Transcripts For BLOOMBERG Bloomberg Technology 20240714

We speak to the cofounder of apple, Steve Wozniak. He discusses everything from trade to services to his strong concerns on privacy on facebook. To our top story federal officials charming former uber engineer Anthony Levandowski with stealing Driverless Technology from the waymo unit. This is one of the most intriguing recent legal battles in Silicon Valley and a top priority for the fbi. Tolerate thell not theft of trade secrets. Let me be clear these are the crown jewels of companies. Taylor joining me to discuss is bloombergs eric newcomer. What a long saga it has been. What have we learned today . Eric this was a total surprise. Uber and google settled this and while ago. There had been a private arbitration. But the idea that there would be criminal charges is something i think people had largely given up on. It has just taken so much time. This is a big deal for Silicon Valley. Taylor talk to me about the difference between the two trials. They settled one, arbitration. But this seems to be a criminal probe. What does that tell you . Eric stealing trade secrets involves theft. It is not just about the harm to google, this is about fundamental laws and whether you can take things from your employer and use them for your own or someone elses benefit. That is what the case is about. Taylor one headline that caught my eye is that they said that the case is ongoing, which led me to think there could be more people at risk. Who else do we think might be involved . Eric there are not a lot of details in the indictment. There are a lot of details in the civil cases, so we will be interesting to see what they found. Obvious question is that Travis Kalanick sort of recruited personally Anthony Levandowski to come to uber. The question, is there anything untoward about what they agreed upon or talked about . Kalanick would be the higherlevel person here. Other than that, levandowski has been the central figure here. There is no reason to believe kalanick is under investigation, but he was a central character in the civil litigation. Taylor remind me what is at stake. Who are these characters . For people who havent been following this, what are we really looking at . Eric Anthony Levandowski is a key figure in selfdriving car research. He was after Googles Waymo for a couple years, and basically became in patient impatient they werent making enough progress. He created his own startup, went to uber, a huge blow up. He went on to keep working with self driving cars. He has gone so far as to claim that he is working on a religion around artificial intelligence. This is a true believer in the most ridiculous sums of selfdriving cars who is ridiculous sense of selfdriving cars who is at the center of this. Taylor any other big deadline we expect . Eric we are hoping to get much more information about the case and what is different from last time. Taylor wonderful. Thank you for joining me. Another big story, it is all also Global Tobacco giants Phillip Morris and altria. They are in talks to reunite after splitting up more than a decade ago. The deal could have big implications for San Francisco ichig start of juul, wh altria has a stake in, and it could have implications for the global industry. Joining me to discuss is bloombergs intelligence senior tobacco analyst. And from washington, Bloomberg News Health Regulation reporter. Let me quickly start with you. Altria we know is a pretty attractive target for Phillip Morris, in part because of juul. Is that part of what was driving this merger . It is certainly one of the big factors. I think there are three pants. Three paths. One is u. S. Smokers who could convert to their platform, it could be juul, and it could be the cannabis opportunity, likely all three are what is driving this potential recombination. Taylor from your side of things over in washington, what is the regulatory pressure as you saw this news break . Is this deal likely to go through . Anna the first thing i thought of was that the fda they were pretty friendly to regulation of ecigarettes for a while. When altria took a stake in juul, things started to change a little bit. Certainly there was concern with children and teens vaping. Once altria took a stake, the concern grew because of the big tobacco interests and some of the comparisons. I first thought that there was a possibility that the fda thought could decide they might want to come down even harder than they had been considering. Anna i want some ofi want to hit on the comparisons in the market. We know that Philip Morris has a stake in a heat, not burn. How does that compare to altrias stake in juul . What is your take in terms of the overlap and the future growth of both of these markets . Ken those are good questions. Altria stake in juul, they paid about when it comes to the heat 12. 