tv Bloomberg Technology Bloomberg July 17, 2017 5:00pm-6:00pm EDT
showcase domestically manufactured products. trump enjoyed overwhelming support from people who voted human but they are less enthused on his leadership on health care according to the bloomberg national poll. 60% think it is unrealistic a bill that improves on premiums and coverage will pass. u.s. trade representative robert lighthizer released a comprehensive summary of renegotiating objectives for nafta. the administration plans to seek a better deal that reduces the u.s. trade deficit and improves market access for americans in canada and mexico. u.s.are demanding the return the country houses seized last year by the obama administration in retaliation for election hacking. russia calls it a breach of international law. o.j. simpson will ask officials this week to let him out of a nevada prison. he served more than eight years for armed robbery after a failed bid to retrieve memorabilia.
he will appear by video conference thursday to face parole commissioners. global news 24 hours a day. i am alisa parenti. this is bloomberg. "bloomberg technology" is next. ♪ ♪ i am caroline hyde from london in for emily chang. this is "bloomberg technology." recordup, netflix's second-quarter. why content is king as tech earnings get underway. uber fit for business? the west coast had joins us to discuss the business platform and rebuilding the company culture without a c.e.o. at the wheel. the highs and lows and hacks
affecting cryptocurrencies. we dig into what is driving volatility and the bitcoin selloff. netflix's second-quarter has seen the company shares climb 30%. the streaming service delivered adding 5.2 million streaming subscribers with a big portion of that coming from outside the u.s. shares are rallying in after-hours trading, up 10%. cory johnson joins us from san francisco. completely smashing it on the subscriber side. now it seems they have 50/50 when it comes to international and u.s. users. cory: i like the way you say smashing, it sounds very british. smashing. now it seems theythe results arn terms of the number of subscribers added. netflix wants to focus on its profitability. meager profitability but some
profits nonetheless. , i guess at my numbers i am looking at cash flow. the number everyone is focused on now is the subscriber number. here is why. when investors look at this stock, they do not see the financial results needed to grow on this valuation. they see a business that might someday generate those results. how do you have the free cash flow to pay for the cool conflict at netflix? by having subscribers who pay you every month and keep on paying. what they see in these numbers is an accumulation of subscribers who credit card numbers in online and the payments keep flowing, and the geographiesill see that are profitable in the rest of the world for netflix. caroline: 104 million users. they say by 2017, for the first time international users will bring tons of profit.
i'm looking at the financial analysis for bloomberg. you can see the revenue breakdown is substantially in the u.s. you are looking at 2016. 57% of revenue coming from the u.s. they want to get that to 50/50. do we have any inkling of when revenue will come into line internationally speaking and how they continue to do so well in content? you know me, i am always a pessimist. when i look at these numbers and how little of the u.s. population netflix has when it looks like that market is pretty full for them, it suggests there may be a lot of growth for them internationally. we will see how the spending patterns are different. they do not give us a lot of country by country detail. that might be too much to ask. they got queried the fcc about aing business with sudan, country u.s. companies are
banned from doing business with. they pointed out there revenues are minimus incident -- in sud 15 as low as $8,000 for the months that preceded their letter to the fcc. i do think it is kind of important. it tells us not every place is going to run netflix as they do in san francisco were in london --four in london. different parts of the world are different. it is not just about the way the internet exists in different countries. people are just not going to be able to stream as much in certain places. they will not want to stream the netflix content as much. it is still a hit driven business. they have done a good job with good shows. they have done alright with some of these things. a lot of stuff has missed the boat. that is to deal with --
tough to deal with dealing with so many different geographies and cultures. caroline: what helped the second quarter was the amazing array of content. it was really interesting if you dig into the letter you are getting from the c.e.o. to investors. he seems to be trying to deflect competition saying there is room for everyone. their words are they make the internet tv market expand. they say hbo has exclusive content. more people are using hbo. we have exclusive content. more people are using us. more people are using you to. why is he trying to downplay the competitive landscape? cory: it is ridiculous. it is great for us as viewers and great for us if we are creating content. fun if we weree in hollywood doing that. but it is horrible for netflix because the cost of content is
going up. the number they do not put on the balance sheet is their long-term cost of content. at the end of last quarter, they had over $15 billion in long-term commitments to content. that number is going up. how high is it right now? we do not know. they will not tell us until they release the quarterly finally. what is interesting about today's report is they put a separate presentation on their investor relations page explaining the accounting for those long-term commitments in content. i will tell you for a business getting a $50 million profit every quarter with 15 billion -- $15 billion in long-term content, it is hard to pay for $15 billion in content you have a run rate of content that is about $100 million. they are going to have to jack up profits a lot. the problem with hulu, hbo, and showtime raising the cost of content is there raising it for
