tv Bloomberg Technology Bloomberg October 5, 2017 11:00pm-12:00am EDT
across all your locations. hello, mr. deets. every branch running like headquarters. that's how you outmaneuver. >> i am alisa parenti in washington and you are watching "bloomberg technology." the washington post reports president trump plans on decertifying the iran deal next week. that could pass the issue to congress for a 60 day review. the move could lead to resumption of u.s. sanctions against iran. police in las vegas say mass shooter stephen paddock did not plan on killing himself following his deadly rampage. investigators say they found a note but would not reveal its content. 58 people were killed and hundreds were wounded. in the meantime the nra says the , bump stock
device the biggest shooter used, turning weapons and automatic weapons, should be "subject to additional regulations." the nra says officials should review whether the devices comply with federal law. the district of columbia decided not to appeal a ruling regarding -- ruling, striking down part of its gun laws. the law had required a valid reason to carry a gun, but that was ruled unconstitutional. u.s. attorney general jeff sessions is revising a bush-era crime-fighting strategy. it sends certain gun crimes to federal court, where they could carry longer prison sentences. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. ♪
emily: i am emily chang and this is "bloomberg technology." delivery disruption plan, how the e-commerce king is experimenting with a new service that could affect some major partners. we will look into the potential impacts on a fedex and ups and the timeline to a national expansion. price hike.x's they raised the plan by 10% to finance its push to own content. we analyze the new plan and what it means for its ambitious tv and movie budget. the pac-12 is about to get more air time in china. we will break down why alibaba made a deal to stream u.s. college sports. but first, to our lede. amazon is one step posted to weaning itself off of services like ups and fedex. they are experimenting with a new delivery service to make more products available for free two day delivery.
their delivery to customers homes, something that ups and fedex now often handle. cheers of ups dipped as much as 2.1% after the announcement. fedex was down as much as 1.6% but recovered , slightly. amazon began using the service earlier in india and the west coast of the u.s. earlier this year on a trial basis. a broader rollout is planned for 2018. joining me to discuss, bloomberg's spencer soper, and our editor at large, cory johnson. spencer, what do we know about how this is different from the way amazon works right now? spencer: the biggest shift here is, amazon has traditionally build this vast network of warehouses and encouraged merchants to send their inventory into that network. amazon would centralize that in -- inventory in its own delivery
system and send it to customers from there. what they are experimenting with now is rather than bringing , inventory in, they want to go to the facilities of their merchant partners and handle delivery directly from those facilities. it is bypassing that step and putting amazon logistic efforts outside and beyond its own delivery system. emily: what does this mean for the bottom line? at what cost will this come to amazon? cory: it might be the opposite. there is speculation that by a union workforce and stripping those people of the potential for this work they , might save as much as 30% or more on the shipping cost. they have done a lot of work on this. they are suggesting this will go from a massive loss center if you will, to potential profit center. if you look at the losses amazon has racked up for shipping, it is substantial.
as their business has grown, the losses have grown. in the most recent year they , lost $7.2 billion in just 12 months in shipping. that is the net loss. that is not the cost of the shipping, that is the cost of the shipping after getting paid for shipping. even more disconcerting is the percentage of revenue. that number got a little worse for amazon in 2016. a little more than 5% of sales. on a percentage basis, that is one of the things you look at. not just how much they are losing, but how much of their sales are they giving up in terms of shipping costs. even,t number would break or be profitable, it changes the income statement for amazon so they can do what they always do, lower prices more or have a better looking business and profitable business, but greatly at the expense of ups come out probably 5% to 7% of its revenue from amazon.com and at fedex, which is about 3% of its revenue coming from amazon.com.
