Late for Your Flight? Your Plane Might Be Too

Emerging markets and greater airline profits have caused demand to exceed supply at an historical rate.

By: Eduard Batash

In mid-2016, Qatar Airways canceled 4 Airbus aircraft orders that were months overdue. In regards to this cancellation, the airline’s CEO, Akbar Al Baker, commented that “It [overdue production] is making a huge impact on my bottom line. We are quite frankly, screaming.” Mr. Baker’s comments underscore airline “bottom lines’,” or revenues’, heightening dependence on ordered aircraft production timetables. In the last 10-15 years, additional wealth creation in the Asia-Pacific and in Mr. Al Baker’s Middle East has spiked global travel demand which consequently, has increased global airline revenues four fold. To accommodate these growths, Qatar Airways and other airlines requested numerous plane orders from the two largest global commercial aircraft manufacturers, European-based Airbus, and its competitor, American-based Boeing, within the said time period. However, both have struggled to deliver the due aircraft on schedule, and have amassed unprecedented backlog numbers. A 2016 Deloitte report on the commercial aviation industry’s current state suggests that persistent delivery delays and inefficiencies due to bloated order calls and large backlogs may enable future market entrants to compete with Airbus and Boeing and break the aircraft market duopoly.

More Passengers and More Planes

According to the Deloitte report, the global airline industry’s cumulative global operating incomes have increased by approximately $300 billion, or by 12%, since 2002. Despite airfares 46% drop on a CPI-adjusted level since 1990, additional sources of revenue such as checked bags, food and premium seating have bolstered the 12% cumulative revenue growth. Moreover, passenger enplanements (passenger boardings) experienced about a 30% increase between 2002-2015, while load factors, measurements of aircraft capacity utilization, were at all-time highs. To account for, and help facilitate this growth, global airlines added, on average, between 2.5% and 4.5% of new aircraft to existing fleets each year between 2005 and 2014. In 2015 alone, aircraft retirements plus new aircraft additions equated to a 5.7% increase in global seat capacity from 2014.

Additionally, aircraft manufacturers’ backlogs, any aircraft orders that are either behind production schedules or are have overdue delivery dates, by region consisted of: 4,041 Asian-Pacific obligations, the highest number of backlogs and 1,112  Middle East obligations, the 4th highest number of backlogs behind North American and European backlogs, but ahead of Latin American and Caribbean backlogs. The large backlog numbers from Asia and the Middle East present these regions’ strong presence in not only demanding new aircraft, but also in aggregate wealth. Higher airline revenues due to rising travel demand have increased Boeing’s and Airbus’ profits in the past 15 years, but have also contributed to potentially overwhelming backlog numbers.

Backlogs Examined: What they now entail

Once commercial airlines, or defense ministries, place order calls, Boeing and Airbus do not begin assembling those ordered aircraft right away. Although popular aircrafts, such as the single aisle Boeing 737 series and Airbus 320 series are typical 2-year productions, both companies keep many orders in backlog, and have long-term programs that require minimum numbers of built aircraft before shipment and sale. The firms receive the majority of revenues upon shipment and can then pay for built-up inventory costs.

*Airbus orders, Airbus deliveries, Boeing orders, Boeing deliveries
Figure courtesy of

However, commercial aircraft backlogs have increased dramatically since 2004. According to Deloitte, total commercial backlogs in 2004 amounted to 2,569 aircraft from 2 market participants, Boeing and Airbus. Boeing accounted for 56.9% of the total backlog and Airbus, the remainder. The normal level of backlog production, which firms determine based on the number of aircraft finished per month, amounted to between 2 and 5 years from 2004 to 2009. By the end of 2015, total commercial backlogs increased to 13,467 aircrafts among all 5 manufacturers. Boeing and Airbus constituted 93% of total unit backlogs- with Boeing accounting for 5,758 aircrafts in backlog, or 42.8 % of total market backlogs, while Airbus accounted 6,774 aircrafts in backlog, or 50.3% of total market backlogs. The normal level of backlog production increased to between 6 and 10 years.

Two periods of unusual high net order demand spikes drove this unprecedented backlog increase. In reference to the earlier Boeing v. Airbus comparison chart, net order calls for both firms spiked around 2002, decreased substantially in 2008 and 2009 due to the global financial crisis, spiked up again in 2011 and have decreased and maintained steady levels from 2016 until now. This data do not entail that Boeing and Airbus have production inefficiencies, but rather highlight the surging growth in global air travel demand, emerging market wealth creation and the aerospace industry’s boom/bust order call cycles. Moreover, they suggest that for the industry to absorb future order calls, it may require other significant market participants.

