Weekly Reads
Weekly Reads - August 14, 2023

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The clean energy transition is moving far faster than we think as innovation and global subsidies push alternative energy forward regardless of the short and long-term challenges society may face as we move off fossil fuels.

The clean energy transition is always capturing headlines, yet the success of this transition is always in question as fossil fuels use remains steady and is the primary form of energy across the globe. After decades of anticipation, it seems that we could be at the inflection point of widespread clean energy adoption with wind and solar power breaking records and renewables expected to overtake coal by 2025 as the world’s largest source of electricity. The cost of wind and solar power is falling, and in some areas, it is now cheaper than gas, oil, or coal. Since 2009 the cost of solar power has dropped 83% and the price of lithium-ion batteries has fallen 97% over the last three decades. These alternative energy sources are becoming more cost-effective prompting private investment into these fields. More than $1.7 trillion worldwide is expected to be invested in clean energy versus $1 trillion in fossil fuels, which is a record for the most spent on clean energy. As these clean technologies become cheaper to scale government and private investment will continue to skyrocket as commercialization becomes less risky. China is expected to double its solar and wind capacity five years ahead of schedule and in the U.S. renewable energy is expected to contribute 23% of total electricity, 10% more than a decade ago. While the future of renewable energy is exciting there are still challenges in the way to a full clean energy future. New oil rigs, coal mines, and gas pipelines are being built with governments still prioritizing fossil fuels to secure the energy future of their country in a time of geopolitical instability. The infrastructure of the U.S. remains woefully inadequate to support alternative energy with a need to upgrade electrical grids and mine minerals to support clean technologies. Even with these obstacles in the way governments across the world continue to support clean energy adoption, spending billions in subsidies pushing forward the future of clean energy far faster than in any previous decade.

The combination of the remaining two U.S vertically integrated steel makers could help secure the future of U.S steel forming a much stronger combined entity built to survive future crisis.

The U.S. steel industry once made up half of the world’s steel employing over 700,000 U.S workers. Today, the industry has deteriorated as 40 steel makers have gone under during the import crisis of the 2000s and China has become the de facto global steel leader. Only two vertically integrated steel makers remain in the U.S., Cleveland-Cliffs and U.S. Steel. The U.S. could be down to one integrated steelmaker with Cleveland-Cliffs’ offer of $7.3 billion to acquire U.S. Steel. This deal would set the stage for creating the 4th largest steel company outside of China alongside reducing the combined company’s cost structure making their steel production much more competitive. U.S. Steel has rejected this principle offer but has promised to look at strategic alternatives for the company including a potential sale. Since the Cleveland-Cliffs offer privately owned Esmark, a diversified industrial company, has made their own offer of $7.8 billion for U.S. Steel. A bidding war seems to be brewing for the 122-year-old steelmaker, a shocking development for a business that has struggled over the last few decades. An acquisition from Cleveland-Cliffs is likely the best outcome for U.S. Steel’s long-term success since merging the remaining two vertically integrated steelmakers would make the new combined entity far more cost competitive.

Netflix’s foray into gaming will likely end in failure as the largest gaming companies have a stranglehold on the franchises and IP that drives a successful sustainable gaming business.

Netflix is joining the long list of tech companies trying to jump on the gaming bandwagon through their announcement of public tests for cloud-streamed games. Beginning Monday, some Netflix subscribers in Canada and UK will be able to play games such as Oxen free via Netflix through select TVs, connected TV devices, and on the web. This new development follows Netflix’s launch of mobile games as a free perk for subscribers on iOS and Android devices in 2021. By bringing games to TVs and web browsers through cloud streaming Netflix is entering a competitive arena against industry stalwarts Microsoft, Sony, and Nintendo. In our opinion, this is likely to end in disaster rather than success as Netflix has no significant competitive advantage over these incumbents. Cloud gaming is not a new innovation and many companies such as Amazon, Google (through failed Stadia project), and Microsoft have had mixed success popularizing the technology. The idea that Netflix will be the one to perfect the technology is wishful thinking and even if it were to happen is unlikely to move the needle in terms of market share gains. Netflix releasing a few small indie games is not going to convince gamers to make the transition to Netflix gaming even if their cloud streaming offering is extremely smooth and best-in-class. Netflix will need to make significant investments in growing its library to match the levels of Microsoft and Sony to get full buy-in from gamers. This is not easy when some of the most popular videogame franchises/IP are owned by these incumbents and the remaining top franchises belong to multi-billion-dollar developers who are incentivized to sell on the most widely used platforms. It is likely going to take multiple years and billions of dollars to perfect the underlying technology, develop partnerships with top developers, and convince users to not only try Netflix gaming but stay using it as they develop their library. We have seen this story play out before with Google Stadia which Alphabet abandoned after seeing how difficult it was to compete against incumbents.