tv Bloomberg Technology Bloomberg October 16, 2017 5:00pm-6:00pm EDT
reporters in the rose garden. mcconnell pushed back on the notion he and the president are at odds. president trump will ask u.s. allies to pressure north korea on its nuclear program when he travels to the asia-pacific next month. he will visit japan, south korea, china, vietnam, and the philippines in november. he will also meet with president moon jockeying best president -- with president moon in korea. althoughighters say the dangers from the most destructive blazes in california's history is far from over, color winds are helping make the progress.com or winds -- -- kolmar winds -- kolma calmer winds are helping make progress.
global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. i'm a alisa parenti. this is bloomberg. ♪ emily: i'm emily chang, and this is "bloomberg technology." netflix's record third-quarter, and this -- third quarter, investors focusing on subscribers. plus china sets the stage to reset its political agenda with the tech sector under the microscope. we but the censorship and regulation laws and perspective ahead of a 90's congress of the chinese communist party. s become aoviepas
victim of its own success? the ceo begs to differ. first, netflix reported a blockbuster third quarter, the company blowing past the company blowing past domestic and international subscriber growth targets and beating revenue, surpassing expected subscriber encouraging sign for investors since netflix recently announced its first price hike since 2015. joining us to discuss our bloomberg reporter lucas shaw and forrester principal analyst jim nail. what is your headline take away here? guest: like you say, blockbuster quarter. there have been many questions over the last few quarters of how long can netflix continue to build this kind of subscriber growth. there's no sign of it slowing down any further. they are continuing to make good steady progress in making their
service really ubiquitous in homes of people who like to watch television. emily: i want to take a look at a chart in the bloomberg now. this is a chart showing that subscriber growth is really growing in tandem with the stock price. lucas, and vectors don't seem to be fussed about the billions of dollars netflix is spending on original content. talk to us about just how much money netflix is putting down, what we know, and whether that is paying off. netflix has spent about $6 billion this year, which was already a huge increase from years past. next year, the chief content officer has said in an interview that they are probably going to spend $7 billion. today they revise that to between $7 billion and $8 billion. just from that, the at up to $1 billion to what they will spend next year. it seems to be working.
i am astonished by the consistency of growth overseas where they added more than 50,000 customers a day in the most recent quarter. that is primarily with shows being produced here. they are just getting going making shows for other countries. they just released their first italian original series and will release their first german one. whatever they are doing seems to be working in enough countries outside the u.s. that growth continued in a pace that makes investors happy. emily: jim, what is your take on the growth they are seeing internationally at how much more potential there is in other countries? guest: there is significant come outsideause of the united states, those countries are at a much earlier ande of adoption of ott streaming video viewing. they are probably at the adoption stage where the u.s. was two or three years ago. they are clearly going to be
faster growth over there for a while, and eventually it will slow a bit, but there's plenty of potential to go out there. emily: the amount they are spending on original content, that is not a concern? guest: no. the thing that was more striking to me than this quarter's results were those enough was adding another $1 billion to content and their guidance for earning per share and $6 million -- and 6 million or so net new subscribers. clearly optimistic projections come a very confident that the price hike, which is just starting to take place so it doesn't really affect to the q3 numbers, is not going to slow them down at all. offs quite interesting that
a strong quarter already, they are protecting even greater growth and strength, and therefore they will have the funds to spend that additional money on more original content. emily: lucas, would you echo that there seems to be a fair amount of confidence that customers are going to be willing to absorb this price hike and that as other price hikes come down the line, the customers will be respective death will be receptive to them? -- will be receptive to them? reporter: it does actually affect the prospects for q4. it was below what analysts had hoped they would forecast. they will have some effect, but it is relatively slight when you look at how price hikes have affected them in years past. there's been a lot more attention paid to them. there's been a lot of concern, and netflix believes that may have affected who signed up, who didn't renew, things like that. there is increasingly believe that customers are loyal enough
and spent enough time using it that they will stick around with it. netflix has not instituted or announced a price hike in some of the overseas countries were people would be more sensitive to it. in the u.s., netflix is a pretty good bargain, especially if you are choosing to watch that instead of tv. in some of the newer countries across asia, even in latin america, netflix is a more expensive proposition. emily: jim, what are the issues you are going to be watching over the next quarter as this price hike goes into effect? guest: certainly going to be looking at is there any consumer reaction to that. in our consumer techno graphics studies we do and our social media listing, we are going to be looking for how consumers react to that. obviously initially there's some again, aso it, but $13, $14,saying, at