What Current Levels of Aircraft Backlogs Mean for Future Travel Supply and Demand:

The commercial aircraft manufacturing industry operates as a duopoly; That is, 2 firms (Boeing and Airbus which constitute approximately 93% of market share) supply the good (aircraft) and a small number of buyers (airlines and governments-owned airlines) demand said good. The narrow-body, or single-aisle jet is typically the most popular product relative to total orders and deliveries for both firms. Furthermore, longstanding contracts between airlines and both firms and their high-quality products have historically restricted new and rising firm market entry.

Deloitte estimates that only 6% of the world’s total population flew on airplanes in 2015. Given this untapped future demand and present backlog strain, immediate market entry opportunities may arise for firms that are not subject to traditional entry barriers. For example, in November 2015, COMAC, a Chinese-state-sponsored commercial aircraft manufacturer unveiled its first passenger jetliner, the C919. It can seat 168 passengers and is meant to compete with the single-aisle B-737s and A-320s. Because COMAC has large capital sponsorship and contacts through the Chinese government, it has the ability to establish contracts with state-sponsored airlines (specifically in the Asia-Pacific and Middle East) and directly compete with Boeing and Airbus. When asked whether he would buy aircraft from COMAC, Mr. Al Baker responded, “no hesitation at all in buying Chinese airplanes” and that “ I think it would be good for this monopoly to be broken.” However, he also added that in terms of reputation, COMAC aircraft would have to be made in the standard that he wanted.

Deloitte also forecasts that global aircraft manufacturers will need produce an additional 34,000 aircraft from 2017-2034, or an estimated 684  more aircraft produced per year by 2034 to supply the increase in travel demand. Another net order call surge may be on the horizon because airlines may desire more fuel efficient planes to combat higher oil prices. These forecasts again suggest that in addition to handling (or losing) high backlogs, Boeing and Airbus may over-expand supply chains and labor forces. This overexertion may lead to idle capacity in the future when the travel boom dies down.

Perhaps the movement towards a monopolistic competitive market with more aircraft manufacturers, such as Russian Irkut’s MC-21,  Canadian Bombardier’s C-Series,  Japan Mitsubishi’s MRJ and Brazil Embraer’s E-Jet E2, will lead to increased efficiencies and provide the airline sector the resources it needs to fly people to their destinations.

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The Cost of High Fashion: A Game that’s Not for Us

Prices are the leading market forces that determine demand among consumers in the luxury fashion industry, albeit, in slightly skewed and unconventional matters.”

By Eduard Batash

     Imagine you stroll down New York’s Fifth Avenue, Berlin’s Ku’damm, Paris’ Avenue des champs Elysées or Rome’s Via Dei Condotti and you notice the luxury fashion boutique stores along the avenues that house brands such as Gucci, Prada and Burberry. You marvel at the shops’ grand and beautiful granite facades and at the extravagant ready-to-wear clothing through the floor-to-ceiling glass windows. You also realize that luxury fashion’s ready-to-wear clothing prices, such as Prada’s $600 cotton top, or Gucci’s $350 cotton t-shirt, or Burberry’s $450 wool-turtleneck sweater, are not only too expensive for your budget, but also may be too exorbitant for anyone’s budget. After all, a pack of six cotton t-shirts from your local retailer at Macy’s cost $19.99. The United States’ $63,000 average adult national income further compounds your uncertainty over high and increasingly high, luxury fashion ready-to-wear clothing prices. But believe it or not, luxury fashion firms want you to ponder about their high prices! High prices create a unique brand name that you associate with luxury, and not with necessity or functionality. Luxury fashion firms then utilize this association to sell high-margin, small products such as small leather goods, cosmetics and fragrances in their shops and through third party branding in large retailers. These sales enable them to yield consistently profitable revenues.

The Economics of Luxury Fashion:

     Prices are the leading market forces that determine demand among consumers in the luxury fashion industry, albeit, in slightly skewed and unconventional matters. In traditional economic theory, the law of demand states that as prices rise for certain goods, demand decreases among consumers for said goods. The prevailing notion is that rational consumers do not pay higher prices for goods that have readily available, cheaper substitute goods and from which they can derive similar utility, or benefit. Conversely, as prices rise for luxury ready-to-wear clothing (the goods), the demand among shoppers (consumers) increases although ready-to-wear clothing has many readily available, cheaper substitutes located in big retailer chains.  