netflix when netflix does not have cash to burn. lostis quarter, netflix over half $1 billion in free cash flow. i cannot continue forever. caroline: it certainly cannot. cory johnson, stay with us because i want to go into another company where profit is keen to the eye. it is a stock we are continuing to watch. blue apron toppling 12%. blue apron tried to calm investor fears during the ipo roadshow. amazon meal kit seriously undermines that pitch. amazon gets in everyone's face. it had already been flagged for blue apron. now it is clear. now it is clear it will eat blue apron's lunch. cory: i think the market has
this one wrong. amazon is not even in this business yet. if you know anything about the restaurant business, you know food offerings fail all the time. just announcing you will get into a business does not mean you will do it well. blue apron is failing on its own in terms of its marketing expenses spending 25% of revenues on its marketing costs. the cost of adding new subscribers is hundreds of dollars and going way up. they cannot keep the subscribers they have got. they are spending more to acquire new subscribers. that is the problem with blue apron's business. if you get the blend right, if you have the right recipes, the right costs, if you give people what they want, a real quick to cook that tastes good enough and delivered the way they like it, i think these businesses can be very successful. we see in blue apron they are not able to get to the scale
they want affordably. i think it is ultimately about the recipes. can get to that, they will have a struggle whether amazon is competing or not. amazon will have to solve the same problem. caroline: all eyes on hello fresh in europe, owned in large part by rocket internet. thank you, cory johnson. leaderup, tesla as newutives -- adds two executives to its board. this is bloomberg. ♪
accelerated after he engaged the driver assistant system and it crashed. ispite the day's decline, anticipation of starting production. elon began to query if it had gone too far over the weekend. get added two new executives today. fox ando. 21st century the chair of johnson publishing will join tesla's board. joining us is david welch from detroit. plenty to digest. let's do the new board members first. this comes after plenty of pressure from investors. i think we are having technical difficulties with david. can you hear me? >> i can hear you now. caroline: let's talk about the board members first. investor pressure to do this?
>> yes, there was. in april, there was tension to add people to the board because he has a seven-person board, one of whom is him. five of the others have connection to him, spacex, or solarcity which has been merged into tesla. they are mostly insiders helping him to run the board. in the solarcity merger last summer, there was a lot of dissension among investors who said that company was run by his cousins and he had two boards of people knowing each other agreeing to get together. you had all this pressure coming up. elon said in april we will add two more members. a lot of shareholders wanted him to have a different board. you have a couple of new people coming on. they are both media executives. i am not sure this will keep everybody happy because you still have a large number of
insiders or friends alongside him. caroline: talking of how investors might not always like what elon musk has to say, we have seen c.e.o. elon musk saying over the weekend the company's current share price perhaps -- have a listen. >> i have gone on record several times saying the stock price is higher than we have any right to deserve. that is based on where we are today and have been in the past. the stock price reflects a lot of optimism about where tesla will be in the future. caroline: he cleared up those comments on twitter today writing i should clarify tesla's stock is high based on past and present but low if you believe in tesla's future. place bets accordingly. what do you make of this backtracking and what it meant
for the share price? >> it is just another day in the life of a tesla investor. he says over the weekend, they are overvalued. there's a car accident involving autopilot and the shares go down more. it turns out it did not really involved autopilot according to the owner and the shares come back up. it bounces around in just one day of trading. that is kind of how these people live. he has said before the shares are overvalued. i think he is trying to take pressure off of himself because they have a very big year. this year and next, they have got to launch the model 3. it has to be pretty flawless and they have to show profit eventually to deliver on the expectations he is talking about. i think that is driving a lot of what he is saying right now. caroline: fascinating stuff. the autopilot issue up rally was not an autopilot issue. great coverage of that. thank you for joining us from
caroline: there is a mass exodus at hampton creek. the entire board has reportedly abandoned ship according to people familiar with the matter who say the only board member left is the c.e.o. joshua tetrick. at least five directors have quit over the past month. others were fired or have worked out since april. the news comes after a string of controversies last year, including a bloomberg report showing have to creek quietly bought back its own products from supermarkets. the global business travel association convention has kicked off in boston.