8 billion. Not burn product, it is the exclusive market distributor in the u. S. A lot of people have been wondering what is the commonality . They are both vapor noncombustible products. That said, they do target separate niches. Juul tends to be a younger adult, some even minors unfortunately, as the fda would point out. The other product, because it uses finely ground tobacco as opposed to flavored liquid nicotine, it targets an older looks toic who really the oldfashioned tobacco, almost like a pipe experience, as opposed to a nicotine hit. I think that is the key difference between those two products. Taylor i think broadly speaking, talk to me about Regulatory Environment as it comes to how people think about ecigs. I have heard on one hand that it is a gateway drug. Others are wondering if the fda thinks it is more of a replacement. Does that debate have a place as we look at Philip Morris and altria, some of the regulatory pressure that you see . Anna i think it does have a place in this debate. There has been this balancing act that the government has been trying to keep up with. Maybe these ecigarettes can help smokers quit. At the same time, they are seeing teens use them more and more. Which they dont want, because the centers for Disease Control and prevention has said that nicotine can have harmful effects on a developing brain. Next year, there will be a deadline in may where these Companies Like juul will have to submit applications to the fda to get approval for their product. They have a really big milestone coming up that they will have to meet. Taylor wonderful analysis. Thank you. Bloomberg News Reporter anna edney and Bloomberg Intelligence analyst ken shea. Coming up, we sit down with a Silicon Valley legend. Steve wozniak shares his thoughts on the trade war, facebook, and of course the company he cofounded, apple. That is next. If you like Bloomberg News, check us out on the radio, the bloomberg app, bloomberg. Com, and in the u. S. On sirius xm. This is bloomberg. Taylor we are getting some late news on tuesday. Peloton has filed for its ipo. The company will seek a mastec listing under the nasdaq listing. The bank it filed with various banks including Goldman Sachs and jp morgan. The Company Posted a 2019 revenue of 915 million, looking at a net loss of around 196 million. The loss is an increase from roughly 48 million in 2018. Companies are hereby ordered to start getting out of china. That is what President Trump tweeted on friday after china retaliated to his escalation of the trade war. Regardless of whether the president can actually force companies out of china, his trade war has highlighted just how important that country is to many tech Companies Like apple. We iphone maker has been the iphone maker has been a gauge of timent and i welcome one of the iconic inventors from Silicon Valley, the man who cofounded apple over 40 years ago, that would be Steve Wozniak. That introduction barely does you justice, but for the sake of time, we will leave it there. It is great to have you. When you think about where we are in terms of trade, tariffs, tweets, given your multi decades of experience, how do tensions in trade feel now compared to previous years . Steve my experience is not in political areas or economics or finance. It is in engineering. I have opinions. Two different people might come to different conclusions. Our tariffs are a good idea, bad idea. Both people would go down a line of thinking that is logical and connected. That just means all parties are good no matter which side they believe on the cusp we dont have a mathematics that prove one thing is better than the other. We just have opinions. I myself will fall into the camp that i dont want many tariffs, i dont want subsidies very much. I want the free market to rule. It comes from my own background. My background was very compatible, growing up in Silicon Valley, where more than half the people speak nonenglish. We accept all types of people, work with them. I am more into cooperation for the competition. I put on a huge festival and sold a million tickets in 1982. We put out a whole policy, programs in schools in all 50 states, things like john nash, who the movie Beautiful Mind was about, and he wrote papers about cooperation can lead to better results than competition. I am into working with others. What is our country called . The United States of america. And states meant countries. We were going to have 13, now 50 little countries, each with their own rule of laws. Differences in culture, for example slavery in some and not in others that is how the constitution was made. I dont care. If wood is manufactured more efficiently in oregon, i will buy my wood from oregon. We never think there is anything bad about that. Why do we establish borders for countries . Politicians just want their domain to be important. I am more of a sharing, be open in business and to the world, try to find ways to cooperate and Reach Agreement that way. It is going to have an advantage in balance of trade. Taylor you mentioned competition. And Reach Agreement that way. That word has come up two or three times. That leads me to wonder if competition is more fierce this time around or that is driving some of the tensions. Are you worried about competition from a samsung, huawei, perhaps encroaching on apple and some of the big market shares . Steve i have thought about that and the ways it can influence apple negatively, but i dont say that there is one logical rule that comes to one answer for all. I just happen to be more against competition. We are taught from the time we go to school, my school, right or wrong, my team right or wrong. It works her way up to your way up to my country, right or wrong. I am more into thinking. Also, why do you have to be, i am going to hurt you, throw my balance of force against you. That doesnt make friends. We should try to be friends with all the countries