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tv   Bloomberg West  Bloomberg  April 10, 2015 6:00pm-7:01pm EDT

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cory: live from pier three in san francisco, welcome to "bloomberg west." i'm cory johnson. here's a check of your bloomberg top headlines. general electric editing most of its finance businesses. the copy will sell $26.5 billion worth of real estate to wells fargo and blackstone is it undertakes the biggest and broadest restructuring of its ce capital unit. here is the ceo, jeffrey immelt. jeff: this is an excellent time to sell financial assets. we think performance in the
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australia consumer finance value demonstrate our platforms may be worth more outside the company. cory: g.e.'s shares responded rising the most in five years. blackstone group also agreed to buy a shopping center owner excel trust, roughly $2 billion. the twin deals today cement blackstone's position as a world's biggest private equity investor in real estate. blackstone oversaw $81 billion in real estate assets. hillary clinton will make an official announcement for candidacy for president of the united states with an online video. the democrat will then head to iowa and new hampshire. clinton forgoing the typical big announcement in favor of meeting with voters in small groups according to a person close to her campaign. the u.s. senate is working on a bill that would give congress the authority to review the
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iranian nuclear deal. such a bill would allow congress to block the obama administration from lifting sanctions on iran. here is former u.s. ambassador to israel on whether any iranian deal will get done. >> if it continues to be the case that they want the deal, in the end it is more likely than not if they get a deal i suspect it won't be by that june 30 deadline. eventually there will be a deal. cory: are are some questions about whether the leadership in a run once a steel. both the ayatollah and a ron have warned they won't accept any deal that does not lift all sanctions against iran. nokia may sell its maps business, called here. nokia was to focus on wireless networking. google maps competitors is attracting interest from both companies and private equity firms.
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now to the lead. preorders have started for the apple watch, apple's first entirely new product since the ipad. already you will have to wait many months to get some of the watches, with many additions not available to ship until june. there were lines at apple locations around the world including australia and japan, among others but we did not see great lines for the iphone's we have become accustomed to in the past, perhaps because you can't bring the watch him today and you can only try it out. apple is encouraging people to make appointments for those tryouts ahead of the april 24 shipping date. one of the people who did try it out, stephen pulver and roughy mohammed, -- raffi mohammed. stephen, let me start with you. this approach to selling stuff -- i have long believed that the lines in front of apple stores are a pr gimmick.
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the press dutifully show up every time they release a new product to use those lines to make it look like the products are popular and they can't manage the demand. stephen: short. what apple is going for here is a different kind of marketing strategy. apple wants customers to be happy and feel like they have access to the product. you can go in the store and look and try them on a demo everything then place your order online or you won't have unhappy customers the wait in line and then go home empty-handed. cory: as part of the image restructuring, roughy mohammed price is an interesting part of this product. we've never seen a product -- i'm thinking of macs with every amount of ram you good stuff into it, would never cost you $17,000. how are they using price to convey image? guest: it's an interesting point. apple is really pioneering moving the merger of technology
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with fashion. what apple understands is there is a wide variety, spectrum of taste. this is why they have gone from this pricing strategy, $349 to $17,000, which i think is a detriment to the future of the apple watch. cory: why? morafi: we know apple suffers from the curse of awesomeness. initial reviews have been good and encouraging, but at the end of the day we all know that apple is going to come out with a vigor and better version probably within a year if you look at the cycle they do for the iphone. the big question is forget about $17,000, are they going to be spending even $1000 for a watch which is in essence disposable? in one year the fashion will look outdated and the technology will be inferior. it's a big question and this is further compounded by the fact
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that we upgrade with iphones all the time but that is because they are subsidized by carriers and you are not going to have the subsidy right now. the big question now is pricing strategy are people going to say, this is cool, i went to the apple store and so it, but then they will sit back and say should i buy now or wait for a year? that is the big challenge they are facing with this pricing strategy. cory: i don't know who knows more about pricing than you do. i think he's wrong. what the you think -- do you think? stephen: it is new territory for apple. there is no feature upgrade and going to the $17,000 apple watch edition or going for the $600 april watch -- apple watch. even within the apple watch additions, the difference in price between the sport band and the leather with the magnetic clasp is $7,000.
