Europe's cold winter fears

Dear TFH Member,

Welcome to a new work week. It’s the 12th Edition of this Newsletter and we’d like to thank our readers for following us so far. Below are headlines for last week covering the global economy, media and tech.

1.?????Europe’s cold winter fears

2.??????India’s the fifth largest economy. ?

3.??????Microsoft-Activision Blizzard deal raises competition concerns.

4.??????Amazon and HBO streaming battle

Before then, here are the snapshot of the markets last week.

Data as at 2/09/2022

GLOBAL ECONOMY

1.??????Europe’s cold winter fears

There are fears among European countries of a cold winter ahead due to the reduced supply of gas from Russia. Gazprom, Russia’s largest gas exporter supplies gas to the EU through pipelines such as the Nord Stream etc. The gas supply is used for electricity generation and other industrial applications in Europe. However, the Russia-Ukraine war has significantly impacted the pipeline network. For example, the Nord Stream, which is a pipeline that runs from Northern Russia through the Baltic Sea to Germany, is now supplying at 20% of its capacity. Last week, it failed to open Nord Stream 1 as planned, claiming further maintenance needs.

Before the Russia-Ukraine war, Russia supplied about 40% of the gas to the EU, rendering the economic bloc highly vulnerable in case of any shock. The sanctions imposed on Russia have impacted the supply of Russian gas and consequently pushed up the prices of Gas and consequently electricity.

Alternatives, Alternatives

Russia is not the only gas-endowed country and other European countries are already seeking alternatives to the supply crunch. Countries are now seeking gas from other gas-producing countries such as Norway, Britain, United States. Rather, unfortunately, some countries have considered the reduced use of coal to augment the power generation capabilities, a move that is harmful to the energy transition ambition of the EU. ?

2.??????India’s the fifth largest economy. ?

Last week, the UK fell off the spot of the world’s fifth largest economy to be replaced by India, the South Asian country and the second most populous country in the World. With data from the IMF database and historic exchange rates on the Bloomberg terminal, Bloomberg reported that ‘the size of India’s economy in nominal “cash” terms was $854.7bn in the first three months of this year when using the dollar exchange rate on the last day of the quarter, while the UK was at $816bn.”

The size of an economy is usually determined by the Gross Domestic Product (GDP) which is a measure of the total production capacity of a country. India’s economy is also forecasted to grow at a yearly rate of 7%. With this growth rate, India is now the world’s fastest-growing economy and is on track to be the third largest economy by 2030. This is an impressive development as just ten years ago, India was ranked the 11th largest economy. India’s export growth has been identified as a key growth driver.

The UK, on the other hand, has been plagued with economic woes such as growing inflation rates, the highest in 40 years and rising energy prices which have made living difficult for individuals and survival difficult for small businesses. An economic recession has been predicted, a challenge which will test the leadership of the incoming UK Prime Minister.

TECH

3.??????Microsoft-Activision Blizzard deal raises competition concerns.

In the previous edition of the Newsletter, the TFH reported Microsoft's ongoing $68.7billion all-cash takeover of Activision Blizzard, the gaming company, Microsoft’s biggest acquisition yet. The deal, when completed will make Microsoft, the X-Box maker a giant in the gaming industry by making Microsoft the third largest gaming company by revenue.

It is expected that with the international nature of the operations of Activision Blizzard, the creator of popular games such as Call of Duty, competition regulators across different countries will scrutinize the deal for any competition concerns.

Last week, the Competition and Markets Authority, the competition regulator in the UK gave the verdict that the proposed acquisition could restrict competition by limiting access to Activision Blizzard games and the emerging cloud gaming market. Concerning the cloud gaming market, the CMA stated that Microsoft “has a combination of assets that is difficult for other cloud gaming service providers to match”

Particularly, Microsoft’s president referenced Sony’s scepticism about Playstation’s continued access to Call of Duty, owned by Activision Blizzard. The CMA has now given parties till September 8 to come up with proposals to address the concerns.

What next?

There are two potential outcomes following the CMA’s initial investigation. First, where the proposals to address the concerns are satisfactory, the deal will go ahead. However, where the proposals are not satisfactory, the regulator will commence the second phase of the investigation which will be in-depth.

MEDIA

4.??????Amazon and HBO streaming battle

It’s only in the modern streaming wars, that two streaming giants will release two prequels at about the same time. A prequel to the famous Lord of The Rings Trilogy: “Lord of the Rings: The Rings of Power” was released last Friday on Amazon Prime Video, the streaming platform owned by the e-commerce giant, Amazon. Many have eagerly anticipated the release of this series, which have been as the Lord of the Rings has a massive appeal to the audience.

What makes the series very interesting is the massive investment in production and the industry context. The Hollywood Reporter reports that the show will cost $465 million for the first season, which effectively makes this series the most expensive series in history. Currently, HBO’s Game of Thrones Spin-off “The House of Dragons” is also making waves to compete with the “The Lord of the Rings: The Rings of Power” in what has been termed “The Battle of Prequels” as the streaming audience is clamouring for an increase in fantasy budget spending.

In an industry driven by completion for subscribers and low margins, Amazon is going against the trend. This shows the financial muscle of Amazon and analysts have looked at the bet that Amazon has placed by introducing this series. The industry seems to be exploring ways to cut costs, the streaming wars continue and it seems that capital investment will play a large role. But the current big question is if this Amazon’s investment will pay off.

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Till next week,

TFH

Written by:

Peter Abegunrin

Adeyemi Akinyemi