Transcripts For BLOOMBERG Bloomberg West 20140324

Turned a has not profit and is losing more money than it is making. With me is our tech editor ari leavy as well as leslie picker in new york. Skype is thea director of a financial resource company. Francis, what is your top line take on these numbers . I look to a lot of the Cloud Companies focused on enterprise software. I look at the Quarterly Earnings , loss, and sales. For the most recent quarter, they had less than 40 million in revenue. Their loss was more than 40 million. They are riding the wave of the Cloud Company hysteria. I think it is premature. I did speak to aaron leavy, the ceo of box, about the timing of the ipo. He has always said 2014 is the year. Take a listen to a portion of that interview. Ipo is on the path. You told us 2014. Are you still on track for that . I have said words like it could happen that year. I think i would still use those words. He is one of the more colorful ceos in the tech community. Ari, what do you make of the timing is to mark why now . They are clearly riding the wave. There is insatiable demand for anything cloud related. The company is growing by leaps and bounds. They have said they will keep losing money. Have Public Market investors subsidize their losses as long as they are willing to do that. If they can sustain this growth and the market continues to rise, they could be given the benefit of the doubt for some time. Theyre spending more on marketing than they made in the year. Is that problematic . Theyre spending more by 50 million more than they generated in revenue. That is an astounding number. That is not a number you see often even among Club Companies that spend a ton of money on research and marketing. Is box trying to beat dropbox . Do they feel like now is the right time for box alone . Their listing them as one of their competitors along with google. Sources have told me that is this race in software to be competitive and get the enterprise customers which could be impactful in terms of their pricing and subscription model. Box offers one year free subscriptions. After that, they rope in the enterprise customers and have them pay. There is a lot of competition in the space. Box is primarily focused on the enterprise customer. What can you tell us about customers in this business . Why are they spending so much on marketing . Is it because of all the competition . Is it because customers turn over . They focus on the enterprise. That is supposed to be a place where there is not as much turn as there is on the consumer side where dropbox is more focused. Dropbox is also on the enterprise side. They are spending to get the enterprise customers because that is recurring revenue. This reminds me of twitter a bit, except twitters financials were better. Their losses were not more than revenue. I think they want to turn public. If you ask them why, they will probably say because they can. That is kind of the stock answer for companies losing a lot of money. I think what will happen is they will pick up the interest in dropbox. Some institutions will want to own the sector. I would be leery about buying in the aftermarket. Twitter is right around 46 now. I dont think this will be a bargain in the aftermarket. Cloud companies have come down quite a bit in the last couple of weeks. What kind of timeline are we looking at . It could be as soon as three weeks away. Box filed confidentially which gives it about 21 days before they can start going on the road and marketing to investors. They want that perspective for 21 days to give investors time to look it over before hitting the road. I guess we are looking at the middle of april before we start terms official valuation and investor demands intel. Francis gaskin, thank you all. We will be following box everyday. Another big story, disney agreeing to buy the studios for at least 500 million. The Online Video Network has more than 380 million subscribers and 5. 5 billion views a month. Jon erlichman is in l. A. This could be a billion dollar deal if you count the earn out. The performance target disney has a in if maker performs gets closer to 1 billion. It used to be disney and other Big Media Companies would buy networks. Now you go out and buy youtube networks. That is what maker is. It is a hub built to bring all sorts of Youtube Content to one place. There are a lot of businesses like this built in los angeles. Disney is aware there are a lot of people more comfortable watching videos on youtube than traditional television. How does that affect the disney business Going Forward . They are positioning this as a deal that gives them access to technology, smart people building these new businesses. We should highlight, these are still challenged businesses. Youtube still takes a big portion of the revenue generated by businesses like maker. Youve seen the likes of maker looking to distribute content elsewhere. I think these are still a work in progress tight business. For disney, there is opportunity to get in there and buy one of these businesses as they grow. Give us an idea of the kinds of videos maker makes. Why has it been such a sensation . The key word they use in the release is millennials. What you have seen with a lot of these hubs. It is a lot of content focused at the younger demographics, whether it is tied to gaming or pop culture. Disney is probably going to view this as a great marketing vehicle for different properties. Maybe they can find some new young stars to build up through this network and push out through other properties. Jon erlichman, thank you so much for that update. Coming up, in a rare interview larry page talks about everything from self driving cars to church. Take a listen to that next. Welcome back to bloomberg west. Im emily chang. Musics about apples ambitions are sending pandora shares lower. They died after a recent report said apple could soon introduce itunes for googles operating system. The report says apple is looking at a standalone app for its next mobile os. The companyapple, wants to strike a deal with comcast that would put apple boxes in consumer homes. Plus give apple tv content a faster route into those homes, that is according to a wall street journal report. Access toas equal consumers with other internet companies. With this deal, google could build an apple fast lane into your living room. More white joins me with on the potential deal. Also with us, John Ehrlichman from l. A. As you understand it, how would this work between the hardware, software, and agreement that needs to get done . I think apple would provide the