emily: spencer, what do we know? we know fedex and ups will have some kind of relationship with amazon, but down the line for that become no relationship with amazon? spencer: that is noise the speculation, spinning way into the future and knowing that amazon ceo jeff bezos's thinking in terms of decades, not just tomorrow. right now, today, this holiday shopping season, the partnership that has always existed between amazon and ups and fedex will continue to exist. as this continues to evolve, how much of that partnership is diminished? cory: if you think about what amazon did with having these third party suppliers, they helped amazon have more stuff to sell when they did not have enough. when they launched amazon web services it helped amazon have
more computing power, when they did not have enough. this could allow them to have more shipping power when they need it. they will be able to sell that to other companies and other merchants when they do not need it. it is about growing their capacity for charging customers or wholesalers are businesses when they are not using it. emily: busy holiday shopping season coming up. this is a time where amazon has had difficulties in the past. do we know the plans are for this holiday shopping season? spencer: this is another example of how they can ease the logjam in their existing network warehouse -- warehouse network. they have more facilities each year. but they still create a logjam during peak season when everybody is rushing and more packages need to get to their facilities. this is a pressure relief valve.
if they can use the facilities of other people, their merchant partners, not drag it to their own facilities, directly from their merchant partners to customers, it takes pressure off their facilities and lower cost with a better bottom line. soper, coryer johnson in new york, thank you both for joining. russian hackers have allegedly breached the nsa, and u.s. defenses. that is according to the wall street journal. hackers working for the kremlin targeted a nsa contractor and removed highly classified material and put it on his home computer. it were able to do so because the person used russian-based kaspersky labs software. it was not discovered until spring of last year. the nsa and kremlin have inclined to comment. up next week continue our
region. uber's revenue rose. it was a 59% jump from the previous year. they continue to operate in london while they seek an appeal to the stripping of its license to operate there. we just covered amazon stepping up its religious tickle operations by testing out a new delivery service. who can go up against the tech giant? box, just focusing on bulk items is taking aim at amazon. the ceo joins us now from new york. amazon is the elephant in your room. what does this mean for you? >> it is a small room. it can fit everyone. emily: what is this change, the fact that they are taking on even more their delivery services, mean for you? >> it means we have to move even faster. these days, if you do anything online, let alone sell anything you have to , control as much of the value jane is you can. that is what we are doing. between writing our own software
and building our own autonomous guided vehicles to make it even more efficient. these are the things that retailers need to do today in order to truly compete. we sell a different assortment been amazon. we only sell big items area -- a ton of b2b items. but we still sell food online. we have to be as efficient as possible. emily: we are looking at your in-house robots. these are powered by tesla batteries. amazon has robots in their lower too. their warehouses, how is what you have different from what they have? chieh: for us, it is about efficiency customized for our business. we sell close to 10 items per order. a lot of the robots you see in amazon facilities, they are not able to handle those orders well. everything sits on a pallet. every single consumable order that we have if you have 10 , robots backed up for every pack table, it becomes untenable.
these robots go along like a train and divert only when they need something on any given pallet. we have done millions and millions of dollars of automation and this is our first foray into automation with hardware built in-house. emily: what is the next step? i know this is just the beginning for you, but deep -- do you see full and end automation? chieh: one day they will be so advanced that they can automate the ceo job, so i will not have a job. [laughter] we are seeing how efficient these robots can be for us. also, to find even better battery suppliers. the battery supply of these robots, we use tesla batteries right now. they are good. we are pursuing other potential partnerships that can give us even longer charge cycles for the fleet of carts we are building. emily: i am imagining what it would be like to interview boxed robot ceo. chieh: it would be a lot better. aily: you said earlier it is
small room but there is room in there for everyone. there is the question about whether that is true. that these say delivery issues are the only things that stands between jeff bezos and domination and that amazon is increasingly pushing other retailers out of the game. could that happen for you? chieh: absolutely. we are not so full of hubris to say we have an amazon-proof business. at the same time when you look , at the evolution of retail, there has been very dominant retailers. and other folks who have built their own niches, and are successful i concentrating on a particular business consumer or business or consumer set have , become very successful. you look in the off-line world costco versus walmart. , walmart is a fortune one company. costco is notme, as big as walmart, but has built a very strong business in
the shadow of walmart. in the online world we have to stay focused on limited skew. our b2b consumer and private brand. i think we'll be all right. emily: tell us a little bit about how fast your business is growing. you have confidence you can take on amazon. chieh: we are not sure we have to take on amazon to be successful. there are a litany of off-line retailers, despite walmart being dominant. literally from my garage about four years ago to now, during that stretch, we have grown from $70,000 in sales to crossing the 100 million threshold in trailing revenue. to did -- to go from that to where we are today, including the automation you see, it has been the ride of a lifetime. but i think we're just getting started. there is so much more revenue and growth to be had. when you think about it we sell , snacks, toilet paper,
things that all americans use on a daily basis. when you look at the history of retail, off-line or online, there has never been a single retailer that captures 90% share of food or everyday consumables. emily: chieh huang, ceo of ined, we hope to have yuan five years or so when you have been replaced by a robot. chieh: [laughter] thank you so much. emily: boeing is expanding into autonomous aircraft with the aurora flight sciences. companies already a long time partner of boeing. terms of the deal were not disclosed. coming up, google unveils the second generation of their most popular devices. why the push into an already crowded market? we will catch up with the senior vice president next. this is bloomberg. ♪
emily: on wednesday, google rolled out the second generation of their devices along with an array of new gadgets. it is their push into a competitive market. among the list of products, two new versions of its pixel smartphone, a laptop, and a cheaper smaller model of its , home speaker. asked why it is important to keep innovating in this space. >> we wanted to make products that were radically helpful for users. a lot of them showcase our technology, things that combine ai and software and hardware and put them together create the ultimate google experience.