the annual event is the world's largest business travel event hosting over 7000 professionals from around the world. one name in attendance is ride-hailing giant uber. eric trasker caught up with and askedoast head how it differed from the traditional offering. is a tech layer, a platform we put on top of the existing application. in the early days of uber, we saw a ton of momentum coming from the business traveler community. as a result, we realized there was a lot of friction for business travelers we could remove. uber for business was initially intended to remove that friction. we are continuing to extend the reach of uber business into other avenues as well. >> you're trying to appeal to corporate customers.
what services do you feel you need to add? is this tech layer fully baked already? >> uber moves people and things. sense,most fundamental we are putting people and things in cars. for businesses, this is about your employees, your customers, moving your customers to bring them to an event like this or send them home from the auto dealership when they drop off their car for repair. and finally, there is the movement of goods. you want to get goods to customers or pull things from customers. as we start to build this business and platform further, we focused on the low hanging fruit which is business travel where we know the most because there are so many people are already using it. it is a $250 billion market opportunity globally. >> uber has been prospecting for growth on a lot of fronts. food, logistics, freight,
self-driving cars, flying cars for example. how fast the super for business need to be growing to remain a strategic priority? we focus primarily on the customer experience. are we solving big enough experiences for our customers? the answer is yes. the roadmap we have is going to continue to have us solving more and more interesting problems as we evolve the business. >> do you see growth accelerating? >> we see growth accelerating. >> a lot of uber's success was the product of deals a meal michael did. he was instrumental in the early days of uber for business. now that he has left the company, where does that leave uber? >> we are set up for success. the work done by the team over the last five or six years has set us up in many ways
strategically, domestically, internationally for success. we are in a great place. >> what about travis? how have things changed since he left sco? -- as c.e.o.? >> it has been a short time. the company is incredibly focused on solving the issues in front of us. we are focused on solving the cultural issues. the leadership aspect we are focused on. finally from a driver perspective, you have probably seen the recent releases around tipping, wait time pay, all these sorts of things are actions to start to solve some of the things that have been exposed over the last few months as issues. >> you came in only a few short months ago from facebook. given the culture they are, did you see those as deficiencies at uber when you arrived? did you see a need for them to be changed in the way they are
being changed now? >> i will tell you this. facebook has an amazing culture. that is something that has been cultivated over the years. uber has all of the nuggets that you need to build a great culture. it is just a matter of maturity and the leadership structure, the organizational structure continuing to evolve which we are heavily invested in now. >> here is what outsiders wonder and perhaps insiders as well. whether it is uber for business, the uber app, how does a company make big and important decisions without a c.e.o.? >> i don't know i have the right person to answer that question. >> but you have to live with the consequences of that situation. >> yes. >> who is calling the shots for you right now? >> there are a myriad of different people who were already in place when the , and theyteam left
are incredibly competent leaders. they understand the business and have taken the reins. >> do you think morale is a risk given the fact something so many theoyees are looking for, ipo, is on hold until management issues are resolved? >> we are focused on resolving any sort of morale issue. i think as we start to have things like what you saw from as we startollout, to put people and pieces in place for an evolved culture, i think that will be solved. >> having spent seven years at facebook, you know what sheryl sandberg can do and has done for that company. her comingike to see around uber? >> i cannot comment on that. i think any opening would be happy to have someone like sheryl sandberg. caroline: that was uber's west coast head, peter jonas. coming up, we bring you the global head of business travel to get his take on the next year