set top box, also could provide some of the cloud services. Comcast would offer the pipes. Essentially, what the article was alluding to is apple would like to be looked upon as managed services. Apple tv would be considered a managed service just like telephone lines and on demand video. It would not get caught up in the buffering on the public internet. Jon, explain what apple is asking for and why would comcast give apple what it wants . On the issue of having faster service, i think they want the same thing netflix has because a lot of people are using itunes to watch movies. You dont want that experience interrupted. As for whether or not they would be allowed to muscle into the world that is comcast with a box, that is an important question. Comcast already has a nextgeneration box. We dont talk a lot about it because the Cable Companies are not as fun to talk about as apple. But it would do essentially the same thing. The reason comcast might be willing to do that is if they felt because apple has a certain kind of customer and certain people would want to use an apple product, maybe that would add comcast customers. But they are only going to go ahead with Something Like this if comcast still controls the whole experience, cable, broadband, the works. As we understand it, apple wants to control the experience. Hearing they are just talking but still far apart. Thesere the hurdles companies will need to overcome to get to some sort of agreement . How likely is it to happen . You hit on one, who controls the customer. The secular be the revenue share involved the second one would be the revenue share involved. Apple would give access to 6 million i tune customers. Comcast is about 30 million when you include time warner. When i look at cable industry, a lot of younger people are totally cutting the cord were not signing up for cable. I think that is a trend. One way to get around that for comcast is to work with someone like apple. There is some precedent for comcast to cut a deal. I believe they cut something similar to tivo, although there are still major differences. Explain how this would differ xbox hasrelationship with comcast. At the end of the day, any cable players want to make sure you can access their content on different platforms. That is the bottom line in all of this. Comcast wants to make sure if you want to use an xbox or any other device as your primary method of accessing television, that you can still be a comcast survivor subscriber. Hypothetically, if there was an apple box you could buy and use in a market where comcast does not currently serve subscribers, maybe this would be a way for them to build their footprint out of the markets they have already got. If you are leaning on the arrangements comcast already has with broadcasters for content, that part is handled. All of a sudden, you can build this out as an app in somebody elses hardware. This would be more extensive than what we have seen with xbox, the kind of the same thing. We will continue to follow this story. Not quite the apple tv unicorn some people were thinking we might see, but a step in that direction. Coming up, how does larry page keep google innovative . We will hear from him directly in a rare interview next. The more i learn about technology, the more i realize that you not know. That is because the technological horizon, the more you learn about technology, the more you learn what is possible. Welcome back to bloomberg west. Im emily chang. Google has covered a lot of ground since it started 16 years ago. Charlie rose sat down with larry page in vancouver and started by asking where google is today. We defined a long time ago is to organize the worlds information and make it universally accessible and useful. People always say, it is that what you are still doing . I think about that myself and am not quite sure. Search, it isbout such a deep thing for all of us. To really understand what you want, to understand the world of information. We are still in the early stages of that, which is totally crazy. We have been at it for 15 years already. It is not at all done. When it is done, how will it be . Well, i guess i am thinking about where we are going. Why is it not done . A lot of it is computing is a mess. The computer does not know where you are, what youre doing, it does not know what you know. A lot of what we have tried to do recently is make your devices work, make them understand your context. Google now knows where you are and what you may need. Just getting that all to work. There are one billion Android Devices now. We recently did comcast. We are starting to work on television sprint we Just Announced wearables this week. Computing to where it can understand you and the information, we have not found that yet. Part of where we are going is artificial intelligence. Where are we when you look at that . Is one of thes most exciting things i have seen in a long time. The guy who started the company has a Computer Science and neuroscience background. He went back to get his phd to study the brain. We are seeing a lot of exciting work that crosses Computer Science and neuroscience in terms of understanding what it takes to make something smart. Let me talk about everett snowden Edward Snowden. Security and privacy. You have to have been thinking about that. Absolutely. I saw a picture of surrogate brain with Edward Snowden yesterday of surrogate brent sergy with Edward Snowden yesterday. Privacy and security are important things. We think about in terms of both. You cannot have privacy without security. Let me talk about Security First because you asked about snowden, then i will say little about privacy. Tremendouslys disappointing the government secretly did all of this and did not tell us. I dont think we can have a democracy if we are having to protect you and our users from the government for stuff we have never had a conversation about. We dont have to know what particular terrorist acts they are worried about protecting us from. But we do need to know what the parameters of it is, what kind of surveillance the government will do, and how, and why. We have not had that conversation. The government has done itself a tremendous disservice by doing all of that in secret. Then there is the privacy side. The privacy side, the world is changing. There is so much more information about you. That is important thing. It makes sense why people are asking difficult questions. We spend a lot of time thinking about this and what the issues are. I think the main thing we need choice, provide people show them what data is being