We dig into the details. Digital currency regulation. Weighing in on whether Central Banks should be issuing their own guidelines on cryptocurrency. First out of story. Netflix reported earnings on wednesday. International growth eased investor worries. The streaming giant topped earningspershare projections. It new subscribers fell short of estimates. For more, i want to bring in our analyst in los angeles. Is it really the new subscribers overseas that are allaying concerns . Investors were clearly worried that netflix would have another bad quarter. They added a few million ittomers your than an spect investors expected another bad one. One i spoke to said that sentiment was awful. Yet they come in right around expectations. They nest in the u. S. But they were above internationally and that is where they have been telling people for years their future is. Its a sign of where netflix is going. They will have one of their worst years in the u. S. This year but one of their best internationally. In a sign of confidence, netflix is going to start breaking out its subscribers by region which suggests they now feel confident enough in the numbers to talk about it which they have not previously. Talk to me about the domestic number. Reversing a decline is it enough . I dont know. I dont know how concerned people are. Netflix has cleared the 60 million threshold. They have historically been adding about 5 million per year. They say its because of a price hike and maybe next year they are up to 3 million or 4 million. They will be facing a lot more competition from disney, apple and at t and comcast. I think we are setting into something of a new reality for netflix in the u. S. Where after years of growing maybe it adds three or 4 million per year instead of 5 million per year. I think thats ok because they will get to 70 million or 80 million in the u. S. And thats ok because they are growing around the u. S. The revenue per customer is up and the margin on those customers is up because the price increases have worked without costing them too much. Thank you. Netflix analysis, i want to turn over to our e marketer analysis analysts. What is your biggest take away from todays report . Ultimately subscriber growth is slowing in the u. S. They missed slightly on previous guidance and this is after a negative q2. Ist this means going into q4 that they are not growing as much as they have in the past. That is partially because half of all households in the u. S. Subscribe to netflix at the moment. This is concerning for them moving into the new reality of competition with disney, at t, apple. Like those companies provided a lot of content for netflix. They were partners and a lot of ways. Now they are turning to competitors. This is a difficult problem for netflix to solve. All we heard from the company is that next quarter will bring some modest headwinds to the company even the competition. How much can they withstand . In the Fourth Quarter you have things like apple tv plus, disney, how strong is that competition . There is a lot of excitement around disney in particular. As otherpple as well competitors are very strong. I dont necessarily have to turn a profit. Apple is really using their service to sell more iphones. Disney is using their service to at eople in to their entertainment ecosystem. What this means for netflix is they have to be more careful on price moving forward. Outexample, apple is giving there apple tv plus service for free with the new device purchase. What this means is that netflix is going to have to be more careful moving forward raising prices. Especially if they want to keep their current subscribers. Although the price hikes are trying to offset the negative cash flow, this is the story we know about the economy. Negative freesic cash flow that we see from the company that Current Quarter has yet to be pulled into that. Its a negative number thats pretty much all we need to know. What are you hearing from the company about potentially flatlining to eventually a positive Free Cash Flow scenario . They raise prices to improve profitability as well as cash flow. Subscriber is the base of their business. When we Start Talking about profitability, it all starts at this is forever. If they lose subscribers, that is going to be difficult for them moving forward. I dont think he will lose but its going to be difficult for them to grow moving forward. You mentioned Companies Like disney, theres a lot of hype around it. What company in your opinion has the best Balance Sheet to take on a company like netflix that is spending 18 billion per year . Who here is in the best position to take on the original which was netflix . X apple and disney are positioned very well in the space. They have lots of money to spend and they are both serious. Disney views disney plus as the future of the company as a whole. Iphones are very profitable. If they can create a service that helps them sell more iphones that will be huge for them moving forward. Netflix is still spending a lot of money to keep up and notably they are not increasing their content spend so thats a good sign for them in the future. Thank you for the dig down into netflix earnings. On also reported earnings wednesday. The reported revenue that missed the lowest analyst estimates falling nearly 4 in the fifth. Of declines. Revenue was 18 billion. In july, they completed the purchase of red hat for 34 billion. Analysts had looked for signs of that megadeal. Shares were lower in afterhours trading. Company,argest