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With Pipeline Contract Expirations Looming, Roughly One-third Of Shipper Contracted Volumes Potentially At Risk

Energy

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

Trading Of US Linear TV Advertising Shifting To Programmatic Trading

Every Industry Is Now A Technology Industry

Online Video Bolstering Consumer Home Video Spend, Spearheaded By Subscription Streaming

Energy
With Pipeline Contract Expirations Looming, Roughly One-third Of Shipper Contracted Volumes Potentially At Risk

Highlights

Pipelines with elevated levels of contracted volume in renewal status may be at risk for re-contracting at lower rates, or even non-renewal in some instances, considering increased competition from other pipelines.

Aug. 08 2018 —

  • Pipelines with elevated levels of contracted volume in renewal status may be at risk for re-contracting at lower rates, or even non-renewal in some instances, considering increased competition from other pipelines.
  • The potential for reduction or loss of pipeline revenue derived from reserved capacity has grown incrementally the last few years as abundant shale gas continues to shift the US natural gas production, cost, and demand landscapes, injecting greater uncertainty and driving more competition into the operating environment.
  • The top owners of firm contracted pipeline capacity have roughly one-third of their contracted volume either in rollover contracts or expiring by year-end 2019, according to second-quarter 2018 data filed on Form 549B with the FERC regarding interstate pipelines; intrastate pipelines are not required to report.
  • While large swaths of pipeline capacity in rollover or soon-to-expire status may be concerning, contracts on many of these pipelines are held with shippers who are related entities, such as a utility owned by the same holding company.

National Fuel Gas Co. was notable in this analysis of 15 holding companies, as it demonstrated the highest percentage, 49%, of contracted capacity in either rollover-status or set-to-expire by year-end 2019 on its two reporting pipelines, National Fuel Gas Supply Corp. and Empire Pipeline Inc. However, over half of the potentially at-risk capacity on those pipelines is held by National Fuel Gas subsidiary National Fuel Gas Distribution, the LDC arm of the company, significantly diminishing potential re-contracting risk.

Southern Company has the second-highest percentage— 46% —of contracted capacity in either rollover or expiring by year-end 2019 status, all of which is on the Southern Natural Gas Company pipeline, a joint venture between Southern Company and Kinder Morgan. However, as with National Fuel Gas Co., nearly half the potentially at-risk capacity is held by Southern Company subsidiaries, primarily gas utility Atlanta Gas Light Co., reducing re-contracting risk. An additional 20% of rollover/expiring capacity on the Southern Natural Gas Company pipeline is held by subsidiaries of SCANA Corp., while Spire Inc. utility subsidiary Spire Alabama holds about 15%. The remaining capacity is reserved by a mix of primarily small and municipal gas utilities and industrial users.

The next-largest representatives of rollover/expiring capacity were Williams Cos. subsidiary Transcontinental Gas Pipe Line, at 10%, National Grid plc gas utility subsidiary KeySpan Gas East Corp. with 8% and Consolidated Edison subsidiary Consolidated Edison Co. of New York with 5%. The remaining potentially at-risk capacity is held by a mixture of LDCs, generators and producers, with no single company logging more than 4%.

Contact us to learn about the full report or for information our deep industry data on the our platform. A team expert would be happy to help refer you to additional commentary, including a midstream industry summary and content on "How midstream contracts work".

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

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Technology, Media & Telecom
Trading Of US Linear TV Advertising Shifting To Programmatic Trading

Oct. 08 2018 — Both buyers and sellers of traditional linear TV advertising, not including connected TV or over-the-top video, are moving toward the adoption of programmatic trading. In 2017, Kagan estimates that $690 million or 0.9% of total linear TV spend was traded programmatically. Within the next five years, that figure is expected to climb to $9.76 billion or nearly 12% of total linear TV advertising revenue. MVPDs are forecast to trade the greatest percentage of their ad inventory programmatically in 2022 with 30% of ad revenue from programmatic trading.

Kagan defines programmatic trading as being automated and data-enhanced, not just one or the other. Trading may be through a private or open marketplace and does not have to be through an auction, which is more common in digital video advertising.

There are several issues holding participants back from programmatic trading. Unlike digital programmatic marketplaces, where there is a seemingly unending supply of ad inventory, linear TV has a finite supply. Demand for TV inventory exceeds the supply, so there is still an attitude of "If it isn't broken, don't fix it." TV ads are also bought well in advance, not immediately.

While many agencies have experimented with the programmatic trading of linear TV, not all are on board. Many of the advertisers and agencies are interacting directly with the supplier platform rather than going through a demand-side platform, or DSP, today. In their experiments, the agency needs to use separate platforms to aggregate inventory and tie it together, which is a lot of work.

The lack of inventory is one factor holding back programmatic trading. The only way it takes off is to make linear TV inventory available in some type of buyer platform that can combine the various supply platforms. It is even more complicated when the buyer wants to bring in connected TV (OTT).

