You can watch live tv on your computer, and smartphone. Thecan even record shows to cloud for later viewing. The Service Costs eight dollars or 12 a month. Preaereo there were three ways to watch broadcast television. Antenna to your roof and get it for free, get a Cable Company or Satellite Company for a box or a dish. While you are paying cable and satellite companies, they are paying broadcasters to retransmit programming to the tune of about 4 billion a year. You know how much aereo. Pays networks . Zilch. It is pulling down the same free signal anyone can get with their antenna. The fact that the antennas are in a warehouse should not matter. Broadcasters say aereo is no different from a Cable Company. In march 2012, they sued aereo for violating copyrights. The lawsuit hinges on one thing, whether or not aereos retransmission is a public performance. Infringingereo is because they have not paid for programming by Cable Companies do. If the Court Decides aereos service is a lot of private performances, one for each subscriber, it is not an infringement and aereo does not need to pay broadcasters. So far, both the lower and Appellate Courts have sided with aereo. Now it is up to the Supreme Court to decide. Arguments will be in april and there will be a rolling by july. I want to bring in my telling her from new york, cory johnson. This little thing this is the aereo antenna. Know possibly millions of antennas that aereo has patented. This is whether broadcasters are scared of. I know that silicon valley, where you are, they actually support aereo. Of dissonant mediating with broadcasters is part of the interest in silicon valley. Technologically, aereo is not that much of a wow device. It is interesting. The case is interesting. Talking about the fundamental rights broadcasters were given and the things they agreed to do as a result of being given the ability to broadcast on these frequencies. It is a fascinating case. It talks about their responsibilities that go beyond offering free tv service. The other question is the changes going on in silicon valley. They are changing what is being distributed and how. Things like netflix and hbo on amazon prime, they have nothing to do with daily broadcast tv over the airwaves. The open question is even if aereo were to prevail, are people going to want to watch that . I agree. Dish network has filed a brief in support of aereo. I want to read what they wrote in their brief. Uses argument is aereo new technology to allow users to do the same old things. The only difference is that the users do not purchase and maintain the equipment. That equipment is basically in a cloud. Jeopardizeses and if aereo loses, does this jeopardize Cloud Computing in this industry . It hinges on the fcc responsibility networks have. It is not just about tuning your local cbs or nbc affiliate, there are other options. Bloomberg tv, for example, is broadcast on aereo. I assume we have a vested interest for full disclosure. It creates an ability for creators of content to have another way into the homes. That could create further value down the road for aereo. You are going to be with me speaking about aereo and covering the Supreme Court case. I want to get to my interview with aereos ceo chet kanojia. Him andbig day for barry diller. He was optimistic about the outcome of the battle, one he signed on to voluntarily. He says the law is on his side. The whole thing has been about making sure the consumer gets a signal. It is not about making a couple guys rich. Me, a different technology. A technologybased and the roots of broadcasting an antenna. None of them can dispute the facts. Unfortunately, they do not have a way to dispute the facts. The Technology Works the way it did. There is all this concoction and basically false narratives being created that somehow this is a copyright problem. It is not. It is a Business Model problem. The world is changing around these guys and they are reacting with what they know, which is litigate and kill new companies that come in. Because they are making far too much money and continue to make far too much money and have no incentive to change. Chet, can you understand that they are spending cbs, abc, spending millions of dollars in programming that basically you are charging people eight dollars a month to access. See what you are talking about in innovation, they are saying it is theft. Heres the issue. If we do not apply this technology to a cable channel like hbo, there is a reason they are called free to air broadcast television. The bargain with the consumer in congress is a Program Public city for july consumer. They make billions and billions of dollars with advertising, 90 plus. That is preserved, 60 Million People in America Today use an antenna. Are those people infringing on their copyrights question mark cons of Companies Make money selling equipment and technology, tivo. Antenna manufacturers. All these Companies Make money by selling technology. You are more than just an equipment provider. Even if that equipment is in the cloud. You want to be more. What are we on a factual basis . Get intosay you original programming and start developing your own channels. Those that change are you are . To know is a great example tivo is a great example. You can get a retail tivo box, tivo will sell you video on demand movies from the internet sidebyside. Wheres the Copyright Infringement . It is only Copyright Infringement because i have made it simpler for the consumer to get it. Cory, i want to bring you along with our Supreme Court reporter who will be inside when the two lawyers make the case. Actually,reo side, for both sides, what cases will they be referring to to set precedent . Aereo likes to talk about the businessmax case as a and legal reason. The court said is ok for consumers to use a vcr, a variation of the vcr, to record programs at home and shift of the time. That is not a copyright violation. That is a different part of the copyright law. Is in the difference that those consumers were still paying for that contact . That content . It is also a different section of the law we are talking about, different provisions. Less of a strict resident but it is a model for what aereo says could happen from a business standpoint. A reason not to be afraid of technology. Sonybetamax be referred to. Another case is the case involving cablevision. It was not a Supreme Court case. The broadcasters like to point to it. It came out of a federal Appeals Court and served as the keypresses president at the lower court level on this case. It has two do with dvr technology. The broadcasters like to say that the reasoning in that case will show aereo is filing copyrights. Was saying to me was even if i fail and even if i lose, there is going to be over aereo. This technology is moving too