tech huawei, reported a revenue jumped in 2019. They also reported Global Smartphone shipments for 26 in the first three quarters. The Company Expects u. S. Export restrictions to reduce annual revenue at its Consumer Devices business by 10 billion. Coming up, tossing out a lifeline. A 5 billion package for we work. We have the details next. This is bloomberg. The funds are coming directly from softbank rather than. Ets get more details what we know so far . Its one of two plans that are the subject of a lot of discussions this week. Keep this Company Going when we work is set to run out of money as soon as next month. As you mentioned, there is a new deal for a potential proposal to invest something around 5 billion in the company. Do we know if this is in lieu of the jpmorgan deal or instead of . If these are both on the table, thats pretty different. One of the major decisions that the board will have to deal with this week and into next depending on how long it takes them to make this decision is which one is better for the company . Which one will provide them a better path forward . The jpm deal is around the same amount of money. Its in a somewhat complicated debt package. , due to getstock control of the company . They do not. They do not get majority control. Longer ceo, heno board member. He still owns a lot of stock. Board member. He still owns a lot of stock. In a transition like this, the ownership could change. He could be looking to get nonvoting shares or some combination of different shares. It they will be taking on more of a stake in the company. Control not necessarily guaranteed. What would be the new tiger valuation . Lower than the high water line that came up earlier this year. It seems like the ranges are all over the place but it could be as low as under 20 or maybe under 10. We talked about the reputation of softbank by putting up this money. What that says about the whole deal that all fell through. What is this downside for softbank in this . It could really be seen as good money chasing bad. Morehave already invested than 10 billion in this company. They are obviously attached to what comes out of we work. Then likees it softbank we work becomes a softbank company. They could maybe install a new ceo to replace these coceos from we work. Very responsible and the narratives suggest that softbank becomes responsible for whether we work makes it out. Feeling we will have you back a few more times this week. I want to switch to bank earnings. Shares rallied after better than earnings better than expected earnings per share. Here to tell me more about bank of america and this Digital Banking status is our analyst in new york. What do we know about Digital Initiatives from bank of america . Something interesting about these banks is that they are under a lot of pressure to rake in more money at a time where Interest Rates are low end only getting lower right now. Take america is highly exposed to that. Its hard to figure out how to bring in more money when the biggest driver is under pressure. Their expenses are flat. You see a race to spend more money especially in Digital Initiatives which end up being 3 billion quarterly at a time when their main driver of revenue is under pressure. Peertopeer payments when you look at their numbers, dell is the most compelling chart. The transactions are double what they were a year ago. 9 million,e users of if you counted by the number of users or transactions people are using it more. Does that mean that adoption is taking off significantly . Its a weird thing because you have bank of america and jpmorgan investing in digital branches at the same time they are investing in technology. You can see them hustling to try to get consumers in two ways. You mentioned jpmorgan. It jamie dimon came out and said fintech is going to try to eat your lunch. Keep on our toes to compete. Have they done enough to take on the competition that is in tech . You can see them wanting to pour billions of dollars into technology to compete here. You have to wonder when jamie dimon says fintech, we see volumes going into the same Tech Community but is he telling talking about the same upstarts or apple and amazon that poses a threat to the Banking Community in terms of whether they get into more financial projects products or whether they still more from the Banking Industry . Facebook has said they are willing to hire hundreds of engineers in new york and poaching from the Financial Community is not a rare thing for them to do. Within the disciplined expense management, we take a look at the right hand side of the income statement. Any sense of what percent of Income Expenses hiring those coders . Let me give you an example. One quarter noninterest expense for bank of america is dean billion dollars. If you take 3 billion, a little bit more than a quarter of the 12 they spend every year, you have 1 5 of noninterest expense. Its a Big Technology spend. Bank of america is leading the pack here. They have the consumer arms they could use more Digital Banking services which tends to be a leader in terms of all technology that big banks use. Thank you for joining. Likeg up, big tech names uber and lyft going public, we speak to a ceo who knows a thing or two about ipos. This is bloomberg. Pinterest shares fluttered on wednesday after a large block of shares was said to change hands overnight. Analysts are saying the deal probably doesnt reflect negative sentiment around the stock ahead of earnings this month. Sources say Goldman Sachs is managing the 4. 