Politics, Economics and Business Magazine- Spring 2024

The Team

Publisher- Hayden Randall

Co - editors- Hayden Randall & Isaac

Hayden

Journalists: Hayden Randall

Isaac Hayden

Mina Chung

Kevin Sheng

Alexander Mazzoni

Roan Ecott

Dylan Mistry

PEB

Politics, Economics & Business

Front Cover- Katja Wilndle

This Edition

March 2024

The Sad Reality of the Sri Lankan Economy, Isaac Hayden

…pg. 2

The Economic Impact of an Ageing Population, Kevin Sheng

…pg. 3

Conglomerates and how they Work, Hayden Randall

…pg. 4-5

Stocks and AI, Dylan Mistry

…pg. 5-6

Brexit’s EQect on Amazon, Alexander Mazzoni

… pg. 6-7

Concerts and Economies, Mina Chung

… pg. 8

The Fortnite World Cup: A Business Point of View, Roan Ecott

… pg. 9

The Fortnite World Cup: A Business Perspective

The first and only Fortnite world cup was held back in 2019 by Epic games as a global Esports tournament. The event took place in New York City and featured the world's biggest streamers such as Tfue, Mongraal and more, playing in and also commentating the inaugural tournament.

The prize pool for the event was larger than ever seen before in any Esports competition (Solo competition):

1st = £2.37 million 4th = £1.19 million

2nd = £1.78 million 5th = £950,000

3rd = £1.43 million 6th-10th = £715,000 each

And the list goes on as even last place (500th) received 20,000 pounds. The total prize pool for this event was roughly £23.7 million ($30 million)

Bugha- winner of $2.37 million

This esports event was one of the biggest ever seen in the industry, Epic games spent hundreds of millions of dollars on this event including: the prize pool, accommodation, staffing, marketing and much more, unfortunately the total cost of hosting this event was never published.

However, tax obviously played a big role as Bugha (winner of the solo competition) won £2.37 million, but after tax he only kept £1.146 million which is still a large amount even though 51.6% of the total was taken in tax.

The success of the Fortnite World Cup highlighted how much the gaming industry has significantly grown. The event was shown on multiple large streaming platforms including Twitch and YouTube. The event also attracted corporate sponsors from large businesses such as Redbull and Samsung which would have helped cover the large costs.

The reason that Epic games decided to host this event was to get more eyes on the game and it proved to work as that there was a huge boost in revenue for that quarter, as there were 1.3 million concurrent viewers on their twitch stream alone. The event reached a total peak viewing of 2.34 million people at once and an average of 1.19 million taken from escharts). As seen in the image below, Epic games received $4 billion 3.17 billion) in revenue in 2019, only beat in later years due to COVID lockdown.

The Sad Reality of the Sri Lankan Economy

I recently visited Sri Lanka on holiday. Beautiful country, culture, and landscapes. However, what I also witnessed was the sad reality of a third world country in an economic crisis.

The Sri Lankan economy collapsed in 2022 and riots and protests have amassed since. Sri Lanka is facing the worst economic crisis since its independence in 1948. The economy is so poor you aren’t allowed to take any money out of the country, instead they also use (US$) Dollar. Or you can order Sri Lankan Rupees but will take at least 7 days to receive the money. Currently with £1 you can buy 410 Sri Lankan Rupees.

(approximately £2500 makes you a millionaire in Sri Lanka)

Everything in Sri Lanka is government owned. There are very few reputable businesses which are privately owned for example: jewellery shops and hotels.

The two major cities in Sri Lanka are Colombo and Kandy. Those cities are somewhat vibrant and filled with culture within the urban streets. However, outside those walls are villages stricken with poverty. Travelling around the country I noticed that you didn’t see many private cars on the road. Instead, you saw motorbikes or TukTuks (taxis). I remember being shocked to see a new mother holding her baby in a sling while riding a motorbike around the village. But then I remembered that people clearly cannot afford private cars. I remember children banging on the doors of my car begging for money. I had not seen anything like it.

