The Economist - UK (2021-11-20)

72 Business TheEconomistNovember20th 2021

hosted  a  virtual  space  battle  to  promote

“Rise  of  Skywalker”  (the  “Star  Wars”  film,

in  turn,  referred  back  to  the  in­game

event—very meta). In July Ferrari uploaded

a virtual version of one of its luxury sports

cars  into  the  game  for  players  to  drive

around. It is not quite the same as renegade

hackers  racing  virtual  cars  in  the  “black

desert of the electronic night”. But it is not

a million miles away, either. 

The best­known uses of “Fortnite’s” vir­

tual  world  have  come  from  the  music  in­

dustry. In 2020 Travis Scott, a rapper, host­

ed a virtual concert. The malleable physics

of  the  digital  world  allowed  him  to  do

things  no  amount  of  stagecraft  could  ac­

complish  in  reality.  His  hundred­foot­tall

avatar,  wreathed  in  lightning,  danced  and

stomped  through  the  game’s  pixellated

universe,  shaking  the  ground  with  every

step.  Around  12.3m  people  attended,

around 60 times more than can fit onto the

fields of Glastonbury, a big music festival.

The second prong of Epic’s strategy, be­

sides “Fortnite” itself, is to sell pickaxes in

a gold rush.  Here it is in competition with

Unity, a firm founded in Denmark in 2004

and which went public last year. Both firms

sell  sophisticated  software  “engines”  that

were  originally  designed  to  power  video­

games. Now they are touting them as piec­

es of general­purpose simulation software

that they hope will become a common lan­

guage in which 3dworlds are built, in the

same way html underpins websites. 

They are already partway there. Games

engines are finding uses outside the gam­

ing  business.  Architectural  firms,  for  in­

stance,  use  them  to  build  virtual  versions

of  buildings  to  dazzle  clients  before  con­

struction. Some use them to help manage

the  build  itself.  A  collaboration  between

Epic and Cesium, a startup that maps cities

and  landscapes,  allows  virtual  copies  of

real cities such as Melbourne or Detroit to

be  dropped  into  Unreal,  the  engine  that

powers “Fortnite”. 

Mr  Ball  points  out  that  much  of  “The

Mandalorian”,  a  “Star  Wars”  tvshow,  was

shot  within  a  virtual  world  generated  by

Unreal. Since they are built with the same

software, he writes, “audiences could free­

ly investigate much of these sets [in an Un­

real­powered  world]”—a  metaversey  twist

on charging fans for tours of film sets. Un­

ity recently paid $1.6bn for Weta Digital, a

visual­effects  studio  founded  by  Peter

Jackson,  who  directed  the  special­effects­

heavy “Lord of the Rings” films. It also un­

veiled  Metacast,  a  piece  of  software  de­

signed to broadcast sports events into vir­

tualworlds.Thefirmshowedoffa mixed­

martial­artsboutthatviewerscouldwatch

fromanyangle—eventhepointofviewof

oneofthefighters.

Whetherthegamesfirmscancompete

withthetechtitansremainsto beseen.

Meta’sannualrevenues,at$86bnin2020,

makeithalfthesizeoftheentiregaming

industrybyitself.ButMrBallpointsout

thatbigchangesintechnologyoftenlead

totheriseofnewplayersdespitetheef­

fortsofoldincumbents.And,besidesex­

perience,thegamesindustryhasplentyof

ready­madeearlyadoptersforwhomvirtu­

alworldsarealreadyanestablishedcultur­

alnorm.“Youhaveatleasttwogenerations

ofkidswho’vegrownupplayingonline

games,”saysMrBronstein.“Navigatinga

3denvironment.Hangingoutina virtual

worldwithfriends.Thisstuffiscommon­

placeforthem.”n

Americanrailways

Chugging along

F

ewindustriesaremorevulnerableto

events  that  depress  revenues  and  in­

crease  expenses  than  America’s  railways.