of the world that are important. China is one of them. As far as how it could influence apple, a lot of people know a lot of the tech products, the manufacturing shifted very much to china, the shenzhen region. A lot of in the world. So what . Not let us make products for a lower cost and people who buys the iphone pays less. Why do we have to say, oh my god, the balance of trade is going in their direction . That is very common, especially levelmpanies at chinas and being a major force in the world economy. Look where they come from. Taylor you talk about all being friends and we know tim cook has had direct dialogue with the president. If you are still involved with apple, or tim cook for that example, what sort of conversations would you be having with the president . Steve i probably wouldnt because with this president , i dont think it would be productive. I would never raise a child to be like that, i am number one in the world, i am always right. I am not that way and i would not raise somebody. I would just ignore it. I wouldnt say anything bad about the president , i would not be nasty to him. I dont think you can direct him. I think tim cook though, being a very important Economic Force in the United States, i think tim cook actually gets the president s ear a little bit and can warn him, this might be bad. If we suffered in a balance of trade with more expensive products, none might weaken the balance of trade. That is an important thing to think about. That would be scary if we lost sales just because of that. Taylor Steve Wozniak, you will be sticking with me because when we come back, we will take a look at the transformation of the company you cofounded, apple. That is next. This is bloomberg. Taylor an update to a story we discussed earlier. Former uber engineer Anthony Levandowski has pleaded not guilty to charges of stealing driverless Vehicle Technology from alphabets waymo unit. The indictment adds a new criminal chapter to the saga surrounding waymos civil claim. The imac, the iphone adjustment the products that became household names thanks to apple. But are things changing as apple shifts more money into the Services Sector like credit cards and apple tv plus . Analyst dan eyes ives sure things to think so. Dan we think this is key to the business and we think the key is 100 million more consumers in the next three to four years. That is the golden goose for cook and others. Right now, in the services, that is key to the growth. Taylor who better to ask about apple than the man who cofounded it, Steve Wozniak . What is your take on how apple has transitioned from a Hardware Company into now more services . Steve i am proud of apple as a company because we have been able to transition. We started out as the name apple computer. When we moved into products that were more personal in nature like ipods and iphones, we dropped the computer from our name. Being flexible and able to shift with the different domains of the market is very important for a modern ongoing company. Moving into services, if that is where a lot of the business is. Apple is a huge company. So apple can only move in directions that will be very large in dollar volume potentially. We have looked into other products like watches. That is about my favorite piece of technology in the world. When apple pay came along, apple took a lot of steps leading the industry. Then allke touch id, of the other smartphones had to copy it. We took the touch id and moved it into apple pay. Protects your identity and credit card purchases everywhere. It is also so unbelievably easy, especially if you have a watch. That is important. Making life easy is what we were known for in computers. These were computers that you did not have to be an expert to use. Now, apple pay, the upper credit apple credit card is even more secure. The looks of it fits apples branding. Apples branding is to have a lot of secrecy about what they are doing, but also styling and beauty. This is the most beautiful card i have had in my life. I dont judge beauty not much. But it is. It doesnt even have a number written on the card. There is no camera that can peak at you and somewhat see what your credit card number is. There is no way people in a retail store ever get your credit card number. It continues that thing of protecting your privacy everywhere you go. What you go and where you buy it shouldnt be tracked that closely in my mind. I dont want it to. Oh, we see that you bought a milkshake two hours ago. I dont want someone coming up to me and saying that. Taylor you are giving us free advertising because you keep flashing your iwatch around. If i heard you correctly, you said it was one of your favorite piece of technology. The iwatch, when it came out, lets call it mediocre. Since then, he has really grown. Is apple doing the right thing with the apple watch in incorporating the Health Services . Steve i am not a biggie in Health Services, but yes. Everywhere i go, people are using it for Health Services and information. The apple watch makes it so comfortable for me. I can walk my dogs and not having to carry a phone, not having to use a phone even. We have the iwatch on cellular, i can text my wife, walking the dog. Apple pay is the best. I put my movie tickets on the watch, my boarding passes for flights on the watch. I do email and get notifications all the time. Hotelrom my computer