fast. There doinghers out the same thing or that want to do the same thing that will just catch up if aereo fails . There is a legal precedent set by this case that could loom large over anyone trying to create a new business. Technologically it is possible that this is fundamentally a gimmick. It is a way to get around the transmission methods of the current day. It is a gimmick to get around fcc rules. It is not groundbreaking technology, little antennas. One might wonder how much the signals are blended together when they are sent out to the consumers. Getting things off the antenna you are assigned to. It is a way for them to create a new distribution model and method for lots of broadcasts, not just local tv channels that are the calling card of aereo. Havent there been cases similar to aereo i am not talking to cablevision or sonybetamax. That havelike aereo failed. It just so happens that technology has made a different. The lower courts are split. There have been aereo copycat cases that have lost at the lower court level. The same issue that is before the Supreme Court. That is one reason why the Supreme Court has decided to jump in. There is disagreement. It is why aereo cannot offer service in certain places like los angeles. Aereo has had success. They are the one service that made it up to the Supreme Court and that is where they can offer service in new york. Cory, i will turn it back to you. Julie hyman has a look at the top headlines. Ford is going to name chief operating officer mark fields to be its next ceo according to people familiar with the metal. Fields will replace alan mulally. Hasant pharmaceuticals offered to buy allergan, the maker of botox, in a cash and stock dea. L. With the support of bill ackman, who recently amassed a nearly 10 stake in allergan. He and valeant say they do not see an antitrust issues. Mcdonalds investors might not be loving it. The Worlds Largest restaurant chain posted earnings that missed estimates. Mcdonalds sales came in later than expected, particularly in the u. S. Where they have been struggling. A momentl be back in from washington. Right outside the Supreme Court. More with my exclusive interview with aereos ceo chet kanojia. Your tv on trial. Broadcasters versus aereo. Live on Bloomberg Television, streaming on bloomberg. Com. You can get bloomberg tv on aereo. Our coverage of the Supreme Court case over aereo. Cory johnson will be at my cohost. Is whether aereo should pay for this content the same as Cable Operators. ,or aereos ceo, chet kanojia the answer is no. He says he is providing the equipment to transfer this data. I asked him how he differs from Cable Operators. There is a huge difference between a Cable Company and aereo. If you look at technology itself. Cable Companies Take the entire broadcast spectrum and push it down to the consumer. Whether or not a consumer asks for it. They make the whole transmission. Sharply contrasted, the signal never enters the aereo symptom. It is every consumer for themselves with their own antenna. A big difference. Explained how they differ in plain language. It is like your tv with an antenna on it. When the consumer turns it on, that is one aereo turns it on. On demand . Theoretically on demand. If i am not watching and i am not tuned in, there is no streaming coming to my antenna. Cable companies are retransmitting the information. As you heard chet say, we are pulling it from the airwaves through the antenna we set up for you. How has aereo been able to make it this far . A very smart guy. They have a lot of financial backing. They understand the tv industry and the technology that has enabled people to watch things in a different way using different mediums. Consuming television in a different way that roc broadcasters have used for that they have exploited that in a very small and successful way. Conversation, he referred a lot to the netflixes and the amazons, the hulus. He admires what they have done. Are they watching . How closely are they watching . Fundamentally, this is about creating a new platform. It was hard to imagine that satellitetv would become as big the last it has over 20 years. The notion there is another way to do this. The broadcasters have been asleep at the switch, literally the switch, in terms of providing content on the internet. Thatlooked at it, selling what they have on the internet would dilute the airwaves. They have missed the phenomenon consumethe way People Television now on their phones and on their ipads and the web. , alex, i could have my aereo and then i could have my hulu and netflix, then i am done. I do not need Cable Operators. That is what supporters of theo will say, lets get to out of the dark ages. I dont need a coat hanger on my television to get free broadcast channels. You can skip the 160, use the aereo product and netflix and hulu. And i am paying 25 a month. That is the argument and that is the fear of being a Chilling Effect on innovation in this and otherf aereo companies are continuously shut down as long as they are not within the construct of the law. Aereo says they have not been able to do as much business as they would like because of this. Why extend into these new areas when we are not going to know if we will be able to operate. 13 cities. Operable in now, 11. Hard to build out if you have a looming case over you. You dont know if you will be able to continue doing business come june. Chet wants to be in 50 cities. That is hollow if we dont know what is going to happen. That has been the hold, last year they wanted to be in 20 cities. Once the cases is started, it slow down the pace. They look ahead to the nations highest court in arguing their case. Alex, thank you. You will be with us. Covering aereo in washington. Flying the need for the radar. More with the ceo of aereo. He says the same broadcasters who are suing his company now ignored him two years ago. We will tell you why. Watching in the loop, live on Bloomberg Television and streaming on your phone and bloomberg. Com. I am betty liu. Live from washington. Awaiting ultimate argument in the case of the American Broadcasting Companies versus aereo. Anybody whor watches television. Time for tonights big number. Billion, the amount of revenue broadcasters expect to reap from retransmission fees this year. It is a handsome chunk of change and it explains why the broadcast operators are fighting so hard to persuade the courts to drive aereo out of business. Broadcasters have been collecting these fees for a decade, ever since satellitetv came into the picture. The revenue from the fees has risen steadily every year. They are not, going to have to pay those fees. Cable operators might say why should i . Cory johnson, great to see you. Back with us in new york with the top headlines. Period. In the playoffs re six