     Luxury fashion ready-to-wear clothes are known as Veblen goods. They are targeted towards wealthy and affluent individuals, have strong brand and luxury recognition, and are not readily available to the mass population in terms of pricing. The utility that such consumers derive is based of a status symbol as opposed to a functional use as is the case with regular ready-to-wear clothing. In theory, if luxury clothes’ prices decreased, then actual demand would also decrease because the clothing would lose it appeal to status-conscious consumers. Moreover, luxury clothing’s exponential prices are usually so high that any decline would still not make it readily available or cheap enough for the mass market. For example, a Burberry cashmere trench coat currently costs approximately $3,000, while a similar trench coat in Macy’s costs $180. However, the majority of the U.S. adult population does not spend approximately 4% of its yearly average income on a single Burberry trench coat. In fact, the income distribution across the U.S. effectively encourages most consumers not to purchase ready-to-wear luxury fashion clothing, and instead purchase it in cheaper retailers.

Can Demand meet Supply?

     According to the World Wealth & Income Database, the average, adult U.S. national income in 2000 was $44,340, but has risen to $63,004 by 2015. However, while in 2000, the middle 40 % of American income earners shared 32.3% of average adult net personal wealth, that number dropped to 27.3% by 2013. Meanwhile, the top 1% of American income earners’ share of average adult net personal wealth increased from 32.3% to 37.0 % in the same time period. Additionally, the 2016 U.S income tax bracket showed that single, unmarried earners of between $37,000 and $91,000 payed a 25% tax rate while jointly-filing, married earners of between $75,000 to $151,000 also payed a 25% tax rate. While a 25% tax rate is not a high tax rate relative to other income earners’ tax rates, it is substantial for the average U.S adult income bracket in terms of luxury ready-to-wear fashion affordability. Luxury fashion firms are aware of the tax and income inequity shortfalls. They utilize them and their high prices to kickstart more readily available and smaller good sales and hence, compete with large retailers.

So how do luxury fashion firms make money?

     The U.S Bureau of Labor Statistics’ most recent 2011-2014 consumer expenditure survey lists the most fundamental and functional consumer expenditures. Major items included food, housing, transportation and healthcare. The survey utilizes the average consumer income, which it approximated as $66,000 (close to World Wealth Database figure) as of 2014. Apparel (ready-to-wear clothing) & services, accounted for 3.5 % of annual consumer expenditures, or about $1,786 of total consumer income. The survey shows that most average consumers view ready-to-made clothing as a necessity, and are therefore, hesitant to dispose of their income on expensive, luxury ready-to-wear clothing. So in accordance with the law of demand, they largely buy in retailers for cheaper, readily available substitutes. Macys’ 2015 annual report presents that in 3 consecutive years, from 2013 to 2015, men’s, women’s and children’s apparel accounted for 46% of gross sales. Many popular featured fashion designers in Macys include Kenneth Cole, Levi’s, Calvin Klein, Tommy Hilfiger and Michael Kors.

      Luxury fashion firms, in line with Veblen Good characteristics, continually raise ready-to-wear clothing prices to retain brand and status symbols, among not only the affluent, but also among the entire population. This symbol creates a name and product that average income earners will desire even if they cannot afford it. For example, manufacturing costs for a standard cocktail dress are approximately $400, yet Gucci sells them from $2300 to $4500 .

     The firms use this artificial brand value to sell high-margin, small products such as fragrances, cosmetics, shoes, wallets, small leather goods and lifestyle accessories. These items cost less to make than ready-to-wear clothing, but are also priced exponentially higher than their base products. As a result, they yield high profit margins and enable a larger portion of the population to purchase them. Firms utilize extensive third party branding, in which they allow retailers to sell these goods in exchange for a portion of the proceedings sales. This method allows the firms’ goods to reach mass consumers. For example, the standard liquid concentrate in an average fragrance bottle costs $2. But the standard cost to purchase a Prada or Gucci perfume in Macys is $90, which is in mass consumers’ price ranges

     High-margin small products entice consumers in a similar fashion to how stocks entice investors. Consumers feel that they buy a piece of the brand name, or a “share” of stock in a large company. For example, the $90 Mr. Burberry cologne in Macys is more popular than the $20 to $40 Calvin Klein cologne in Macy’s. Although the Mr. Burberry cologne has cheaper substitutes, consumers are willing to buy it because the Burberry brand name does not have any easily and readily available substitutes. Macys 2015 annual report also accounted that women’s accessories, cosmetics and shoes made up 38% of gross sales in 3 consecutive years from 2013 to 2015.

     Luxury fashion firms’ gross revenues are largely attributed to the average income earners who purchase these “designer” perfumes, shoes small leather goods and cosmetics and not attributed to high-wealth consumers clearing ready-to wear-clothing inventories. According to Statista, Gucci’s 2016 global revenue distribution by product category consisted of the following:

Screen Shot 2017-04-04 at 9.50.41 PM

The ready-to-wear clothing that you saw as you walked by the grand Gucci store in New York or Paris really only contributed 13% towards gross profits, while shoes, leather goods, and cosmetics and fragrances (other) contributed towards the bulk of gross profits. Burberry’s gross revenue has actually increased from approximately $1 billion to $2.5 Billion dollars in the last decade.