68 million share block trade on behalf of an unknown holder. Ass came on the same day selling restrictions lifted. While pinterest is a newly public company, a bunch of private ones are trying to make the leap. One such company is snowflake. It sells a cloudbased Data Warehouse service that helps organizations such as netflix store and analyze information. 4is valued at under billion. Joining me is the ceo of snowflake. Great to have you here. Let me start with some of the hot ipos that havent gone so well. Companies like palatine where peloton. Palatine personally very honda of doery fond of peloton. They have a viable business . Whether the company can really sustain itself over the long haul. I dont have anything specifically but those of the parameters i would watch for any company that is going public. You want to be able to blast through the first four quarters of being public and have a good showing that way. Yield does the ipo market to you . Is it healthy because companies are getting shaken up if they are profitable or is it to volatile . X i think its profitable. It felt to me too euphoric for it. Too euphoric for some time. Its helping to examine companies so that when they come to market, there can be confidence that they have real velocity and momentum and they are viable and they have been properly vetted. Theres nothing worse than companies coming to market falling apart after an ipo. Thats not good for anyone. How has the environment affected snowflakes plans to go public . It hasnt affected it at all. Were focused on running the business and preparing the company to go public. We will find our window. Comes, we will pull that trigger. The ipo is a milestone but life continues on right after. Would you prefer direct list or an ipo . Really isect listing an obvious choice when you dont need to raise money. If you do need to raise money, then the choice between an ipo and a direct listing is not as obvious. There are a lot of odd tickets advocates these years. I dont find it that obvious. One of the great things about the ipo process is a real price discovery process where Price Basement is really hard to know whether you are pricing the company at a market value. We have seen some glaring examples where people by overpriced or underpriced basements and the experience we have over ipos is that we are pretty good at discovering that price then having companies go public in an orderly manner. I want to talk about the fundamentals of your business. You compete with amazon very well. What are you doing right . We are very focused on what we do. With amazon. Rtners we liked working with them. Of course, we compete with them as well. Were absolute specialist in what we do. Amazon has many other products. Its not always easy to compete with somebody who is very determined on succeeding in its core business and thats what we are. Talk to me about the new customers that you are getting. Are these new customers or are you cannibalizing them from another company . The way it is in business, you are always taking someone elses money. Legacymes, we replace a system. People who want to go to the cloud or to have the utility model be elasticity to perform under scale. All of those good things. They always come from somewhere. There are projects where there was nothing before. By and large, something gets misplaced by the entry of snowflake. You previously ran service now. What was that experience in taking them public teach you about current environment . Was a terrificow experience for us. I took the company in 2007 public as well. Experience ofined the two companies. With really important is that when a company goes public, you have the philosophy and the momentum to have a very good showing. That youally, it means have to capable of forecasting your business. Not just at the top line but the bottom line. Cash flow and all of those things. It will provide a lot of confidence in the markets. If you dont have the velocity, it gets to be hard being a public company. Thats what throws up the timing of people wanting to go out, going public being public things all things on the market, ipo arect listing, greatp,e will hm representative of the Peterson Institute on whether Central Banks should be issuing their own digital currencies. This is bloomberg. Everyone uses their phone differently. Thats why Xfinity Mobile lets you design your own data. You can share 1, 3, or 10 gigs of data between lines, mix in lines of unlimited, and switch it up at any time. All with millions of secure wifi hotspots and the best lte everywhere else. Its a different kind of wireless network, designed to save you money. Switch and save up to 400 a year on your wireless bill. Plus, get 250 back when you buy an eligible phone. Thats simple. Easy. Awesome. Call, click, or visit a store today. This is bloomberg technology. In the Digital Currency revolution. On thursday, the g7 will release guidelines for regulating digital money. Also up for discussion, if Central Banks should be issuing their currency. Sweden and china are studying that topic and the bank of canada has launched a formal Research Topic that has partnered with other monetary authorities. To discuss, the president of Peterson Institute for international economics, adam posen. First give me your take on yes or no if Central Banks should be involved in Digital Currency. Yes, i think they should be, but in two senses. They have to keep away regulatory arbitrage that would exploit average people or Small Businesses if you have private