Written by Roan Ecott

The entire economy is currently dependent on Tourism. Therefore, when doing activities, they often have a local price and a tourist price which is more expensive. This is a way to generate more money into the economy because without tourism no money would be going into the economy it would only be moved around within the country. The economy is also entirely dependent on tips. Being there for two weeks made me realise that you tip everyone: your driver, your waiter, your bellhop, your tour guide, and the list goes on! This made me realise that the people are trying to generate extra income due to low wages and poor living standards making it customary to provide tips.

Why has this happened?

Several reasons. For example, Covid hurt tourism a lot in Sri Lanka as there was no money coming into the economy, tourism was low even before Spring 2019 because of the Easter Bombings.

Another reason was tsunamis – this would wipe out farmland which is one of their most lucrative exports. A lot of rich Sri Lankan families had their entire wealth destroyed due to tsunamis.

However, the most important reason is politics and corruption. In 2019 President Gotabaya Rajapaksa introduced tax cuts from 15% to 8%. This led to a steep loss in tax revenues from 11.6% of GDP in 2019 to 8.1% of GDP in 2020. This later didn’t benefit the Sri Lankan people and in the long run the Treasury lost 16 billion Rupees (£40 million).

Overall, it made me realise that we are so lucky to be in this country because witnessing all the villages made me feel that even the poorest of us are richer than the richest of them. So, we should be grateful for what we have.

Written By Isaac Hayden

The Economic Impact of an Aging Population

‘The world’s population is changing in ways that could barely be imagined a generation ago and at a pace that is faster than any in recorded history. A recent United Nations World Population Ageing report cites that between 2015 and 2030, the number of people in the world aged 60 years or over is projected to grow by 56 %, from 901 million to 1.4 billion. And by 2050, the global population of older persons is anticipated to more than double its size of 2015, reaching nearly 2.1 billion.’

Elizabeth Gasiorowski-Denis from ISO

As more people live longer and have fewer children, our economies are facing significant changes. This brings with both problems and chances that we need to understand, especially when it comes to money matters like healthcare, pensions, and jobs.

E/ects

Firstly, our ageing population significantly affects aggregate demand for healthcare services. A big challenge is how to handle the growing need for healthcare. As people get older, they often need more medical attention. With older individuals requiring more medical attention, there is an increased demand for healthcare goods and services. Governments must respond by allocating resources to expand healthcare infrastructure, invest in technology, and enhance the skills of healthcare workers.

This surge in healthcare demand not only influences government spending but also stimulates growth in the healthcare industry, contributing to an increase in aggregate demand. The aggregate demand means the total demand for goods and services within our economy, in this case, rise in demand for healthcare service could lead to the rise in inflation causing more issues.

Pensions and social security systems are also affected. With more people retiring, governments need to find new ways to help these systems. This might mean changing when people retire, encouraging them to work longer, or finding new ways for people to save for their retirement. Recently the government has raised the state pension age from 65 to 66 with plans for it rising further to 68 years old between 2044 & 2046.

The economic impacts of an ageing population are important to understand. We must find ways to deal with healthcare, pensions, work, and services to ensure our economies can handle these changes to avoid future struggles.

But it's not all problems; there are opportunities too. The "silver economy," which includes businesses for older people, can grow. Industries like healthcare, technology, and services for seniors mentioned as a problem above can become more important. This can create new jobs and help businesses.

Work is changing too. Older workers bring valuable experience, but sometimes they face limitations on jobs because of their age. For example, firms may think older workers may experience more health problems or disabilities that affect their productivity, and they may be worse to new technologies or processes. We need to create workplaces that involve employees of all ages, provide training for older workers and handle teamwork between different age groups.

Entertainment

Concerts and Economies

Going beyond the revenue generated by artists, holding a concert can have a significant influence on local economies. Concerts and live entertainment events generate significant economic impacts at the state and local level as much revenue is pumped into sustaining daily operations, such as marketing costs, legal services, and professional services.

Furthermore, the economic impact of live events extends beyond the jobs, event, and venue itself to local restaurants, hotels, bars, retailers, and small businesses where concertgoers, such as those who fly in from other cities or countries can help boost local food & beverage or hospitality industries.

