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UK to crack down on companies at heart of money laundering scandals

Studios, Exhibitors Set To Spar Over Streaming

Power Forecast Briefing Discusses Improved Spark Spreads and Profitability Projections for ERCOT and PJM


Power Forecast Briefing: Fleet Transformation, Under-Powered Markets, and Green Energy in 2018

Nexstar Buys WGN For A Song; Divestiture Of WGN, Stakes In Food Channels Likely

UK to crack down on companies at heart of money laundering scandals

Plans by the U.K. government to tighten the rules around limited partnerships, which played a key role in the Danske Bank A/S money laundering scandal, have been condemned as inadequate by campaigners.

Such entities, along with Scottish limited partnerships, or SLPs, can be registered at Companies House, the U.K.'s official company registry, for just £50.

Though a partner must be named as the ultimate beneficial owner of a limited partnership, the Labour Party said earlier this year that 17,000 Scottish limited partnerships had failed to comply with such rules.

Companies House has come under fire in recent years for a lack of supervision of the system after limited partnerships featured at the heart of international money laundering scandals.

The government is now planning to introduce new legislation to ensure limited partnerships are registered through an official supervised agent and must maintain a link to the U.K., according to the Financial Times. Legislation to address the issue is expected in 2019 and will include measures to allow company registrars to strike off dissolved LLPs, while partnerships would have to update Companies House with key information each year.

LLPs, or limited liability partnerships, differ from limited partnerships in that all partners have limited liability protection against company obligations.

"The government recognizes the need to reform limited partnerships legislation and has consulted on proposals to prevent SLPs being abused. The response will be published before the end of the year," said a spokesman for the Department of Business, Energy and Industrial Strategy.

'Opaque and ineffective'

However, campaign group Transparency International, which said that limited partnerships had been abused in money-laundering scandals "on an industrial scale," said the measures, though welcome, did not go far enough.

"Implementation will be key to ensuring these proposals are effective in practice. It's all very well saying that those incorporating limited partnerships need to be subject to supervision, but in practice that means nothing if the regulators aren't up to challenging those enabling money laundering either here or abroad," said Duncan Hames, director of policy at Transparency International UK.

"Our research has found bodies overseeing compliance with anti-money laundering rules to be opaque and ineffective. This needs to change urgently if these proposals are to be more than just words of good intent."

BEIS estimates there are 48,000 limited partnerships and 31,000 SLPs registered at Companies House. SLPs differ slightly from others in the U.K. because they can hold assets, borrow money from banks and enter into contracts. The number of SLPs grew by 236% between 2009 and 2016.

Much of the $234 billion that flowed through Danske Bank's Estonian branch between 2007 and 2015 moved through accounts held at the bank by U.K.-registered limited partnerships and limited liability partnerships.

Suspicious activities

Graham Barrow, an anti-money laundering consultant, investigated a sample number of the suspicious accounts linked to nonresidents at the bank. He discovered that just six bank accounts were linked to 32 LLPs registered at Companies House. All of the LLPs had overseas-designated members, 22 had the same members and 17 were registered to the same address. In one instance, Barrow identified one U.K. LLP that received $1 billion in just 14 months despite having no internet presence and paying no wages, rent or tax.

"It will require both resources and impetus from Companies House to enforce [these new rules] and there is no indication that the change will apply retrospectively, which means that there will still be thousands of already created entities that will likely circumvent the rules," said Barrow.

Global Witness also reported that more than 40% of the beneficial owners of SLPs are either a national of a former Soviet country or a company incorporated there.

Howard Wilkinson, the British whistleblower who repeatedly tried to alert senior executives at Danske Bank to his concerns over money laundering, told the European Parliament that the U.K. was "worst of all" at combating corruption.

He said U.K. entities were "the preferred vehicle for nonresident clients" who were at the heart of the money laundering scandal. He told Danske executives in emails to alert them to the issues at the bank's Estonian branch that one U.K. LLP, Lantana Trade, appeared to be linked to the family of Russian President Vladimir Putin, though the Kremlin has denied any such link.

"The role of the U.K. is an absolute disgrace. Limited liability partnerships and Scottish liability partnerships have been abused for ... years," Wilkinson told European lawmakers Nov. 21.

Technology, Media & Telecom
Studios, Exhibitors Set To Spar Over Streaming

Dec. 14 2018 — According to an article published in Variety in November, Warner Bros. and Universal Pictures are expected to reopen conversations with exhibitors about earlier VOD releases for their films. The studios argue that an earlier on-demand release helps minimize piracy and allows them to better leverage the multimillion-dollar ad campaigns launched for their films' theatrical debuts.