currencies that are not regulated. Second, Central Banks should be involved because they can provide efficiencies and safety that make private currencies irrelevant. But third, they should not be getting involved just because it is digital just as a people money. They should not be getting people involved to try to drive down negative rates. As governor brainard said at a speech earlier today, those are not motivations you want to have, and i agree with her. Taylor i want to get to the fed because a lot of international Central Banks have started to weigh in. Is there a risk the fed is moving too slowly on this . I dont think so. I think it is a fair question. You mentioned the peoples bank of china and the swedish bank, which are leaders in this space. Swedish sweden having a sophisticated population is in position that it can afford to experiment a bit, but also because the bank has a lot of credibility at they are able to keep ahead of the private sector. For the u. S. , if the u. S. Is slower and the Federal Reserve is understandably cautious, i dont think there are any big losses. This is not like a privatesector race. Taylor you mentioned kaplan at brainard, who have come out with comments saying the fed is looking at issues on digital currencies. Governor brainard saying a currencies solution is not a solution to a zero lower bound. Walk me through that. That is what i made reference to, her remarks, which i agree with. One argument that theoretically minded economists have made is that if you have a Digital Currency, it is easy for the government or central bank to erode the value of that currency, to inflate it away once it is under government control. The advantage of doing that is not to rip people off, in theory. It is to allow you to go as negative on Interest Rates as you need to be without having to go through the Banking System without having other problems. I think governor brainard makes the argument, and i would make the argument, that it is destabilizing to the Financial System. It causes people to want to move their money out. It may cause runs on various institutions, if not the currency, and ultimately there are other ways of achieving your monetary goals than trying to go negative with rates. That particular piece of the argument should be killed. Taylor does the issue of Digital Currency need to be a syndrome back issue, a department of the treasury issue , or a congressional regulation issue . That is a really astute question for two reasons. First is because it is a Public Interest to determine what is the value you are trying to serve by putting this in place, and that should not be up to the fed to decide. Second, because right now we dont have an appropriate regulator or supervisor in the u. S. System, the fed can regulate interbank payments in a limited way, but in theory the Financial Oversight Committee could take in, if they decided this was systemic. I think this is not so much the treasury, this is a legislative issue. I would like to see Congress Talk about and legislate what goals they think digital money should serve for the rest public. Who hasone individual an opinion on that is david marcus, who heads up Facebooks Libra cryptocurrency. We spoke with him yesterday. He said the government is holding back regulation. For these types of letters to be circulated for anything that is an idea and telling people you should not explore innovation at a time when not only here in this country but around the world the core of our Financial System has not evolved much in the last 15 years and consumers around the world are paying the price for it. I think we should ask ourselves whether this is the right approach if we want to lower costs and lower the barriers of access for Financial Services for all the people who deserve better in the world. Taylor what do you make of those comments . Somebody is talking their book. Anis very nice to make appeal to lowering costs and financial inclusion. Financial inclusion can be better served by various legal changes. For example, we have treasury direct, direct deposit for government payments, a number of ways we can restrict Check Cashing fees and other fees. There are a number of things we can do for financial inclusion, and that is just in the u. S. The key thing is to get people to know your customer ids. That was the great leap forward in india and when that is done badly, people get cut out. This is serious, but has nothing to do with libra. It has to do with a public commitment to having ids for people and giving value to those at not abusing the information that goes with those ids. All of those i would not be willing to trust with some profit center, self oriented, privacy ignoring company as opposed to a government that is wellregulated. The government would have to be watched even then. Finally, it is not just about driving down costs. Poor people are exploited in the u. S. Because of their lack of access to banking and the payment system. There are ways to fix that. The main reason to move to Digital Currency is to create economy tos in the prevent people from getting their privacy and finances ripped off. It is not mainly to save cost. Taylor adam posen of the Peterson Institute, thank you for joining me. Sticking with cryptocurrency, but a much darker side of the technology. U. S. And korean Authorities Say they broke up one of the Worlds Largest markets for child pornography. Prosecutors say the suspect operated in a darknet market that accepted bitcoin and distributed more than one million