it is still a bargain. it is a lot cheaper than any other kind of cable package. for all the great content they are putting out these days, for $13, $40, you can't even get two movie tickets. it is a really good bargain and entertainment. emily: forrester principal analyst jim nail and bloomberg entertainment reporter lucas shaw, thank you so much. meantime, former u.s. defense secretary leon panetta wants congress to permanently protect the so-called dreamers. he has brought his name behind a new initiative dubbed the dream coalition. he discussed support for passing a permanent fix or dreamers in both the house and senate. guest: i think there is strong bipartisan support for fixing this program and being able to provide the protections that were promised to almost 800,000
children of immigrants. i think there is a strong coalition both in the house and senate in support of the dream act. emily: other dream coalition members include apple ceo tim cook in chicago mayor rahm emanuel. coming up, the supreme court will weigh on microsoft's fight against the justice department. what this could mean for your private data, next. and "bloomberg technology" is live streaming on twitter. check us out. this is bloomberg. ♪
emily: facebook continues to ramp up its site against agents trying to use the platform to meddle in elections. bloomberg has learned the social media giant has looked to hire people who have national security clearances, a movie company thinks is necessary to prevent foreign powers from many dealing future elections. they led to search marker forvely -- more proactively social media campaigns ahead of elections. microsoft is getting its day in the supreme court over the future of digital privacy. the nation's highest court agreed to take on the long-running case between microsoft and justice department on whether the government has a right to access customer information stored overseas. this is a case that could have a major impact on the tech industry as a whole, especially at a time when access to sensitive information and cloud storage is a top concern for consumers and corporations.
, greg, me to discuss what is the legal issue the court is being asked to decide? reporter: the court is being asked to look at a 21-year-old law called the stored communications act. the question is whether that law lets prosecutors get information that is being stored overseas. the law doesn't really say specifically whether it does. the court will have to do with that someone archaic law in this modern era of digital privacy. emily: is it a surprise that the supreme court agreed to take this up? reporter: it is not a surprise because the trump administration said basically, look, we have hundreds or thousands of criminal investigations that are going to be jeopardized if we can't get access to information being held overseas by not just microsoft, but other companies
like google and yahoo! any technology company that stores information on the cloud and keeps some of it overseas could potentially be affected by the case. interviewedently the ceo of amazon web services, obviously a huge cloud platform. he suggested these issues actually don't come up that often where the government is asking for information on customers that was stored overseas. take a listen to what he had to say. guest: when you encrypt the data and keep the keys yourself, even in the odd event the government asks to try to get access, for us if they ask, we don't just say yes. we always advocate on behalf of our customers they have to come with a subpoena. even on the odd case where they come with a subpoena and have a legal right to the data, if you encrypt the data and own the keys, there is not much people can do with it. emily: you mentioned hundreds of cases. what do we know about how often
governments are actually asking for this type of information? reporter: the federal government suggests it is an awful lot, and not just the federal government. it is also the states. the trumphave joined administration in asking the supreme court take it up. the one key issue may be weather information is encrypted. that is not an issue in this case. there is no reason to think that the government would have to overcome that hurdle. it just says, let us have the information, and that will be sufficient. emily: what do we know about how the court is likely to think about this particular microsoft case? reporter: there are a lot of crosscurrents in this case. you might think it is a law enforcement issue. conservatives might be more inclined to side with the federal government. but the court as a whole has been rather protective of digital privacy. some cases in recent years have been unanimous on that score. there is also the question of
what we are doing is interpreting a federal statute. generally the conservative justices most reluctant to say a federal statute can apply overseas, which is the legal issue in this case. there's a lot of things going on in this case, and it is really hard at this stage to predict how the case is going to come out. emily: what kind of impact could this have on the tech industry at large? reporter: the tech industry at the lower court level certainly all got behind microsoft, and you would expect them to do that at the spring court as well. -- at the supreme court as well. they want to say to customers, we are protecting your information. if it turns out they have to turn over this information, it will make it harder for companies, particularly companies based in the u.s., to make that claim they are able to protect their customers and their information from u.s. prosecutors. emily: what are the chances that congress could ultimately take this issue up? reporter: microsoft urged the
court not to take this case, say you should leave it to congress. this is a 20-year-old law that congress needs to update. for now they probably will not do anything. when the supreme court rules, they may have to go all or nothing. either they can get access to these messages overseas or not. either way, congress could see a lot of pressure to come up with a more nuanced solution where prosecutors can get some information depending on the country and exactly what kind of information it is, depending on where it is stored, that kind of thing. after the supreme court rules, probably in the spring, you may see some impetus for congress to get on that issue. emily: greg stohr, thanks so much for that update. coming up, a lifeline for harvey weinstein's production company. why billionaire tom barrett is returning to hollywood. you can watch us live.