Written By Kevin Sheng

Emerging from a pandemic that undoubtedly had effects on various sectors, it comes as no surprise that many artists’ concerts and touring plans were put on hold, postponed, or cancelled altogether. However, this lost revenue was quickly recovered as the touring industry soared back in the year 2023 (as seen in the graph).

The Ugly Practice of Ticket Scalping

Unfortunately, due to fans’ desperation to get their hands on a concert ticket, the issues of predatory pricing and ticket scalping have become more prevalent. One example would be Taylor Swift’s Eras Tour and the ensuing Ticketmaster fiasco after the tour was announced, in which the 2010 merger of Ticketmaster and Live Nation resulted in an effective monopoly over ticket pricing in the US. The overwhelming response from fans coupled with Ticketmaster’s inability to handle such a demand due to poor customer service forced many fans to turn to purchasing tickets from scalpers, who charge exorbitant prices for relisted concert tickets on ticket resale websites.

This can be reflected in the very black markets we have learnt about in Economics. Hence, consumers turn to these ticket scalpers who act as the agents in this black market where consumers must fork out more money than originally required.

Written By Mina Chung

The FBA was a simple concept where sellers sell their products, and Amazon ships them making transactions and deliveries easier. Without the FBA, sellers will have to handle all shipping, returns and refunds. Due to the process of distributing products becoming more difficult, this leads to international sales decreasing for Amazon.

Increasing exchange rates/trade rates

Brexit decreased the exchange rates/trade rates which in turn affected Amazon since trade is being limited. During the transition period, UK to EU trade was depressed by 10.5% and after the transition period trade was depressed by 15%.

This is a hefty blow to international trade which had a significant impact on Amazon. The decrease in the value of the pound caused issues as inflation grew and the cost of producing goods increased significantly.

Increasing costs

As mentioned above, ever since the UK left the EU a variety of changes have had to be implemented into Amazon due to the costs of production increasing. One of these changes was an additional 2% digital service tax. Due to these increases in tax, EU sellers are now being charged service fees at the checkout.

This leads to UK sellers feeling discouraged from distributing their products through Amazon because of these extra costs and could lead to them selling through another online retailer such as eBay or Etsy.

As seen in the graph Amazon’s quarterly growth was down in in the later stages of 2016 in which they would have had to face the struggles discussed all due to Brexit.

Written By Alexander Mazzoni

Business

Conglomerates and how they Work

Conglomerates are huge corporate entities that are large in size, revenue and profits. At a basic level conglomerates are corporations that are made up of many, many individual businesses that can sometimes be completely unrelated. Examples include the well-known tech giants of Meta and Alphabet but there are also conglomerates that are lesser known such as that of Tata.

Tata is an India-based conglomerate that operates in a range of sectors including: technology with Ignio; clothing with a huge Indian online shopping centre ‘Westside’ and the more western Zara; the food and drink sector with their own Tata Tea and (surprisingly) Starbucks; and, finally, they operate in the automobile market with giants such as Jaguar and Land Rover and their more humble Tata Ace mini truck that has still amassed 2.3 million sales. (Big numbers for such a small car)

In total from all their business Tata earned a huge £115 billion in revenue in the 2022-2023 financial year.

So how do conglomerates like Tata get this big?

Most frequently a single business will register and then be built on in various ways over the years. The three ways that conglomerates grow include: acquisitions, expansions and extensions.

Growing a conglomerate by acquisitions simply involves the purchasing of other businesses and firms. If the business they are aiming to purchase is too large there may be a merger or takeover that occurs to make both businesses one or separate with an overriding parent company.

Secondly, these mega corporations can be put together by expansions. This method is more about organic growth and restructuring inside a large company. For example, when Google restructured in 2015 it formed Alphabet as a new parent company for it. This allowed for the main Google search engine to continue as it was while Alphabet could acquire new businesses and extend its company portfolio. This allowed it to develop into the tech giant it is today.