minutes after the hour, bloomberg is on the markets. Scarlet fu has the latest. Not a whole lot going on in futures, big deals with allergan moving higher in the premarket. As in the futures down by less nasdaq futures up by almost five points. Two year note sale later on today in the bond market. At almosto be sold the highest yield since 2011. The expectation is the federal Interest Rate for that matures. Back on the markets in 30 minutes. Botox maker allergan being targeted by valeant and pershing capital. Hor t makers anc bloombergfrom west. Guy. Re our botox you know how hard it is to do it on yourself . Stop. And unorthodox alliance between black men and valeant. And unorthodox alliance between bill ackman and valeant. With bill ackman they have a lot more game. Bill ackman does not work alone. He is always sourcing these and then he makes them happen. He has an iron got like no one else. This is not a slam down, they have got to get this through the sec. Look at his training history, herbalife, fannie and freddie, the automakers. Unity government intervention. Investors, short sellers and activist investors, would not invest that way knowing how unpredictable the government is. This is not a clear path, they could get roadblocked. Yearset with ackman ago. We know more about our name that anyone. No, they said we know more. That level of research. I have spent an enormous amount of time with bill, whether he is right or wrong he knows his stuff inside and out. People who have said there are antitrust issues, it does not seem that there are. As far as Insider Trading goes, you would have to share nonpublic information and there would have have to be a breach of a fiduciary. Valeant and ackman have shook hands, they are in for the long haul. A great evolving story. Doesnt this guy take a vacation . Why . All the botox. They are saying maybe allergan will get involved in depression you cannot frown. Stephanie ruhle, thank you. Back to aereo. Story, highstakes today. The biggest broadcast networks going after aereo. Attorneys preparing to make arguments before the high court. It would change the course of broadcast television. Betty liu is live at the high court and joining us now. Josh also cover this. Our testers are more and more of these transmission fees. That is not the longterm history of this business. Transmission fees have grown from practically nothing 10 years ago to a significant portion of their income now. It started with the Satellite Television businesses getting into and try to compete with cable. Starting to pay these fees. Companyhave another trying to build a business on not paying them. That is why broadcasters are fighting this. Of money butt maybe not the biggest thing they have got going . It is not the biggest part of their income. Billionout 10 , 4 projected this year. It is expected to keep growing. This is not their major business. In terms of other observers right now, who else is watching this deal . Who might either today . Barry diller is going to be here, along with chet kanojia from aereo. Dish network filed a brief in support, i do not believe Charlie Ergen will show up. We do not know if any of the broadcast ceos are going to be here. Lets invest les moonves has been most vocal about aereo. Imagine that they are going to be watching this very closely. Josh, you have written some pieces about the impact of this case. It going tos, is be as lifechanging for media as others have been saying . It is not clear that it is going to be an immediate shift. Even the people i talked to who a step towards a longterm end of television as we know it. Aereo gives you broadcast channels, if you look at what youle watch on television, are not going to be able to watch monday night football not of youre going to be able to watch monday night football and game of thro nes if all you have is aereo. Other broadcasters, are other places looking for another outlet. Looking towards aereo as a way to get into homes . Itright now you have aereo, has been relatively small. The court case has hampered growth but given it a lot of attention. For it to be a viable outlet it will have to grow in scale. Then you will see other content Companies Looking to get on board. I was going to say yes, it independentbe other operators who might be interested in going on to aereo. That then gets into a gray area. What if aereo chet dodged this question what if aereo starts creating their own content . Then, basically, they are just like a cable operator and should be paying those fees. He would argue that no matter what else they are doing, as long as they are using the technology they have set up now, the distinction with Cable Operators remains. Technically a distinction they are making, not a Business Model the station. In terms of aereo and content, i think we are pretty far from that. It is an expensive proposition and very different from what a Small Company is doing. Thank you, josh. D. C. Hat he and betty in bloomberg tv does have a Distribution Deal on aereo. Shows the kinds of things that could be on the future of aereo, if there is a future. Fraud in mexico. Michael corbat likely to face questions today at the annual meeting for citibank. Coming up next. Welcome back to in the loop. Julie hyman has the latest. A big shakeup at novartis. Buyinss drugmaker is glaxosmithklines cancer drug business for 16 million. Novartis is selling most of its vaccines unit two glaxo and its Animal Health unit to eli lilly, bringing in more than 12 million. Largest Cable Company bucking a trend, comcast adding video subscribers. It beat estimates. The company is trying to get bigger. They have asked regulators to approve its 45 billion takeover of time warner cable. Joe biden and ukraine, the u. S. Has unveiled an eight package. More than 11 million will be spent to help ukraine with next months president ial election. American experts will be sent to assist with governance issues. Shareholders of citigroup gathering in st. Louis where the company is holding its annual meeting. The firm failed a stress test and has been dealing with fallout from the fraud accusations and its mexico unit. Louis. Rg news is in st. Could be a harry meeting for these guys. The citigroup annual meetings are always entertaining. Michael corbat has a lot to answer for. The shareholders are pretty upset at this point. You mentioned the mexico unit, the fraud down there, the stress test failure. Certainly with the stress test, mike corbett mike corbat was pandit in after vikram did not pass, to also fail under michael corbat, stockholders are not happy. At some point, this is the day when shareholders can have some kind of reckoning. I think most shareholders think it does not matter. Does this one matter . Yeah. It will matter for the dialogue. We have heard from analysts who are