        The grand storefronts and beautiful ready-to-wear clothing only entice the consumer to buy more, not less as it turns out.  The stores are like museums: even though the onlooker cannot afford the paintings or the sculptures, she adores them with attention because of their beauty. The attention is not due to the prices. Luxury ready-to-wear clothing is not about prices either.


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Net-a-Porter. (2017). Shop Designer Clothing [Data File]. Retrieved from

Statista. (2017). Global Share of Gucci 2012-2016, by product category [Data File]. Retrieved from

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Macro-Axis. (2017). Burberry Group Historical Income Statement Analysis [Data File]. Retrieved from

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Macys. (2017). Shop All Product Categories [Data File]. Retrieved from|BS|BA%26slotId%3D13

Bankrate. (2017). 2017 Tax Guide [Data File]. Retrieved from

U.S Bureau of Labor Statistics. (2016). Consumer Expenditures 2014 [Data File]. Retrieved from

Patner, Josh. (2017). The High Price of Fashion. NY Magazine. Retrieved from

Bailey, Sharon. (2015, February 5). Macys revenue dominated by female apparel and accessories. Market Realist. Retrieved from

Thau, Barbara. (2012 May 22). Behind the Spritz. What Really Goes Into a Bottle of $100 perfume. Aol Finance. Retrieved from

Macy’s Inc. (2015). Macy’s, Inc. 2015 Annual Report. PP.20-45. Retrieved from

Image Source: [Photo from Luxury Topics blog.]. (n.d.). Retrieved from


Time to Shake and Stir the Big Six’s Revenue Models

“Hollywood needs to go back to the drawing board.”

By Eduard Batash


        In the last decade, video-on-demand (VOD) film services and independent production companies such as Netflix, Amazon and HBO have dented the “theatre experience,” the core medium through which the Big Six Hollywood production firms provide their entertainments services. The Big Six’s decreasing market share in film viewership can be attributed to the increase in portable content-enabled viewing accessories among consumers. In turn, VODs brings vast arrays of content at lower prices than those of average movie box office tickets. In fiscal year 2016, the Big Six grossed over half of all domestic and international movie box offices’ revenues.  However, high cost, high stakes, CGI-driven and franchise-based New Millennium films represented a large market share of their revenues, while mid-budgeted and indie films lacked extensive marketing campaigns and were not popular among viewers. The Big Six’s current revenue model might be profitable in the short-term, but future revenue volatility is likely because of a lack of diversity in film style and content, and increasing competition from the VOD sector. The Big Six may consider producing larger volumes of mid-budgeted and indie films, that do not fit the criteria of New Millennium films, and require original stories and character development. This shift in the revenue model can stabilize future revenue streams and increase the Big Six’s cash flows.  


The Big Six and the New Millennium Film

        The Big Six is a common reference among media outlets that refers to the six largest film-production and distribution firms. These firms are parts of larger conglomerate entertainment and media companies and have produced and distributed many of the popular and major blockbuster franchises, or the New Millennium Films, beginning in 2000. In 2016 alone, the Big Six accounted for approximately 58% of the total international revenue market share. They include Warner Bros’ (DC Comics Universe), Disney (Marvel Cinematic Universe), Universal Pictures (Fast & Furious series), 20th Century Fox (X-men series), Columbia Pictures (James Bond & Spider-Man) and Paramount Pictures (Mission Impossible & Transformers).

        In a 2009 essay on the state of the film industry since the year 2000, film critic Thomas Schatz established the term, New Millennium Film and listed specific criteria that such films all shared:

  1. The films exploited established entertainment franchises; these included, toy lines, theme parks, comic books, graphic novels, classic children stories and TV series.
  2. Continuances of the then existing films in forms of multiple sequels.
  3. Either by choice or circumstance, the protagonists performed noble and heroic social acts.
  4. Scintillating computer graphics and effects- driven actions sequences in regular intervals.
  5. Ensured a PG-13 Rating to appeal to mass audiences.
  6. High-stakes climactic confrontations between the hero and villain, and “happy endings” in which the hero prevailed.

While not a concrete genre, New Millennium films have continued to gross large revenues since 2009 while sharing many, or all, of Schatz’s prescribed characteristics.