he saw things that are real important everyday use and other things that appeal strongly to other kinds of users. we wanted to do a broad range of things to show the full range of innovation we can do. >> talk to me about what users and markets you are trying to reach now. the home speakers are still really new. it is mostly people in the silicon valley and the coast. are you seeing this takeoff in middle america? >> it is definitely an early market. we are very excited about what we announced today. what we were doing is trying to think about how people use these in their home. google home of many is a great product for small rooms, maybe your bedroom. the original, perfect for a medium-sized room. if you have an entertainment area, we wanted to create google home max which has a powerful sound. they all have the google assistant for easy user experience. that is how users are going to use them, in different ways, in different parts of their house.
that is why we created this whole family. >> you recently brought on 2000 engineers with the pretty big price tag. is it just for the pixel? >> these are the people that have been working on the pixel with us. super talented group of people who have come up with a bunch of industry innovations over the years. we worked with them a long time as part of google. we are excited to bring them on board. we are going to have a boost in our capability and we are thrilled to have them. they are obviously very skilled in the smartphone domain. >> a lot of people said this was an echo of motorola. is it the same? >> it is very different from motorola. a couple key things are we are acquiring part of the team, and that team is critical to something we are focused on, which is the pixel phone. we are not acquiring the rest of the operating business.
they will continue to operate as they are. we are really focused on that smartphone segment. it is a little different than motorola. they will be part of the mainstream company as well. that is how we are going to integrate our hardware and software efforts. >> you are not just smartphones, you had a vr announcement today. you had a new camera. >> it is a real showcase of what we can do and how far we have come with ai in machine learning. google clips is a small camera you can place anywhere. it has a wonderful little clip and it will take these moments where you can be in the picture. you set the camera down and it will automatically take photos. it will discard ones it does not think are good, if they are blurry or not in focus. it will capture ones that are unexpected that you might miss if you were pressing the shutter yourself. it is all because of the machine learning capabilities we have added to this little device that used to take massive computing power to run.
we have miniaturized it and make it run on a small consumer electronics product. it is perfect for parents and pet owners because we have trained it to focus on people that you are close to. >> it is compatible with the pixel? >> at the moment, and the compatibility will expand in the future. >> talk to me about that. it has been a year and a half since you launched the first hardware. how is it changed the relationship with android partners? >> i do not think so. it is something that google has been doing for many years with the nexus program. clearly, we're after the cutting edge of innovation of hardware in the smartphone stage. we have to invest a lot of money premium tier and components and hardware and software and integrate them together. we have a very focused approach to bring people the best google experience. more importantly, we have a wide portfolio that looks at a number of different areas. it is not all focused on the smartphone.
we introduced today a new chrome book called the pixel book and the speaker family. there are a lot of efforts we are doing. >> the speaker is a natural competitor with amazon. how are you setting your strategy apart? how do they look different than amazon? >> we design things for how we think people use them and how they live. we have a range of products that has a small device that might fit in a small room. we have a middle sized device that might fit in a kitchen. we have a very large google home max device that has our latest and greatest technology to fill a very large room or outdoor space. that is how a lot of people's homes are. we think that is the right way to prosecute our business.