coming. I talked to investors who really want to hear from the board. The board, over the last three or four weeks, as these two things have become public, has not said a whole lot. I have talked to investors who really want to hear from the board. When it comes down to it, do i think there is going to be any big change coming out of this meeting . Probably not. There are a couple pro posals that might get lower vote counts the normal. I dont think it will ultimately be a huge mandate on mike corb at. Of themere any hope increasing their dividend . Their inability to pay a dividend seems what to be holding them back in terms of equity returns. The company had earnings last week. On the earnings call, corbat said they are not going to resubmit this year and theyre going to set their sights on 2015s stress test. Asking for capital back then. At this point, investors have 11 or 12 months to wait before they can start looking forward to increase dividends or share buybacks. In st. Louis, thank you. Betty liu is outside the Supreme Court. She spoke to aereos ceo, chet kanojia. People are calling this a historic day. What is really at stake while your tv is on trial . More from my interview with chet kanojia. As well as one of the lawyers advising the broadcaster. He has called aereo una merican. Stay in the loop. Welcome back to in the loop. Live from the Supreme Court as your tv goes on trial. The moment barry diller joined the board of aereo in 2012, he had a date with the u. S. Supreme court. The streaming tv startup is challenging the economics of the television industry. They will fight copyright claims from broadcasters including cbs and abc. Aereo lets customers in 11 cities watch live and recorded broadcast pogroms for eight dollars a month. It is aereos ceo chet kanojia who says broadcasters paid him no attention for seven months when he first part of the company. We announced our existence and we did these tors for about seven months. Before you start of the company . Yes. Fore, when we announced our attention to launch on a particular day, that is when they responded with a lawsuit. During the sevenmonth period when you are visiting broadcasters, did you get doors shut . No reaction. Do you respect the broadcasters . I am sympathetic to the marketing conditions. The internet is happening. Weirdternet has a characteristic of transparency, given more choice. Consumers get more agile and they come in and out of things at will. Attentionle have an span problem. That is not a negative thing, they have so much choice. Efficiency is higher in a lot of ways. I am simply to the fact that they react. I am sympathetic to the fact that they react, there is a lot going on. Netflix is adding pressure. The world is changing. What i am not sympathetic to is the idea of litigating try to kill versus take a step back, work with people and explore technology and bring efficiencies to the market. It sounds like you feel sorry for them because their Business Model, in your view, is dying. Feeldont think anyone can sorry for executives making 100 million a year. Generalpathetic in a sense. I am aware that the market is changing and evolving. I think all of us are. Unless they change, they are going to get caught flatfooted. Maybe by aereo or whoever else. Sayobody will sit here and it is not inevitable. It is inevitable it will transfer to online. There will be more choice. Nothing online sells for 300 a month. Except maybe a very small niche club. We will have much more on chet kanojia and aereo as your tv is on trial. We will be back. Welcome back to our special coverage of your tv on trial in the case against aereo. The me is a special guest, former acting solicitor general of the u. S. And now a partner at a law firm in d. C. He advises and represents the broadcasters in this case going to the Supreme Court later this morning. We just heard from chet kanojia, who said when he first started the company in 2012, he spent seven months going to broadcasters and talking about what he is going to do. And he received no response from them. What is your reaction . I was not party to any of that. I think the question before the Supreme Court today is a strictly legal one. It is not about what business went to home went to whom. It is does the copyright law permit mr. Kanojias companies to yank signals out of the air and sell them to the american profit without paying for the content. A sustainable Business Model, would it be better if he was not charging for this content . It would be an interesting and different case. You have other arguments available to him. This is the essence of what copyright law is about, the broadcast networks spend billions of dollars every year creating entente and acquiring content, marketing and distributing content. Broadcasting is the envy of the world. Partly because they expect to get money from it. For an interloper to grab these signals, bundle them, and sell them is violating the copyright. I went to read one part of dishs brief in support of aereo. Uses new technology to allow users to do the same old thing. The only difference is the users do not purchase and maintain the equipment. Why is that wrong . Is using is aereo not a technology model. They keep saying they have innovative technology. What you were just reading suggests otherwise. This suggests aereos technology has been around for a long time. The innovation is a legal strategy. It is a contorting of the copyright law to say that black is white and white is black. Explained that. Aereo is not selling you hardware, it is not like you go to best buy and pick up an antenna call that aereo antenna. That is what they say, they showed me the antenna. But you cannot go by the antenna and use it, you have to sign up for their service. When you do so forhey say that pays warehousing the antennas. It is physically you are renting the space. Is whatou are not, that the Supreme Court you will hear a lot about. Is that really what aereo is doing . It does not allow you to own your own antenna in the warehouse. That is a different case. Aereos model is the entire American Public can get access to that particular antenna as long as they pay aereos subscription fee. They say they are not going to transmit the signal until the consumer demands it, it is private use. Senseis private in the that the individual consumer is using it. When you have billions of consumers using it, the idea that it is private is just how is that different from millions of people buying antennas . If you put an antenna on your wrist and use it to pipe the signal of a basketball game, no one thinks that violates the copyright law. Wrote6, when congress this law, they said if you are watching it in your home with friends and family, they went through and defined this. They said that is not a copyright violation. What