A New Wave of Hits

        The Big Six’s post-2000 transformation into franchise- obsessed, blockbuster-driven studios began when it acquired many successful art-house and indie production companies in response to the surging independent film movement in the 90’s. It also expanded and created seperate indie filmmaking operations through subsidiary companies focused on art films, international imports and “specialty” products. Some of these subsidiaries included, Fox Searchlight, Sony Pictures Classics, Focus Features and Miramax. This consolidation created 2 dominant modes of production within the film industry: The conglomerate- owned subsidiary indies that produced mid-budgeted films between 30 million dollars and 50 million dollars, and the parent conglomerate whose prime objective was to produce blockbusters budgeted between 100 million dollars and 250 million dollars that would appeal to the global marketplace. The Big Six’s extensive control of the film market enabled it to govern new releases and film marketing campaigns. And beginning in 2000, New Millennium films largely outpaced independents in terms of marketing and planning, and became the Big Six’s dominant revenue model.

Screen Shot 2017-03-26 at 8.02.08 PM

Figure courtesy of


Since 2000, each of the Big Six has produced over 10 New Millennium films. They have included the X-men franchise, Fast and Furious, Star Wars, Mission Impossible and Pirates of the Caribbean series, Marvel and DC comic book adaptations and Cinematic Universes and Star Trek reboots. Out of the top 7 grossing production companies in 2016, 5 out of the 7 each financed at least one film over 150 million dollars. Film budgets have increasingly risen from 2000’s X-Mens’production budget of 85 million dollars to 2016’s Captain America and Batman V. Superman production budgets of 250 million dollars.  Disney Studios’ Pirates of the Caribbean: On Stranger Tides (2011) reportedly cost about 400 million dollars, and currently stands as the most expensive film ever made.

        The New Millennium revenue model rests on the assumption that the Big Six can consistently regenerate each film to sustain and increase revenue in terms of sequels. Films’ earn the most revenue from theatrical showings, while the rest is accounted for by home entertainment, television and merchandising. Currently, the revenue model assumption has held as series installments have routinely outperformed their predecessors. Additionally, according to a study, New Millennium films use extensive marketing campaigns, which often times, determine the films’ final box office performances.

Screen Shot 2017-03-26 at 8.02.47 PM

Figure courtesy of


While this revenue model has been steady, new market forces in the form of VOD entertainment are poised to revolutionize film entertainment services, and advance past the “theatre experience.”

Growing competition against the theatre experience    

        The most significant medium through which the Big Six provide their entertainment services is through the “theatre experience” in cinemas. The theatre experience is in modern terms, backwards and uncomfortable. It is a stationary and sedentary medium in large, public and noisy cinemas. Viewers often sit in uncomfortable chairs, and cannot take restroom breaks for fear of missing part of the film. According to the latest Theatrical Statistics 2015 study by the Motion Pictures Association of America, the average U.S cinema ticket cost $8.15, while the average price for a family of four cost $32.72. The 12 to 17 years old age group had the highest per capita attendance, while the 25 to 39 years old age group’s attendance rose.

        The VOD sector offers attractive alternatives in terms of content, service mediums and

pricing. Major VOD services, Amazon, Netflix and HBO have developed and created their own

original content in the form of mini-series, shows and documentaries and have kick-started independent film development. Given these newer alternatives, millennials’(18-34) viewership -and – entertainment habits have gradually shifted from stationary locations to more comfortable and mobile locations such as homes and offices.

Screen Shot 2017-03-26 at 8.03.20 PM

Figure courtesy of Marketing Charts

According to a study by Marketing Charts, an online data collector, the current average millennial VOD viewing time has increased steadily from mid-2013 to the beginning of 2016.  The millennial age group also heavily utilizes mobile and portable accessories such as smart phones, laptops and tablets from which they can view VOD content.

        Netflix currently accounts 70.1 million paid subscriptions at approximately a 96 -dollar yearly fee for the most basic subscription. Amazon unofficially accounts over 20 million paid subscriptions at a 99 -dollar yearly fee. HBO offers original film and TV- series content on cable networks for yearly subscriptions. HBO subscriptions have increased from 81 million in 2010 to 134 million by 2016.

        The VOD revenue model has drastically changed the way film content is monetized. Viewers no longer have to purchase an $8.15 one-way cinema ticket for an uncomfortable theatre experience and for one, genre specific Big Six movie. Instead they can pay in the form of an $8.99 monthly subscription to watch content in comfort and for unlimited genre selection.  

        Increasing teenager and millennial attendance rates are indicators of  their interest in films. But given that VOD offers more personal comfort than cinemas and lower pricing for greater genre selection, these groups in 10-15 years may choose to switch in higher rates towards VOD modes of entertainment.  Families of 4 may also choose VOD services instead of cinema services due to lower pricing for greater genre selection, thereby eliminating more consumers from viewing films in cinemas. Thus, the Big Six is perhaps on the verge of losing future revenue streams and alienating potential viewers.


