Netflix = 4 bags of popcorn

Also in this edition: Food inflation, Glance acquires Shop 101, The Xbox mini-fridge is here.

Good morning! Let’s start with some good news. It is the morning, after all. Novavax declared that its vaccine has over 90% efficacy. The phase three trials were conducted in the US and Mexico. The company will file for final approvals in the third quarter of the year. Fingers crossed it arrives in India soon.

Anyway, on to the day’s stories.

  1. Adani Group of companies lost $7 billion in a single day’s trade.

  2. Tax collections doubled in one year. Some good news for the FM.

  3. Chips and crypto are hurting the environment.

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Netflix Has Some Big Plans

Netflix, it would appear, is done being called a mere “streaming giant”. Its transition to an entertainment company is well and truly underway. Last month, keen to appeal to a younger, more engaged audience, it signalled its gaming ambitions.

Now, it has launched an online shop where users can purchase merchandise — hoodies, streetwear, sweatshirts — tied to its popular shows. Products related to Netflix shows are in demand and have found a following on sites like Etsy. The Netflix shop now becomes a destination, besides selling consumer goods like toys and beauty products through other e-commerce channels such as Amazon and Walmart. This is in addition to the luxury fashion line it is quietly building.

Netflix wants more: Having seen off HBO, Netflix is slowly eyeing Disney. How? By creating global, multi-format franchises, either through character-led spin-offs of popular shows or sequels, prequels, and beyond. As this Bloomberg report says, it could include a Korean adaptation of the hit series, ‘La Casa de Papel’.

Four bags of popcorn: Even as Netflix tries to expand its grand entertainment (and retail) ambitions, it may have a carbon footprint problem, albeit a small one. The streaming of an hour-long show, researchers* concluded, is the environmental equivalent of “boiling a kettle for six minutes or popping four bags of popcorn in the microwave”. That is to say, it is a lot smaller than estimates suggested in the past.

(*Spoiler alert: Netflix funded the study)

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A Good Day For The FM

Finance Minister Nirmala Sitharaman must have been elated when she saw the taxman’s update. Direct tax collection for April, May, and the first 11 days of June nearly doubled to INR 1.62 trillion from INR 870 billion during the same period of 2020, the Business Standard reported. It was higher by a third compared to the same period of even 2019-20, the last ‘normal’ financial year.

Where from: Three centres — Mumbai, Bangalore, and Chennai — brought in INR 910 billion which was 62% more than the INR 560 billion recorded in the first 72 days of FY21.

We think: It may appear contradictory that tax collections are piling up when the economy is doing badly. There are two possible reasons: corporate earnings and capital gains. The combined net profit of listed companies was up 57.6% in FY21 as compared to the previous year. The trend is likely to hold in early FY22 and may continue with demand expected to pick up as the second wave of Covid-19 abates.

The second source that likely contributed more to the government kitty is the ebullient stock market. Chances are, a large number of investors booked profits. Mutual fund schemes that churn their portfolio frequently and wealth managers are likely to have encashed gains. Even retail investors and day traders would have made money. The Nifty has gained over 60% in the past one year, swelling investor profits, a fair share of which has gone to the government.

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Adani Short Circuits

It was a bad day to be a shareholder in the Adani Group’s companies. The conglomerate’s promoter, Gautam Adani, the second richest Asian, lost $10 billion in notional wealth as group companies’ stocks plummeted within an hour of the market opening. A few rallied later in the day, but reports suggest collectively the group still lost ~$7 billion in market cap in a single day’s trade.

When did this start? Last week, CNBCTV18aired a report raising concerns about the foreign institutional investors (FIIs) that held equity in Adani firms. An Economic Times report then said that the National Securities Depository Ltd had frozen accounts of three funds, Albula Investment Fund, Cresta Fund, and APMS Investment Fund, which held equity worth INR 435 billion in Adani Group companies. The group, for its part, denied that these funds were in trouble.

Then the world changed: Traders dumped Adani shares on the news. The sell sentiment was so strong that the stocks hit the lower circuit, an artificial limit set to prevent quick, extreme movements in a stock or index.

The Signal

The breadcrumbs of this story have been laid out for a year. The warnings for retail investors were clear. There were very few big domestic investors that were buying into the six Adani Group companies. In August 2020, an ET Primereport stated that one company, Adani Green, had no major Indian institutional shareholders. It had some small passive funds which track indices, but none that held a major position in the company. In December 2020, another Economic Times article stated that the promoters of Adani Green held three-quarters of the company while foreign investors held 22.4%. Some of the FIIs who held large swathes of stock didn’t have exposure to any other large-cap company.

