdown period that started on March 25. But in reality, instead of allowing clients to pay just 30%, WeWork is offering to give a credit equivalent of 70% to their existing contracts.

This means that customers will have to continue paying the entire rent each month even though they are not using the space. At the end of the lockdown, WeWork will add extra days to their existing contracts equivalent to 70% of the rent for the days its offices remain shut.

https://qz.com/india/1837749/indian-startups-now-battle-both-wework-coronavirus-lockdown/ 

These guys have been in business long enough to know its all about the cash-flow. Giving me back 70% of the rent when my contract ends will do nothing for me. In the meantime, homegrown co-working players such as 91Springboards and BHIVE have waived the rent considering this a force majeure event. 

Jio – Facebook

Earlier this month as rumours swirled, I had written a post about why Reliance needs Facebook to invest in Jio – Badly. Facebook tried bringing its Facebook basics service to India and was chased out of India as fast as it arrived. It was against the principles of net neutrality. By making certain services free, they can make users prefer one over the other and kill the competitors. Reliance was dying under a mountain of debt and their plans to sell 20% of Reliance to the Saudis also fell through. They needed a lifeline. Facebook needed a partner who can twist the law to its will, has political clout and enough penetration.

Match made in heaven. 

“This investment by Facebook values Jio Platforms (at) Rs4.62 lakh crore pre-money enterprise value ($65.95 billion, assuming a conversion rate of Rs70 to a US dollar),” RIL said in a statement. “This is the largest investment for a minority stake by a technology company anywhere in the world and the largest FDI in the technology sector in India,” RIL said in a statement. “The investment values Jio Platforms amongst the top five listed companies in India by market capitalisation, within just three and a half years of the launch of commercial services.”

https://qz.com/india/1842729/facebook-invests-5-7-billion-in-mukesh-ambanis-reliance-jio/

So what is the problem you ask? Facebook owns WhatsApp and Jio owns the pipes. If you want to pay a bill in China, you turn to WeChat. If you want to buy a movie ticket in China you turn to WeChat. If you want to check the news in China, you turn to WeChat. iOS and Android do not matter in China because the Operating System of China is WeChat. Reliance and Facebook want to do something similar in India. It is sinister and diabolical. 


Technology

Weather

Did you think the weather forecast was always shit? I always thought so. Well, it is going to get worse. Flights used to contribute a lot of data to help model weather patterns. Since flights have reduced drastically since the pandemic began, the data available has sharply declined. This may lead to worse weather forecasts.

Observations of temperature and wind routinely collected by commercial aircraft are routed to government weather agencies and other users around the world through the Aircraft Meteorological Data Relay (AMDAR) program, operated by the World Meteorological Organization.

The number of AMDAR reports has risen from about 7,000 per day in the early 1990s to more than 800,000 by 2017, according to a recent overview of forecast improvements published by the American Meteorological Society and led by Stanley Benjamin (NOAA Earth System Research Laboratory).

https://weather.com/health/coronavirus/news/2020-03-24-fewer-people-flying-might-affect-quality-weather-forecasts

Drones

I had written a blog last week about how new technology adoption will get accelerated in these times. Africa is leading the way with their homegrown drone startups getting a huge push. 

In Ghana, rural health facilities send their coronavirus tests to the distribution centres. On Friday, Zipline ran four flights to Accra, transporting 51 COVID test samples and making each trip in under an hour. On Saturday, it started service to Kumasi. Now, Rinaudo says, the company is ramping up service, looking to deliver as many samples as needed every day.

In addition to shipping test-kit flights, Zipline is using drones to ferry unused tests, protective equipment like gloves and masks, and supplies including vaccines and cancer drugs from its distribution centres to the rural health facilities. The idea, Rinaudo says, is to make it easier for people to get what they need without going to a hospital, where they could be exposed to the coronavirus and take up scarce resources. The company is doing similar work in Rwanda.

https://www.wired.com/story/drones-flight-carry-covid-tests-labs-africa/

Misc

The space shuttle was the NASA workhorse that for years made ferrying the astronauts to the ISS possible. This came to an abrupt end when NASA retired the Shuttle in 2011 in the hope that United Launch Alliance backed by Boeing would deliver on the rocket that they were building. 10 years and several Billion dollars later, nothing has been delivered!