Exhibitors, on the other hand, worry that a shorter theatrical window will reduce ticket sales as potential patrons opt to wait and watch films at home. Fewer ticket sales also lead to lower concession revenues -- the most profitable aspect of the exhibition business.

The article also notes that studios have an extra incentive to negotiate earlier release windows, as WarnerMedia is launching its own streaming service in 2019 while Comcast, home of Universal, is looking to expand its streaming offerings. Having their major films released on their respective services shortly after theatrical release could help drive subscriber growth.

Pushing for a film's possible VOD release just weeks after its big-screen debut could be seen as an aggressive move, but studios have been slowly shrinking their theatrical release windows over the past 20 years. In 1999, the average theatrical window was 169 days; this was just as the DVD market was beginning to explode and the VHS cassette was still a market factor. Soon, DVD became a massive source of revenue for studios and they began to release their films on home video at a quicker pace. In 2017, the average theatrical window dropped to 105 days before dipping to 99 days in 2018.

The major studios all trimmed their theatrical windows by a fair amount between 2000 and 2018, from an average of 172 days down to 94 days, a difference of more than two and a half months. Twentieth Century Fox and Universal Studios had the shortest average theatrical window at 89 days, while Walt Disney had the longest theatrical window at 107 days.

We tracked eight blockbuster films in 2018 that were released on home video less than 90 days after premiering in theaters. The shortest window belonged to "Venom" ($212.3 million domestic gross), which was released in theaters on Oct. 5 and will debut on DVD and Blu-ray just 74 days later on Dec. 18.

The motion-picture business has always been able to capitalize on new technology, from the TV to the VCR to the DVD player, to drive growth. Streaming video has become the primary source for home entertainment — just ask Netflix and its 137.1 million subscribers worldwide. If studios are launching their own services, they naturally want their own premiere content on those services. Studios may not get the rapid release window they are hoping for, but they will likely keep bringing it down slowly, as they have for the past two decades.

If you are a client then learn more about Economics of TV & Film below:

Movies make their way to your home in less than 100 days in 2018

State of Home Entertainment 2018

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Watch: Power Forecast Briefing Discusses Improved Spark Spreads and Profitability Projections for ERCOT and PJM

Dec. 13 2018 — In our latest Power Forecast Briefing, Steve Piper discusses recent power market activity and a forecast that points to profitability for merchant generation regions of ERCOT and PJM. Both saw improved spark spreads in 2018, but ERCOT's upside appears more limited than PJM going forward. More data and market tracking tools can be found on the Market Intelligence platform’s Power Forecast subscription.

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Watch: Power Forecast Briefing: Fleet Transformation, Under-Powered Markets, and Green Energy in 2018

Steve Piper shares Power Forecast insights and a recap of recent events in the US power markets in Q4 of 2017. Watch our video for power generation trends and forecasts for utilities in 2018.

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Technology, Media & Telecom
Nexstar Buys WGN For A Song; Divestiture Of WGN, Stakes In Food Channels Likely

Dec. 10 2018 — Walt Disney Co.'s pending acquisition of much of 21st Century Fox Inc. certainly raised the bar for cable network valuations — at 15.4x cash flow — and the divestiture of the regional sports networks may see another double-digit-multiple transaction with Inc. in the mix of buyers. Another deal, Nexstar Media Group Inc.'s pending acquisition of Tribune Media Co., sees stakes in three cable nets going to the buyer for single-digit multiples (6.9x).

The deal follows the collapse of Sinclair Broadcast Group Inc.'s deal to buy the company, which is now being litigated. We think that Nexstar is getting quite a deal on the cable network assets and will likely flip them for a quick profit.

When Discovery Inc. agreed to buy Scripps Networks Interactive Inc. in July 2017, the domestic cable networks were valued at $10.14 billion, or 10.5x cash flow, with Food Network (US) valued at $4.5 billion (Scripps owned 68.7%) and Cooking Channel (US) (also at 68.7%) valued at $525 million.

In the current transaction, the valuations come to $3.47 billion and $323 million, respectively. Thus, if Nexstar can get Discovery Communications to pay at least what it paid in the Scripps transaction, Nexstar may make a quick profit. Granted, minority interests typically trade at a discount. Scripps Networks Interactive, however, has tried for years to cut a deal to buy out the minority stake and it may be willing to strike a deal at a higher price to put this issue behind it.

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