blamed the majority of 1600 deaths on bombings by insurgents. the u.n. report did commend afghanistan's security forces saying fewer civilians were caught in the crossfire compared to last year. british prime minister theresa may is expected to remind her cabinet tomorrow about the need for privacy after several weeks -- leaks. philip hammond described the book sector workers as overpaid and allegedly made offensive comments. south korea's president is following through on a campaign promise to pursue dialogue with north korea. moon's government has proposed resuming talks on military and humanitarian issues with kim jong-un's regime. they have agreed to consider further measures against north korea after it conducted its first icbm test. the bloc stressed tensions on the peninsula had to be resolved
peacefully. thailand's new king has tightened control over what is reputed to be the world's richest royal fortune. it is estimated at more than $30 billion. the king succeeded his father last year. global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. i am alisa parenti. this is bloomberg. it is just after 5:30 p.m. in washington. 7:30 tuesday morning in sydney. we are joined by paul allen. he has a look at the markets. good morning to you. >> good morning. it looks like it could be quiet around the asia-pacific today. nikkei futures are flat. similar story for the asx. futures down by just four points. we will be keeping an eye on a few stocks today. outterly production numbers
for the second quarter. production numbers could be affected by the weather on the west and east coasts of australia. also waiting on the reserve bank minutes for the month of july. it was not very exciting. not even the wording of the statement changed a great deal, but we will be looking for more signs of lingering concern over household debt, weak wages growth, and the aussie dollar. waiting on the second quarter cpi numbers of new zealand and property prices from china. i am paul allen in sydney. more from "bloomberg technology" next. ♪ ♪ caroline: this is "bloomberg technology." i am caroline hyde in for emily chang. it is making a push into the world of business travel putting
the company in more direct competition with hotel chains. schatzker whoerik is standing by with airbnb's global head of business travel. >> thanks very much. i'm here with david from airbnb for business. good to see you. the corporate lodging market is enormous, hundreds of billions of dollars. help us understand where this fits into airbnb's business strategy now. what percentage of airbnb's revenue does it account for? if you are successful, how much could account for two or three years from now? >> today, it is 15% of our trips. by 2020, we expect it will be about 30% of our business. >> with airbnb presumably growing at that pace, it will be vastly larger. a 4x clipl grow at eigh
and keep that trajectory for the next few years. the challenge is to continue to keep up with that pace. >> last week, you signed a partnership with the company people may be the low your with. what does it entail? why is it important? >> we are going to work with the managed travel community, it is logical you will work with them. they control about 70% of the fortune 500 business in the u.s.. it is very common for business travels to work through concur. what was interesting about this is this is the first time -- unfortunately, we have had some technical difficulties. we will be back as soon as we can. that was the airbnb head of global business. ibm is betting big on cybersecurity. how big blue is planning to
caroline: this is "bloomberg technology." let's go straight back to erik schatzker with a special guest in boston. >> thanks very much, caroline. i am with david holyoke, levelheaded airbnb for business. apologies for the technical difficulties. we are back. we were talking about the partnership airbnb signed with concur. why is it necessary to crawl into bed with the established hierarchy in global business
travel? the reason i ask is because there are so many companies that occupy that middle ground, all of which are taking something in the way of a fee out of the business you want to be able to do directly with your end customer. >> the answer is simply companies need to be able to have visibility for their employees. there's obviously a duty of care element to that. we are going to need to work through some channels to help them manage that. concur is the logical partner for that. onwill your inventory end up othermerican express, or established managed travel service companies? >> what i would say today is we have third-party booking capability on airbnb.com today. it is possible for anyone to book on behalf of the guest and host. iw that evolves over time,
think those are conversations we will continue to have. >> how do you anticipate or expect the hotel industry to respond to this incursion by airbnb on its most profitable turf, business travel? >> i don't lose a lot of sleep about what the hotel industry is doing. >> why not? >> they have a business and we have a business. a directt here making assault on the hotel industry. we think we are a compliment to the traditional program. we look for where the use case maybe not i deal with a hotel and where we could complement. >> they see it differently. that should not surprise you. lobbying association is complaining the playing field is not level, that it is unfair propertiesbnb or the on airbnb do not have to comply with many of the rules and regulations the hotel industry
