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tv   Bloomberg West  Bloomberg  December 12, 2013 12:00am-1:01am EST

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>> live from pier 3 in san francisco, welcome to the late edition of "bloomberg west," where we cover the global technology and media companies that are reshaping our world. i'm emily chang. our focus is on innovation, technology, and the future of business. let's get to the rundown. >> should you be able to make cell phone calls in flight? federal regulators take up the issue tomorrow in what could be the first step to turning the friendly skies into the chatting skies. spotify get the lead out. they are the first site to stream led zeppelin music.
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as we approach the end of the year, google shares are listed on the most-watched video youtube. first, to the lead. it is an issue that is generating plenty of talk and tomorrow the fcc will take its first vote on whether to and in- flight cell phone calls. if the vote passes, it would open up a period of public comment. the sec is taking the vote among stiffening opposition in congress to passengers yapping on their cell phones in flight. they have committee has already introduced a ill outlawing phone calls. fcc chairman tom wheeler, says he doesn't want someone yapping next to him, but the industry should not have to hide behind an unnecessary technological role.
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joining us now, nicholas thompson. talk about the procedural issues here. what stands between getting this ban overturned and not? the fcc will take its vote tomorrow. they will take it to the next step. in the next up, they will have a year-long review. there will be public comments. the rule says that if planes install certain technologies, they will be allowed to allow their customers to talk on flight. it is a technical requirement that will have to happen. congress may pass a law saying this could happen which will derail the whole thing as well. >> it seems like the safety issue is off the table. people are not concerned it is dangerous, but it might be annoying. that is the concern. >> a safety thing with a serious issue back when cell phones were less technologically advanced. the carbon was the old line. now there is no technological problem. figure that all of the phones
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that have been left on a brief cases over the years and the plane was fine. they have taken that off the table. now it is just too darn annoying. i asked one of the questions is, would your phone's data plan work on the plane? what would this mean for the wi- fi companies? >> it is not bad. what will happen is that the lanes will install technology that allows the phones to communicate to cell phone towers at high elevation. you will be using your regular cell phone carrier. you could even have wi-fi in flight. you could make voice over internet protocol calls as well. >> this is a tough call. what do you think? i cannot decide to stop. >> i
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think the fcc is probably right. it should not be on fcc rule saying that you cannot talk on planes. if it is just a tatian concerned, that is up to the private companies. i think the world a bit better place if nobody talked on phones. but i think you should have the freedom. we have a private marketplace. airplanes can come up with their own standards. maybe it is that jetblue and southwest really want to allow people to talk and other people do not want to allow people to talk. maybe it will become a cultural norm like trains were there is a quiet car. i will definitely sit in the quiet part. i think you should probably have the right. >> it is nice to get some work done when you are in flight. is this inevitable? at some point, is this going to happen? >> i don't know if it is inevitable. i think public outcry against it
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is pretty passionate. it is interesting, there are not that many places in our lives where you actually have peace and quiet. a place where there are not ads coming to you every time. people really like airplane rides. it is a bizarre phenomenon. you are in a confined space, you are traveling, it should not be comfortable or something you look forward to, but because you are able to turn off in a lot of ways, it has become that. there may well be lots of public opposition that starts this and preserves that stop we will see. >> all right, nic. nicholas thompson, we will see. spotify is taking on pandora, and they get the led zeppelin collection. we will talk to the man who made that happen. that is up next on "bloomberg west." ♪ >> i'm emily chang and this is
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"bloomberg west." an event in your city today, spotify announced that it will offer it using streaming service on mobile devices for free. customers no longer have to pay $10 a month. our editor-at-large cory johnson was at the event this morning. what can you tell us about this event. >> this is an important deal for spotify. they have took a big step to distinguishing themselves from competitors like pandora. they are enticing more customers to try their premium service. take a look at what the spotify's ceo had to say. >> it will not be about purchasing one song and then another song. it is about listening to music and adding to this unlimited collection on spotify.
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it is accessible on all devices. >> the chief content officer got into the nitty-gritty of how the service works. >> the new service allows three users to experience on any devices. three years ago, we launch the service and it was a different world. >> people had computers and desks back then. wright state introduced the service on the desktop and then they upgraded to premium to get features on the mobile. now the majority of our users are on the mobile devices. it is very important that we keep them engaged. it is all about an offering that keeps people engaged and increases the number of people who get on that conveyor belt. >> it increases their access on mobile devices? >> you do not get all the benefits of premium. >> premium? >> there are still a distinction
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between free and premium, but they get to build collections and they get to experience playlist and all of the cool features, while maintaining the benefits of a free music player on demand. there are no ads. >> people can create their own playlist? they listen to ads interspersed with the music? method is different from radio and better than radio. you can listen to bob marley all day long. it does not have the limitations that for instance other groups have. >> i remember there was a famous story where someone said it was specific to medium. when cds came around, they had to renegotiate deals. it was medium-specific.
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are there a lot of contracts like that that you have to wrestle with? >> there are some. it is a short list. it is important to obtain the right to say yes or no. for a group of the stature of led zeppelin, it is not uncommon for them to have those rights. they had the right to say yes or no, and they said yes, we want to embrace this model and introduce our catalog to a whole new generation of fans. >> is there going to be a time in this business -- you are talking about a catalog right now. new music is of course a big thing. there has always been talk about surely get approach direct. >> don't call me shirley. i think it is greatly exaggerated. they are our most important partners today and that is still true.
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it is easier to make a record today than it used to be. it is a valuable source of capital to make records, and the marketing costs. you have to cut through the clutter. it is still an important part of the landscape. >> i can look at pandora, i know what their costs are. i cannot locate yours yet. i wonder what the prophet has been about lowering your cost? >> we think that artists deserve to profit. no business model is successful unless it aligned itself with the interests of artists. as the cofounder and ceo mentioned today, we still pay out about 70% of our revenue to the artist.
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we pay interest rate to rights holders. -- directly to rights holders. everyone deserves to make a dollar. radio stations are paying single digits. one of the cool things we announced last week was a whole new level of transparency in terms of how this model works. we launched a website that we call spotify for artists. it provides a detailed model of how this works. i encourage you to check it out. >> you have spent over $500 million this year paying for music? >> correct. and it is over $1 billion back to rights holders. we would not have this conversation today if we were not taking users who were being monetized -- you mentioned radio
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as a poorly monetized channel. and we are converting these users to a much higher way of consuming music. at the end of the day, we have continued to do that. again, back to a point i made earlier, we are trying to get more people into this. we have an efficient way of moving people from no pay too little pay to a much higher payback to the industry. it is about getting more people onto that efficient conveyor out belt. >> as you know, there's a lot that we do not know that spotify, how big do we think it is? >> there are some clues out there. you have heard of content cost being 70% of what their revenues are. we know what their content costs are. they said they paid $1 billion total, 500 million in the last year. that suggests that they have done about $14 million in revenues up to this point.
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that is a really big business already for spotify. it sounds like they are really growing by leaps and bounds. this new service may help them get closer to pandora. >> how does it compare to pandora? and/or has been around for a long time. >> pandora's content costs have been less. they also claim to own 70% of the market. i am wary of market share claims could they are hard to check -- because they are hard to check. it is not just from the amount of people paying to use the service, but i think that in terms of pandora, these guys are going to head to head. this new service will take them on in a new way. >> cory johnson, editor-at- large, thank you. this video, featuring singer andy levine -- adam levine and eddie samberg was one of the top 10 videos on youtube.
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what was numr one? that is coming up next. you can watch a streaming on your tablet, your phone, and now apple tv. ♪ >> welcome back.
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i'm emily chang. this is "bloomberg west." some yahoo! mail users have been able to get into their mailboxes is late monday. they are blaming the outage on a hardware problem. in a tumbler post, yahoo! writes that the issue has been harder to fix then asked active. they have dozens of people working around the clock. they launch the new yahoo! mail in october only to be hit by user complaints.
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discovery networks is the company behind tlc and animal lannett. they are eyeing a possible bid for scripps network. edmund lee is with us now. why would discovery want this network? >> he gives them a lot more cable channels that they can take when they talk to distributors like comcast or directv. they can say they have a much bigger lineup with popular content. we want more money for that. it raises the affiliate fee for all their networks. it gives them a bigger package of channels that they can sell. >> is scripps looking to sell? >> there are no reports that they are actively looking to sell full discovery has been looking at them as well as other possible targets. it could be that anyone could want to buy them. it could be fox, time warner,
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they have attractive assets. they have popular content. it is relatively cheap to produce. >> if this happens, how would it shake things up? >> you are seeing more consolidation potentially on the cable side and the distribution side. talking about time warner cable and charter going after them, on the programming side, the more they can bulk up, whether it is discovery or similar networks, they have a better chance of negotiating with these distributors when it comes time for renewal. we all are member what happened of cbs and time warner cable . >> where is this going? but this is very preliminary. no one has hired bankers to take a look at this just yet.
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it is something that has happened at a strategic level, and high-level discussions. it does not mean that anything will be imminent. but it is a smart play. it is something that discovery should be looking at. it is also good for scripps to start thinking about, if someone would buy us, who would give us the best deal? >> edmund lee, i know you will continue to follow this story. but thank you. facebook' bonds are synonymous with the hacker culture. how are forced laxative related horse laxatives related? take a look. >> we're in the bowels of their hardware labs. facebook actually built and designed its own servers and storage systems and networking equipment. a big goal is to save money for facebook by making more
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efficient data centers. they want to make more efficient equipment than what they can buy from hp or dell. >> this is the electrical lab. this is where we are doing the circuit board level work. we are running more than 20,000 servers per technician. we are looking at the common replacement items. an easy example is getting rid of screws right now. there are guys down there with the screwdriver, and there are a number of screws. >> you use a pop-up system. >> you got it. >> google, amazon, microsoft, you guys are doing things that such a high level. you have found something that works for you and suited your needs. you have created standards that other companies are now building on. >> at gail, it does start to have an impact. >> can we take a look around? >> this is a server sitting in a vat of oil.
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why? >> this is the facebook hacker culture and how it applies to hardware. >> you have hardware hackathons just like you have software hackathons? >> absolutely. we purchased some mineral oil from a veterinary supply store. it is a horse laxative. this is what we call her oven room. we will simulate everywhere our servers might go. the ovens that we have here allow us to create a very wide range of environmental conditions, including what we call thermal event. >> do you take an actual server and put it inside these massive ovens? >> we do. we need to have our own testing standards in addition to our strip -- suppliers. we understand our operating environment much better than our suppliers do. >> you guys must have the
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noisiest workstation at facebook. [laughter] >> it is noisier than the software development four. >> there you have it. ashlee vance. a twitter executive tries his hand at venture investing. we have him after the break. you can watch it streaming on your tablet, phone, and now on apple tv. ♪ >> you are watching "bloomberg
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west" where we focus on technology and the future of business. sales of the xbox one console have topped the $2 million mark 2 million mark. microsoft says that it is having a tough time keeping inventory on the shelves. rival sony says that it has sold 2.1 million playstation fours since its debut a work -- a week earlier. it is available in 32 countries. an online poker site is dealt another setback as it tries to get back into the u.s. market. poker stars application for a gambling license new jersey has been suspended for two years
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because the founder is currently under indictment. poker stars has been trying to get a deal through a casino in new jersey which recently launched legal online gambling. amazon has expanded its grocery delivery service to san francisco. same-day delivery is free for any order over $35. amazon fresh is also available in los angeles and seattle. twitter shares are up about 0.5% today. the company's stock price has more than doubled since it went public. investors are flocking to twitter, but one twitter executive decided not to stick around for the ipo. after four years of twitter's head of platform, he left the company in late june before
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public. he is now a partner at red point ventures. they have invested in netflix, tivo, and more. great to have show.n the >> great to be here. in some ways, the transition has been very different from twitter. and some days, it has been similar to my old role their full i was interacting with a ton of companies each day. the length of time you have to think about the job is longer in venture. >> how did your four years of twitter shape but you are doing? what did you learn a twitter that you are applying to investing? >> that is a good question. when you look back at twitter's history, investors look at how twitter has grown over and over. i joined around 30 people who left around 2000. you see things that are not obvious. you see the characteristics inside. having seen that, and spending time on the inside of the
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company, i hope i can apply that in investment. >> you are focused on the hot, competitive stuff. what is your strategy? >> it is less about focusing on ace pacific area, but i want to learn a lot. -- a specific area, but i want to learn a lot. we are learning about the pushbutton economy and getting services on demand. we are trying to make it a more convenient service for you. >> uber has come up a lot lately. there are not a lot of other names. what do you think are the hottest consumer bennies? best companies -- companies? >> we have a new credit card for people to simplify their lives. we are excited about that investment opportunity. >> i have to ask this question as you worked at twitter for so long. mobile messaging seems to be a battlefield. twitter has just added photos to their direct messages. there is facebook messaging, who knows what could be here tomorrow? how do you see this battle shaking out?
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>> that is a good question. it ties into this communion -- human need to communicate. people doing different ways. each new medium -- snapshot was so different from anything that existed before. it is too hard to predict. it is important to watch how users behave around the world and how they connect with each other. >> is snapshot a threat to twitter? >> i think they are different services. they are used in different ways. they may overlap a bit, but twitter is about information sharing and snapshot is more for personal communication. >> what about facebook? was snapshot right to turn down that $3 million offer? are they a threat to facebook? >> i think it is more a threat to facebook and it is to twitter. it was smart of them to pass. it seems crazy at the time, but
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>> how do they make money? >> every when asked twitter that at the beginning, but now they are making money. making money is the least of their worries. messaging will probably become bigger. and only messaging is too far off from the things that we have looked at in the past. >> let's talk about twitter. what is their biggest challenge going forward? post-ipo, what do they need to work on? but it is a good question. i try not to pay too much attention to it. i tried to focus mostly on my new job. i have a lot of great people there. >> you will be watching. >> of course watching and cheering from the sidelines. that's what are you doing at red point? >> i am focused on finding great entrepreneurs to work with. i am so decided to switch from
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operating to investing. and my other jobs, i thought what was the part that made me the most passionate? it was working with great entrepreneurs and seeing the businesses that they would build. i have the freedom of starting from scratch and finding great people to work with and grow the business and support them. that is the most exciting part of the business for me. but we will be watching you from afar. former twitter executive and now a partner at red point. everythingcluded from funny shorts to music videos. when we return, we will show you who claimed the top spot. ♪
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>> welcome back to "bloomberg west." i'm emily chang. the video parody of miley cyrus's wrecking ball was even more popular than the original. it just came out. funny clips like that are helping google post some big growth when it comes to revenue. revenue will hit five point $6 billion this year, up 50% from 2012. google will keep 35%, or roughly $2 billion, while the rest is shared with content creators and add creators. viral videos help drive all that traffic to youtube. from james franco and south broken poking fun at -- seth
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rogan poking fun at kimye to my favorite of course, the cap videos. -- cat videos. for more on what we watched on youtube in 2013i am trying to bite you to trends expert kate mason. it was a fun trip down memory lane. any surprises on the list is year? >> it is a fun time of year for us. one thing that stood out was that three things in the top 10 were from brands. they are making things that do not look like commercials. but they are investing a lot of money in them. >> let's go through some of the number 10, mozart vs. skrillex. yolo, a smooth with adam levine a spoof with adam levine and andy samberg. >> we have lists around the top videos and music and education and beauty and fashion. corrected the list this year
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differ in any way from previous years? >> sharing is important. the parody is getting more views. these videos were encouraging engagement and encouraging people to participate. >> i am shocked that kimye is not on this list. that video that just came out, that was unhide opener. but we are always surprised. >> number five, baby and me. number four was that spoof on miley cyrus's wrecking ball video. number two, the harlem shakes. this is the original army audition. this is one of the most popular
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videos. there were 1.7 million videos uploaded about the harlem shakes. 1.7 people out there decided to make their own videos of the harlem shake. >> how many people have uploaded these? >> there are a lot of parodies and remakes about the subject. >> let's get to number one. many of you have seen this video. " what does the fox say?" tell us about this video. >> it is wonderful. both of the top videos this year are from norway. this is a comedy duo out of norway. they have been around for some time. who knew that a bizarre video not even in proper english would become the most popular video of the year? >> 276 million views.
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that does not compared to the most-watched video of all time. >> 80% of youtube videos actually come from outside the u.s.. we are seeing international stars like the people who did the fox video, but we all remember gangam style from last year. >> that has 1.8 billion views. does anything even come close? >> it is a good song. one of the thread that runs through popular content is that it is shareable. it is something that you want to send to all of your friends. who knew that a south korean pop star would be a global phenomenon? has follow-up song, "gentleman." >> he is on a roll. thank you for joining us on bloomberg west. he is an amazon board member and now he is starting a new venture.
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he is here next. you can watch a streaming on your tablet, phone, and now apple tv. ♪
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>> i'm emily chang and this is "bloomberg west." gordon is a board member
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at amazon and zynga. today the firm announced that he will also become its chief product officer. he is starting a new program for mentoring entrepreneurs over technical details like product design. jon erlichman sat down for an exclusive interview and asked why he chose to do this. take a listen. >> i am concerned about the level of innovation in life. i have a high filter for cool. we are the florence of the modern economy here. there are untold emotional creative and economic rewards for doing cool really well. i do not think this is a fix-it. we see that when people get something 90% right, it is not nearly as valuable as 100% right
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. >> you are looking at people like steve jobs. are not enough people following in his footsteps? >> there are a lot of people inspired by steve jobs. one man said that steve jobs pushed for the last 10%. he landed on that 10%. he said that they thought they were done, but steve jobs would go for insanely great. a push for that last bit. you look around, and you can see people like tony fidel and others who are channeling his example daily. >> obviously you have spent a lot of your time over the last few years helping to build the business of zynga. you have shared this tidbit about the knowledge learned from mark pincus. can you elaborate on that?
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>> more broadly speaking, we all look for mentors. sometimes you are lucky enough to have a mentor who will let you sit on his or her knee and tell stories and talking detail. i think that was like me and david ogilvy. it is a remote mentor relationship. mark pincus, when he worked in malone's organization, he could see from a distance the information the way malone would use math to get right to the heart of value creation and the media business. pincus has the extraordinary ability to use math to see inconsistencies and
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possibilities in this new media ecosystem. >> product innovation is needed that young companies. it is needed at large companies. microsoft is obviously looking for its next ceo. on the themes that you are talking about, how important is that this vision that microsoft makes on who it ceo will be in terms of the future? >> is at least important fast as important as general motors. congratulations to them. not only is it the former head of product, but it is also a female. i grew up in detroit. those two backgrounds for a ceo of general motors was inconceivable when i was growing up there. >> talking about amazon, you
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have sat on its board. jeff bezos is getting a lot of attention for his future focused on drones. the ebay ceo told emily chang recently that is a long-term fantasy. obviously people who are thinking of the future are going to be dealing with critics in the short term. what do you make of all of that? >> the best way to predict the future is to invent it. the culture of amazon is very much about invention. the most -- most inventions start out seeming foolish or impossible. we circle back to steve jobs, and he said, stay hungry, stay foolish. >> i want to look at one particular product story. we are talking about product innovation here. intel spends all this money to develop a tv project only two a buyer for it. what do you make of that? >> the book "the innovator cost dilemma" makes it clear that it
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is hard for incumbents to do this kind of innovation. it is never a surprise when an incumbent fails at discontinuous innovation. the surprise is when they pull it off. when microsoft pulled off xbox and xbox live. or when amazon pulls off kindle. or frankly, when apple. the ipod. >> that was bing gordon would jon erlichman. it is time for the bwest byte. we focus on one number that tells a whole lot. cory, what do you have? >> $1500. this is a great story. there is a street in a little vietnamese village that had the and renamed facebook. a flag knocked out this road and it was used by farmers to reach their paddy field. people on facebook raised $1500
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to rebuild the road. the village has put up a sign dubbing the road facebook. >> that is so sweet. and a reminder of the global reach of facebook. >> when you think back to the arab spring and everything, the role that facebook and twitter played in all of that. it is very interesting. i tend not to think of those social networks and other places and the way they work there as very different from here, but that is a wonderful report. >> on another note, i have to ask you, what was your favorite youtube video of 2013? >> i don't have one. i'm not really a youtube video guy. i know people who love the "what does the fox say?" video. i thought for the first time today. it is not really my thing. >> i have watched it several times. >> who knew this could be so
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funny? or funny at all? a stopped clock can be right twice a day. >> it was the top video of 2013. if you have not watched it, you have to see it. thank you all for watching this of "bloomberg west." here ♪
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>> hilton worldwide pulls up the biggest listing from a hotel raising 2.3 billion dollars in its initial public offering. >> former bank of israel chief stanley fischer, according to people familiar, says that president obama take for the number two spot at the fed. pay $100 million to settle u.s. claims they violated sanctions programs. hello. welcome to cohen -- "countdown." i'm marrt


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