The future of Cloud Based Media and Blu Ray

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Cloud based media is currently in the cross roads similar to what the web was during the 1990s. The revenue as well as the mass adoption of cloud-based media is heavily dependent on the nature of relationships and consolidations that are going to take place over the next 1-2 years. With forecasts claiming close to 1 billion connected-devices, there is a huge potential for the cloud based media companies as well as the media content owners. PWC’s Global Entertainment Outlook underlines the huge potential available in this space; Consumer e-book revenue would grow from $4.1B to $8.3B by 2015, Video distribution would grow from $8B to $12B and recorded music revenue to jump from $9B to $12B by 2015.

Current Scenario

There are several stakeholders in the value chain of cloud based media distribution. Though the current ecosystem is very fluid, the key stakeholders are content companies, service providers, devices manufacturers and consumers. We will currently not take into consideration the traditional cable and satellite TV services, (though they do engage in on-demand programming such as Comcast’s Xfinity) as their core business is distribution of content via proprietary cable network. 

Tech powerhouses such as Apple, Google, Microsoft and Amazon are garnering their entire intellectual asset as well as their relationship with the content owners to establish their supremacy over the cloud based media market. The cloud-based media currently can be classified into music, video, games/apps and books. The presence of a supporting device from each of these players cannot be ignored, as they are successful in locking the users into their eco system. Currently, there are two kinds of cloud services offered to customers namely, storage and media. We would be currently dealing only with cloud-based media services offered to customers. Apart from the tech powerhouses mentioned, services like Netflix, Hulu, Rhapsody etc. are major players in their respective spaces, but do not have associated devices to offer which makes it tougher to vertically integrate their service. They might find themselves at the disposal of the device manufacturers when there are downward pressure on prices (like the recent row between the publishers and Amazon, where Amazon placed a cap on of $9.99 on eBooks). The Content owners or the media companies are finding a huge shift in their bargaining power as the technology companies are trying to disrupt the release windows as well as consumption on multiple screen delivery for the same price.

Future Scenario

The future of content consumption is expected to be in TVs, PCs, Smartphones, Media tablets and Out-of-home screens. Though the death of television has been speculated, it has never been reflective in the numbers. Apart from the companies mentioned earlier, we believe that with over 800 million users Facebook would play a vital role in aggregating the content and facilitating social/usage recommendations to users. With the enormous amount of user data at the disposal of companies such as Facebook and Google, they would play undeniably huge role in the future of cloud based media consumption. Technology companies such as Amazon, Google, Apple and Microsoft who are in an attempt to vertically integrate the content distribution value chain (by being etailers as well device manufacturers) seem to be in a better position to pull customers, depending on their improvement in the customer experience.

The media industry is a concoction of fluid and experimental relationships and business models, currently based on complex licensing and distribution. The future business models for content distribution might be extremely unsettling as previously well-established norms in the media industry such as staggered release-windows and variable screen for multiscreen delivery might topple for good. The next 1-2 years might be a painful transition which gives the top players with significant partnerships to chalk the future business models as well distribution strategies and give an opportunity for artists and content owners to revalue their content and negotiate prices that is profitable for all the stakeholders in this value chain. We do expect around 3-4 years to completely transition to the new business model, the legacy models of DVD and Blu-ray can be expected to stay during the transition period.

Blu-Ray, Is it the last Physical Media?

Blu-Ray might well be the last physical format for video consumption and distribution. To delve further into this we would need to measure the success of Blu-Ray in comparison to DVD or CD in terms of ubiquity in adoption. Blu-Ray never seemed to have caught up the imagination of an average viewer like DVD or a CD. There can be multiple reasons from proprietary distribution to availability of substitutes such as Netflix and other streaming services. If we analyze the reasons why consumers currently opt in for Blu-Ray would be the quality of media, lack of user training for alternative sources( as user training is minimal when moving from DVD to Blu-Ray) and Blu-Ray content’s availability before online sources. Thus, the extinction of Blu-Ray would be heavily dependent on filling the gaps mentioned above. With better or equivalent quality of media made available online using better decoding and faster internet, Blu-Ray’s necessity is obviated. Similarly, if the media companies are able to come to mutually beneficial contracts to release the content immediately along with the Blu-Ray release, the need for physical media would be visibly reduced. With smart TVs entering the mass market and consumer awareness improving on these areas, the Blu-Ray could be the last physical media. However, for successful adoption in the mainstream market, would require more than 6-7 years. With Sony shipping close to 18.5 billion Blu-Ray players the end of the physical media is still not here yet If the fate of Quickster’s or growth of cloud media services such Amazon, Netflix or Apple is anything to go by, then there is an imminent shift in consumer’s preferences towards cloud based media is imminent.