must comply with. for example, access for disabled people. >> i would say first we have place75 agreements in around the world and we continue to show in good faith we want to work with governments and communities to make sure this is done in a responsible way. >> i can only imagine if i were disabled, fortunately i am not, i would think of that as a legitimate complaint. i am sure there are disabled people who would share that point of view. secondly, is it reasonable to expect the people who would list their properties with airbnb for business would make the kind of investments the hotel industry has to make to bring those properties up to the standard for the fair disability access? >> i don't want to comment on the fair disability act. i can tell you what we continue to do around standards with our properties. business travel ready homes are
a prime example of that. it is a subset of our 3.5 million properties around the world that have convenient features, safety features, that are more in line with what you would expect for a business traveler. >> what are some of the other challenges or requirements you need to meet to deliver a business ready launching product compared with what many of us might know as an airbnb for leisure purposes? you mentioned some of them. homes orre full apartments. it is the actual resident you would have access to. it is 24/7 check in. it is the ability as business travelers to come and go as needed. you work on their timeframe. there are safety features you would expect to be up to code. you want to make sure there is reliable wi-fi. you want to make sure things a
business traveler would not want to have to pack are made available in the home for them. >> is maintaining quality control over these properties -- i have to imagine it involves more on the part of airbnb than your leisure properties do. >> we care a lot about quality. we do a lot working with our host community to make sure they are educated around what guest needs are and where they can continue to deliver a memorable experience. as we go forward, we will continue to refine and look for areas where we can improve on quality. of the hotelree industry is successful waging its battle against what they perceive as a threat, will you respond similarly the way airbnb has in cities like san francisco and new york, which is fight for your own interest? >> i think we continue to demonstrate our commitment. sit down withth cities around the world to find their concerns and how we can
work together. >> sometimes it gets acrimonious. >> ultimately, we are protecting a community. we want to make sure we are doing right by our guests and hosts. >> nice to see you. caroline, that is daily -- david businessglobal head of for airbnb. back to you. caroline: fascinating interview. thank you very much, erik schatzker in boston. now another interview. the cyber security is booming with no signs of slowing down. according to the market research firm, it will reach over 171 billion dollars global revenue by 2021 driven by fears of hacks and losing confidential information as attacks continue to rise. one key tech giant is betting big on cybersecurity. a rollout of the mainframe capable of handling 12
billion encrypted transactions a day. it seeks to address cyberattacks which have compromised financial data. joining us to discuss from cambridge, massachusetts, ahead of threat intelligence for ibm. thank you for joining us. talk to us about the new mainframe. you are working with companies who want encryption. how big a revolution is this? >> this is a really big deal. this is the largest innovation on the z platform in a decade. what this involves is looking at encryption and how we make it pervasive. in this particular case, we are talking about a system that can process 12 billion transactions a day. perspective, let's take something like cyber monday as an example.
on cyber monday, we see maybe 30 million transactions globally. this single system can process up to 12 billion transactions a day. part of the technology that comes into play is this new chip. on this chip, we have over 6.1 billion devices. 14.4 miles of wire. there are 24 of these in a single new ibm z. caroline: how difficult was it to do? how much r&d and time? 150 companies over two years. >> we work with a variety of companies including high mark health care that services about 50 million americans in the pittsburgh area along with companies like adp. what is important to our company base is they have a way to encrypt traffic and data. if you look over the last five years, over 9 billion records lost or stolen.