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even brands like rolex and omega are not charging $7,000 for a leather band with a gold clasp. cory: go ahead, stephen. guest: my counter to stephen's point is that it is great there are a lot of people looking at the watch, but apple is the largest company in the world with $183 billion worth of revenue could you need something bigger than diehards and diehard people -- big pocket people to get this watch going. from a pricing standpoint i think they need to focus more on the mass-market instead of the high-end watches, which let's face it -- cory: i don't think they are focused on the $17,000 watch. i think the $17,000 watch -- it
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is a gimmick. it is a way to say, this thing is really cool. i don't think anyone thinks they are going to sell 51% of the watches are going to be of the $17,000 model. it is an image leader and the same reason they bought ads in vogue, even though it is more efficient -- i would encourage them to buy ads in bloomberg businessweek. they are leading with functionality. rafi, why isn't that the model here, the same model we see in the fashion industry, where you can buy a polo suit for $5,000 to help them sell polo shirts? guest: two points. we have to remember that that polo suit is timeless, so to speak, versus a new apple watch. in a year, it is somewhat
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disposable. that's a big difference between your example. they really should be focusing on the mass-market spirit great to have a $17,000 watch, but they need to be focused on the $500 -- i would have gone down to $249 and gone up to $2000 and even offered a monthly payment plan to make this thing of it being disposable little easier for people. i would have bundled this with the iphone 6. most of the iphone 6 sales have been done. it would have been a nice counter to samsung's galaxy six released today to say, we have this new apple watch and we are bundling with the iphone for a value bundle. cory: stephen, what do you think of the role that the high end watch does to pull consumers to this product line? stephen: it's a marketing tool. it's not going to be their
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biggest seller. they are using it as a way to get exposure. when you have people like pharrell wearing them on national tv and positions and pop stars and public figures out wearing them, it gets exposure for the apple watch in general. like rafi said they need this to become a mass-market thing that everybody wants and feels like they need to have if it's going to move the needle for apple. cory: you have all these companies writing apps for the product even bloomberg writing an app for this product that you really want to get a bunch of watches out there so we can find out what the use case is. are you saying the high-priced watch will prevent that from happening? rafi: i don't understand how seeing for all wearing the $17,000 watch is going to affect
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the person looking at the $249 model. cory: glad to have you both on. we will keep looking at technology. coming up next, we will talk about tech. ♪
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cory: i'm cory johnson. coming up, how the apple watch can be a major player in payments, and we'll talk to the "game of thrones" cast about tech. goldman sachs giving ceo lloyd blankfein a long-term incentive compensation, eligible for $7 million in bonuses paid out in eight years. new bonus brings blankfein's
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total comp to $31 million last year making him the highest-paid u.s. bank ceo. china is using a new tool to disrupt access to foreign websites. researchers at the university of toronto say the deployment of a new system represents a significant escalation of the chinese government's great firewall of china. the report says the system, this one is nicknamed the great cannon, was used in a recent attack. amazon its new approval to test out delivery drones. the faa is given amazon a waiver on flights 400 feet above the ground and as fast as 100 miles an hour. an earlier faa approval said no for use of amazon because it applied to specific drones that amazon no longer uses. imagine making all your payments with the flick of your wrist, making it easier to use is one of the new features of the apple watch which is now available
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for preorder today. let's look at apple pay. one of apple's big corners, first data, the coveney powers half of all credit card and debit card transactions in the u.s. guest: it is a 40-year-old company. we have 6 million businesses as clients, and we are the indispensable component in the payment 8 am not sure why people don't know us better, but our job over the last two years when the ceo came to the company and myself as presidents has been to move away from that anonymity and bring prominence to silicon valley financial systems and districts, as well as the world. cory: your ability to get the money from the bank to the merchant or really from the consumer to the bank to the merchant like that, and controlling the whole process behind the scenes. guest: this is waterfront property.