Lastly, conglomerates can form from extensions. Similarly to expansion, extensions involve the building up of one business into other sectors but involves a historic or family business that has always dealt in one sector expanding into different markets by extending itself. Hence the process being called an extension.

What are the benefits and drawbacks of conglomerates?

With conglomerates being huge in size they seem almost invincible to any setbacks. However, due to their sheer size they face a few drawbacks. These include: a lack of efficiency due to a long chain of command meaning information can take a while to get from person to person; and that conglomerates stock can sometimes be lower than that of one of the businesses they are the parent company of making them seem less enticing for investors.

However, their benefits include: the huge, mitigated risk from having an expansive portfolio meaning a collapse in one market or firm won’t lead to a collapse of their whole business; and if they wish to grow a firm under their name then they can take profits from one of their more successful businesses for extra capital. For example, Tata could put some profits from Starbucks into their own branded Tata Tea.

Overall, conglomerates are complicated entities due to their shared goals between a range of businesses. However, when done right they can reach huge market capitalizations such as the top ten in the table on the right.

Stocks and AI

By Hayden Randall

Additionally, Meta has grown significantly since October 2022, largely due to its implementation of AI. They have used AI on their social media platforms to enhance the content recommendation engines. Meta has planned to double the content that AI recommends to Facebook users. The AI allows Meta to deliver more personalised content and advertisement and enhance its monetisation through short-form videos like Reels. As a result, Meta can command higher payments for the advertisement and can decrease the costs on monetisation through AI. Therefore, AI has played a large role in Meta’s impressive 198% gain over the past year.

In summary, the stock market has seen massive rises to tech giants driven by their strategic utilisation of Artificial Intelligence. Nvidia with their cutting- edge processors catered to the high demand of AI and Meta implementation of AI to increase their engagement and advertisement. This highlights the significance of AI integration in evolving the market and advancing innovative firms in the tech industry.

The stock market is a central marketplace where shares of publicly listed companies can be listed. This allows for investment by the public. Recently, AI has become more prevalent in the world as it can be used for a wide range of activities, from finding answers to questions to assisting self- driving cars. AI’s influence has reached unprecedented levels, spreading through every aspect of life, from powerful search engines to transforming transportation through self- driving cars.

The AI revolution has allowed innovative firms to dominate their niche market. In the tech industry the largest 7 firms are currently Microsoft, Apple, Alphabet, Amazon, Nvidia, Meta, Tesla which are known as the “Magnificent Seven”. Since October 2022, they have collectively risen by 112% massively outperforms the other companies in the S&P 500. (The S&P 500 is an index that tracks the performance of the 500 big companies in the US from all industries). Between the “Magnificent Seven” stock there has been variation between growths.

Nvidia has massively increased by 417% from October 2022 and this is mainly due to the new AI era. As AI becomes increasingly integrated in various aspects of daily life, tech companies are relying more on the tech to operate these AI systems. This is where Nvidia comes in place with their cutting-edge processor which are used to operate and train the AI models. Nvidia's processors are exceptional at performance complex computations and offer unmatched speeds. The most common use is NLP which is natural language processing like ChatGPT which requires a powerful processor to understand and create a human-like response to a question. So as the demand for these services increases, so does the demand for the Nvidia processor which has led to its significant growth.

Brexit’s effect on Amazon

Brexit has affected many businesses over the years from when the vote was announced to now when regulation is finally being put in place from it. However, in this article I’m going to focus on the corporate giant Amazon.

Amazon is the largest online retailer and was established on the 5th of July 1994 by Jeff Bezos and has amassed a huge 1.5 million employees.

Written By Dylan Mistry

There are three main areas where Brexit has affected Amazon which I will be discussing in this article. International sales, increasing exchange rates and increasing costs.

International sales

Firstly, the decision made by the UK to leave the European Union has affected Amazon's international sales. This was shown in 2020 when Amazon had to announce that it was ceasing UK to EU fulfilment through FBA (fulfilment by Amazon), meaning sellers were no longer able to use this programme to sell products across the channel from the UK to the EU after the 31stDecember 2020.

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