Ongoing and Future concerns with the New Millennium Films:

        Inherent problems associated with New Millennium films are their limited storytelling capabilities, lack of critic’ praises, jumbled CGI effects and sequel set-ups. The theatre experience is also less attractive to contemporary consumers because the Big Six, in attempting to reach wider audiences, establish PG-13 ratings and therefore, avoid the grittier material so popular in Netflix, HBO and Amazon films.  New Millennium films have gradually come to tell the same storyline, and consumers are growing weary of watching their immortal heroes save the world time and time again. For example, popular New Millennium franchises, The X-Men and DC Comics have historically experienced drastic second weekend drops. X-Men films such as X-men: The Last stand (2006) and X-Men: Days of Future Past  (2014) experienced 77% and 74 % drops, respectively during their theatrical runs. Batman V. Superman and Suicide Squad (both 2016) experienced 69% and 67 % drops, respectively during their theatrical runs.  The drops shows that New Millennium films attract the die-hard fans during the first weekend, but without stellar ratings and reviews and similar plot lines, other parts of the population do not go to the theatre to view the films. While there have been a number of outliers, this trend is more the norm than the exception.  

The Big Six Solution:

To counteract future VOD competition and inherent Millennium Film creative issues, the Big Six can begin utilizing their indie- houses more and effectively allocating marketing resources towards mid-budgeted films (15 to 60 million dollars) and smaller indie films (5-15 million dollars). These types of films are forced to focus on telling an excellent story with a relatable plot due to the lack of extravagant actions sequences, CGI and continuance mandates. Apart from less expensive financing costs, mid-budgeted and indie films will help avoid drastic second weekend drops by keeping audiences intrigued and garnering better critic reviews, and competing against diverse VOD content.

        Successful mid-budgeted and indie films can be complementary sources of income and cash to the Big Six along with New Millennium films. In fact according to The Numbers, the most profitable mid-budgeted and indie movies based on ROI (Gain from Investment- Cost of Investment/ Cost of Investment) since 2000 had an average ROI (excluding the highest film) of 7,124.6 %.  New Millennium films do turn sizable profits, but incur large expenses, have thinner profit margins and can cause studios incredible financial losses just by breaking even. In 2016 alone, films such as La La Land , which was budgeted at 30 millions dollars and grossed 430 million dollars, and Split, which was budgeted at 9 million dollars and grossed 260 million dollars, frequently paced and even outpaced New Millennium films costing over 100 millions dollars.  

        An increase in mid-budgeted and indie film releases does not burden Big 6 conglomerates with huge financial risks. They have the market power to influence wider releases for these films, and can generate more marketing than traditional, smaller independent studios. If some films flop, they do not incur huge monetary losses. Taking such actions is necessary to avoid future revenue volatility and shortfalls in response to the post-millennial blockbuster trend and advance in VOD technology.


Works Cited


  1. Buckland, Warren., & Schatz, Thomas. (2009). Film Theory & Contemporary Hollywood

Movies. New York and London: Routledge. Retrieved from

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blockbusters. Retrieved from

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Retrieved from

  1.      Maglio, Tony. (2016, February 10). HBO vs. HULU: Here’s Who’s Winning in

Streaming Subscribers- By A lot. The Wrap. Retrieved from

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[Data File]. Retrieved from

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The Paris Climate Agreement: Worth a Mass?

“With the US on its way out, a joint EU-China effort is needed to curb global warming.”

By Eduard Batash

A Shift in Global Climate Change Policy

     In the subsequent weeks, the United States, the world’s 2nd largest emitter of Carbon Dioxide, will likely withdraw from the United Nations’ Paris Climate Agreement. While the direct effect on the climate agreement’s legitimacy is uncertain, China and the European Union (EU), the 1st and 3rd largest emitters of CO2, respectively, will now carry a heavier financial and political burden to implement measures to lower warming. Additionally, without the United States’ commitment to the 197-country deal, developing countries will lack additional financial support to fulfill their own carbon reduction pledges.

     The Paris agreement itself relies too heavily on public energy funding and government subsidies for policy adaptation while excluding, to its detriment, political and private sector considerations. To effectively curb CO2 emissions, countries may need to step outside the Paris agreement’s boundaries, alter their emissions reduction targets, and integrate private sector finance for policy implementation and adaptation.