makes it a violation is taking that antenna, getting the broadcast, and making it available to the public. If you put that antenna on your roof, pipe the signal in your home, and sell it to your neighborhood, that violates the copyright law. That is a public performance. That is what aereo is doing, grabbing the signals out of the air. Not selling to one person, they are selling it to the entire public. Other cases have come up and they have failed. Why has aereo gotten this far . On the basis of one court of appeals opinion in new york, a 21 opinion in the court of appeals. I suspect they will have a much rougher time today. Are you surprised they supported going to the Supreme Court . Their entire Business Model depends on them winning this case. That illustrates something. When you have a neutrality, say the iphone, when you have a new technology, say the iphone, when the court rules against the technology on patents, no one thinks it is going to disappear. It is not innovative, it is the legal strategy. Thank you for joining me, former acting solicitor general and represents the broadcasters. Looking into the future of aereo. Next, with ceo chet kanojia. Stay in the loop. We will be back. Theelcome back to in loop. Tv is on trial. Right in front of the Supreme Court. Oneo will be making its case the Pay Television service. I spoke with the ceo chet battle witht his the broadcasters, who he says are not interested in innovation or progress. Could noto folks figure it out, who had the backing of one of the smartest guys. You it used to be in the 1990s and 1980s there were Technology Companies and cable television. Today, there are zero. There is a reason. There is not a single investor on either coast that will put a single dollar up to find a company. They know that the company will die. The guys on the other side will figure out a way to kill it. They are not interested in progress, they are interested in control. If you win, is it going to be transformational . I dont think so. These things take a long longer. There will be no change except for the people who have access to a decent signal and when to use aereo. All the hyperbole we hear, that the world is going to end and the nfl is going to leave 60 Million People use an antenna. A few more people will. How will that end. Cable companies are bound by retransmission consent as a fact because they are Cable Companies. It does not matter what technology they use. You can exist with Cable Operators and broadcast networks, you are not a threat. We are not. We bring more audience in. 25yearolds are not signing up for cable tv in new york city and watching the today show on time warner cable. They use aereo. What have you not been able to do because you are occupied with this . We have been very slow in our growth. We have been cautious. It is an Infrastructure Company that requires a lot of capital. It has been measured capital deployment to make sure you are being judicious despite your confidence. You have still been able to raise 100 million. More will invest a lot than that. Right now it has been laying the groundwork. We want to put out 50 markets and Start Marketing the product. We want to add more devices and do a lot of things that we have not done. Because the overshadowing of things. Is 50 markets your goal, where you want to be in the next year . Yourrgren plan whats grand plan . We have no grand slam, i generally know where i want to go. 50 markets in the next 12 months. Alex is joining me. She will be covering this case. Our Supreme Court reporter is here with me as well. Are you surprised aereo is unusual aereo supported going to the Supreme Court . Very unusual, usually when someone wins at the Appeals Court level, they say we will take our victory and live another day. It is inevitable that it will come here, we might as will do it sooner. Here,y had to come up they wouldve had to keep fighting statebystate . Exactly. There are some Federal District courts in los angeles that have said Similar Services cannot go forward. They would not have been able to sell their product there unless they got the Appeals Court in that circuit to overrule that decision. They charge eight dollars a month to give you those channels. Is that even a viable Business Model . Say it isheard chet an infrastructure business that takes a lot of capital to build out locations and data centers. They say they are in their growth phase. Thats what a start up will say. Theyre not making money. Barry diller less subscription businesses. He thinks the constant revenue stream is great for a company that will grow out. If they win and expand, and maybe they will get there. That is a question whether a dollars a subscriber can sustain an infrastructure business. I want to play another part of what chet said about the doj supporting the broadcasters. Shockingly disappointing. Arrow copyright perspective. It is not all the other departments in the government woulde hoped and wished have commented. It is the copyright office. I dont think there is a single instance in which they come out in support of the technology, they always come out against. In support of copyright laws. How helpful is it that the doj sided with the broadcasters . It helps. One thing to keep in mind is that this court under john thatts has not been deferential to the solicitor general under barack obama. Be a certain advantage. You would always rather have someone on your side than not. It is not clear that it is going to be a game changer. The two lawyers, paul clement and david frederick. If you ask people in washington, who are the best supreme lawyers, they would be in the top 10 or the top five. Very experienced. They have one most of their cases . Paul clement was the solicitor general, you usually do when more cases than you lose. Have very good track records. We are going to get a firstrate argument. Who do you think of the justices will be asking the most questions . In most cases, every justice except Clarence Thomas asked questions. A couple justices wrote separate opinions in another case, Stephen Breyer and ruth bader ginsburg. They had different views on the copyright law. This is not a case we are expecting to be ideologically divisive. They are both democratic appointees that may be on opposite sides of the case. For aereo, what is the end goal . What does barry diller want . They want to disrupt the cable industry. Because they want to be acquired . Not interested in going public, he is focused on winning the case in building the business. Continuing the legal and building the business strategy. You believe it is true, if they dont win, they are done . That is what they both set. They are done and will cross their fingers someone else will be able to come in and follow through with that mandate they are looking to follow