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As global demand for food soars, fresh challenges arise

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

As global demand for food soars, fresh challenges arise

A new study describes in stark terms the challenge of providing food for nearly 3 billion people in the next three decades while simultaneously trying to lower deforestation rates and curtail greenhouse gas emissions, a task that will require an unprecedented response from governments, food companies and consumers.

The Dec. 5 report, six years in the making, notes that the global population is expected to jump 40% to 9.8 billion in 2050 from 7 billion in 2010. In that time, food demand will grow by more than 50%, while demand for animal-based foods will rise by nearly 70%. The question is whether the world can meet soaring food demand without expanding agricultural land but at the same time also reduce greenhouse gas emissions, an agent of climate change.

"The issue and challenge is much bigger than we realized," Janet Ranganathan, vice president for science and research at the World Research Institute, or WRI, said during a call with reporters to discuss findings from the report ahead of its release.

Tobias Baedeker, an agricultural economist at the World Bank, added: "The gaps between where we are and where we need to be ... have become so large, and the timelines so condensed, that we have no choice but to turn every stone and try to push in every possible direction."

The research was undertaken by WRI, the World Bank, the United Nations and two French research centers, La Recherche Agronomique Pour Le Developpement, or CIRAD, and Institut National de la Recherche Agronomique, or INRA. It was funded mainly by the World Bank and the Norwegian government.

The report echoes findings from a separate study recently published by the journal Nature, which said that between 2010 and 2050, "the environmental effects of the food system could increase by 50% to 90% in the absence of technological changes and dedicated mitigation measures, reaching levels that are beyond the planetary boundaries that define a safe operating space for humanity."

The WRI report identifies three gaps that need to be closed. The food gap — the difference in food production in 2010 and what is needed by 2050 — is estimated at 7,400 trillion calories, or 56% more crop calories than were produced in 2010. A land gap — the difference between the agricultural land area in 2010 and what is needed in 2050 even if yields continue to grow at past rates — is estimated to be nearly 600 million hectares, an area nearly twice the size of India.

And there is a "climate change" gap as well. To do its share in helping prevent global temperatures from rising by more than 2 degrees Celsius, the agriculture sector would have to reduce annual greenhouse gas emissions to 4 gigatons of carbon dioxide equivalent by 2050. At current rates, though, those emissions are projected to hit 15 gigatons per year — a gap of 11 gigatons. The sector's emissions currently total about 12 gigatons per year.

The report's authors stress, however, that the gaps could be filled if sustained action is taken on several fronts. For example, if consumers worldwide shifted 30% of their expected 2050 consumption of meat from ruminant animals — cattle, sheep and goats — to plant-based proteins, that alone would close half of the climate change gap and virtually all of the land gap.

There are some signs of such a shift taking place, with global sales of plant-based meat alternatives growing an average annual rate of 8% since 2010, about twice the sales growth rate of processed meat.

But because the change is slow and small, some observers believe governments might have to intervene. "There's growing momentum for a meat tax," Kevin Brennan, CEO of Quorn Foods, a U.K.-based maker of meat substitutes, said on the media call. "I think we will see that in the five-year-plus time frame."

A separate area that can be tackled is food waste. About one-third of all food by weight produced each year is either wasted or lost between farm and fork. Food loss and waste mainly occurs closer to the consumer in developed regions and closer to the farmer in developing areas. In the region of North America and Oceania, for example, consumption-related waste makes up about 61% of all food waste, with production-related waste at 17%. In sub-Saharan Africa, by contrast, 39% of food is lost in production but only 5% in consumption, according to the WRI study.

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On this front, companies are leading the charge. A recent analysis showed that nearly two-thirds of the world's 50 largest food companies participate in programs that have a food loss and waste reduction target. The analysis, by a coalition known as Champions 12.3, noted that several of the companies, including Koninklijke Ahold Delhaize NV, Conagra Brands Inc., Danone, Kellogg Co. and Tesco PLC, now measure food loss and waste within their operations.

Tesco, which says it has met 70% of its food waste target, recently disclosed that 27 of its biggest suppliers would publish their food waste data for the first time, and that 10 of its branded suppliers including Unilever PLC, Mars and General Mills Inc. would do the same within 12 months.

But the single most important step to meeting the food challenge, according to the study, is to increase crop yields to higher than historic rates and dramatically raise output of milk and meat per hectare of pasture, per animal and per kilogram of fertilizer. Earlier this year, Bayer Aktiengesellschaft completed its $62.5 billion acquisition of seed manufacturer Monsanto Co. When first announcing the deal in 2016, the companies claimed their combined firepower would help them accelerate agricultural innovation in order to meet future food demand.

But while higher productivity produces more food from the same land, there are unwanted effects. "It's what I call the wicked problem," Tim Searchinger, senior fellow at WRI and lead author of the report, said in an interview with S&P Global Market Intelligence. When yields rise and the cost of planting food crops fall, "there's a natural inclination to clear more land" and take advantage of the better economics.

A plausible way to get around the problem, Searchinger said, was if governments were to explicitly "tie programs that increase yields to programs that reduce forest clearance. It remains to be seen if that can be done."

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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