The Player; Blockbuster plays hardball with Hollywood.
Forbes Magazine, 09/03/01

INDIA: AES exit would not affect India's Orissa-official.
Reuters English News Service, 08/21/01

India: 'Dishonouring energy contract is the main issue in India'
Business Line (The Hindu), 08/21/01
Canada takes close look at business, rights code
The Globe and Mail, 08/21/01

Florida's Governor Outlines New Energy-Conservation Policy
KRTBN Knight-Ridder Tribune Business News: The Orlando Sentinel - Florida, 08/21/01
USA: Pacific N.W. states press FERC for power refunds.
Reuters English News Service, 08/20/01




On the Cover
The Player; Blockbuster plays hardball with Hollywood.
John Gorham

09/03/2001
Forbes Magazine
60
Copyright 2001 Forbes Inc.

Blockbuster is giving Hollywood a taste of its own hardball tactics. 
It was the shot heard around Hollywood: In an otherwise routine earnings conference call in July, Blockbuster ChiefExecutive Officer John Antioco casually mentioned that the 7,781-store video chain might end some of its rental revenue-sharing programs so popular with the studios.
Hollywood had already heard rumblings that Blockbuster wanted to modify the deals that force it to buy the studios' clunkers as well as their hits. But it was the first time that Antioco, 51, had gone public with his plans. "Sharing No More,"screamed Variety the next day. For Hollywood, the move is akin to killing the industry's golden goose:Since Antioco first negotiated the deals in 1997, Blockbuster's sales have jumped 14% compounded annually, reaching $4.9 billion last year. The studios have raked it in, too, collecting 40% of videotape revenues--an average of $25 to $30 per tape--while consumers have benefited from a wider selection. 
Under the old system, rental stores bought tapes up front for $65 each, and got an exclusive rental window. The effect was that the stores under-ordered, hurting consumers, stores and moviemakers. 
By speaking out, Antioco put the studios on the defensive. "It's unfortunate that they would say that in a public way instead of privately," seethes one studio executive. Blockbuster is "an endangered species," warns Warren Lieberfarb, president of AOLTime Warner's Warner Home Entertainment division. 
Antioco takes the criticism in stride. After rescuing Blockbuster from a death spiral since arriving from Taco Bell in 1997, he has turned the tables on Hollywood and put the company squarely in the middle of the debate over the future distribution of movies. Whereas there was talk as recently as the beginning of the year that movies-on-demand and other delivery schemes would spell the demise of Blockbuster, the company is now strong enough to muscle the studios. That includes Paramount, which happens to be owned by Blockbuster's former parent and still-80% owner, Viacom. 
"They're dependent on the $20 billion-plus home-video rental market," Antioco says in his Dallas office overlooking the new American Airlines Center. "I don't feel sorry for them. It's a great revenue stream for them. Every studio would be out of business without home video." 
Studio executives won't soon forget Antioco's scrap with Universal in February. At the time, Blockbuster was involved in a video-on-demand trial with Enron, the energy company that has branched into telecom. Blockbuster would line up movies that Enron would distribute over its network. But the studios were reluctant to sign any licensing deals, preferring to keep their options open with other partners, especially cable companies. 
At the least, Antioco thought he had a deal with Vivendi's Universal Studios unit for video-on-demand rights as part of the renegotiation of its regular videotape revenue-sharing agreement. But Universal balked at the eleventh hour, leading to a heated late-night phone call from Antioco to the head of Universal Home Entertainment, Craig Kornblau. 
Close the Enron deal or forget the revenue sharing, Antioco demanded. Just to prove he wasn't kidding, Antioco refused to stock Universal's new Rocky and Bullwinkle and Bring It On videos. Universal blinked. Antioco got his video-on-demand rights and then put Universal's movies on his shelves, a day late. 
Though the deal with Enron eventually fell through, the message was clear: As the single-largest revenue generator for the studios, providing 15% of their U.S. sales, Blockbuster isn't going to be pushed around. While Universal has complained of being bullied, Antioco makes no apologies: "I didn't want to be in a situation where we were shut out of a potential business opportunity." Hedging his bets, Antioco also has a deal with GM's DirecTV unit to sell the service in his stores, as well as cobrand pay-per-view channels for a cut of sales. 
Antioco learned his tactics as a convenience store retailer, rather than as someone smitten with Hollywood glitz. The son of a Brooklyn milkman, Antioco got his start at Southland's 7-Eleven unit, where he spent his early days auditing inventories of Slurpee cups and Slim Jims. Rising to the post of executive vice president of operations and marketing, Antioco later served stints as head of Circle K and Taco Bell. Stocking some cineaste's precious video is no different to Antioco than stocking burritos or Twinkies. 
"There is something very seductive about the movie business," says Antioco. "But the truth of the matter is, it's a business like any other business." 
Now, thanks to the surprising popularity of DVDs, Hollywood has even more cause for concern about Blockbuster. Sales of the discs are expected to double this year to $7.8 billion, while rentals should more than double to $1.4 billion, according to Kagan World Media. Antioco figures that Blockbuster will derive almost a third of its rental sales from DVDs by the end of the year, up from nothing two years ago, and half of rentals by 2003. Blockbuster's earnings (before goodwill amortization charges) are expected to jump 62% to $154 million for the year, on sales of $5.2 billion, according to SG Cowen, while the stock has almost tripled from its 52-week low to a recent $18. 
But the studios face a Faustian bargain. The more Hollywood depends on DVD money, the less it can afford to cannibalize those sales by pursuing risky dreams of video-on-demand. And that only strengthens Blockbuster's hand. Blockbuster never agreed to any revenue-sharing deals for DVDs as it did with videotapes, instead paying studios $15 up front per disc. While Blockbuster rents tapes and DVDs for about $3.65 each, its cost per rental transaction is $1.20 per DVD compared to $1.60 per videotape. 
Some studio executives, most notably AOLTime Warner's Lieberfarb, aren't convinced that Blockbuster is the only game in town. He predicts consumers will buy more DVDs from mass merchants than they rent, and video-on-demand and satellite TV will erode Blockbuster's near-40% market share for rentals. 
So go ahead and find someone better to peddle your movies, says Antioco. "No one is holding a gun to his or anyone else's head telling him to do deals with us. If they really believe that there is a way to monetize their product without Blockbuster, I am sure they will do it."

Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. 	



INDIA: AES exit would not affect India's Orissa-official.

08/21/2001
Reuters English News Service
(C) Reuters Limited 2001.

CALCUTTA, India, Aug 21 (Reuters) - A threat by the Indian subsidiary of U.S. power firm AES Corp to pullout from Orissa would not affect how well the eastern state's power sector performs, a provincial minister said on Tuesday. 
AES, whose investment in Orissa a few years ago was hailed as the beginning of serious reform in India's power sector, has a 51-percent stake in CESCO, an electricity distribution firm in the eastern Indian state. The Orissa government owns 49 percent.
Last month, AES said it would sell its stake in CESCO unless the state allowed it to raise tariffs and gave it a better regulatory environment. 
"It (the pullout) will have no impact at all," R.K. Patnaik, Orissa's finance minister, told reporters in Calcutta on the sidelines of a business conference. 
Patnaik said the role of AES, which has interests in 165 power plants worldwide, had not lived up to expectations in Orissa. 
"Transmission and distribution losses have come down only 1.8 percent from the earlier 43 percent." 
The U.S. company also holds a 49-percent stake in Orissa Power Generation Corporation (OPGC), which sells electricity to state-run transmission firm GRIDCO. 
AES complained that GRIDCO was not paying OPGC's charges, which had mounted to $45 million last month. GRIDCO says it cannot pay because CESCO owes GRIDCO an even bigger amount. 
"What is happening between CESCO and AES is their internal affair. The state has absolutely no role to play in this. But we will step in if we receive an SOS from CESCO," Patnaik said. 
Foreign power utilities, which entered India in the early nineties, have faced rough weather due to a slowdown in the pace of economic reform. 
Recently, Enron Corp announced its intention to exit the $2.9-billion Dabhol plant in India. 
Four other firms have already pulled out of India. 
They include U.S. company Cogentrix, which walked out of a project to build a 1,000-MW plant in southern India last October, and Electricite de France, which scrapped plans to take a 15-percent stake in a project in western India.

Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. 	