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we happen to be there. that is why we issued 800 million cards. merchants are dependent every day on everything from the authorization of those transactions to the security and trust that goes with it, and the settlement payment that goes with it. we are that nexus in the middle of the activity. cory: consumers are starting to see some of the innovations going on in the industry. i don't think they have any idea what they are about to see. in october there is a change in the laws which means that merchants that don't accept the cards with a chip in them will be liable on their end for fraud and theft there. that says to me we are going to have a huge upsell of point-of-sale systems throughout the country. guy: that's right. the shift in my ability has driven large business to small business to rethink where they are today. they all need to re-terminal eyes -- re-terminalize to accept
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the chips. cory: i love that term. guy: you try to move to the forefront rather than just catching up to a the current law is. people will go to the terminal -- cory: the chip inside [indiscernible] guy: they will dip their credit card into a terminal. that chip will be read. it will stop counterfeiting and fraud. people move to encryption and tokenization. they will look at a whole different set of activities. from a point-of-sale terminal all the way down to [indiscernible] with the terminal in between to provide that capability and enrich the overall capabilities of business. cory: tim cook was boasting that two thirds of all transactions that are cordless were done with apple pay in the first quarter of apple pay. guy: apple pay has been one of
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the few things i can rub her in history -- remember in history that improves the consumer experience. cory: when security gets better the customer experience doesn't. guy: in this case, the consumer experience got better. every transaction is completely encrypted and tokenized, which makes it one of the most secure digital payments in the industry. any issues that have been written about as it relates to security issues are much more about the registration process. the actual transaction itself is as secure as it can get right now. cory: tokenized, every transaction rather than being connected up through the system as a transaction moves all the way up to the bank being connected to that consumer and the credit card number becomes a token and a completely anonymous transaction. guy: that's right.
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that token cannot be connected except by the person doing the authorization, or reused. it is never seen across that whole transaction. cory: does this mean you guys will make more money? guy: we will make more money and our customers will make more money if we make commerce secure. safe trusted commerce will increase that drive. i think the consumer experiences will get better and better. we are seeing the uptake significant across the board because people are making this leap to not just driving a secure transaction, but building into consumers' experience. cory: you have a long history working in trading systems working on wall street. ease of use is not what trading systems are known for. how does that work with what
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you're doing with first data and payment systems where you want great ease-of-use? guy: in trading systems, the idea is high-frequency, low latency capabilities. build good strategy to make sure fraud and security are out of that system. it's the same with payments, reduce fraud, improve the safety of the transaction split-second capability for authorization. and along the way build in a series of capabilities and enhancement. cory: first data president guy chiarello. of next, "game of thrones together" technology. ♪
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cory: big day for hbo launching a standalone web service for cord cutters people without a premium cable subscription. the ceo talked about it with charlie rose. >> we went our subscribers to say over the course of a month, this is more than worth it or it if we provide flexibility for how you get that service going forward, we think this is multilateral. it's not binary. cory: catch the full interview on "charlie rose" at 7:00 and 10:00 eastern. hbo's hit show "game of thrones" coming back with a new season this weekend. i caught up with the actress at the show's premiere. we talked about the characters would do if they had access to high-tech smartphones in the land of "game of thrones." >> took two episodes to get from
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king's landing at the beginning of the show all those years ago. and apparently now has taken four seasons to try to get back again. maybe she could do it with a map. >> may be a relaxing game would be good for him, something with cute characters or something. >> is angry birds to angry for your character? >> to angry -- too angry. maybe he would have a property app. >> i think he would take two years and still not be able to work it out. >> she might die if she saw a phone. it would be too much. >> would probably reverse it. >> i do not think he would get on with it too well, actually. i think it would be smashed up a wall or something. >> and a kind of gps would be
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helpful. i still get confused when i see maps. if i could just pinpoint, now i'm in winter phil -- that would be great. >> she desperately needs some loving. ♪