In the meantime, NASA has been totally dependant on Russia for any space transport. Especially of man and material to the ISS. Even during the Ukraine crisis, they were needed to go back to Russia! SpaceX is finally about to deliver; bringing the capability to launch a man into space back to the US.

At long last SpaceX will finally carry a human to space next month. 

Signing off…

Categories
General Thinking

Disney+ joins the Streaming Wars

Disney+ came live in India through Hotstar on the 3rd April.

Streaming services like Netflix and Hotstar have been the greatest beneficiaries of the CoronaVirus Outbreak. With several people staying at home there are certain businesses that are bound to do well. While people are working from home, they are saving between 1-4 hours of travel.  All this time is spent on the TV / Computer / Phone / Tablet, most often consuming content. Steaming has become the most preferred way of consuming content. Further, the breadth of programming available for consumption is staggering.

On the 3rd February 2020 in the USA, Disney launched its streaming business called Disney+. It was Disney making a splash in the streaming wars. Disney has amassed more than 28 Million users in less than a month of launching in the US. 10 Million users on day One. Now it has its eyes firmly planted on the entire world. Disney has a formidable catalogue of content at its disposal. Close to 100 years worth of content that Disney themselves have produced, they also own Marvel, Star Wars (Lucasfilms), Pixar and National Geographic. They also own ESPN and 20th Century Fox.

Through the 20th Century Studios acquisition, they came to control the Star India group. Star has been perhaps the most important player on the Indian cable scene since the sector opened up in the 1990s. Star had launched Hotstar in February 2015 to tap the growing streaming demand in India and through the exclusive rights to stream cricket matches, they turned several Indians into chord cutters.

Hotstar reported over 300 Million active users on its service in 2019. They came out with some incredible insights last year, the link to which I have shared at the bottom of the page. Not just that, during the World Cup, their technology was really stress-tested with over 19 Million concurrent viewers watching a live event. Hotstar is an unbelievable asset that Disney got and it is going to wield it.

Disney+ comes to India

3rd April 2020, with India under lockdown and another 2 weeks of sitting at home in the horizon [at the very least], India is waking up to a new service. The breadth and quality of content put forth is unlike anything anyone has ever seen. Disney+ could not have found a better time to launch in India. Having studied the Hotstar report well, they have launched almost all of their content with multiple Indian language options. So you can watch Frozen in Hindi or Tamil or a host of other local languages. This insight is one which has evaded our own startups [even today, Flipkart is only available in English] but Disney is keenly aware of it. This will serve them well.

Disney+ is going to give every other streaming service a run for their money. They have a formidable catalogue of high-quality content that is guaranteed to keep many engaged. To add to that almost any household with kids will see immediate value in having the service. They now have three pricing tiers. Free, Premium and VIP which also gives them more leverage in terms of pricing. Most importantly, they have room to add a lot more in the future. 

I do not know what they will do with ESPN. The cable subscriptions for ESPN have been cratering in the US. This dynamic is challenging and will need to be addressed soon. Will they decide to bundle it into Disney+? They also own ABC and a few other networks which also have room to bring some more live content onto the streaming platform. Through the India introduction, Disney will grow its subscriber base by 5X – 7X in one day!

In India, the field is littered with many players. Apart from Prime Video, Netflix and Hotstar which are the biggest there is AltBalaji, Zee5, ErosNow, and others joining the fray every day. I think many of the smaller ones do not have the firepower needed to go into this war and will end up getting acquired as this industry undergoes consolidation over the next 24 to 36 months.

We have some exciting times to look forward to – especially the couch potatoes!

Trivia – Disney+ launched in Feb — Hotstar Launched in Feb — Netflix started the online Video-on-demand service back in 2007 in Feb 2007 — There is something about February.

Hotstar India Watch Report