India: 'Dishonouring energy contract is the main issue in India'

08/21/2001
Business Line (The Hindu)
Fin. Times Info Ltd-Asia Africa Intel Wire. Business Line (The Hindu) Copyright (C) 2001 Kasturi & Sons Ltd. All Rights Res'd

MUMBAI, Aug. 20 IT is important that monopoly industries like energy and power answer to regulating bodies if consumer interests are to be protected, according to Ms Linda Breathitt, Commissioner, Federal Energy Regulatory Commission (FERC), USA. 
In an interview with Business Line, Ms Breathitt discusses the similarity between Maharashtra's Enron imbroglio and the energy crisis in California - both situations have proved a challenge to regulating bodies. Excerpts : What has been the reaction to two US majors pulling out of India? Ever since reports that US power majors AES and Enron wanted to walk out of energy projects in India appeared in US trade papers, the industry outlook has been negative. It has been disturbing, especially being a regulator, to watch US companies walking away from financial responsibilities here. American companies have so far found India an attractive place to do business in.
Do you see any parallel between the Dabhol incident and the situation you have in California ? In India, the challenge with Dabhol company is not only one of the price of power, it has become one of how to keep foreign investments in India. California is more about the undesirable effects of deregulation. 
Power prices in San Diego shot up in May and the crisis caught up in the entire Western region of the country. 
In India, it seems like dishonouring of the energy contract is one of the issues. This is similar to California where the parties are hoping to renegotiate certain contracts and consumers have filed a $9 billion claim with the FERC. Regulators have to now balance between ensuring the sanctity of contracts and protecting the interests of consumers. 
What can India do to ensure better regulation of the energy sector as a whole ? There is a lot of convergence in hydro-electric power and natural gas trading. May be the Indian Government could ensure that there is knowledge-sharing in agencies dealing with both these. 
I am not telling the Indian Government what to do, as the markets in India may not be mature enough. But this may be a good idea at a future date, considering even the UK has recently combined its offices of gas and electricity. 
What steps would a regulator need to take to ensure that interests of energy consumers are safeguarded? The FERC has set up a cell to get real time information on trade such as spot buying of electricity, weather problems which may affect power supply, etc. The thought behind this was to equip the regulator with real-time up-to-date information on the current trade situation. 
The main problems we have faced so far, have been the concerns of consumers such as municipalities and towns, about lack of transparency in energy trading. These bodies do not have tools to keep them informed of the current energy situation and often end up buying gas from corporates at higher prices. 
We have demanded that companies report daily prices, trades, requirements for transactions, etc. The corporates resent this. But as regulators, consumer interests are larger than confidentiality clauses of the corporates. 
Do you have any information exchange between the FERC and India's Central Electricity Regulatory Commission ? The FERC and CERC plan to bring together the State Commissions in India with their US counterparts to learn more about each other's work. 
Also, as part of the South Asian Regional Initiative/ Energy, there is an ambitious plan to synergise transmission, distribution, regulation, renewables and environment in the entire South Asian region covering India, Nepal, Bhutan, Bangladesh and Sri Lanka. The programme will be funded by the US AED, details of which, are being chalked out. 
Archana Chaudhary

Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. 	

Report on Business: Canadian
Canada takes close look at business, rights code
WENDY STUECK

08/21/2001
The Globe and Mail
Metro
B1
"All material Copyright (c) Bell Globemedia Publishing Inc. and its licensors. All rights reserved."