through with. Thank you, alex and greg. Cory, back to you in new york for what is still ahead on in the loop. Mcdonalds comes up short. We will look at mcdonalds earnings when in the loop continues. Youre watching in the loop. Streaming on your tablet, bloomberg. Com, apple tv. Mcdonalds reported firstquarter earnings below estimates. The analysts got it wrong again. Seeing increased competition in u. S. Sales. Peter joins us now. What stands out in this quarter . Not much. It was pretty lackluster. The guidance really unchanged from the full year. I guess that is good news. No change on the commodity costs in march. Driven by europe getting a little better, the u. S. Is still fairly weak. Not getting any traffic in the u. S. At all. The company made a lot of changes over the last couple years. It seemed to boost sales growth but that has fallen off. Are there new changes that are not taking hold or have we exhausted the last group of menu item changes that had success . They have been so good for so long it is hard to stay on top. They have 14,000 restaurants. You have got to find a product that you can source to 14,000 restaurants that is also affordable, tough to do. Mind, mcdonalds is doing 1300 transactions a day per store on average. They are doing a lot of transactions. It is about finding the instrumental it is about finding the incremental transaction. Talk about source as. Talk about store size. It is really all the same size, they are remodeling stores around the world and the u. S. It is the incremental, through the drive through. Goesf business in the u. S. Through the drivethrough. It is getting the speed of service as past as possible. Adding one second or two seconds can drive traffic for them. Like in reports you get a sense that the increase in numbers of drive throughs were responsible for growth in terms of revenue in the last five years or so. Not every restaurant cnan have a drive through. In an airport or an area where you do not have land, you cannot have the drive through. They tend to build a lot restaurants with drive throughs. They generate a great return for them. What about competition tocqueville and others . What about competition, taco bell and others . The big one is taco bell. They are entering the break this category. If they can make a splash and do this properly, they have to 0,000 of about 15 incremental unit volume for each taco bell. Million to 1 billion of revenue. They have to take some share from mcdonalds, you see there ads, going right at mcdonalds. They have got to go after mcdonalds to be successful at breakfast. I, this from the perspective i come at this as an san elite, are there changes in the American Public with fast food and the Health Benefit that are not available . Everyone says they went to cet healthy, but the qsr spa caters to value and convenience. That will never go away. Component be a health over time, for sure. Everyone wants to eat healthier. If you are providing rate value through a convenient way, there will always be a place for that. Health craze a going on. People want to eat healthier. That is a fairly small segment of the market. Peter, thank you very much. Haveg up, ford said to chosen a successor to alan mulally. We asked how big shoes he is leaving behind. E look at ford when blue bank lets look at some top tech stories. Third straight drop in profit for china mobile. Earnings fell9 in the First Quarter. 7 in of netflix up premarket trading. They will be charging new customers one dollar or two dollars more. Surprising analysts. Apple and samsung at it again. Forung says apples demand Patent Infringement cases is 57 times too much. Samsung says it should only pay 35 cents a phone. Get all the technology and media news every day at 1 00 and 6 00 on the east coast on bloomberg west. Ford said to have decided on mark fields as the next ceo after alan mulally retires. Mulally has guided the company through bailouts, and economic collapse, pushing to outsell toyota. For more, i am joined by matt miller. We have known he was looking at the exit door. I never know if this is a time to look at what has to be done next or take a moment to recognize the amazing job someone has done. We can do both. We have time to do both. Lets do that. Alan mulally, lets talk about what he did. Coming from boeing, people were skeptical he could turn ford around. They had a tough time after jack nasser bought everything and then bill ford took over. Jacques. In detroit they called him jack. The luxuryid of all brands, he got rid of volvo and pretty much every other brand th besides ford and lincoln. He mortgaged the kitchen sink and the brand, the ford logo. That is what got them through the economic collapse. Hehe did array before did that right before. They were one of the only big three without a bailout and they have been running on all eight cylinders. It reduced the number of different types of cars they were putting out. Most importantly was he changed the culture. It had been an infighting Corporate Board room. A lot of General Motors style fiefdoms. He said listen, it is a familyowned company. We all have one vision and need to have one goal. We need to tell each other the truth about what is going on. Mark fields was the first acolyte, the first guy to buy into alans strategy. Whats next . Mark fields, he has bought into Alan Mulallys strategy. He is not going to turn that around. He has they have a special meeting every thursday where they discuss all the aspe cts of the business. They have one goal. He is not going to change that. He is his own man, you may see him try to put his own mark on the company. Bill ford, the chairman of a company, really has the overview. The family has control of what happens in the company. Will be partnering with mark fields, much like he was partnered with alan mulally. Interesting stuff from interesting company. A few minutes from the opening bell. Keep here on in the loop. Welcome back, your in the loop. By six minutes after the hour, bloomberg is on the markets. Scarlet fu, what do you see . Futures slightly more positive but not much of a change after five days of gains in the cash market. The s p 500 8. 5 below its record close. Earlier we had mcdonalds report results, profit and sales missed estimates of the First Quarter. 