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cory: this is "bloomberg west." i'm cory johnson. let's check the bloomberg top headlines. president obama spoke with cuban president raul castro on the phone. both are attending today's summit of the americas in panama. there is a chance of an informal meeting. john kerry met with his cuban counterpart, bruno rodriguez. >> country after country the people of the americas have strengthened their democracies and taken steps to ensure the fundamental freedoms of their citizens. cory: the state department called the kerry-rodriguez
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meeting lengthy and constructive. hillary clinton is running for president. clinton will make the announcement on video before heading to iowa and enters the race as an unprecedented front runner facing little to no cup edition for the democratic nomination. china's central-bank pumped billions of dollars of loans as an effort to boost the economy. last china -- last year china had its weakest economic growth in more than 20 years. in florida he said today that recent soft figures in the economy will be only temporary. last month said policymakers were split on the beginning of raising rates. nyc's most expensive home purchases ever bill ackman paid $91.5 million for a duplex at
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157 tower in manhattan. last year ackman told "the new york times" it was the mona lisa but apartments. what a linkedin spent $1.5 billion on an education site? who better to ask than the linkedin ceo, jeff weiner. jeff: it works for individuals, it works for companies that want to invest in their employee basis. a big portion of the current customer base is universities, and its administrators professors, and students of those universities. is a broad cross-section of folks, and it is increasingly international as well. lynda.com is producing contents not only in english, but german, french, and japanese. cory: you guys give helpful
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guidance about what the building -- business is doing. about 1/3 of that is a corporate business. do you see the corporate aspect of this becoming a bigger aspect of the lynda.com business because it will be matched with your big sales team? >> its growing faster than the consumer base today. both businesses are growing. we do think there are strong synergies with our platform in both the segments, with regard to individual members, we think it aligns well with our subscription model and we're looking forward to a number of different points of integration. we have tens of thousands of enterprise customers. we've got a global sales force with regard to our talent solutions business. we think there are exciting opportunities to grow the business. cory: when i look at this, it seems like the kind of thing that your guys have just taken and run with it. do you think it grows faster under linkedin that it would by itself?
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jeff: we will see. it is the intention to continue to invest in. we think there are simple wins in terms of integration that we are looking forward to testing. slide share is reaching tens of millions of people every month. we had a repository there of 18 million plus presentations and videos. when you are doing a search for a specific knowledge base, you can imagine a lynda.com learning module on the right rail with related coursework. the same would hold for a job seeker, we know what skills you have as a job seeker, the skills of the job you're interested in looking for. we can suggest you go and acquire that skill. we can send you a congratulatory note and let you know that people who have been promoted into similar roles have certain skills that you may not have and we can suggest you learn those skills. there are myriad examples of where there are straightforward integrations like that. cory: i'm imagining a data component where you layer on the geography. i want to move to denver i'm
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good in oil, but i'm not good in gas. you can coach me up on that as a potential job applicants. jeff: for any given locality -- we have talked for quite some time now about our vision for realizing our vision to build the world's first economic map, to digitally map the economy. in any given locality, to be able to measure the fastest growing jobs and skills required to obtain those jobs, the aggregate skills of the workforce, and measure the gap. with a world-class library of content that lynda.com offers, we can suggest to any individual with in that locality, here's a skill you need. it's not just about the jobs that were, but training you for the jobs that are and will be. cory: i love this idea and i want you to explain it more. bigger about the social graph and facebook kind of mapping the connections to the network we have as friends and family. what is the economic graph? jeff: the economic graph is a
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digital mapping of the global economy. historically the value that linkedin has been able to create thus far to date is oriented around relationships between professionals. it is a professional graph. the economic graph takes those professional relationships and builds on that. we want to map the global economy digitally. that would require a profile for every member of the global workforce all 3 billion plus people, a profile for every company in the world. there are 70 million companies in the world. we want a digital representation of every job in the world. we would like there to be a digital representation of every skill required to obtain those opportunities and those jobs. presents for every university and higher education organization in the world that offers the ability to acquire those skills to obtain those jobs. we want to make it easy for every individual, every company, every university to share their