it is just how users are likely to use them. >> are you ready for next year? >> we are getting ready for next year. you will have to stay tuned for 12 months or so until that time comes. emily: google's senior vice h there.t rick osterlo coming, netflix raises prices as it tries to fund its ambitious content strategies. what this means for the video streaming giant and its users. a feature i want to bring to your attention is our interactive tv function. check it out it tv . sendan watch us live area our producers a message, play with charts. this is for a bloomberg subscribers only. this is bloomberg. ♪
>> it is 11:29 a.m. in singapore, tropical and 20 9 p.m. in tokyo. i am haslinda amin with the first word news. the pentagon is asking private companies what they know by using computers to analyze images to speed up the detection of potential threat. later this month, they will host a seminar to learn more about algorithms. inspectors include lockheed martin and others. washington has warned -- renegotiate a trade deal with the trump administration, blamed for widening the u.s. deficit.
the president has threatened to rough it if seoul does not agree to the demands. [indiscernible] saudi arabia says cooperation marredssia has made opec optimistic, then it has been for years. visit to moscow highlights the warming of relations between the two nations as they take actions. as the king met president clinton, brent crude rose for the first time in eight years. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. >> i am sophie kamaruddin with a check on the asian market. good vibes going into the weekend.
equities set for the best week since mid-july. japanese shares are on the rise as the adjuster -- investors digest the new hope. we do have a firm dollar ahead of the u.s. job before dragging on currencies. the aussie dollar down 0.6%. reported rba's harper is not rolling out a rate cut. sydney, looking to halt a three-day drop, led higher by miners. plenty of action in hong kong. the hang seng poised for the best week since july. this one leading that advance over 6%. there is a glaring drop in casino operators, sinking after the visit from china to macau disappointed, falling 5.1% in the first four days of the holiday.
casino stock valuations are very high. any minor disappointment could fuel a selloff in the sector. that is your market snapshot. this is bloomberg. ♪ emily: welcome back to "bloomberg technology." netflix is raising its prices, once again. they will be charging $11 a month for its most popular plan. it is a 10% hike. the streaming giant is looking to pay for its budget for tv shows and movies. the market is reacting favorably to the news and shares of netflix have hit a record high since the announcement. joining me from l.a., and editor. what do you make of this news? >> a couple years ago, netflix put through a price increase. it was a little bumpy,
subscriber growth slowed down. then they saw it come through again and they are bigger than ever, user base-wise. we can get a little more out of subscribers, especially in our more developed markets like the u.s. and u.k.. the market seems to agree with the netflix. shares have risen a bunch, which gives you some sense people believe they can pass through this price increase and continue to grow. emily: the market seems to agree, but what about subscribers? will they stick around? crayton: history would say yes. based on the previous price increase that went through a couple years ago. they rolled it out very gradually and took their time expanding it to all users. the user base has continued to grow. one analyst said today even , people who shut off the service after the pricing increase, it looks like they eventually came back.
that is a good sign. it does not hurt to announce this right before the premier of season two of "stranger things." you have to come in the middle of a bunch of new shows there rolling out over the next month or so. that is what keeps people staying with netflix. every few weeks, there is another show or a new season of a show that has been talked about. it keeps the buzz alive. emily: remind us how much they're spending on original content and what this price increase will do to the bottom line. crayton: it is funny people talk , about netflix losing money. it depends on how you define it. they have been profitable for a number of years. but people look at the free cash flow number, that is the key to understanding the barricades for netflix. they spend all this money on content and have all these obligations to spend money for years and years. not just on programs they are developing themselves, but reruns and movies that are already out. that content budget is $6 billion this year. it will be $7 billion next year.