emily: the weinstein company continues to be in the spotlight after the firing of founder harvey weinstein due to several sexual-harassment allegations. amazon has announced it will sever ties with the production company. amazon had ordered two seasons of a high-profile project produced by the embattled company starring robert de niro and julianne moore. that show will no longer be made. amazon suspended he had of its own tv and movie studio, who was also accused of harassment. sticking with the weinstein company, it has been thrown a lifeline by a billionaire investor. has agreed to provide immediate cash to the film
studio and return the company to its "rightful iconic position." will the production company turnaround from this harassment scandal? joining me from l.a., anousha sakoui covers hollywood for us, d in new york, jordyn -- jordyn holman covers diversity issues. he owned miramax for a long time. he began an increasingly -- he became an increasingly bigger shareholder after it was sold, and last year he sold it to the qatari company bn. it is interesting because it will be questionable what the value of this company is going to be without the weinstein that is known for making oscar-winning movies.
it is not surprising to me that he's gotten involved because he did have that link to miramax and has done deals with the weinsteins. according to some people are on hollywood, it could be a good investment. i don't think it is probably a huge amount of money. until it isthis either sold or he ends up owning it and makes some money in the short term, he is going to have a pretty good investment. it is what he does. he takes risks on companies like this. emily: jordyn, these allegations have sent a shudder through the industry and hollywood. how have they resonated in other industries and human resources departments outside of hollywood? >> diversity and inclusion strategists and lawyers have impressed upon me that it is not just hollywood. hr departments are really taking a look at how they are messaging what is sexual harassment, how
you train employees to understand that. it is definitely across all industries thinking about how they are messaging and making sure people understand what sexual rothman is and how corporations -- sexual-harassment is and how corporations don't stand for it. emily: what are you hearing in hollywood? should we be bracing for more stories like this on the lines what we saw with roy price? >> i think so. there had already been a report at amazon when he was a senior executive there. that came out on thursday when he was accused of sexual-harassment, decided to go on the record, emboldened by all the women who have spoken out against harvey weinstein. it is really a follow-on effect of what happened last year with gretchen carlson's lawsuit against roger ailes, which also break the barrier down for women feeling confident come forward.
the talk is about who else might it be. i think some people would say harvey weinstein was an outlier -- one would hope so given the scriptures of some of that behavior -- given the descriptions of some of that behavior. clearly hollywood has put its foot down. the academy has expelled harvey weinstein. we just had news the producers guild has expelled him. amazon has cut ties. all the producers in town making content have cut ties with his company. emily: and yet it is unclear still what amazon new and when with regard to roy price. the allegations against harvey weinstein, some of them outright that, why is there still confusion over what constitutes sexual-harassment within companies in general?
>> i think people just haven't gotten the message that it is not as over the allegations against weinstein. there's interpersonal relationships that just don't, where there is a difficult and understanding that. a lot of people i have spoken to say it is not just hr's responsibility to stop sexual harassment in the workplace. it is also the responsibility of other coworkers who might see it, especially male coworkers who can speak out against that. emily: a lot of this has unfolded on twitter, including a women boycott after twitter kicked off rose mcgowan, an actress also making allegations against harvey my theme. alyssa milano kick started a me too campaign for other women to speak up about their stories of sexual-harassment. how are women responding in the industry? >> i think it is really interesting because they are being very vocal.