sexually explicit videos involving children. Joining me to discuss is jamil jaffer, Vice President of ironnet cybersecurity. Talk to me about this story and using bitcoin to be able to trace and find the suspect. Of course, the whole effort with bitcoin has been to anonymize transactions and allow people to engage in assured transactions where it is not known who they are. What happened here, the irs working with the Criminal Division of the Justice Department were able to de anonymize these transactions and identify the 23yearold south korean mad hosting over one manion downloads korean hosting over one million downloads. The scale of the exploitation of Young Children is exploding and bitcoin is enabling this. Now we are using bitcoin to track these people down and put them in jail. Over 300 arrests in this case alone. Taylor bitcoin gets a bad rap for instances like this, but if we are able to use it on catching the bad guys, cracking down on illegal activities, couldnt we make the case that bitcoin is helping . Obviously what happened here is the government was able to undermine the nature of bitcoin, the anonymous nature of it, to identify these folks. It is unclear how they did that. A lot of people have different identities online. If you are able to access large corpuses of data, you might be able to deanonymize data that way. If people use common email addresses, that might be one like. The nature of bitcoin is anonymous, but also permanent and a detailed record of who transacted with whom. When you find one bad actor, you can trace their activity, and if you can deanonymize, that is hugely powerful. The government used a Metadata Program to identify terrorists back in the day. Taylor generally this is how the irs, the fed, can track a bad actor. They can be able to find it and once you find one, you can find everyone else within a legal within illegal activity. If they were smart, they would figure out who these people have in common. These are people in child pornography, trading on this website. They transacted with a lot. Maybe those people are involved also. You can see people who transacted with known bad sites. Dn itemization, identify the location. If you can do that at scale and speed, that is powerful. There are companies out there in this business. Those Companies May be poised to do Something Interesting based on the capability to deanonymize. Taylor any sense that regulation would help, or bad actors will always find a way . I am skeptical of regulation because of the fastmoving nature of the technology. It is hard for regulators to keep up. You look at the hearings on facebook on capitol hill and you are appalled at the level of knowledge of members of congress, some young members, and it is still hard. It is hard to imagine regulators keeping up. That said, in child pornography the government has to get aggressive, work with industry, partner and identify these people. Whether it is a child pornographer or terrorist, we need to identify these people at put them in jail. Taylor wonderful points being made. Jamil jaffer of ironnet, thanks for joining me. Coming up, we hear from bill gates on the role government needs to play in regulating technology. This is bloomberg. Taylor tuesday nights democratic president ial debate featured candidates weighing in on issues facing tech and society, and they had plenty to say. Using a 20th century antitrust framework will not work. We need new solutions. I am not willing to give up and let a handful of monopolies dominate our economy and democracy. Its time to fight back. I agree with senator warren that monopolies have to be dealt with. They either have to be broken up or regulated. Right now we treat them as a utility, when they are more a can to a publisher more akin to a publisher. Senator warren, i was surprised you did not agree with me on the subject of the rules about corporate responsibilities for the Big Tech Companies when i called on twitter to suspend Donald Trumps account, that you did not agree, and i urge you to join me. If we are going to talk seriously about breaking up big tech, we should ask if people are taking money from the big tech executives. Taylor joining me in new york to discuss, eric newcomer, who covers the intersection of tech and politics. How much was big tech under attack . It is a total freeforall. Everybody knows they should be mad at tech, but i dont think they all agree exactly what should be done about that public anger. Everything from antitrust to privacy to election interference and one idea after another, so a lot of different ideas thrown at the wall there. Taylor who had one of the more realistic plans, in your idea, a real actionable solution . Eric Elizabeth Warren has put out a plan that calls for breaking up google, facebook, and amazon. That is pretty drastic, but fairly specific. On the other hand, Kamala Harris is pushing the idea on warren to push trump off twitter, which seems to be trying to empower a tech company, taking on more responsibility where warren has been pushing for the government to step in and sort of humble these tech giants. Taylor there is also a lot of debate about removing President Trump from twitter and removing his account. What are those claims . Eric i think there are a lot of people that worry any head of state could posed a threat of war or something truly dangerous, and twitter, just like it looks through peoples tweets to decide if they cross certain lines, should apply the same rose to a president , specifically donald trump the same