75 afteris up by mcdonalds said april sales growth should be modestly positive. Comparable sales in the First Quarter missed estimates because of competition. Netflix up by more than 8 . Profit, sales, and subscriber growth better than anticipated. The big news is on the price increase, one dollar to two dollars more for new customers. Back on the markets in 30 minutes. Lets head back to washington with betty liu and the aereo deal. Minutes, your tv goes on trial. Broadcasters including cbs and abc are contesting aereos service, that lets customers watch live and recorded programs for eight dollars a month. I spoke with aereos ceo chet kanojia about how much of this battle come down the technology. Technology is extremely valuable. We created this incredible infrastructure technology, even if you take the antenna omponents out, why are trend the cloud ddr in the application and the integration with the social experience. It is tremendously valuable. Have createdhat we has tremendous value. If we can to be seen what may kill you if you lost, and five years later another company just like yours was able to break through . It is going to happen. Whether i like it or not. You are saying even if we lose the trend is there. Not, i feel do confident that we will not, but it is inevitable. I went to bring in david, former executive with a e and now serves as executive Vice President of a Film Distribution company that has partners with netflix, amazon, hulu, and apple. If they lose, is there a way around this with future technology . I think there will be. It will depend on what the Supreme Court says. I think aereo is not going to win this case. The language the court uses and how they decide the case will determine what aereo or another provider does. The whole aereo concept is to say we have this little satellite that you own but we will house it for you in the cloud. It is like going to radioshack and buying your own satellite. They are putting it in the cloud but they are retransmitting that signal to the consumer. If they end up, one of the justices says if they went directly to the consumer and the consumer has the choice, whether or not to put this in the cloud or to give it to aereo or another company that can house it in the cloud, that is different. Thats ok . I believe that would be ok. Then it will go back to congress. David, stop here. So many nuances. Using aereo you think aereo is going to lose because they take the estate of themselves and put it in the cloud first. Senderok at it argue a or a receiver of the signal . Aereo the Internet Provider is getting paid. The only person not getting paid is the broadcaster. I see their argument. If they sell it directly to the consumer just like you by and intent of from radioshack, you buy that from radioshack. Then you have a choice to buy their Cloud Service and many were ok. Chefs informing interesting, to the effect of, the broadcasters are still selling their content and still getting advertising dollars. Qwest that is true but that is not what it says. When cable first came to suedion, the broadcasters cable because they were taking the system and got it for free. They lost twice and then congress changed the copyright law. Any retransmission of the signal by any device now or hereafter is a violation of copyright. It is almost plain and simple. Everyone is worried about the interference of the cloud but i think the Supreme Court will be narrow here. Class ok. Im trying to figure this out. Who will be more worried about this. If they win, will it be Cable Operators or broadcasters . Both. Cable operators, it will change the landscape of cable television. They are in good position because they provide the internet for the most part. And are in a good position it will change things for the will pay for we the internet. Lets say they create their own device they will give to consumers to offset what aereo is doing. I think for a consumer, it will telle how they pay for the television. Smallbut aereo is so right now. All coexistey could. Cam may . The crux of their position, the law is quite clear. Ando is taking the signal then retransmitting it out. They are not paying for it. Broadcasters are not getting paid and they do not like that. All right. Thank you for joining us. Executive Vice President of screen media ventures. Does have alevision Distribution Agreement with aereo. You could pull it up and watch us live right now. Back to you. Moving today. In addition, there are other big changes going on in health business. Partnering with valiant in a big deal there. Also selling its Animal Health for 5. 4ou live a billion. The president and ceo joins me now. You have an interesting business. Already 10 , nine percent of your sales. We believe the acquisition, the combination of our Animal Health business will create a new Top Tier Company and the industry will the number two, globally, in terms of revenue. We think it is important and expands our reach particularly into europe. Brought is our portfolio and gives us access to the Animal Health pipeline with 40 different projects underway. We think the base is a good area to be in as hundreds of millions of people move into the middle class in the next 10 to 20 years around the world, we know cosi becomes a bigger component of their diet. We all love our pets and it strengthens further our Companion Animal business. Last thing i need is to get my dog on drugs. He arty has issues. You have seen dramatic growth in the animal business. You have seen doubledigit growth every year except for last year. What are the dynamics in the ininess you have yet the Animal Health, since we made a conscious decision to invest in 2007, we havein seen a land co. Really outgrowing the industry year after year. Recognize this is a somewhat cyclical business. It tends to ride the broad waves of commodities and food prices. Offsetting that, tends to be more steady. What about the aquaculture this is an entree into the business for us. We are given products in aqua culture. Significante up a part of the business. We move into anothers ages. Geographically, is that a other places . The combination, we have a number two in the u. S. Us to number moves three. Our presence into aquaculture, it helps diversify our portfolio. Species,l of the major beef, pork, eggs, milk, we are number two or three globally now and we like that. Qwest talk to us quickly. You said in the release it will not interchange the dividend. Talk about your thinking about taking on more debt. With a strong Balance Sheet and and the deal with a strong Balance Sheet. We pay 3. 