i talked to someone who says, you don't have to do this in a position where you don't want to disclose. but there has been a huge number of women who have come out, and it is actually kind of shocking when you see the incidents ranging in severity. i think definitely there is this in be a bit of hollywood, especially with this take place at parties and whatever, so people will be reassessing. emily: you'll have to leave it there -- we will have to leave it there. thank you both so much for joining us. we will be right back with more of "bloomberg technology" talking about china. that is up next. announcer: "bloomberg technology " is brought you by boeing, continuing our mission to connect, explore, and inspire.
both men spoke to reporters after a lunch at the white house. they both pushed back against the notion that they are at odds. now, despitebably what we read, we are probably now as far as i'm close earned, closer than ever before. the relationship is very good, we are fighting for the same thing. >> iraqi forces have seized headquarters of kirkuk's provisional administration. the iraqi government is trying to prevent a government forming in that region. the united nations is calling for all sides to take steps to avoid more violence. >> the secretary-general calls on both parties to manage this situation and resolve the issues through dialogue, in a manner that is consistent with the constitution of iraq. >> there have been three weeks of rising tensions since the vote referendum last month.
a man pleaded guilty today to misbehavior and desertion before the enemy. walked off his post in afghanistan in 2009 and then captured by the taliban. he will be sentenced next week. all credible violations of human rights must be thoroughly investigated. more than 500,000 rohingya bank rohingya have fled into bangladesh. i am mark crumpton. this is bloomberg. my colleague paul allen has a look at the market. paul, good morning. ball: we looking at the new zealand struck exchange -- stock exchange trading. after a record close of the s&p in the u.s..
we also have oil in a two-week high at 51. 87 per barrel. surging to its highest since july 2014. if we look at iss features, they percent,with about .6 and we just had third-quarter productions come in beating estimates that 85.8 million tons of iron or. e. nikkei futures are higher as well. i am paul allen in sydney. more from "bloomberg technology next. -- more from "bloomberg technology" next. ♪ most important political event kicks off on wednesday, the 19th. that is the national congress of the political party.
it is set to chart the political path of china's next five years. one item sure to be agenda is aging's continued quest to tighten its grip on a rapidly growing tech industry. i am joined by the former u.s. to china. gary locke he was also the commerce secretary of the united dates and governor of washington. thank you so much for joining us, secretary locke. what do you think will be the main highlight to, of this congress meeting? locke: obviously, it will be who will be the set of ruling for china. it is governed by a 7-9 thinning committee of the communist party -- it is governed by 87-9 member group committee of the in's party.e
if they are able to stay on as change the mandatory retirement, what will it mean five years from now when president xi jinping is facing mandatory retirement? will he be able to stay on and assume an unprecedented third term? that is the big question circulating around china today. emily: what do you make of the move that the chinese government has taken to crack down even more on vpn's, the social messaging sites, after facebook and twitter being shut down there now for years, yet the government talks about openness and seems to be taking another direction? locke: china has tightened its grip in terms of what people can see and read, social media, television, radio, there is a human rights activists, lawyers, none organizations, nonprofit organizations, it is becoming an
authoritarian and rigid climate in china under president xi jinping. advent ofabout the technology but it has to be controlled by the chinese government because they are one thing they've want to focus on is continued efficacy, power of the commonest party. emily: what is your take on the government to take managerial stakes in companies like tencent, like waymo? toagain, they are trying make sure they have control over what these technology companies are disseminating. they want to make sure that these for-profit, private companies are still supporting, towing the line of the company's party. so we are seeing the growing involvement, entanglement of the chinese government in many more layers, even in the private sector, especially in the technology area. which is why for example google,
facebook, snapchat, many of them are not even allowed to be accessed by the chinese people. >> would you expect, we know the president xi jinping is expected to be in power for another five years, do we expect to see more of it for the next five years? if there is a new leader five years from now, do you expect the drumbeat to continue? locke: as you see china trying to exert its influence around the world, while bringing more western ideas and technology into china, they still wants to control the thinking and what the chinese people are able to access, what they talk about themselves, limiting debate even on sensitive topics whether it is human rights, religion, everything else. people are having more access to things and technology from around the world, china is really trying to play a preeminent role in the development of technology, in