in a or at home. My computer to keep up with email and news around the world, and i pretty much skip the phone. I do not want to be like an addict. Make jobs and i wanted to blind and cited people more equal. Everywhere you go, look on the sidewalk or in front of you in the street, there are people walking along and not seeing anything except their phone. I dont want to be in that addictive type area. I pretty much skip the phone for most things, except for occasionally checking in. Taylor quickly, with 200 billion of cash on the balance sheet, what should apple do with it . Steve i never even think about that. I do not want to think about money, large amounts of, where to put it. Apple has been doing a very fine job. Apple makes a certain amount of money, profit return on investment. You have to look for investments that will keep that return level high. That is what the apple brand is partly based on. Businessman that know a lot more about business than i do are inside apple. Taylor when we come back, we will hear more from Steve Wozniak about the question of whether or not big tech has gotten too big. That is next. This is bloomberg. From the 5am wakers, to the 6am sleepers. Everyone uses their phone differently and in different places. Thats why Xfinity Mobile created a Wireless Network that auto connects you to millions of secure wifi hot spots. And the best lte everywhere else. Xfinity mobile is a different kind of Wireless Network designed to save you money. Save up to 400 a year on your wireless bill. Plus get 250 back when you buy an eligible phone. Click, call or visit a store today. Taylor this is bloomberg technology. While the u. S. President ial election is still more than a year away, one topic that will not go away, big tech and antitrust regulators. On monday, democrat joel democratic president ial candidate Bernie Sanders weighed in in his oped in the columbia journalism review, saying when it comes to Silicon Valley, i will appoint an attorney general as well as federal trade commission official who more stringently enforces antitrust laws against tech giants like facebook and google to prevent them from using their enormous market power to cannibalize news organizations. Their monopoly harms small and independent news outlets that do not have the corporate infrastructure to fight back. Still with me is apple cofounder Steve Wozniak. What is your take on antitrust . Is big tech too big . Steve i am one of the founders i am againstso monopoly powers being used, not opening up the world to equal competition, using power in unfair ways. I think that happens a lot in and that happens with a lot of things. People love technology, aspects of it, but then they always find other things to grieve about. I am forced into this mode and i no control over it. There is an awful lot. A company that has a strong presence in one market, using that presence to grow another market is sort of unfair. The example i used long ago was, if you owned all the gas stations and then you said we are converting the nozzles of all of our gas stations and they will only work with the new cars we are coming out with, that would just be unfair. That would be using your power in one market to subsume another, and we see this all over the place. Just apps that come standard with products like phones do that to some extent. Im in favor of looking to splitting up companies. I wish apple on its own had split up a long time ago and spun off independent divisions in faraway places and let them think independently the way hewlettpackard did. But thats my opinion. Its not like there is one set of facts that makes it right. Other people can come to other conclusions, but i think big tech has gotten too big. It is too powerful of a force in our life, and it has taken our choices away. Taylor what is your prescription to break up big tech . Selling off pieces of apple or facebook . What would be your prescription . Steve i think apple is the best of the companies, for different reasons, making money from good products. I think a lot of other companies, like google and facebook, should allow competition. For example, facebook. Give me a choice to pay for almost no tracking and explain to me, if i let a friend who is not really a good friend, they might get some of my data that i didnt want them to, but i made a mistake. Or force them to have an ability to easily export a file that you can export into a new book and that would bring along all your friends as well as your timeline and your other data. You can tell all of your friends, come on over to new book and we are in the same friends group. That would enforce competition. Competition forces a company to make good products and be the best at it and not just saying weve got you trapped. Big data the biggest concern here and is that what worries you the most . Steve the data that is accumulated on people . Yes, it does worry me. I wouldnt say the most. A lot of things worry me about big tech, but in cases of data about you personally, that is only one factor. To some people, it doesnt matter, and to others it does. What matters is honesty. Honesty is at the peak. If you think youre getting one level of protection of your security and your safety and knowledge about you, you should be getting that level. If you send mail to somebody and say a few Little Things my favorite color is green to my wife, that should be kind of private. It is kind of like whispering in your ear. No one else should have access and heard it. Wheret alexa and siri human beings listen to data that is recorded. That is beyond what you think is going on. You think you have a level of privacy. You should have it. I am always preferring the consumer over the producer. Taylor when we transition to talk about cryptocurrency, is that the future, or all hype . Bitcointocurrency is an amazing example. It has not been hacked or messed up the software it has really lasted and done its job for a decade or whatever. You never heard of any technology that had code that was that secure. Bitcoin is gold. But then a whole ton of other people. 