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professionally relevant knowledge in the event they would like to do so. we want to allow capital, all forms of capital and human capital, to flow to where it can best be leveraged and in doing so, the hope is that we can lift and transform the global economy. cory: is that all? that's enormous, jeff. it is wonderfully ambitious. jeff: it is straight it is something we have been talking about for several years. it was true north for us. what has happened is over time we have been somewhat successful in generating traction on each of those six pillars or dimensions in terms of playing the right foundation, building the right infrastructure, and with our acquisition of lynda.com we take the skills pillar and go beyond the data to understand what skills are members have and what skills they need. we can actually offer the content that enables them to acquire the skills. this is that last piece of the puzzle. at this point it is a question of scale in time. cory: the guidance you guys gave
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us was operating margins for lynda.com is 5% to 10%. do you think it becomes not just a bigger business, but a more profitable business, where the operating margins are closer a few years out more like 20%? jeff: we have not released details yet. what we can say is there is tremendous potential here. for many of the reasons we discussed thus far, like our sales footprint our pre-existing membership base $350 million strong. one of the things we're most excited about is the extension of this platform on a global basis. you think about china where we now have 9 million members. that is up from $4 million -- 4 million in for very of last year. india, 30 million members. and the opportunity to bring the lynda.com library to these markets and extend beyond international footprint.
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we could not be more excited. cory: linkedin ceo jeff weiner. vinod khosla will talk about education when bwest continues. ♪
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cory: up next vinod khosla talks education, behind the scenes in the music business and streaming. a sectional heatwave intensifying in california extended drought. the last 12 months were a full four and a half degrees above the 20th century average. it's having a big impact on food producers like kind healthy snacks. >> is a serious issue for humanity. this is just the beginning of some major challenges we will
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face. it's not just water, drought. it is also climate change. cory: more than 44% of california is now in a declared exceptional drought meaning crop losses or water shortage is in the top two percentile. the city of brotherly love ain't loving comcast trade many of its residents can't even get an answer when they call their hometown cable company. let's must comcast said it would triple the staff the response to members on social media. silicon valley does not have a better-known investor than vinod khosla. he is now heading up khosla ventures. we talked about education technology startups. vinod: i think previously it was this lower faction view of technology applied to education. you always heard about speeches
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and classrooms, but there wasn't this notion of, let me create something for the student or the teacher for interaction. now with cloud and mobile we have gotten the basic infrastructure to do all kinds of interesting things. if you look at something like twitter or facebook, what they are about is taking a person and addicting them to the application. i think that ecosystem has been enabled for entrepreneurs to come in and start addicting students to learning. i think it will happen. cory: where do you see that happening? vinod: we have made some investments. i will give you an example. piazza little ecosystem that professors use in colleges do essentially have a class forum, a place for students to ask
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questions, get help from peers other classmates, teachers' assistance. i looked at my son's enrollment in three classes. he had 3000 interactions on piazza. my son is at stanford and computer science. he had taken three courses where the professors were using it. there were 3000 individual interactions across those courses in the forums. that is way more engaged than any classroom you can imagine. the founder of piazza started with the idea that people need to interact in a forum, this lots of questions, lots of peer help that then becomes a way to extend. imagine you can do assessment for class. in a normal class, professors
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give tests. but if you know every interaction the student had in class, you could get much better assessment of how the student understands. cory: not just the score on one test. vinod: what questions do they ask? what comments do they make on other people's questions? i think all of this will change. that is mostly college education at the outset. teachers and other people who are passionate have created over 100,000 pieces of content to attach to. all of high school education is only about 2000 concepts you have to learn. for each of those there are
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100000 concepts that have been created, elaborations that have been created and we call them modalities. these modalities are literally, you describe photosynthesis, but can i see a simulation or a video, or can i play with what happens if the sunlight is late evening versus morning. being able to run those experiments right on your ipad or android tablet those kinds of things are getting students engaged. imagine that much content. we were talking about mcgraw-hill earlier. they don't have people who can offer that much content. the community has authored it. k-12 started with a complete set of stem textbooks for middle school through k-12 six through 12 education. people are now adding to it.