it will probably keep growing. that is again to keep rolling out those shows to make people stick with the service. adding another dollar a month to the subscription price helps alleviate that. emily: thank you so much. netflix is the main focus for many media companies. we spoke with fx network ceo who has been very vocal about this disruption the cable world is facing via silicon valley competitors. we asked about how the industry should respond. >> we have to build our own brand. we launched something called fx plus with comcast a little more than a month ago. cox is joining and we are talking to other operators. that will be a subsumption service for people who want a whole brand. and they wanted commercial-free. is only within the
multi-video distribution service. it is only available to basic cable subscribers. we can layer on our own subscription business. they do not need to grow nearly to the scale that amazon netflix, or hulu has. ,we are not trying to be platforms, but brands. brands will evolve. the best brands still have a very bright future. i would bet on hbo to be a thriving, successful brand. >> as you look at these platforms, is it a matter of reaching the audience or a matter on the cost side? we look at the incredible production budgets we seeing from netflix and amazon. that must be giving you fits on the cost side. >> the cost of making quality television programming is going up. that is a good thing for consumers. an arms race in programming is part of what is feeling this
platinum age of television. on the other hand too much , content creates a paradox of choice, a different and difficult system in which to navigate. i am a subscriber to these platforms. i am and amazon prime subscriber, netflix subscriber hulu , subscriber. i cannot navigate through the sheer volume of these platforms. amc,d brands, i want hbo, good brands tous navigate me toward excellence. platforms and brands have to learn how to coexist. i do not think silicon valley would agree with that assessment but that is my assessment. i am truly bullish about this transition period. a brand inou build this new digital world? it has all been a challenge. in a day where you had three broadcast networks, you could build a brand doing it that way. it is much more complicated now
with so much material out there. how do you build a brand? a similar mechanism to an editor of a magazine, you have to be a curator. you have to stand for something in terms of the editorial quality of what you do. we have a unique ability as an organization to seek relationships with business and bring out the best in creative people. we have shown a track record over 15 years of making numerous comedies dramas, series , that are not just good but great, and acclaimed as among the best television being made. we have a unique skill set. most of that is with first-time producers that you would not think about being brand names. we are not in the business of going out with a massive payroll
a+ talent. we are in the business of developing that talent and working from the ground up. when you take everything back 15 and put it in a context with all the great work we are -- i think it is a very powerful environment within which there is an extraordinary amount of television of exceptional quality, which has been curated and nurtured. the editor of one of the best magazines in america is doing something similar. i can only tell you as a consumer of longform journalism i still find those , editors and magazines to be incredibly valuable to giving me access to really great writing that provides context within the world we live in. i still rely on hbo and showtime
and many other brands to navigate me towards the best in television. i believe netflix can be one of those brands, but it is not the lada, they will not manage to supplant every single legacy brand. i do not think they can get all the talent. i do not think they have the breadth of skill set. that was the ceo of fx networks. harvey weinstein, famous for releasing oscar-winners like "the english patient" and "good will hunting" has taken a leave of absence from his production company, following allegations of sexual harassment. actress ashley judd is one of those claiming to have been harassed by the producer. he is best known as the producer of miramax.
emily: now to a stock we are watching. shares of snap under pressure. the estimates for their next three years were cut and medium after research showed smaller spending by advertisers and tough competition from facebook and instagram. have ay they do not clear path to profitability before meantime, entrepreneur
2020. personality sat down with scarlet fu as part of bloomberg's ongoing series. they covered snap and changes the company needs to make. >> we have to innovate in a way that is not a feature. a feature is not the way you innovate. the cat is out of the bag. fast following features are not -- now going to be away that is not going to allow the house parties or the marco polo's to get there. they will have to give it some thought. what is ironic about that is snap is uniquely a company that could do that. i never met evan. i know a lot of the other characters. he is an l.a. kid. he treated snapchat as a fashion brand. he could go left field. if i said it was snap, not adidas to put nike in a weird
spot, it would not seem that far-fetched. it is not as far-fetched if i said twitter or facebook or uber did that. that is why i am fascinated with what snap is going to do. we will find out if evan was a one trick pony. or if he can adjust to the reality of the new marketplace. they quietly invested very aggressively in ar. we will see if they can or will do anything there. the other question is this. snap is an incredibly big platform that can build a very big business. it is just that the market put the value into that. what is fascinating with snap is that it is probably overvalued in a wall street dynamic amongst everything being overvalued. they will have to do something. they will have to truly innovate. emily: that was gary vaynerchuk