200 other companies that had their own voice and want to be currency. I dont believe that, i dont want to look at bitcoin prices and invest in it. However, im getting involved in a couple of startups based on blockchain, which is a technology that makes things like bitcoin work. Our technology will have tokens which are not the equivalent of cash. The tokens are representative of ongoing, Efficient Companies that are very profitable now. Im very conservative economically and financially. Im only getting involved in these to basically have another financing arm for companies that are already very profitable and making money. Taylor so talk to me about facebooks libra. Do you see that as a competitor if you are having money invested in other cryptocurrencies or Blockchain Technology . What is your take on libra . Steve no competitor at all. What i am talking about is where cyber tokens are just like shares of stock in a company that is ongoing and making money. Libra, i dont know. I dont even know the principle behind it, but im sure it comes into that category of antitrust. You have so many clients using your product, all of a sudden we will get them into our cryptocurrency and challenge bitcoin. I dont know. The whole department should be done independently with competition. Lets see how that goes. Im not really against it, but im against any bad uses, implementations, not giving your users choice or knowledge. At least be transparent. Transparency is the best thing you can have. Taylor you were honest enough to come and talk about some of ventures, the caveat that that is not why you are here but because you gave us the teaser, talk to us about some of the new adventures. What can we expect from you in the coming months and years ahead . Steve i do a lot of public speaking around the world, but right now i have about four startups going on. I like startups. Young companies with an idea trying to make something out of it, much more than the big huge Tech Companies. Silicon valley comiccon, another is waz u. It is a university for technical education. Im about to have my name attached to such a thing. I have wanted that for a long time. A couple of these are blockchain. There are countries like malta that desperately want to become known for wellregulated and very open but usable blockchain companies. We are choosing malta for one. Gibraltar works in exchange for another company. Im not here to promote myself or to promote them, but i have a busy life still. Taylor this was wonderful, its our pleasure. Steve wozniak, thank you so much for joining me today. As i said, being the cofounder of apple barely begins to describe your experience. Appreciate it. Steve honored to be here. Taylor u. S. Stocks closed amid uncertainty over china trade talks. We will discuss which Tech Companies have been impacted the most by the dispute. That is next. This is bloomberg. Taylor hp shares are up in afterhours trading after the company gave a profit forecast that topped wall street estimates. They reported thirdquarter earnings expectations, while missed estimates. Hp raised Employee Earnings and guiding progress in its effort to cut cost and reshape its business to highmargin products. U. S. Stocks slipped again tuesday as investors digested the most recent twist in the ongoing u. S. China trade talks. The s p 500 fell for the third time in four sessions after chinese officials question President Trumps comments about trade discussions between the two countries. This is the day after trump said beijing very badly wanted to make a deal. Tech and chip stocks have been among those hardest hit throughout these trade tensions. Joining me to discuss is art hogan is here, and the palatine news seeking to file its ipo, as we talk about some of these unicorns. You see some revenue growth, but you continue to see losses on the bottom line. Are you nervous at all about that . We look at some of these companies that come out and wonder if they stay private too long. So some of that amazing growth, that early growth was not captured by the initial public investor. The other piece of the puzzle is yes, amazon was able to go for a long time with growing revenue and never really showing earnings, but i think that timeframe is behind us. I think investors have proven, lyft, there should be some point in the future where this flexes to cash flow positive. Then just how much growth in revenue are going to pay a multiple for. Taylor what concerns me as we are digging through the filing, we expect to incur operating losses in the future and may not achieve or maintain profitability in the future. What is the path to profitability . Are we overvaluing some of these companies, given that they