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Come In For A Drink?

As the pandemic turned beloved hangout spots into Covid hot spots, restaurants and bars had to shut shop. On-premise alcohol consumption shrank. On-trade sales accounted for 11% of all alcohol sold in the country in 2020, down from 27% in 2019.

Drinkers gonna drink: People started stocking more alcohol at home instead. With the change in drinking venue, the share of retail store sales grew to 88% of the total in 2020 from 73% in 2019.

The pandemic has changed the drinking habits of consumers. People are drinking less, but are drinking quality. They’ve realised drinking at home is cheaper. Also, any day is a Friday if the bar’s in your room. In-home get-togethers are the norm now and D(rink)YOB the rule of this new world.

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Chips Are Bad For Us

A semiconductor shortage is slowing down the world, literally. Chips are needed to run everything from mobile phones to household appliances and LED bulbs to cars. Meanwhile, cryptocurrencies may one day become globally accepted legal tender. While these two technological marvels could underpin the future world we inhabit, they are currently destroying the only Earth we have.

Resource-sucking: Semiconductor foundries guzzle fresh water. Taiwan Semiconductor Manufacturing Company, one of the world’s largest, uses 156,000 tons of water per day for production. That’s enough to fill 60 Olympic-size swimming pools.

Cryptocurrency mining, especially for the most sought after and difficult-to-mine Bitcoin, requires machines to work round the clock, guzzling electricity. A Cambridge University study estimates that Bitcoin mining, at present levels, consumes more energy than the whole of Argentina in a year. A Nature study says the cryptocurrency’s carbon emissions alone could push global warming above 2 degrees within the next three decades.

Is there a way out? Semiconductor chip makers are trying to be more water-efficient. But the shortage is driving the US and other countries to set up their own foundries, which is likely to increase the demand for pure water. Meanwhile, China is continuing its crackdown on Bitcoin mining, but operations are only picking up elsewhere. These problems may require some unconventional thinking to be resolved, such as harnessing volcanoes to mine Bitcoin.

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What Else Made The Signal?

Food on fire: After remaining subdued last month, rising food and energy prices sent retail inflation soaring to a six-month high. The Consumer Price Index clocked 6.3% in May, up from 4.23% in April.

Glance 101: InMobi’s Glance, which owns Roposo, has acquired Shop 101 in an undisclosed cash and stock deal to strengthen its social commerce play. Curiously, one of Roposo’s previous avatars was as a social commerce company.

Delta+: The highly infectious Delta variant of the Covid-19 virus, first discovered in India, has mutated once again into a stronger version. AY.1 or Delta+ may even be resistant to antibodies.

Totes safe: The Union Ministry of Electronics and IT has ruled out a data breach in the National Informatics Centre-maintained government email system, saying the network is “totally safe and secure”.

ICICI starts up again: ICICI Venture is eyeing the digital startups and real estate space, with plans to set up separate funds for each. The private equity firm is looking to set aside about $300-400 million.

Gamers ahoy! E3, the annual video game trade show, is here with the Xbox-themed mini-fridge that was promised by Microsoft last year. Other highlights include Far Cry 6 and a game based on Avatar from Ubisoft, Microsoft-owned Bethesda’s Starfield, and EA’s Battlefield 2042.


Fun Signals

For your watch list: Netflix has been experimenting with the anthology format for a while now. After the success of films and series such as ‘Ghost Stories’ and ‘Paava Kadhaigal’, they’re now ready to premiere ‘Ray’, an anthology of four short stories by Satyajit Ray on 25 June. Directed by Srijit Mukherji, Vasan Bala, and Abhishek Chaubey, it features an ensemble cast including Manoj Bajpayee, Kay Kay Menon, and Radhika Madan. Ray fans, are you excited?

No joke: If you didn’t switch off after the first two sets, and, well, if you follow the news, you know that Novak Djokovic won the French Open 2021 title. In the audience was a young fan who kept coaching the Djoker during the match. At the end of the match, the Grand Slam winner handed him his racquet. Watch the heartwarming video of the boy jumping with joy.

Flying cars: Marty McFly told us, there will be flying cars in the future. Sure he got the year wrong, but not by long. It didn’t happen in 2015 but 2021 might just be the year. Marcus Leng, the inventor of BlackFly, a flying car, has spent a decade designing this new breed of aircraft that can take off and land without a runway. Will we soon be complaining about too much air traffic?

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