THE PETRODOLLAR

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This is one of the research Papers submitted for my Global Energy Course. Though a bit judgmental, these represent solely my views and no one else.

Who controls the food supply controls the people; who controls the energy can control whole continents; that controls money can control the world.

— Henry A. Kissinger

The price of crude oil over the last 10 years has risen by over 350% in USD, over 250% in Euros but the price of oil vis-à-vis the price of gold has remained constant. This points us to a very interesting reasoning of inflation of the USD and the subsequent diminishing value of USD. Experts believe that the only way to curb the sky rocketing prices of crude oil, is to curb the reckless printing of USD bills.

On August 15th 1971, President Nixon took the US dollar off the gold standard. The inside sources say that OPEC did consider moving away from dollar oil pricing, as dollars no longer had the guaranteed value they once did. The US lobbied with Saudi Arabia in the 1970s to ensure that the world’s most important oil exporter stuck with the dollar. Considering the monopoly of oil production in the Middle East, the OPEC followed anything that received consent from Saudis. International oil trades at New York’s NYMEX and London’s IPE were (and still are) strictly denominated in dollars, hence the name ‘petrodollar’. Most of oil traded in the world is through the USD.

The goods and services imported by United States are paid in USD to the producing nation. As a part of the cycle, the producing nations pay their oil bills in dollars to the Middle East producers. These dollars received by the oil producers flow back into the Federal Reserve in New York. This concept is commonly known in international political circles as Petrodollar recycling or Petrodollar cycle. And in response to this cycle, all United States needs to do is print the bills. Essentially this has two effects on the economy of United States of America, it keeps the value of USD artificially inflated with respect to other currencies and given USA precarious flow of credit. The Petrodollar cycle has contributed significantly to the $15 Trillion debt.

The US military and the USD are the two pillars that have helped United States establish hegemony over the years. Any shift in the scales with the valuation of USD would definitely harm the military and vice versa. A sound understanding of the petrodollar concept is essential to comprehend the current political turn of events in the Middle East.

The military might of United States protecting the other pillar, the US Dollar, was at display during the war with Iraq in 2003. Saddam Hussein, after decade-long economic sanctions, was ready to export oil to the Euro nations and the world. In November 2000, Saddam Hussein decided to trade the oil in Euro denominated currency. The reason for this was a mix of economic and political elements. He decided to forgo dealing with the “currency of the enemy” also for the reason that the Euro seemed to be 17% more valuable vis-à-vis the dollar. Almost all of Iraq’s oil exports under the United Nations oil-for-food program were paid in Euros since 2001. Around 26 billion Euros (£17.4bn) was paid for 3.3 billion barrels.

The trading of oil in Euros was considered blasphemous and was one of the reasons for the attack by US army on the pretext of weapons of mass destruction, which the military was unable to find eventually. Once the Saddam was put to death, USA ensured that the trading of oil in Iraq happens through dollar denominated currency. The global economists have always held Petrodollar as one of the top reasons for the invasion of Iraq in 2003.

Iraq is often claimed by experts to have shot at its own foot, and its neighbor, Iran, was in similar waters. Though Iran and Iraq share a very bitter history, they have irked United States and its stock currency, the dollar, in a very similar style. In 2005, Mohammad Javed Asemipour stressed the vision of initiating the trade of petrochemicals and light sulfur crude (and eventually regular crude) in its own oil exchange on Kish Island in the Persian Gulf, southern Iran. Iran proclaimed that the trade could be carried on in the Euro denominated currency. As the Kish Bourse gains momentum, Iran has offered to trade in a basket of currencies that is preferred to the seller and the buyer. This could pose some serious threat to the hegemony of US dollar as the paramount currency. United States and the European Union have unanimously imposed sanctions that have made international financial transactions for the government and Iran’s business community more costly. Iran has increased its offense on the United States to continue trading in either dollar or trading with the home currencies such as Rupee and Yuan. Coincidentally, on March 20th 2007, Levey told the Senate Committee on Banking, Housing and Urban Affairs that unilateral US financial sanctions “warn people and businesses not to deal with the designated target.“ The sanctions are now targeting foreign banks that handle transactions for Iran’s national oil and tanker companies, and companies or individuals involved in dealing with Iran. The sanctions are perceived in international political circles, as an attempt to cripple Iran trade and thus cash strap it. Iran, though, cannot be considered morally supreme with its impending nuclear program, and the Petrodollar is one of the many reasons why United States cannot ignore Iran or its imminent threat to the US.