frankly, cannot make money . Art not sure where rideshare goes to get profitable at some point in time, and i think uber has some plans to do a lot of other things logistically. With palatine, the question you have to ask is threefold. There is a real cult following around that stock and that in and of itself, that lifestyle. It also feels like there is a creative mode around it so people are involved in the palatine experience are involved for a lot of reasons, not just exercise. But at the end of the day, how much scale do they have to grow to to get enough of the market to turn a profit, and should they stay private longer until they can have some window into what makes them a Profitable Company . Taylor what companies as you digest the landscape should you be or not be targeting as you take a look at what companies can or cannot do well within the midst of the trade fight . Art semiconductors are front and center on this battle. When you look at Philadelphia Semiconductor index, you can point to the inflections and trade tensions. The peak to trough in may when things fell apart, the Semiconductor Index went down 18 and the Broader Market went down about 9 . Youre seeing a doubling of the volatility in semiconductors and theres a lot of reasons for that. They are indexed to china toys. They have parts manufactured in china. China is the in market for them. When we look at the Semiconductor Index we say, why would you step in the middle of this fray with a blunt instrument that is at the tip of this fight when you could step back and have other exposure to technology . When i think software as a service, it is much safer. If you look at the index, much less less volatility. It is a much more consistent revenue flow. You dont have the comings and goings. It is a safer way to be exposed to technology. Taylor is it as simple as sell qualcomm, buy salesforce . Or is there more idiosyncratic analysis that needs to go on . Art you could pick a multitude of which of those companies or you can buy and sell both of those indexes and do an overlay. While we are in the heat of this, it doesnt appear that we are close to the end of the u. S. China trade war. I would avoid the semis at all cost. If you have to have some technology exposure, think about companies that dont have that index into china. Think about companies that dont taylor we just spoke with Steve Wozniak. Talk to me. He talked a lot about big tech, frankly, we need to break up big tech, particularly facebook. Do you agree . Art whether i agree or not, its going to be an issue through the election cycle and probably afterwards. If only for the fact that that had enough opportunity to get things right in terms of keeping our data safe. That is a huge part of the problem. This is a bipartisan argument going on right now that perhaps not only have they gotten too large, but also they are not doing a very good job of keeping us safe. We continually hear this. Facebook will be looked at by the regulators. They are not alone. It is all of social media. Youre not going to pick facebook out and say they are the bad actors. It is the whole group. It is keeping our data safe. Unfortunately their product is us. If they can keep us safe and operate in an environment where they are able to stick to that, they will be under pressure. Taylor talk to me about some of the old companies, apple, microsoft, transitioning from hardware into cloud services. Art they have done an amazing job. Cisco used to be 3 . It is in the teens now and they did that in a function of 12 calendar months. It is an amazing transition. You are seeing the same things reflected in microsoft. What a fantastic job they have shifted to the client. Apple is looked at as a services company, not a Hardware Company anymore. You have to take a different look at these companies today than you did a year ago. Taylor so much energy about the tech sector. That was great. Thank you so much, art hogan. Thanks for joining me. Still ahead, we look at chinas booming music industry. One name has become a hit, but is chinas regulator a fan . This is bloomberg. Taylor now to a story we brought to you earlier this hour. Interactive Cycling Company palatine has filed for an ipo. It is the latest in a string of Tech Companies who have made moves to join the Public Market this year. Joining me to discuss from new york, as we give you a cool 13 minutes to brief through this, give us your first take. What do you make of this . Investors are waiting to see what the numbers would look like. We have seen about 6 billion raised by Tech Companies this year. A lot of those companies are up, but then you have uber and lyft and performances for those sorts of companies have not been that good. As expected, palatines numbers show that this company is obviously not profitable, but the revenue is growing very fast. Their revenue in the last couple years was up 100 year on year. Year werelosses last 195. 