collected, search history, location data. We are excited about incognito in chrome and doing that in more ways which will give people more choice and awareness of what is going on. Give me a sense of the philosophy of your own mind. You have this idea of 10 x. You dont necessarily want to go in some small, measurable arena. I have been amazed. The more i learn about technology, the more i realize i dont know. It is because the technological horizon, the thing you can see to do next, the more you learn about technology, the more you learn what is possible. A rare interview. Google ceo and cofounder larry page with charlie rose. Turkeys government is blocking twitter. How did they do it and is it backfiring . That is next on bloomberg west. You can watch a streaming on your tablet and apple tv. Welcome back to bloomberg west. We focus on technology, innovation, and the future business. The turkish government has blocked twitter access across the country and the Prime Minister defended his action over the weekend. He also threatened to Block Facebook and youtube as his administration fights corruption charges. Twitter responded by saying they remained committed to defending the privacy of their users in turkey. Skype byed now via Andrew Gardner was on the ground in turkey. Describe the situation on the ground for us. I know some people are successfully circumventing the difficulties of the government has put into place a what is the latest . Cks that is right twitter was first blocked here. They moved to different type of blocking which is more difficult for people to get around. A lot of people are still tweeting from turkey. The issue is really a polarizing one just like so many other issues in turkey. The Prime Minister is still talking about the twitter ban, threatening to even ban youtube and facebook and his supporters seem to be in agreement with him. Lots of people in turkey are completely outraged that this attack on freedom of expression. It looks like the situation will go on and there is no end to this with the bann in sight. What is the state of affairs in terms of how far this outage reeses r eaches . The blockage is that the ip level which means you cannot reach those particular ip address is that belong to twitter from inside the country. What you mean by the ip level . I understand it was blocked on thursday and friday but Something Different happened. What does that mean and what you imagine the governments involvement is . It makes Network Performance management tools for the internet. Towards that end, we saw a lot of the same things that consumers on the ground wouldve seen. It was simply a block of the name twitter. Com. Not the real twitter. Com machine, it was the government machine. As people figure out how to work around it by reconfiguring the devices to use public dns, like googles public dns. Something had happened different and sure enough about 24 hours later, additional blocks were put into place so that even the ip addresses belonging to twitter, the numbers that are used to identify their servers in california also became unreachable. What are people doing now . Are they just using vpns . Twitter is more popular days into this block and it was before. Thats right. The people that are using twitter in turkey, about 10 million users, the twitter traffic is actually increased in the day after the ban. Now there are a lot of people proxyre using vpns and servers to get around it. A lot of people are being able to do that. That is how i managed to use twitter. I think it is fair to say there are a lot of people who are not able to do that and they have been shut out. I know certain countries are more vulnerable. Where does turkey fall on that list . They rank as an intermediate case for us. You have countries that have only one or two Network Service providers that are allowed to have International Connection to the outside world. Where like korea or syria internet outages are not completely unexpected. Turkey ranks as an intermediate case. A we work with many of the providers for many years and they are very sophisticated group. There are more than two or three in turkey. The number of companies in turkey that are able to make direct International Connections with the outside world is higher. That gives them a certain amount of resilience to complete that network shutdown. A lot of the Government Intervention tends to be more surgical, tends to be more targeted at specific services, specific ip addresses, specific domain names. This comparable to anything we have seen recently . Consistent with the sequence we have seen as it evolves over time. Takein 2011, we saw egypt the country out of the internet with a blank tool. It has become much more surgical. It is like what you might see in iran before their elections where the road blocking specific domains and it was done very tactically. In venezuela, twitter has some problems. The same thing happens in china on a daily basis in very sophisticated ways. What impact has this blockage had on the political situation . Hasar the turkish president taken to twitter to criticize the latest move by the government to shut twitter down. What can you tell us about that . Comes lesster ban than a week of key elections in turkey so the result is very politically significant. Allegeds been these castoffs and conversations released with the Prime Minister is the latest to be speaking about things which substantiate corruption allegations against him. Unfairness in the media and other private business sectors. Uplly what has happened until now is questionable whether it has been either identity for him and his government and his party because the whole world is starting to the telephones, conversations, and now this outrageous attack on freedom of expression which the twitter ban is. I think this is really the start. Passed as recently newly restrictive internet law. It seems very unclear how the government would seek to use these news powers these new powers that they have. Ordered foris court the individual twitter accounts to be taken down, there is no court order for twitter itself to be to shut down. The Prime Minister has said that he personally took this decision so it is very indicative of how policy is made in turkey and how rights are violated. I think this will have longterm implications. It is really a battle for whether there is internet freedom, whether people can access information, whether social media will continue to be a place were critics of the government can really share their ideas and receive information in a form which is which is not subject to the same