Agencies do like the automation capabilities of programmatic, particularly where the process takes a lot of time. An algorithm may do better in areas such as weighting estimation, the first pass at scheduling and the negotiation process as well as postings and billings. The process of buying inventory is not difficult, but computing where a buyer will be able to find its preferred audience is. Therefore, interest in automating the planning and analysis to find an optimal audience is high.

We forecast a gradual uptake for programmatic trading with continued testing in 2018. Broadcast stations and networks, cable programmers, and MVPDs need to add more inventory to programmatic platforms before agencies begin using it in earnest. It will take time for all parties to feel comfortable transacting in a new way.

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Technology
Every Industry Is Now A Technology Industry

Highlights

And every company is now a technology company.

Sep. 28 2018 — As machine learning (ML), artificial intelligence (AI), and robotics become commonplace and enter the operations of mainstream organizations, leadership teams are finding that failure to harness and leverage AI puts them behind the competition. Repeatable tasks are carried out by bots in a fraction of the time and employees are more focused on adding value, which means companies on the forefront of technology can be more reliable, more user-friendly, and faster to market.

In this highly disruptive environment, one traditional truth of business has withstood, or has perhaps even guided, these technological advances: above all, the customer experience is king. More than ever before, businesses have effective technologies at their fingertips to quickly and effectively address customer pain points, while at the same time dramatically improving their internal operations.

At S&P Global Market Intelligence, we strive to get beyond the buzzwords and truly deliver essential insight. And second to this, we strive to adopt real operational efficiencies into our delivery that are paralleled by the workflow efficiencies we promise to our customers. To that end, we are committed to remaining on the cutting edge of emerging technologies, first through optimization, then automation.

Download a recent analysis of how we’re applying new technology like natural language processing to structure data, robotic process automation to deliver insights faster, and predictive analytics to stay ahead of the market.

You can also view this analysis in Spanish, Portuguese, Mandarin, and Japanese.

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Technology, Media & Telecom
Online Video Bolstering Consumer Home Video Spend, Spearheaded By Subscription Streaming

Highlights

The following post comes from Kagan, a research group within S&P Global Market Intelligence.

To learn more about our TMT (Technology, Media & Telecommunications) products and/or research, please request a demo.

Sep. 20 2018 — Spending on home entertainment is rising toward levels not seen since 2004, when consumers spent $24.37 billion building massive home-video libraries of DVDs and VHS cassettes. Since then, the optical-disc market saw more than a decade of significant declines as consumers shifted to digital entertainment. By 2012, total spending on home entertainment was down to $20.13 billion, with $4.13 billion coming from online video while DVDs and Blu-ray discs accounted for $12.88 billion and multichannel PPV/VOD contributed the remaining $3.13 billion.

Fast forward to 2017 and the mix of consumer spending has changed significantly. Consumers spent a total of $22.62 billion on home entertainment from multichannel, online and disc retail/rental sources. Online spending accounted for $13.00 billion of that total while spending on discs dropped to $6.84 billion and multichannel PPV/VOD shrank to $2.79 billion.

While the data might seem like good news for traditional providers of home entertainment, a key component of the growth in digital spending is the rise of subscription video on demand. The majority of online spending is going to over-the-top services like Netflix, Hulu and Amazon Prime, which increasingly have focused on creating original programming (mainly episodic TV) rather than licensing content from Hollywood studios.

Removing subscription streaming from the consumer spending pool paints a less favorable picture for traditional content providers. In 2012, consumers spent just $1.43 billion on non-subscription online video purchase/rental, and a total of $17.44 billion excluding the SVOD component. By 2017, while consumer spending on online video overall had risen to $13.00 billion, some $10.47 of that came from streaming subscriptions versus $2.53 billion from online video purchase/rental, and total home-entertainment spending was just $12.16 billion excluding SVOD.

Spending on sell-through home video peaked in 2006 when consumers shelled out $16.53 billion for DVDs and VHS cassettes. Since then spending has declined by hundreds of millions (sometimes billions) each year. In 2017, consumers spent $6.50 billion on DVD and Blu-ray sell-through and electronic sell-through. This seems to suggest that people are becoming less and less interested in adding to their home-video libraries and are turning to the more affordable streaming options. The story is similar for the home-video rental segment, which saw consumer spending peak in 2001 at nearly $8.45 billion before dropping to $2.87 billion by the end of 2017.

This has to be a somewhat unsettling trend for the major film studios, and is likely a key factor in shifting their strategy to focus on major franchise films and low-cost genre fare. The former tend to have broad worldwide appeal and can still move enough video units to help offset their high production and distribution costs. The low-cost genre fare, on the other hand, may be more risky and not sell as well internationally, but has a fair chance to break even. If the latter films lose money, the successful franchise films typically cover the losses.

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US Online Video Outlook To Eclipse $15B In 2018

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DVD, Blu-ray Spending Down $1B-plus For 11th Year In A Row

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