6 million. Taylor and you say thats up from the year before. So losses are growing and interestingly enough in the statement, they say we expect to incur operating losses in the future and may not achieve or maintain profitability in the future. As you look at peloton and some of the other deals you cover, what is concerning, the fact that they are saying that may not be profitable . They are all saying that. Investors have to figure out if that is worth buying into anyway, because these are highgrowth companies. They are choosing not to be profitable for now. They are pulling in revenues and once they get to a certain level, they can probably start to make some profits, but as you say, its concerning when a company says please buy our shares, but we may never be profitable. Theyre obviously not going to be giving a dividend, either. Taylor any idea what this means for the banks . They have looked at offering a size upwards of 500 million, but that could just be a placeholder. Jp morgan, barclays, some big names involved. What did the fees look like . Nabila the 500 moving dollars is just a placeholder, as you say. The companies will be valued at probably around 8 billion. We will find out in the coming weeks how much they will actually look to raise from this. Taylor thank you for joining me. Another big story, Tencent Music is under investigation by chinas antitrust authority, according to sources who say the probe could end exclusive licensing deals the company has been working with some of the Biggest Record labels. How did Tencent Music become so dominant . Joining me is lucas shaw who covers all things streaming. How concerned is Tencent Music today . Lucas i would say the concern is moderate. On one hand, its never good to have regulators looking at you did tencent is in a pretty dominant situation across the media landscape in china, and in particular in music. Tencent Music Services account from anywhere from 50 75 of the streaming market in china. This investigation, the outcome would likely result in them not striking an exclusive deal. The music market in china works differently than most arts of the world. Here, the big record labels license to spotify, pandora, apple. A lot of those services dont operate in china. Instead what they do is sell tencent the exclusive rights and then tencent sublicenses it to other companies, all of whom say tencent is paying too much and makes them all suffer for some bad deals that it made. Taylor what has tencent said in response . Lucas so far, they have said very little. I think theyre waiting to see how it plays out. This investigation started earlier this year in january or february. A lot of the people we spoke with said there is an outreach to Competitive Services and their partners march and april. There may be some outcome later this year. My guess is that tencent will try to keep a low profile until they figure out what this will mean for them in the long term. Taylor any idea what the music labels who are involved, what is their impact . Lucas they have a lot on the line, because china is a market that many years ago was a nonfactor for them. There was too much piracy. It has grown a lot in recent years. For that to keep growing, they need deals with all these services, and they will have to renew their deals with tencent or make deals with rivals sometime in the next 12 months. Taylor how good is it for competitors . We have a list alibaba, baidu. How thrilled are they . Lucas Companies Like these one said to be the real challenger to tencent in china they would be happy if instead of having to sublicense from tencent, which means they might not get all the songs they want at a given time, they could just make direct deals with record labels. I was based in hong kong for a few months last year and executives were clear they hated the exclusive structure, because it gave tencent an advantage. Most Music Companies that did not go the exclusive route, they said they tended to benefit when they may deals with everybody because they had more transparency in their data. The downside of the exclusive deals with tencent is that tencent has a lot of control over what happens with that music in a country where western music still only accounts for 10 15 of all listening. Taylor how much does Tencent Music mean to Tencent Holdings . Lucas its a big deal, but at the moment, Tencent Music is a 25 billion company, and tencent is depending on 300 billion to dollars 500 billion. Social apps are still booming for tencent. Music helps feed into that. Wechat is a super app where they want you to come in there and chat and watch video and music. Tencent has staked out a leading position in the areas of streaming video and music to make sure people never leave we chat. If it loses its dominance in those other media areas, the strength of we chat on its users is weaker. Taylor that was lucas shaw in los angeles. That does it for this edition of bloomberg technology. Bloomberg technology is livestreaming on twitter. Check us out technology. Be sure to follow our global breaking news network at tictoc on twitter. This is bloomberg. From the couldnt be prouders to the wait did we just winners. Everyone uses their phone differently. Thats why Xfinity Mobile lets you design your own data. Now you can share it between lines. Mix with unlimited, and switch it up at anytime so you only pay for what you need. Its a different kind of Wireless Network designed to save you money. Save up to 400 a year on your wireless bill. Plus get 250 back when you buy a new samsung note. Click, call or visit a store today. The following is a paid program. The opinions and views expressed do not reflect those of bloomberg lp, its affiliates, or its employees. Announcer 1 up next, how would you like to get the celebrity secret for ageless skin . 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