only 4% of those were encrypted. why is that the case? historically, it has been too expensive. i don't mean expensive just in terms of money. expensive in terms of time to encrypt all of that data. systemthe things the new does is make the encryption everywhere pervasively possible. caroline: how expensive is it if i want to upgrade to the new mainframe? >> for new customers, this new mainframe costs about $500,000. when we consider the average cost of a data breach is about $3.6 million, this is a good bargain considering the threat out there. those numbers go up or down depending on the number of transactions and the configuration a particular client might have. you have been working on this understanding what they want and need, how big of a mass adoption do you need for this to make inroads? >> because we have worked with
clients along the way, we know this is something badly needed. let's put it this way. 2015 was a great example of the problem. 2015, 100irst half of million people lost their health care records. those contained data that cannot change like your social security number, the fact you have diabetes, your mother's maiden name. that is roughly one in three americans that lost his data forever. if that data had been encrypted, all the bad guys would have is gibberish they could not read. that is why this is so important to us. you have to remember that most of what we are dealing with is of aized crime to the tune $445 billion industry every year. if we can pervasively lay down encryption on top of our data, we can change the economics for the bad guy making it more difficult and expensive for them
to get access to our critical data. caroline: how much do we need the whole ecosystem to take this on? clearly if one company starts in crafting their data, that helps, but there is so much interconnection between businesses nowadays. much of corporate america do you need to get on board and use this if you are going to be able to stave off these attacks? >> you are on a key point. having encryption pervasively is incredibly important, especially when we talk about large transaction volumes. the beauty of this is most people end up having their data on a z and may not even realize it. 87% of all credit card transactions occur on system z. part of what we are trying to do is make this possible. we need to make sure encryption occurs everywhere regardless of what platform it operates on because it is so important to
protect our data. caroline: what about regulators? how are they reacting to this? many have a headache when it comes to encryption for our own communication like facebook. will they be able to access the encrypted data if need be? >> the keys are in the hands of the customer. they would need to go to the individual that owns the system and get access to those keys. we are talking about backend transaction systems. we are not talking about a phone or consumer device that has g.p.s. information, things like that. i think we can all agree if we are talking about our travel records, banking records, health care data, think these are things as a society we can all agree are best kept locked up. caroline: i agree. the ibm vice president of threat intelligence, caleb barlow, thank you for joining us. into the, a hack
caroline: bitcoin investors have been on a wild ride this year with a digital currency more than doubling before plummeting last week into what is labeled a bear market. it lost 1/3 of its all you since june. now we are going to discuss what is driving the west wing's in the market for cryptocurrencies
with lily katz who covers the cryptocurrency bloomberg news. it is interesting with bitcoin there is real buildup toward the end of the week where we could see bitcoin 2. remind us. >> after last month, bitcoin searched to an all-time high of around $3000. in the last couple of weeks, it has lost around 1/3 of its market value. in the last week, it fell below $2000. a lot has been going on in the cryptocurrency world. one of the hottest debates has been the scaling space. for the last couple of years as bitcoin has become more popular, it's blockchain has experience some congestion, slower transactions, and higher fees. two rival can't have emerged. they both have their own ideas about how to deal with these issues. cryptocurrency community is gearing up for august 1, which is when we will
get an idea of who wins the battle. one side has proposed a software update. less than 80% of bitcoin miners implement the updates. there is a chance it could split and there would be two separate crystal -- cryptocurrencies. this has caused a lot of volatility in the market. splitne: ethereum did into ethereum classic and ethereum. talk about the other cryptocurrencies. we have seen ripple, ethereum, many other cryptocurrencies down. why? >> i think investors tend to lump cryptocurrencies together as one thing. the whole or currency market has lost a substantial portion of its market value. peak of the whole cryptocurrency market was around $15 billion.
now does around 70 billion. scaling debate is one thing. i've heard people say maybe some of the initial excitement is starting to wear off and then there are continuing concerns around security and safety. caroline: talk about the initial point offerings. we saw one today that did not go quite according to plan, a hack affecting one. it seems very easy to do. >> there is a start copy called coindash. they offer the cryptocurrency base trading platform. today, they were scheduled to start their initial offering and were planning -- hoping to raise around 12 lane dollars in that ipo. and they were hacked and lost around $7 million. they said the address they had told investors to send money to was compromised and exchanged with a fraudulent address.
$7 million was stolen. they had to stop the ipo. they told investors they would refund the money. this adds to concerns in the market about security. there have been other hacks. it is definitely something investors are focusing on. caroline: fred wilson in new york saying easy come, easy go sometimes. thank you very much, lily katz. in testing -- fantastic reporting making a complicated situation easy for us to understand. , tuesday's show will be from the tech conference in aspen. ♪
♪ announcer: from our studios in new york city, this is "charlie rose." >> good evening. charlie is a way. i'm jonathan karl of abc news. we begin with politics. president trump has been on a state visit to france this week. when he returns to washington, you will find russia is still dominating the news. on thursday, senate republicans released the newest version of the bill to repeal and replace the affordable care act. joining me now, megan murphy, the editor of bloomberg businessweek. and from washington, mike allen, the cofounder of axios