artificial intelligence, semiconductors and everything else. they are trying to move away from low-cost manufacturing to be a country of innovation and technology at the same time that they want to control how that technology is used by the people of china. notake sure that they do ever get thoughts of more technology or human rights or freedom. blockedresident trump the sale of a semiconductor company to chinese investors, he is cracking down on -- to the extent that he has the power to do so, on trade with china. what do you make of that approach? towhat he did with respect blocking the sale of the american company to a chinese entity is no different from what has been going on for quite some time. he was merely reaffirming that decision of a committee that oversees foreign investment acquisition of u.s. companies. have beenransactions denied under president obama's administration, president
trump's administration, and these are done at the department level, people from -- a committee made up of people from the homeland security administration and other agencies. that committee has consistently blocked this particular proposed , and the chinese buyer and the american seller simply wants to president trump for an appeal, and he denied the appeal and upheld the committee decision. many of these deals are blocked, whether it is deals from israel, france, china, germany, they have been blocked in the past by this little-known committee. they are supposed to be focused on national security and this is an area involving various sensitive technology which america thought that if china were to purchase, would jeopardize an independent supply chain of semiconductor chips used by american companies and ultimately by our military as well. emily: and yes, president trump
has increasingly adopted a isolationist approach when it comes to trade and other things. what does it mean for u.s.-china relations? >> the u.s.-china relationship is very strong. millions of jobs in america depend on exporting need in america goods and services to goods -- made in america and services to china, from food, weeks, soybeans, you name it. and we americans use many things in our daily lives manufactured in china. we depend on this ever deepening economic relationship, and if were ever to get into a trade war, if president trump were block the was ever to tariffs or raise the tariffs, it would raise the pr ices of those products and china would retaliate.
they would impose huge tariffs on things like automobiles, agriculture, on airplanes, which would impact american workers. -- boeing50% ofbowing airplanes are sold to chinese companies. nobody wins in a trade war, it is always the cause is and always a workers. think the u.s. relationship with china is at risk in this administration? do havee actually differences with the chinese on trade, human rights, some of their territorial claims and other issues. but ever since nixon wants to china 45 years ago, our relationship has gotten stronger, we have many more areas of common interest and cooperation and our naval forces have worked together to stop paris he off the coast of africa
--piracy offris the coast of africa. we are doing research to fight cancer, aids, it of tb that are resistant to common drugs. there are areas of disagreement, but we have to figure out how we can continue to work on those areas of disagreement while continuing to work on very important issues that are important to the world. i think that certainly some of the things that president trump has been paying our troubles them -- troublesome. at first he was going to slap all these punishing tariffs on china and he stopped that. they had a good meeting with the chinese president in mar-a-lago early into the administration and he said he was counting on china to solve the north korean problem. china cannot solve that, so president trump has said that he is disappointed in the lack of results and now the trade
rhetoric has heated up again. i think that is bad and we need to work with china and find a way that we can work with them, south korea, russia, japan and north korea, to solve the north korean problem so that they do not develop nuclear weapons and a delivery system available of delivering them and threatening the united states mainland or our allies. thank you, gary locke, former u.s. ambassador to china and former secretary of commerce. thank you for joining us. coming up, a startup that is looking to turn the movie theater experience on its head. will move the past birth or cash s takell moviepas this experience --♪ ♪
♪ miliband moviepass has been -- emily: moviepass has been getting customers, but no industry watchers are taking a look at the company questioning how it can make money and hold onto partnerships with theaters. the previous president of the red box and executive of netflix joins us from moviepass to explain what he is confident about the future of the company. >> people really want to go to
the movies more often, especially millennial's, they do not like the transactional model. they grew up with netflix, amazon prime, and they love this concept of trying movies but not committing. the subscription allows you, kind of like movie insurance, i can go and see more movies and not have to stress on whether it is a great movie or not. >> but it is deal $30 a month and it means that you can watch as many movies as you want, but at the same time, if you watch more than three, you would be making a loss. how viable is the profitability in the long-term? >> it is a better price, it is actually $10 a month. the subscribers we acquire are those who previously wants to 3-5 movies a year. moviepass,start with they go twice as often, roughly 10 times per year or slightly less than one per month. the reason they love it is now they do not have to stress over that decision.
on -- willou plan you need more money by the end of the year? you need to entice these customers from loyalty programs. the idea that going in the morning is much cheaper. that is where we priced it at $10 a month, we wanted to attract young people who will go more often. >> how much more money will you need by the end of the year? lowe: we will need much more money. there are so many other things that you can do with your entertainment dollars, so we need to find growth. the first people who joined the program are in high-cost markets like new york, l a, because they see what an amazing deal it is. or people who already go a lot. so it will take a few years for us to get to positive cash flow. >> are you going to the popcorn business, any ads, anything on the side? >> yes, we get our customers to
go twice as often, the purchase -- they buy 120% more of the concessions, they get to go to nearby restaurant, use uber, and the movie distribution system is broken. $50 is our spending 5000 -- million to $100 million marketing a film and we can do that better than any other ways. we collect revenues in many different areas. moviethere are distributors who have not reached deals with you. have you reached deals with any other movie studios? >> we are able to get people to such by the major brands as independents. we have not yet proven to the big guys that we are a valuable part of the ecosystem. but in the same days of netflix, we had to prove to the city is
that revenue share with the right model and we had to the money where our mouth is which is what exactly what we are doing. we are putting away money for the next x months to show this that he is that we can improve their business. >> amc's argument is that this model will not provide sufficient funds to find quality theaters. what you think of that? >> that is what blockbuster told us when we started netflix, and when we started red box. we were renting movies at red what blockbuster was renting them for and they said, how could you possibly do that, you will fail? it is all about putting technology and data behind your retail business to drive more profit. >> how much time do you need for that to reach profit? >> we are already talking to a number of studios, to show them how we can ensure more people are in their seats. we need more than six months.
we are working with theaters to collect a portion of their concession sales. close to but i can see it being a genius idea, the only thing is the underlying business that you need to survive. for thenetflix of content that it needs to keep churning out, and in your case, will the theaters themselves survive? it is funny, a few weeks ago i was on the phone with the former cfo of netflix and he reminded me that it took two negativeere were growth margins dramatically, and still today, netflix hours huge amounts of money, aliens of dollars are year. so it is not -- billions of dollars a year. a is about the energizing business and you need to find it and we are prepared to do it. emily: that was the moviepass ceo. startupp, a
♪ emily: pet care on demand, the latest startup up trend with multiple companies hoping to revolutionize an industry that has long relied on word-of-mouth for world and -- word-of-mouth referrals and ads on lamp posts. wg is drawing scrutiny. we are joined by bloomberg technology journalist olivia zaleski about dust to talk about the complaints from facing these startups. what is going on here? to take intoave consideration that you feel are walking thousands of dogs, among them will get lost in some of them will die under the dog 'care.s
the problem we are finding is how the company is dealing with it. moving in ands going into many markets, customers have complained that they feel that the company did not handle responsibly their lost dog. emily: you talked about one dog in particular, what happened? dog was lost and her owner wanted to go on local news media to get the word out there and talk about the dog and the strata wag was very opposed to that. -- the startup wag was very opposed. they dispute the claimant say that they did not do that all, but there are two sides to every story and wag has now sent the dog owner a easy and deceased --ter -- cease and deceased cease and desist letter to her. americans spend about $70
billion a year on their four-legged friends, we really care about our pets. --these start companies silicon valley companies are moving into that. it care is the last bastion has not been interrupted by technology, because it is a very franchised business, people rely on rumors, their teenage neighbor to walk their dog, so these companies are trying to go in and digitize that and create walkingike over for dog -- an app like uber for dog walking. which may explain why they are monthg about $4 billion a . there are spending money as -- in the same way that uber did. raisempany is trying to millions of dollars in seeking new management. a great piece,
olivia zaleski, our "bloomberg technology reporter. thank you for joining us. that does it for this edition of "bloomberg technology, tomorrow we travel to the western journal in laguna beach, california. will be talking to arianna huffington one of the bloomberg board members. see you then. ♪ who knew that phones would start doing everything?
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♪ from our studios in new york city, this is charlie rose. ta-nehihassee coats -- is here with a book of essays written during the obama era. his first essay called "the first white president" was featured in this year's "atlantic monthly". he has won many awards including the macarthur genius grant. the new york times calls him the preeminent jour