The  basic  business  model  is  to  lug  lots  of

stuff to offset the high fixed costs of own­

ing fleets of locomotives and maintaining

thousands of miles of track. That has been

hard  as  America’s  supply  chain  has  come

unglued, first because of covid­19 and then

as it has waned. Ports are gridlocked, ware­

houses  over­stuffed  and  labour  unavail­

able.  It  has  unquestionably  been  a  tough

time to be a rail company and, it turns out,

a remarkably good time to be one.

Volumes  and  profits  at  the  listed  com­

panies that run America’s tracks and trains

used to be tied as closely as a locomotive to

its  cargo.  No  longer.  Traffic  has  yet  to  re­

cover from pre­pandemic peaks, according

to the Association of American Railroads, a

trade group. But the financial equivalent of

a train crash that such a slump would once

have presaged has not arrived. On the con­

trary,  America’s  major  freight  carriers  are

on their way to record annual profits. Their

share  prices  in  recent  weeks  have  helped

stockmarkets there chug to new highs.

Train  dispatchers  have  earned  their

crust in recent months: vital rails underly­

ing many trans­continental supply chains

are  not  exempt  from  disruptions  of  their

own.  At  Union  Pacific  (up),  one  of  Ameri­

ca’s  two  largest  rail  operators,  fuel  costs

have risen by 74% over the past year and lo­

comotive  productivity  has  fallen  by  8%.

Freightcar“velocity”,thenumberofmiles

travelledinaday,is5%belowthecom­

pany’sstandard,inpartbecauseof“termi­

naldwell”—rail­speakforbeingstuck.

Wildfiresacross 13 westernstatesdur­

ingthesummercausedwidespreaddelays,

reroutinganddamage.Theglobalmicro­

chipsnafuhasreducedshipmentsofcars,

a lucrativecargo.Railwayshavetheirown

shortagestocontendwith,fromtherolling

chassisusedforunloadingcontainersto

largewarehouses.Employees,whomrail

bossesoncethinnedinrepeatedcost­cut­

tingdrives,arenowinshortsupplytoo.

Manywhowerefurloughedduringtheear­

lydaysarenotkeenoncomingbackto

work,saysJamesFoote,thechiefexecutive

ofCSX, thethird­largestrailcompany.

Ordinarilyall thesefactorswouldbe

toxic,butthesearenotordinarytimes.The

capacitytogetgoodsfromatobhasbe­

come extraordinarily valuable. Jennifer

Hamann,up’sfinancechief,explainsthat

strongdemand“supportspricingactions

that yield dollars exceeding inflation”.

Pricerisesmeanup’s operatingincomeov­

erthepasttwoyearsisupby9%evenas

volumeshaveslippedby4%.

Otherrailwayshavemadepreciselythe

samepoint(thenetworksoverlapinplac­

es,thoughlargelycovertheirownpatchof

America). Allhave limited capacity and

similar obstacles.Betteryet, forrailway

shareholders,theshortageoflabourhas

beenevenmoreacuteinthetruckingin­

dustry,bluntingoutsidecompetition.

Inevitably,theenvironmentwillshift

asbottlenecksareresolvedandworkersre­

turn.Pushybusinesscustomerswillnot

haveforgottenhowtonegotiate.Therail­

waysthemselvesarenotsittingstill.up,

for example,is stretchingits seemingly

endlesstrainsfrom9,500to10,000feet.

csxisintroducingautonomouslocomo­

tives. Norfolk Southern is shifting ever

moretrafficfromjammedwest­coastports

tosmootheroperationsontheeastcoast.

Thisunusualmoment,inshort,willpass.

But for now, the industry remains on

somethingofa roll.n

N EW YORK

Supply-chain snags are driving up the

profits of those shifting rail cargo

Off the beaten track

United States, freight-rail traffic*

Average weekly carloads, ’000

Source: Association of American Railroads *US carriers only

600

550

500

450

400

2017 21201918

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writer to provide thematic features across

geographies and sectors. Applicants need not be

journalists but should be stylish writers and

financially literate. Please send a cover letter and cv

to [email protected] by

December 20th.