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they're a great simulations you can play with and say, why is summer and winter different in the northern and southern hemisphere? you can run a model and see how the earth is going around the sun and actually see it. cory: coming up, the secret sauce behind streaming music. ♪
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cory: spotify, serious, samsung -- they all offer streaming music. the streaming themselves that is up to on the. the cofounder and chief engineer joins me. good to see you. and so fascinated by your business. how to you describe what you guys do? guest: we are like a big box in the cloud. we have spent the last eight or nine years going around all over the world and just doing high resolution audio from all of the music labels in over 200 countries, bringing them into the cloud and preparing for this moment right now when we can launch the world's first music cloud. cory: everything you do is awesome? phil: 25 years ago when i
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started software for rolls-royce, the way we approach software than is you select a database like oracle or microsoft, and you build everything else. the world has come such a long way in software engineering. you don't do that approach with fantastic life forms like amazon web service. software from hundreds of different -- cory: all for the purpose of spitting music out to streaming services. phil: today it's all about integration or you have to be careful about what software you run. what we just launched with samsung in asia is the world's first music as a service platform, making it completely easy for anybody who wants to deliver high quality -- as services move into high resolution there's 41 million really big files, really hard to deliver globally, very far. cory: higher resolution than
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pandora, spotify. what is your role with title? phil: we don't have a role with title yet. jay-z is a creative genius trade he has proved that time and time again with his music. as he gets more involved in the title service, what he's going to find out is there are multiple things and components behind it. the content has got to be right and exclusive. the technology behind it is critical and hugely complex. if you build all of that yourself, you should leave that creative part to us. that genius of the backend technology is really hard. that is what people like a serious -- sirius xm and samsung focus on, the value added a straight we do the complex stuff behind the scenes. cory: do you think title is
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going to be limited not just -- because the depth of catalog they can't get unless they sign up with somebody like you guys because then they can get 41 million songs, not songs from 10 artists who are the biggest names? phil: title can be a fabulous success. that is why we're going to meet with jc. -- jay-z. cory: also meeting with neil young. i listened to led zeppelin on a level i have never heard before. phil: the whole music industry is pivoting right now. for years it has been operating not realizing it is a digital business. this is a pivot point for the music industry. music as a service for the first time, it means it can truly turn into a digital business. it is one example of how companies are using our
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platform, focusing on the value-add can do something really deadly. cory: at least 41 million kids to listen to. i thank you. time for the "bwest byte." today, going solo. the number is three. as president ford said our long national nightmare is over. emily chang returns from maternity leave on monday. three days from now. you will get back to emily chang sitting in this seat, and i will welcome her at that. he will be good to have her back. thank everyone for putting up with me for the last few months while she has been away. thanks to the staff as well. it has been a blast. emily will be back with us on monday. thank goodness for that. it the latest headlines all the time on your phone, tablet bloomberg.com and bloomberg radio. ♪
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>> from our studios in new york city, this is "charlie rose." charlie: richard plepler is here. he is the chairman and ceo of hbo. he has green lit such hit shows as "true blood," "boardwalk empire," and "true detective." this sunday night, three series that began under his leadership return with new seasons -- "veep," "silicon valley" and "game of thrones." hbo has released its standalone streaming service. it is called hbonow. here is a look at what it offers. >> ♪ i get high

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