The Paris Agreement

     On October the 5th, 2016, Barack Obama, the previous President of the United States, stated that the Paris agreement’s signing was “a historic day in the fight to protect our planet for future generations.” Mr. Obama’s statement was intended to demonstrate the United States’ commitment in spearheading the agreement’s new international climate change policy. Under the agreement, the United States was to finance emissions reduction programs for developing countries, while cooperating on a number of sustainability programs with other large emitters such as the EU and China. It should be noted that the United States had previously not ratified the Kyoto Protocol, the preceding U.N climate deal, in 1997.

     However, Mr. Obama’s words, and the United States’ CO2 commitments under the Paris agreement, will not gain much traction due to the current Trump administration’s desire to pull the United States out of the deal. Further, the United States’ probable withdrawal is only one of the larger doubts that precede the Paris agreement. The Climate Action Tracker, an independent scientific analysis website, which tracks global climate change action, has questioned the plausibility of participating countries’ CO2 reduction pledges. Furthermore, it is unclear whether the EU and China, now the most influential and significant parties to the agreement, can effectively implement their pledged goals due to other political and economic instabilities.

     The United Nations Framework Convention on Climate change, which included 197 countries, adopted the Paris agreement on December 12th, 2015. As of February 2017, 128 parties to the convention have ratified it. The agreement intends to lower the maximum warming by the end of the 21st century to 2 degrees Celsius, with an added effort to keep warming below 1.5 degrees Celsius. Participating countries must include “intended nationally determined contributions” in their yearly budgets, and increase their annual spending to reduce CO2 emissions and promote sustainable energy alternatives to fossil fuels such as solar, wind, hydro and nuclear power. Each participating country must periodically report on its progress, and on the amount of money they subsidize for alternative energy projects to the United Nations.

        While the Paris agreement brings climate change to the forefront of global concerns, it actually does very little to mitigate the situation in terms of policy implementation and execution. First, between now and 2030, participating nations will begin their emission reduction projects and sustainable energy subsidies. To reach a maximum warming of 1.5 degrees Celsius by 2100, parties to the agreement must make significant cutbacks in fossil fuel usage by 2030. These setbacks would require the parties to the agreement to fully honor their subsidy pledges. Second, the clauses in the agreement “strongly urge” but do not require these parties to set aside any specific budget percentage to lower CO2 emissions. A “nationally determined contribution” will be determined at the country’s discretion, and without any oversight. And while the agreement does add a level of international transparency to climate change issues by requiring periodic reports, its success largely hinges on its two of its most volatile participants: The EU and China.

Climate Change Finance Under the Agreement

     Climate change finance, in light of the Paris agreement, refers to either public or private capital flows that aim to “adapt” subject countries from heavy fossil-fuel usage toward low-carbon and climate-resilient developments and projects. Types of public financiers may include government agencies, ministries and national development banks. Private financiers may include private equity firms, financial institutions, corporate actors and project developers.

     According to a study by the Stockholm Environment Institute, private climate change finance is not evenly distributed among world economies, but rather, more heavily concentrated in large and developed economies. As a result, developing and resource poor economies will require further public climate financing flows from the developed ones to assist their adaptation efforts. The negotiators of the Paris agreement took this issue into consideration, and presented countries such as the EU and China with recommended financing amounts. However, the World Resource Institute estimates that emerging markets’ commitments from base year 2013 will need to increase by 450%, or 140 billion dollars to satisfy the Paris agreement’s goals of limiting warming to 2 degrees celsius by 2100. The EU and China will likely have to finance this funding shortfall. But without any budgetary mandates under the agreement, they may not want to fund other countries’ shortages.

     Private financiers are reluctant to directly involve themselves in climate change investments due to the concern of risk. According to a study by the Centre for Economic Change and Climate policy, potential climate change financiers fear that low-carbon investments tend to have higher risks due to longer time horizons (which delay expected returns on investments) high financing costs, and most importantly, worries about market adaptation  and policy support. The Paris agreement does not effectively alter these perceived concerns among private investors because it does not provide a sustainable or effective financial model in mitigating CO2 emissions.

Germany Leads the Way

     The EU has pledged a 40% reduction in CO2 emissions by 2030 relative to the year 1990. While the EU has had a 27% drop in CO2 emissions since 1990 and continues to project a downward trend in the coming years, the Climate Action Tracker projects it will still fall short of its 2030 reduction goals. The EU’s governing board has showed consistent intent in its public policy but, to reduce emissions, many of its goals hinge on its de facto leader, Germany.