emily: the college sports conference, the pac-12 is about , to get more air time in china. alibaba has acquired the right through 2024. immerse the first time in college sports network will be made available in china. corey johnson sat down with the commissioner larry scott and asked how big of a deal this truly is. >> it is a really big deal. we're the first conference to have a comprehensive partnership outside the u.s. they will help us distribute a vast amount of content, 175 live
events to the chinese audience and help us have a regular-season basketball game in china. it is a big milestone for us. >> is there one sport in particular -- there are great usc, andes like beyond. >> the chinese audience loves prestigious brands. some of the ones you mentioned are very well known. >> arizona, washington, my apologies. >> we have 12 major -- amazing brands. the interest in the u.s. higher as olympic sports. but among the sports, basketball has done well in china. the chinese play and love basketball. one of the interests in the pac-12 is that they know so much about it, they want to see where nba stars
come from and see the highest level of amateur athletics and amateur collegiate athletics. it is a novel concept. >> and you will have a game in china? >> yes, we are the only conference that will have this this is , an exhibition game. >> when we look at how this partnership works, that is interesting to me as well. >> in order to make this partnership work, they will have to distribute 175 live events. if we were still relying on satellite delivery and the price and logistics we probably could not do it. but digital transmission has really allowed us to keep our cost down when it comes to the international distribution of our content, on the one hand. on the other hand, the connectivity we have with each of our campuses allows us to produce in a very efficient way of a huge amount of events. on the pac-12 networks here in the u.s. we produce 850 live events per year. >> the quality is good enough that you could take a game from
eugene and send it to san francisco and broadcasted to china with the same quality you would have seen on espn. >> you would not know the difference. >> it is not just about doing a pac-12 football game that might get a lot of interest. you could do a woman swimming match that might not have ever seen tv because your cost of production is so much lower. and you have your own network where you can put the stuff out. >> that is why we created the pac-12 networks to be masters of our own destiny, to control. it is true to our mission. in the past, we would license our rights. to espn, fox, or others. we still license half of our football games and some women's basketball games, that brings significant revenue for our schools, significant exposure. all these olympic sports that might not have a lot on espn or fox, they were on telecast. our mission is to promote the
broad-based competition, about 7000 student athletes across 35 different sports. these are the best of the best. the best swimmers, track and field, soccer, rowing. we want to promote the student athletes, and let our alumni and fans have access. we invest to produce these events and expose them. on top of football and basketball games on the pac-12 number we have 750 ,that otherwise would not be on tv. emily: pac-12 commissioner larry scott there with our editor at large corey johnson. joining me now for more from hong kong, bloomberg's stephen engle. what do you make of alibaba's interest in u.s. college sports? >> it fits into the pattern of is trying to do. and another, who was a lacrosse player there. i saw in this press release, lacrosse will be one of those pac-12 sports being broadcast in china.
it is basketball and football. jack ma told me they want to go china has become much more of , the middle class aspirational society. they want to go healthy and happy. they have invested in evergrande, they want to do more streaming of sports. 27,000 chinese national students are at pac-12 schools. 12,000 pac-12 alumni live in china. what is your hunch on how well these games will actually do in china? >> they have had some streaming in china. there are some sports that do not necessarily translate. again, this is a marketing tool as well for the pac-12 to get the eyeballs of the families in
china for not only the sports, but the academic futures of their children, going to west coast schools. it will take time to get pac-12 football. usc,here are great names, mater, washington state. they are 6-0. emily: when i lived in china, this was six or eight years ago, the narrative was the same brain drain, students leaving china to go to the united states. is that still the trend? are more students choosing to stay at home and choosing to study in china? >> looking to the united states, it is still the holy grail to students. in china there is a lot of prestige to going to universities in the united states. i think that will continue, especially with a lot of the children of college age. still the one child policy is, the family wants the best for them.
you can see the united states -- they see the united states and universities there is the best. emily: thank you as always. that does it for this edition of "bloomberg technology." next week we will be broadcasting from the summit in seattle, speaking to the president of baidu, starbucks ceo, and a ceo of amazon web services. do not miss our interviews next week. this is bloomberg. ♪
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