rules to a president , specifically donald trump. The counterargument is he is sort of the ultimate public figure. For a company to step in on what a president can say is a super controversial idea. Taylor then we push forward to 2020. A lot of discussion on Election Security. Is facebook the only target when it comes to Election Security . Googleacebook, twitter, all play a part getting information to the public, so it is not just facebook, but there is the history there. They have control of not only facebook but instagram, whats ,p, Facebook Whatsapp facebook messenger, so facebook is central. There is not a lot of confidence that the problems of 2016 have been cleaned up. Taylor thanks for joining me. It is not just president ial hopefuls debating tech regulation. David rubenstein sat down with bill gates to get his thoughts on the hot button topic. In thelargest Companies World today are Technology Companies. Apple, facebook, google, microsoft, and so forth. You worry that there is too much power and data in the hands of these Technology Companies and are you surprised the government has not done more than they have done today about this . Gates technology has become so central that the government has to think, what does that mean about the elections, about wiretapping authorities that would like to find out whats going on financially . Or drug money laundering, things like that. Yes, the government needs to get involved. Microsoft, i told people i did not have an office in washington, d. C. Eventually i came to regret that statement. Companies,hnology partly because of the lesson of microsoft of course, they could have seen that lesson through at t or ibm or kodak or a lot of innovators they are very engaged. There will be more regulation of the tech sector, things like privacy. There should be at some point federal regulation related to that. The fact that now this is the way people consume media has really brought it into a realm that we need to shape it so the benefits outweigh the negatives. Gates that was bill speaking with David Rubenstein on peertopeer. Tune into the full interview where the two dive into a wide range of topics, including making Climate Change a bipartisan issue. Announces a volvo bold new all electric vehicle. We hear from the ceo, next. This is bloomberg. Taylor volvo is entering a new space, unveiling plans for its first all electric vehicle. Its goal is to cut the Carbon Footprint on each car by 40 by 2025. The volvo ceo spoke with sherry on and amanda lang. From day one, it will be profitable, but with the very low volumes, you have to understand the cost will be higher, so it might be a lower profit margin initially. I think what counts is more evterm, and we believe an car will have a higher value for the consumer and long term is the right thing to do. When you talk about subsidizing the charging cost, how did you come to that as a decision to help push this car . It is really not related to the all electric cars. We will promote the sales of the socalled plug in hybrid, a parttime electric car. Important that you not just fill in gas and drive it as a conventional car. We follow this very closely. Right now consumers are using electric 40 of the time and we want to incentivize consumers to use it even more. Thats why we say firstyear electricity is included in the price of the car when you buy a plugin hybrid from volvo. Where will these cards be made . Will they be affected by tariffs . They are made in charleston, some in tucson. There is no connection to tariffs. Is really a problem for us for electric cars, plugin, or conventional. Our program is based on some cards will be in one location and trade high volumes locally. If we have trade restriction and are forced to build all cars locally, there will be additional cost for our consumers, so we hope that will not be the case. We have seen the Chinese Government reduce subsidies for new energy vehicles. Are you concerned about ev demand within china . Yes, the subsidies have gone down, and it is always helpful with government to support introducing a new technology. On the other hand, we believe if electric cars are going to fly longterm, they have to be sold to customers who are ready to pay for it. It has to be competitive on the free market. Otherwise you have to have temporary subsidies. Thats why we are so sure about that. We need to participate with attractive products for the free market. As you move beyond those subsidies, you want to get to volume. Is china the market for you . Will there be mass purchases of these vehicles there . I think all markets, on the west coast of the u. S. , for example, is a big market for electric cars. Also in europe. I think so far the interest in china has been too large to be based on the incentives, but i think chinas market will pick up and see the beauty of the electric car. It is also based on having somewhere to charge the car overnight. It is difficult to park the car on the street in a big city. I think those customers will be the last one going electric. Taylor that was volvo ceo haakon samuelson. That does it for this edition of bloomberg technology. Bloomberg technology is Live Streaming on twitter. Be sure to follow our local breaking news network ticktock on twitter. This is bloomberg. Welcome to daybreak australia. We are counting down to asias major market open. Here are the top stories we are covering in the next hour. President Trump Defends his decision to pull out of syria. He is in long time u. S. Allies the kurds are not angels