     The U.S Energy Information Agency index ranks Germany sixth in the world in terms of aggregate CO2 emissions. However, it has decreased its CO2 metric tons per capita emissions from 11.6 in 1991 to 9.2 by 2013, according to data from the World Bank. In line with the Paris agreement, Germany has introduced energy efficiency goals that aim to develop alternative forms of sustainable energy. Among these is the reduction of energy consumption by 50 % by 2050, while also increasing energy productivity and efficiency by 2.1 %. But Germany’s commitment to these goals and projections is also affected by its influential automobile industry and its uncertain future in a volatile political union.

     The German upper house of parliament passed a resolution that would ban all internal combustion engines in cars by 2030 in direct response to the Paris agreement. This resolution led to a 5% market value drop in diesel in Germany and was followed by much criticism from German automakers who claimed that the plan was far too ambitious, and even surpassed the EU’s reduction models. German automakers’ resistance to changing energy standards is nothing new. During the Volkswagen diesel scandal between 2008 and 2015,  the German automaker deliberately cheated pollutant emission tests to sell more diesel cars. As mentioned previously, the period between now and 2030 is vital in order to reach the agreement’s emissions’ reduction goals. Yet, internal conflict between policy makers and the German automobile industry only creates more obstacles and decreases cooperation between public and private spheres in finding energy-sustainable solutions.

     Germany’s role in the EU has increased dramatically since the beginning of the 21st century, and, with Britain exiting the union, its power will only grow. Germany has a vested interest in remaining in the union because it allows it to keep its exports artificially cheap, and increase demand for its goods. Angela Merkel stated on January 12, 2017 that “we are absolutely in agreement that we cannot let ourselves be divided” in response to ongoing Brexit negotiations. To achieve the optimal Paris agreement targets, Germany will need to fully honor its CO2 emission goals by 2030. However, its focus on remaining in the EU and the economic stability of its people, might outweigh its focus on lowering CO2 emissions over the next thirteen years.

China Still Lags Behind

     In the same U.S Energy Information Agency index, China ranked number one in terms of aggregate CO2 emissions. However, its CO2 metric ton per capita of 7.5, according to data from the World Bank, is lower than that of Germany’s. More so than other countries, China has experienced an exponential growth in its CO2 emissions since 1960 and is infamous for dense fogs sweeping its major cities. Specifically, its largest CO2 metric ton per capita growth period was between 2002 and 2013, when it experienced growth from 2.8 to 7.5 tons per capita. Its largest GDP growth was also between 2002 and 2013, when its GDP grew from 1.4 to 9.6 trillion dollars. These trends demonstrate the direct correlation between China’s fossil fuel outputs and its economic growth.

     China has clearly stated that it believes climate warming and CO2 emissions are a major concern and has taken much action to alleviate the issue. It has allocated 361 billion dollars to renewable energy projects by 2020 and has reduced its coal usage for the third consecutive year.

     Even with these vast improvements, the Climate Action Tracker estimates that China’s aggregate carbon emissions will peak at approximately 12,000 metric tons by 2030 under the Paris agreement, approximately 4,000 metric tons greater than its output in the U.S Energy Information Index. But, China’s own commitment must be compounded with greater cutback measures from other countries to achieve the 2 degree peak by 2100. Given that China will likely need to provide financing flows to developing countries under the Paris agreement, its own massive spending on domestic programs, and its heavy economic reliance on fossil fuels, there remains a great deal of doubt on whether or not it will meet its goals.

The Future of Global Climate Policy

     Rising CO2 emissions are a monetary issue that also impact social, environmental and humanitarian efforts. They are expensive to mitigate, but become even more expensive to combat as they progress. According to the Stern Review, action taken to curb CO2 emissions will cost 1% of GDP, while inaction will cost 5% of global GDP in the short term, and 20% of  global GDP in the long term. If countries do not immediately decrease their emissions, extreme weather events, food and fresh water shortages, rising sea levels and severe heat waves will become apparent much sooner.

     Countries with high-income economies may allow their firms to invest directly in sustainable energy and climate-resilient projects in poorer countries with developing economies. High-income economies may also raise funds through the capital and debt markets and assign a development bank to redirect the capital raised. Relying on private investors who are motivated by financial returns might prove more fruitful in combatting carbon emissions than relying on policymakers’ fickleness. An integration of the public and private spheres, and policies aimed at increasing each individual country’s energy-self sufficiency will provide a more efficient model to curb climate change’s consequences than the Paris agreement’s model.

     The main flaws in the Paris agreement lie not in its cooperative intent, but rather its public funding and subsidy prerogatives. It offers no monetary incentive to the participating countries, fails to mandate the use of monetary resources, relies too heavily on public financing and sets CO2 reduction goals that are implausible and expensive.  Given both the EU’s and China’s predicaments in terms of economic obstacles and insufficient emissions reduction goals, parties to the agreement will need to rollback their targets and integrate private financing.


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