4 billion dollars. Most of the cash will be inside the u. S. And take on 2 billion in debt there this should not create any kind of problem, nor should it preclude us from raising the provision in the future. Really interesting Animal Health deal. Thank you for joining us. How do the antennae actually work yet fell to bring the content to your screen, we will take a look at the details on how it works when we come back in two minutes. Welcome back. The idea seems simple but the Technology Behind it is not so simple parent Jon Erlichman got exclusive access to manufacturing facility in New Hampshire that manufactures this. Guys, atex assembled and technology that makes area work. This is the aerial antenna. We did a lot of work and customized it and achieved great performance for the size we had. Class it gave us an inside look in thebusy factory product that is revolutionizing the way we watch tv. Technologye how the works, it is different than using oldfashioned rabbit years. The antennas are not mounted on top of the subscribers tv. Box that canto a accommodate five to 7000 antennas. Antenna sends it to a transcoder, allowing you to stream online. A Cable Company takes all of this and pushes it down the wire to you. Whether you as a customer wants it or not. What is the capability of what you could manufacture . Manufacture, huge numbers. Qwest aereo plans to operate in 22 cities by the end of the year and build a city so accommodate whatever comes its way. Grow withrows, we can that, as opposed to the conventional model. I dont think they are capable being discussed today. They look harmless. [laughter] Jon Erlichman is joining me, along with cory johnson from new york. John, you know hulu and netflix. You talked to these guys almost every day. Class i think everybody is watching. It itss referenced own document. Of people, inc. , we do not know how many people are using aereo, but some people say they will subscribe from netflix to aereo. One of the key things of what we just said was that we do not know how much demand for this this service is and this device, even though this is such a huge issue and washed it and the reason youre there area but, they are setting themselves up to be able to manufacture more if they need to. Case an area, this has come about because of the growth of Cloud Computing and cloud storage. Qwest fundamentally, the business is in part based on Cloud Computing, the availability of broadband and more and more consumers. In the last internet double, it was about building. Now you have companies able to get consumers. And it is why you see Companies Like aereo get the potential for growth. The cost is falling dramatically. Qwest will there be other channels you expect . Is on area,berg tv but others, they want the be on what is available, the broadcast channels there that is important to their case now. Everyuld have to think player out there wants a more robust offering. For sure, they would have an interest in doing that. They make the antennas small because it is a way to be efficient. Too small and they cannot offer much. Qwest thank you. Stay tuned. We will look at chinas economy. It is growing and we will show you the top foreign brands in china including rollsroyce. Stay in the loop. The beijing auto show is well underway. Stephen engle has taken luxury chart luxury cars for a test ride. Class the same can hardly be said of todays chinese up and comers. Credit tightening slowing economy be dammed, rollsroyce is predicting another record year in china. Industry, to captains Economic Growth in china, it is important they see themselves reflected in the way we service them. Qwest any growing economy will than theysable income are often well situated regardless. Qwest i have tester than a few cars in my day, but never a rollsroyce era hope they are insured area class i have got the car to myself. Theng in beijing is not for faint of heart, especially when 770,000 u. S. G a car. Qwest this car is very much younger. Younger customers, we have seen potentially around 15 sports car drivers, for aris, lamborghinis, and they are attractive for the first time. Qwest beautiful. It picks up so quickly. I need one of these. Just the foreign brands trying to capture this section in china. Local brands, check out the extended wheelbase. It keeps on going and going. Great wall wine. Qwest the sector has continued to surprise most. It has grown in the First Quarter this year. There is such a vibrant and growth to the chinese economy. Income levels are rising and so to availe wanting themselves of the brand. I have no concern about the all goodal area things come to an end. My time behind the wheel of the race is over and i did not put a single scratch on it. Qwest bloomberg, beijing. You are driven around in a rollsroyce regularly. I do not. Qwest then you should. I do not know how my neighbors would feel in new jersey. He does it in file. Stephen engle. Corey, thank you for cohosting with me this morning. That does it for today. Stop here. E does not i will be live outside the Supreme Court, in that case will be underway in just an hour. Stay tuned for coverage of aereo throughout the day. It is 56 minutes past the hour and Bloomberg Television is on the markets. 30 minutes into the trading day and minutes before the existing home sale number, lets get you caught up on what is going on now. Equities are higher. The sixth straight game for the s p 500. A quarter of one percent, industrials adding 40 points, and the nasdaq doing better than the two, up by half of one percent. As for treasuries, lets look there. Not as Much Movement there. High yields. Note sale. They will be sold at the secondhighest yield since 2011. The thinking is the federal. Eserve will be raising that i am joined by mark sebastian. He joins me now here in new york. Talk to us about the momentum left the s p 500 back where it started a week ago. We came down and came back up as this the market has run out. Maybe, but i think there is a lot more fear underlying the nasdaq right now. If you look at the major 500, the rbs,s p the nasdaq 100 and the 2000. Seenf the things we have is over the last couple of weeks, the spread is at an incredible level. Right now. Those levels we normally do not see. Way higher. Was as for a percentage of where it is, around 18, this we have not seen since 2000. There is a lot of pentup fear in the small caps. When i look at the overall market and what is going on, the s p will outperform 2000 for the time being. Es will be dragged down. The catalyst . The Federal Reserve has been clear on where it stands on the tapering and raising Interest Rates when it does that. Home sales will move the needle in any way . Thingsll see them move in the day. It will be slow today. But really, it will be to put up or shut up for the growth company. Tesla and netflix and google and amazon, all the benefit of doubt the fedyears. Now that is unwinding, the Companies Need to produce real revenue, start making money, otherwise, the , the s pthe nasdaq drive down with it. Do k one has to portfolio. ,very time we have gotten down ions youre looking for potential the client with a lot of complacency and fear in the markets. Thank you. We are on the markets once again in 30 minutes. Live from bloomberg headquarters in new york. Class a takeover bid, will it happen for him . We will find out. Christ big shoes to fill. Mark will be the next ceo of ford. We will ask what the automaker challenges ahead. Qwest the new york Film Festival is in full swing but it is more about disruption this year. The ceo is