VANCOUVER -- The Canadian government is watching closely as international energy and mining companies try to strike a delicate balance between protecting themselves against threats such as kidnapping in foreign countries and respecting human rights. 
Canadian officials say they do not have a formal position on a voluntary code agreed to last year by the British and U.S. governments, seven multinational corporations and numerous non-governmental organizations.
But Canada is widely expected to join the process if it is opened to other countries. 
"I would say the odds are excellent," said a spokesman for an American group that helped develop the principles. "Canada is very interested." 
The principles, announced last year, address the thorny issue of companies in the so-called extractive sector -- either oil and gas or mining -- working in countries where security risks, including kidnapping, are common. 
Corporations' use of either their own employees or hired, local forces as security in countries such as Nigeria, Colombia and Indonesia can lead to human rights violations, including the use of excessive force or restricting legal, public demonstrations. 
Last year, some Canadian diamond companies were accused of using mercenary security forces in Africa. And companies such as Royal Dutch/Shell Group in Nigeria and BP PLC in Colombia have also been criticized in the past by human rights groups for alleged human rights violations by their security forces. 
The voluntary principles on security and human rights outline steps that companies can take to avoid such problems, including screening security service providers for previous human rights abuses, and working with host governments to attempt to ensure that international laws are respected. 
The corporations who participated in drafting the principles included BP, Royal Dutch/Shell, Chevron, Texaco and Enron, as well as mining companies Rio Tinto and Freeport-McMoRan. 
Canadian officials said the U.S. and British governments have kept Canada informed of continuing discussions around the principles, and that Canada has shared the guidelines with interested companies. 
"We have not yet developed a formal position on the principles," said Marie-Christine Lilkoff, a representative with the Department of Foreign Affairs and International Trade in Ottawa. "But we continue to consult with relevant stakeholders to gauge their interest in the principles, and continue to follow it very closely." 
Talisman Energy Inc. is using the principles to help design its own policies, said Reg Manhas, Talisman's senior adviser on corporate responsibility. The Calgary-based oil company has been pilloried by church and human rights groups over its operations in war-torn Sudan. 
"And we have put it on record with the U.S. State Department and with the government of Canada that if the process is expanded to other countries and other companies, Talisman would like to be at the table," Mr. Manhas said. 
Vancouver-based Placer Dome Inc. has also been studying the principles, and sent a consultant to an information briefing on the guidelines held last week in Washington, D.C. 
"Canada has a very large number, relatively speaking, of corporations in the extractive sector working all around the world," said Jim Cooney, Placer Dome's general manager of strategic issues. "And a number of those places are areas of conflict where security is an issue." 
Mr. Cooney said the principles are signficant because of input from government, industry and human rights watchdogs. 
"I think this was the first time that government, NGOs and corporations together have taken a joint initiative to deal with a common concern," he said. 
He said Placer is studying the principles because human rights are part of the company's sustainable development policy, and because the company operates in places such as Papua New Guinea and South Africa where violence can be a problem. To date, he said, Placer Dome has not had to hire external security forces, but he said the voluntary principles also apply to corporate personnel. 
Observers who helped draft the principles said it is too early to judge how effective the principles have been, as companies are still in various stages of implementing them.

Illustration 
Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. 	

Florida's Governor Outlines New Energy-Conservation Policy
Mark Hollis

08/21/2001
KRTBN Knight-Ridder Tribune Business News: The Orlando Sentinel - Florida
Copyright (C) 2001 KRTBN Knight Ridder Tribune Business News; Source: World Reporter (TM)

TALLAHASSEE, Fla.--Sensing that energy issues could light up the 2002 governor's race, Gov. Jeb Bush on Monday outlined a new energy-conservation policy for state government and hinted that he would revive the fight to deregulate Florida's electric industry. 
With Florida's energy demands expected to greatly expand over the next 20 years, Bush said new power stations will have to be built and there will need to be increases in the capacity of transmission lines. But he also said Floridians can do more to cut energy use, and he wants state government to lead by example.
"We all agree that we need to build capacity, and we've begun to do that," Bush said. "But every megawatt we save in conservation is one less megawatt that has to be built." 
After addressing a national conference of utility executives and regulators in Amelia Island, Bush said he would ask state officials today to begin cutting energy consumption. He said he wants a 5 percent per year reduction in the amount of energy used by state agencies. 
Among Bush's recommendations are: new requirements that agencies purchase fuel-efficient vehicles, the creation of a state energy office to develop energy policy and training for state workers on energy consumption. Bush said by turning off at night the 77,000 computers in state government, Florida could realize up to $4.4 million a year in savings. 
David Struhs, secretary of the state Department of Environmental Protection, who accompanied Bush to the meeting, said one of the recommendations is to bring in energy experts to make state office buildings more efficient. 
Struhs said the Bush plan would bring in private vendors who would spend their own resources making the buildings operate with less power and would be able to share in the long-term cost savings. 
Bush has been an advocate for at least limited utility deregulation, which has been promoted as a way to make it easier for out-of-state companies to build plants and sell power in Florida. Among the firms interested in Florida is Enron Energy, which was a major campaign contributor to President Bush. 
The move toward deregulation slowed in the Legislature after lawmakers became uneasy by headlines about California's woes. 
"I think we should restructure," Bush said. "I think we need to move to a less regulated environment in the wholesale market. But we need to learn from the lessons of other states, most particularly California." 
Also playing into Bush's call for more conservation measures is the fact that he has argued publicly against oil and natural gas drilling off Florida's shores. Just last week he said he wants his brother's administration to deny drilling permits for a natural gas field, known as Destin Dome, that lies 25 miles south of Pensacola. 
"For a governor who opposes oil drilling near the state, it's important for you to come up with ways to save energy," said Brian Ballard, a Tallahassee lobbyist who represents power companies and has close ties to Bush. "Florida isn't building a lot of power plants and doesn't want oil drilling. The only thing we can do affirmatively is to get our house in order." 
Meanwhile, Bush acknowledged that energy issues of all sorts are likely topics in his re-election effort. 
"One of the things we've tried to do is refocus folks in Tallahassee on longer-term issues," Bush said, mentioning road building, water capacity, growth-management reforms and energy policy. 
Some say the debate over utility deregulation and Florida's energy demands are stepping up. 
"I think he's reading the tea leaves and realizes this is a very significant issue," said Sen. Walter "Skip" Campbell, D-Tamarac, chairman of the Senate Regulated Industries Committee. The Senate panel and Florida's Energy 2020 Commission are studying the feasibility of utility deregulation.

Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. 	


USA: Pacific N.W. states press FERC for power refunds.
By Chris Baltimore

08/20/2001
Reuters English News Service
(C) Reuters Limited 2001.

WASHINGTON, Aug 20 (Reuters) - Pacific Northwest state officials pressed a Federal Energy Regulatory Commission judge on Monday to consider refunding over $1 billion in overcharges they say they incurred to buy electricity during the California energy crisis earlier this year. 
California officials also took part in the case to pursue $1.5 billion in refunds, part of the total $9 billion the state says it is owed.
Monday's pre-hearing before FERC Judge Carmen Cintron was the opening act in a case brought by Puget Sound Energy Inc. and a host of Pacific Northwest cities including Seattle. 
It is one of two cases pending at FERC on alleged electricity overcharges. 
The other, now before Judge Bruce Birchman, weighs the need for refunds on power sales within California state boundaries. 
FERC commissioners ordered the hearings in July to sort out liability for the meltdown of California's newly deregulated electricity market earlier this year and its spreading impact in other Western states on power sold from last Dec. 25 through this June 20. FERC could rule on the judge's recommendations in October. 
"Our goal is to get as much money as possible back into the hands of the California ratepayers as quickly as possible," Kevin McKeun, outside counsel for the California Attorney General's office, told Reuters. 
FERC JURISDICTION QUESTIONED 
Energy firms named in the case said Monday FERC's July order does not give the judge authority to rule on refunds. But state officials from areas affected by the California price spikes - including Washington, Nevada, Oregon, and California itself, say refunds are within the scope of the hearing. 
Cintron said her ruling may not determine the amount of any refunds, but may spell out the a methodology for the FERC commissioners to use to set refunds. "I am not charged with making an initial decision in this case" on refunds, she said. 
In documents filed at FERC on Friday, California said that energy companies overcharged by $1.5 billion to ship power from surrounding states and Canada onto its grid. 
Sales by Powerex, the power marketing arm of Canadian provincially owned utility BC Hydro, account for about $600 million of the refund amount. The rest is for power bought and sold inside state boundaries. 
ENERGY FIRMS: ALL SALES FINAL 
Energy firms named as the culprits in the case - including Powerex, Enron Corp. , Idacorp Inc. and Pinnacle West Capital Corp. unit Arizona Public Service Co., say that the July FERC order does not empower the judge to rule on refunds owed by their individual firms. 
Judge Cintron should "defer individual claims and determine for (the Pacific Northwest) to what extent refunds are due," said Lawrence Acker, an attorney representing the 60 individual sellers that banded together into the so-called "Transaction Finality Group." 
They claim that sales they made to Pacific Northwest states are final and should not be considered for refunds unless counterparties can show they wielded unfair market power. 
FERC should "leave contracts the way they are and not undo everyone's expectations," said Dan Watkins, an Enron attorney. 
Pacific Northwest and California officials cried foul at the demand. "The commission did specify directly that this proceeding should address potential refunds," said Philip Chabot, an attorney representing the so-called "net purchasers group" that includes Pacific Northwest utilities.

Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved.