tv Bloomberg West Bloomberg April 21, 2014 11:00pm-12:01am EDT
♪ >> 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. netflix is raising prices for new members, daring to up the price even after the huge clash it faced when it increased prices by 60%.
we will get to that in a moment, and also using 3-d and virtual reality to make her movies. find out why interactive is one of the big trend at the tribeca film festival. first, a check of your top tech headlines. samsung says the money apple wants for patent infringement is 57 times to much. in san jose federal court, a professor testified if they have to pay anything, it should be $.35 a phone because of the five patents at the center of that case are of marginal value. apple is demanding $40 per phone, or $4.2 billion. the new york attorney general, eric schneiderman ellis says more than 50% of the air bmb rentals appear to be illegal under state law. this comes as the site is fighting to cough up names of users tomorrow. multiple reports say airbnb raised $450 million in funding, giving it a valuation of $10 billion. airbnb takes aim at google fiber. the phone giant lands to expand its high-speed internet to 100
communities, including 21 major cities. at&t wants to deliver the internet at speeds 100 times faster than standard web access. first, to our lead story of the day. it will soon cost more than $7.99 a month for netflix subscribers to watch originals like "house of cards." they will start charging new users one dollar or two dollars a month as netflix reported a big first quarter revenue, revenue of $1.72 million. profit soared to more than $53 million. netflix added 4 million subscribers, including 1.70 5 million international members. we have a roundtable to discuss all stop jon erlichman is here as well as chris edwards, who covers netflix for bloomberg news. the price raises the biggest deal. one or two dollars, what is it going to be?
>> like they say it depends on the territory. they say they are raising it across the world for new subscribers. it will really depend on the market. they have not said what's going to happen in the u.s.. >> any concern this could hurt their image question mark when they try to split off the streaming and dvd business, that did not work out well. any big changes, that could disrupt a gain in new subscribers. >> when they run out the list of reasons, i think you are left with the message they are not concerned about price increases because of the adoption of netflix. you're looking at a company with over 48 million subscribers around the world will stop they talked about how the adoption markets outside the u.s. has been successful, the netherlands, mexico. in fact, it was their international subscribers where
they had surprise loss a little bit. i think it is their message that absolutely, we are customer first. we don't like to shock people, but we are in a good position. they feel pretty confident that they can get to 90 million subscribers in the u.s. >> porter better, managing director of media capital is joining us. when you look at the numbers and look at the hainan subscribers, the business seems to be doing quite well. do you worry about a major change like a price increase? >> the major changes going to happen. you can't worry about it. you will have to try to fathom what it's going to do to the share price, which is going through the roof as we speak. >> let's talk about original programming. we got a little more color on
house of cards. they don't break out the audience numbers. why don't they if the audience is as huge as they say? >> i think a don't want to give their competitors any ammunition and they want to keep the prices down when they are acquiring these shows. they say the budgets of acquiring these shows are going up. on the conference call they said the free trials are driving new subscriptions. so what is driving them are the originals and they say it's doing extremely well for them. >> the original programming is very expensive. is this something netflix can sustain long term? new subscriptions are happening because of original programming. >> reed hastings says the secret sauce is the metrics, which are more extensive and deeper than any other media or content provider has ever dreamed of. making original content is harder than even netflix understands. no one pays attention to the original content that missed and did not draw any crowds. the first one that they did was a series called "lily hammer."
which almost no one saw. i'm not sure if they can continue to come up with "house of cards" hits or "breaking bad" hits which was blocked off of cable. the missing numbers are not the original bits. those are drawing a lot of attention and yes, they did spend well over $100 million on the first season and almost $200 million on the second season of house of cards will stop but it's the hidden numbers, not the number of viewers, it is what their turn rate is which is approaching 30% by their own customer research. it is a contingent liability on their off balance sheet with the contracts they have entered into for future content approaching
$3 billion. they will really have to keep this momentum going and keep adding subscribers or they are actually going to hit a wall. >> they came out formally against the comcast and time warner merger. i have a statement they sent -- if the merger is approved, the combined company will pass 50% of broadband households. its dominant enough to be able to capture fees from providers like netflix. why come out so strongly against the merger? >> i think there are those concerns about what they will have to pay long-term when so much broadband ends up in the hands of one player. we saw them cut a deal with comcast in anticipation of all this change will stop one of the things said on the call by reed hastings was brian roberts of comcast, nice guy.
that has to be 60% rod band in the hands of one person or one company, he's a pretty nice guy am a but no company should be in that position. it's a concern because they don't have a lot of power over what they're going to be charged on that. >> jon erlichman and porter bibb, and our own cliff edwards, thank you all. coming up, we want to turn to another story -- disrupting the media business. tomorrow morning the supreme court will hear arguments in what is likely the most important media case in years all stop american broadcasting companies versus aereo. but what's the legal issues the court will be deciding? sam grobart explains. >> bag now, you may have heard about aereo. launched in 2012 and backed by barry diller, it allows you to watch broadcast tv over the internet. but is it legal? in 13 cities so far, they have created antenna farms,
warehouses full of dime size antennas that work like the rabbit ears you would attach to your television. they receive free signals from broadcasters like abc, cbs, and fox. they take the signal and sends it to subscribers over the internet. you can then watch it on your phone, tablet or you can watch it later on the cloud. the service cost eight dollars or $12 a month, but here's where it gets sticky. before that, there were three ways to watch broadcast television. you could bolt an antenna and get it for free, pay it company for a box or pay satellite company for a dish. while you are paying cable and satellite companies, they are paying broadcasters to retransmit their programming to the tune of about $4 billion year. but do you know how much they pay the broadcast networks? zilch.
they argue it pulling down the same free signal anyone can get with their own antenna. the fact that the antennas happened to be in a warehouse and not on subscribers' roofs should not matter. broadcasters say this is and that they are no different from a cable company. in 2012, they were sued and the lawsuit hangs on one thing -- whether or not aereo's retransmission is considered a public performance. if it is, they are infringing because they have not paid for the programming like able companies did. but if the court decides the service is just a lot of private performances, it would not be an infringement and they would not need to pay the broadcasters. so far, the lower and appellate courts have sided with aereo, but now it's up to the supreme court to decide. arguments will be in april and will be a ruling by july. >> a quick programming note --
>> i'm emily chang and this is "bloomberg west." facebook may be about to launch its own mobile ad network. they're offering a database of user information as a better way to target ads to users. they could reveal the new ad network at the developers conference later this month, but they would not comment on this. they have been testing something like it. could a new mobile ad platform -- what would it look like for advertisers? my guest helps brands to target users with ads.
how is this different than what already exists? >> currently, aside from targeting on facebook-owned properties, their website, their apps, anything you could control, this would allow them to create partnerships with third-party development will stop whether the games were sold to the facebook ecosystem where facebook would presumably share some revenue with the ad developer. although details have not been shared. >> google has been doing this for some time will stop but that's correct. even if you look further back, with adsense, it was a similar concept where advertisers were flocking to google to be on the google.com search engine. based on what we know about what people are doing in their search behavior, why don't we allow any publisher to put an ad on their site targeted isn we will share
some of the revenue generated from that ad with them? facebook is presumably following a similar playbook. >> twitter is doing it as well. so, how does that change the broader mobile at lance gave you work in? >> every marketer right now is trying to figure out how to solve this problem, that consumers no longer just have a single computer and they research and eight by everything from that one device. today, people maybe find out about something on their desktop machine at work, if people use facebook at work. i'm sure that never happens. then on the bus ride home and they see with their friends are doing their and then they might go on a tablet and read product reviews.
that presents a real challenge that needs to we've that together and understand where the users are going and how they do spend money across these devices, what was the result and what impact did it have? a big trend in the add role spaces trying to solve the problem of identifying who people are on one device, targeting them and then tracking it back to clearly measurable roi. >> add role just raise $70 million. how are you using that money when it comes to building and developing technology to improve the targeting of mobile ads? >> a big heart of us raising such a healthy round was solving that problem because it's a difficult problem to solve from the technical perspective. it involves collecting data across multiple devices, being able to integrate with different ad formats and platforms. about a month ago, we did launch our first mobile ad product
which involved identifying users on a desktop device and then be able to reach them on the internet, namely facebook's mobile app and twitter. there are some resources behind us into needing to expand upon that and solve that problem for marketers. >> some of the companies that do it you do that are public companies, they are struggling in the public markets right now. what's going on with that and how are you different? >> it depends on the time horizon you look at. if you look at where they ipo and where they are today, it shows that generally, there's a positive trend and we are still early days in terms of mobile. if i think six or nine months ago, the conversation around mobile strategy has evolved so much. now, marketers are figuring out ways they want to engage with users on mobile devices. they're building mobile optimized websites and applications and developing metrics they need to figure out how to drive people to those different properties, how to
reengage people once they follow the apps. it's becoming a must have of the marketing toolkit to understand how to get people onto their mobile properties and keep them engaged once they are there. >> thank you so much for joining us. from tragedy to triumph -- she survived the boston marathon bombings and decided to follow her dreams of launching her own business. that is next on "bloomberg west." ♪
>> welcome back to "bloomberg west." i'm emily chang. runners in boston are crossing the finish line in the city's first marathon since the deadly bombings last year. tech executive amanda north worked in technology for more than 30 years, inc. looting a stint at apple, but after surviving a marathon bombing, she decided to follow her dream and start her own company.
ari leavy joins me now. this is such an inspiring story. tell us the basics. this is a woman who went to the marathon to cheer on her daughter and was injured in the race and decided to make a major life change. >> she was right by the first bomb, 15 feet away and ended up helping somebody who would ultimately lose her left leg. that person has credited amanda for helping her save her life. it was after the madness that amanda and her daughter reconnected. they were not able to reach each other. they didn't know if the other was alive or was ok. it took all to various family members and when that did happen and they spoke together in the hospital, their daughter reference the fact that their lives would never be the same and they needed to make decisions based on their passion and purpose. that is what led her to ask what am i passionate about and how
can i help? >> in a year, she's started her own company. it's like an at sea for merchants abroad. >> she has collected artisan crafts from different countries and brought them back. she understands the artisan business well, whether you are a basket weaver or whether you make rugs in bolivia, she has talked to a lot of these people and got to understand their businesses and has understood there's a problem and they have a finite market in their own countries and have not been able to reach rotter mark gets. she's decided she can help them do that because she understands marketing in the u.s. and can bring this is ms. that only exist in developing countries to the u.s. maybe there's a marketplace for them. but and she is back in boston? >> yes. her daughter is running again and such would be near the finish line, but probably not hear the exact spot. but and the woman she held save, she lost her legs, but they have kept in touch and erika has provided a lot of emotional support as she started this new
business. >> they keep it in fairly regular touch and have seen each other number of times. amanda says she's constantly reminded of the challenges of that day as she encounters the walls entrepreneurs hit as they are starting a business. this a particularly difficult business when you are dealing with merchants all over the world. >> such an inspiring story. this as runners are crossing the finish line a year after the deadly bombings. we will be right back with more "bloomberg west" after this break. ♪
aerospace headquarters in phoenix. we will get to the malaysia investigation is in a moment. first i want to ask you, what is the cutting edge right now? what are the most exciting things you are working on? >> thank you very much for having me. it's a pleasure to be on here. there are a lot of things i'm excited about and i'm afraid you don't have enough time to cover it. but we have some great trends going at our back. we have the connectivity of aircraft we are reducing this last island of capability where we do not have conductivity on airplanes will stop bringing it to the cockpit and back of the aircraft is a big deal for us. changing the way we fly from air traffic modernization and technologies in which we introduce a green taxi
capabilities, so people can taxi around the airport surface using electric our as opposed to waiting for a tug to show up. those are very exciting things that will change the way we fly. >> you are also working on the 3-d printing of airplane parts, new jets in the airbus 350, but i want to talk to you about drones. you have been working in drones long before companies like google and facebook got into them. what do you think about their new interest in drones? >> i think unmanned aerial vehicles will change the way a lot of flying is done in the world, whether in defense or commercial applications. i don't think we have yet figured out all the different ways that all of these unmanned air vehicles can be used, but there is a lot of technology we can apply. autonomy, flight control, capabilities that require or allow these aircraft to fly will be vital to how they operate in the commercial airspace, which is an area where we have a lot of capability. we are bullish on where these are going to go and the things
we have to go through our around how do you certify these and operate them so you don't occupy the many airspace and how do you make sure you are safe. a 25 or 40 pound vehicle falling out of the sky would be a bad thing for a lot of people. we have to make sure safety regulations are there. >> i do not need a drone crashing into my house trying to deliver a package. but in interviews with other experts, it sounds like drone package delivery or even conductivity, connecting remote parts of the world is very far off. how far out are these things happening on a routine basis? >> i think this is one of these technology areas that may come to the left as opposed go to the right. there are a lot of technologies we will see introduced in both dod and commercial that will allow people to have an unmanned aircraft and evil can get them in the relatively near term. the question is what is the utilization of them and how do we make them safe and certified
in a commercial air market? >> i do want to talk a little bit about malaysia 370. i know you are involved in the investigation and can't give us specifics, but i want to talk about black box will it sounds like it is quite outdated. why do airlines still use this technology and why not upgrade to something better? >> the sophistication is quite high when you think about the environmental conditions they have to go through. we have to certify them through long times under water and have them survive huge g forces. other conditions you would imagine going through an impact. when we find these black boxes,
they are flawless in terms of their performance and getting the data off. i call you back to air france 477. we found that rocks two years after being in the water and we pulled out of a dried off and it worked flawlessly. we got to the bottom of what happened on that investigation. the technology is quite sophisticated. the areas we are looking at where we might go next is longer battery life and what is the connectivity solution? in the 370 case, we came into an airspace that had a different environment than what you'd normally see on most routes. it did not have the same coverage you experience in other parts of the world and i think we will learn from this investigation about where we want to go next. >> longer battery life is something that could have helped in the malaysia 370 case because it would have been pinging for longer?
>> one of the things on 370 is we don't know whether we are over the site or we have more places to go. it may have been operating completely the way we would like it too and have been operating for longer than its design life, but we don't know where the debris field is and that's part of the investigation we will have to keep all. >> fascinating stuff you are working on. thank you for joining us today. >> thank you. >> coming up, our special series, wiring the world of entertainment. how the business is changing the business of hollywood, including film festivals. ♪
evolution in our series "wiring the world." jon erlichman is in new york and joins us from there. give us a glimpse of what we will be seeing this week. >> when you talk to the creative types, storytellers and filmmakers, they are excited about the technology available. the question becomes, "what are the technologies that are practical for use?" you mentioned 3-d, an area where we saw explosive growth but also saw some filmmakers pull back a little bit after some of the early 3-d films. even with things like virtual reality, you got directors like james cameron already saying if they could use of virtual reality in a bigger way -- we saw facebook make a splashy announcement in that area. maybe that's something they will continue to focus on. students at usc who are, as part of their curriculum, trying to
see what is possible, what kinds of different projects they can launch that would be using something like google glass. there's a lot of opportunity out there. we will be exploring these things over the course of the week. >> let's compare that to changes in the movie-watching experience. >> a lot of filmmakers and producers will say at the end of the day, it's about good stories. that's true, but there's no doubt new technology and new platforms allow for the stories to change in some way. we talked so much about netflix and binge watching. there are great examples and some of the shows on those platforms being successful because people can gobble them up all at once. that is being factored in to future productions aching place. it's definitely a big theme. >> when it comes to movie financing, things like kickstart or have made some impact. is it making a big impact in terms of how movies are funded or is that the exception?
>> i think we will have to see how some of these films do. there was a great example recently with veronica mars. it generated more than $3 million at the box office but we are waiting for other movies going through the process to come. everyone from spike lee to zach braff have shown excitement about going to kickstart her to raise money for films. but and you are in new york for the tribeca film festival. a big focus on technology there. >> tribeca a very much like to use the festival is a way to highlight new technology. they introduced innovation week with the president and ceo of of tribeca film festival.
good to see you during a busy week. there are some any storytellers have at their fingertips. what are they gravitating toward. >> you are seeing an adoption across a range of different platforms. we ran a contest over the past couple of months with a company called interlude. we made it open to the public, we ran it for a couple of months and we just brought the winners to new york. we had submissions from over 26 countries. i was on the way you had filmmakers across the world willing to adopt brand-new technology. >> you say you had 125 videos and that being submitted? >> we worked with lincoln motor company and when you give filmmakers only a few weeks and put this new technology out there, the fact they are able to adapt and the winners, none of them came to the united states. it's incredible to see this global surge of production and new technology. >> as far as the big names in the business, some seem
comfortable with hollywood lock -- blockbusters as they do with new ways of disturbing films. joss whedon is comfortable with big hollywood movies and is also comfortable making a film available for five dollars. >> he brought it to the festival, showed it saturday night and then announced on stage they would make it available for the first time on vimeo. it's totally disrupting the way films are distributed. >> we've spoken about new technology allowing filmmakers to allow for multiple endings. that meant going to the theater and seeing the movie "clue." does a get complicated for the filmmaker, do they want the shared experience?
>> we are in the early innings of figuring out how the audiences are going to adapt. we've got a great program we've been running where we profile these new forms of storytelling. many of which have some kind of film element to it. we have one called choose your own documentary that's like choose your own adventure that involves an interactive these. we are trying to figure out to some extent are there films were you just want to watch something passively or others to that just want to be more active in their viewing. >> if you are a filmmaker who is committed to the next generation, but there is a traditional way of getting paid if you are selling something that ends up on television or something that ends up in a movie theater, if the length is different or interaction is different and that is not something we would traditionally see on television or on the big screen, what does that mean for the business model and how these people end up getting paid? >> it's something that has not
taken root. it's really an area for exploration. i look at filmmakers like eddie burns who the filmmaker we've had a great relationship with. he was one of the first to go to itunes directly, the same way joss whedon is doing. he figured out you have to really lower the cost of the production of your going outside the system. these new forms of distribution do not support the major block busters. it's important to control your cost and investment and take some risks when it comes to the distribution of your film. >> we spoke to a well-known producer who said he wishes he was starting out now because there are a lot of places where you can make a small film and get it out there.
you've talked about it before come in netflix was a great place for independent filmmakers to go but netflix is very hollywood now. they're going after the biggest content and original shows. does that result in the independence getting pushed to the side? >> the example this week with vimeo is a good example. you would not have heard their name a few years ago. but the reality is there's a lot more discussion. we've worked with a company called maker studios and seeing what they do in terms of opening up short form storytelling, companies using the youtube ecosystem and using the video platform, that is partially a result of companies like netflix, amazon and others moving toward the established hollywood fare.
>> disney went out and acquired maker studios for a lot of money. what message does that send? >> it sends the message that everyone is very much looking for the new frontier and new voices. it's about aggregating audiences, upscale, ultimately they are a talent on youtube that has millions of followers and subscribers and are building these voices. we watched a program called tribeca now that's not just showcasing films, but is showcasing serial content and web-based shows. that's where we see a lot of great new storytellers coming from. >> have fun with the festival. >> thank you very much. emily, we will send it back to you. >> what if businesses could predict a cyber attack before
>> welcome back. i'm emily chang, and this is "bloomberg west." you can imagine if target had been able to predict the cyber attack that compromised millions of accounts. one san francisco startup is turning to data analytics and crowd-sourcing to identify cyber threats before they happen. they aggregate data about potential threat indicators from across the internet. i sat down with the ceo, greg martin, earlier today and he told me how the company enables sharing cyber-threat data to prevent future attacks. >> we are the first cyber-threat carrying platform that allows enterprises and governments to be able to share their cyber-threats and breakdown the organizational aerators, and allow them to do that in real-time by providing controls, anonymity, and the concept of trusted circles. that allows organizations to select which sectors or individuals to share with in
advance. >> but how does it work? >> i have a demo here. when you login to the platform, you have the ability -- maybe the ceo of tango amerco would get a spear phishing attack in his e-mail account and forward that to his security team. they would upload it to the platform and then select whether they wanted to do that public, private, or in a trusted circle. so i'm going to share with my high-tech trusted circle made up of j.p. morgan and citigroup among for example. once you upload that threat, it's going to automatically analyze it and share it with those organizations that belong in that trusted circle. >> we have talked about this issue at length. i sat down with mike rogers, chairman of the house
intelligence committee to talk about the benefits of information sharing. >> remember, the government is not on private sector networks. so they miss a lot of what the chinese are doing, the russians are doing, when they are trying to steal information, what the iranians are doing, robust sharing of only those threats can go a long way to help the private sector to protect itself. >> how receptive are companies to share information and get onto your software and take the steps needed to share it? >> what we are seeing in the market is after events like target most recently, the big cyber security compromise, organizations are starting to have that psychological shift where if they don't start sharing cyber threats with their peers, they are never going to get ahead of the cyber criminals. so we see more openness to sharing that started in the financial services sector and it's going to all organizations. mike skinner me an example of an
-- >> one of the most recent attacks you may have heard about is the heartbleed attack on the encryption that empowers most of the inner net. they can leverage threat stream off next to watch who is attacking in real time across an entire geo map. >> one about an example of where you guys actually detected something? >> we have many customers today who use our platform like facebook and they share cyber threats with each other. this is on a daily basis and they feed it back into the system like firewalls to block these attacks in real-time. >> now it's time for the bwest byte, were we focus on one number that tells a whole lot. john is in new york today with the bite. what you got?
>> i will take an apple bite. 37.47 million. that's the number of iphones apple sold, based on a dozen analysts polled by bloomberg. we are already switching the conversation to the next generation of iphones, but here you go. a number that could be higher than last year and an average selling price of $610 on average per phone. >> and the iphone is the most important product to apple. earnings coming up on wednesday we are probably going to be looking for any hint of what's to come as far as future products like a bigger phone. rex all of the buzz is around >> mall of the buzz is around going to or which would fall between the ipad mini and the