control of the national media. I think this is going to go on and on. A really start of longterm situation in turkey. Jim, are you seeing other sites being blocked . There were reports about u2 being next. What about facebook . Going to keep an eye on youtube. They have a long history of being blocked in turkey and that would be no surprise. Andrew gardner, Amnesty International researcher on the ground in turkey. Tank you. Thank you. What is the value of design and technology and what are titans investing in . We are going to talk to apples first design chief next. Welcome back to bloomberg west. Today we begin a special weeklong series on the role of design and technology in conjunction with bloomberg businessweeks special issue on design. The way a product looks and feels is now as important as its function. Great design leads to great User Experience and Robert Brenner is the former head of Industrial Design at apple. Great to have you back here. You left in 1987, how was your design philosophy evolved over the last two decades . It has always been around designing that is simple an example an accessible but at the same time aspirational. That is what apple continues to do and the way i like to work with companies and create meaningful things for the customers. One of the things i found interesting is like is that you like to jot your thoughts down right away. I like ton . Dive in and see what my reaction is. What of the perverse things in your head what are the first things in your head. I like to come back to them. A lot of times i am right. Guthat it is that reaction of our products to look and behave. A that feels like apples as well. How did you approach that design problem . When i start work never started working them, headphones are wearable things. They are all designed very functionally, very articulated, very mechanical. The goal for me was to streamline all that and make something really beautiful to look good on the body and your head and neck. It still did what it was supposed to do and especially from an audio perspective. No one really had done that. As much as they are highperformance audio quitman, they become beautiful fashion that people love. You are taking a deeper look at wearables. It seems like there are a lot of a lot of products out there but none are something i would want to wear every day because of how it looks. And embeddingsh technology and everything which is cool from a design point of view. Most people are rushing to connect your appliances up without thinking it through in terms of value. Also, what does it say about me . I like to say that fashion is about the drive you want to belong to. When you start writing things, it promotes Consumer Electronic Companies do not understand the emotional aspect of putting something on someones body. What is the secret . One is connecting to the emotional aspirations people have. One of the reasons we are successful is that a lot of people want to feel like an athlete. It says i am into athletics seriously. Those are the kinds of things you need to key upon. Also, integrating into peoples lives. A Health Monitor if i have to invest a lot in it, i am not going to wear it that much because i cannot do that. I know you hired jonathan ive and then you left. A lot of questions about what is apple working on. Some people are having doubts. What do you think . I am not that close to apple anymore. I have no doubt apple will continue to innovate, especially in design and continue to push forward. Theyre the type of group and the talent there that they will continue to push. A discussion on whether they lost it, i dont think there is any you dont think they come out with anymore category defining products like a watch more tv . They will continue to look at the assets we have they have. They will continue to push outward. It is the constant maturing of technology in peoples lives. It is interesting that Technology Enables the design establishes and that is one reason why apple is good. Thank you. Great to hear your design philosophy and how you approach these problems. Vice media started out as a small pump magazine and now it is supposed to become it is becoming a alien dollar media business. That is next. Welcome back to bloomberg west. Disney has named abc news president as the new cochairman of Disney Media Networks and president of the disney Abc Television group. You will be taking over for and sweeney will be leaving in january. He staying on on abc news until a replacement is named. It includes abc, abc family, and the disney channel. Media combines punk culture with online journalism and the strategy is getting traditional Media Players and run for its money. The price has grown its way to a whopping billiondollar valuation. Met up with the head of vice media. We are talking watching smith. Talking about shane smith. It reaches one or 29 Million People each month. Their latest venture is vice news. I started by asking him how many new batch how much money they are putting into this new empire. Llects about 50 million . About 50 million. It has been a tremendous success with our coverage of the crimea and the riots in venezuela. Not only is it driving a lot of traffic but it is also getting whos from Mainstream Media are doing nothing but making fun of us. Any interesthave in having your own Cable Network to sort of be there for people to discover you in that way . I wouldve said no up until recently but we have been selling so much tv around the world. Whenever we look at something, we were doing so many parties in london and so many events that we bought a pub. That pub became our white are most widely successful venture. We are creating so much ip now that it is smart to own your own platform if you can. Variousooking at opportunities because there is such a destructive case in going on in media right now. We are throwing off a lot of cash that we can look at buying media assets. You are Profitable Company. What does that mean . Does that mean youre a widely a wildly popular Profitable Company . Sincehave been profitable they won because we came up in a recession and will believe you have to make profit otherwise you dont exist. We have been doubling our top line pretty much every year we have been in existence which gets harder because there are a lot more zeros than now. As we are now licensing tmobile online and tv around the world, are margins are actually going up. We are running around a 34 margin. We will try to get to 40 next year and then the holy grail at 50 for an Online Company would be huge for us. What do you think your company is worth . A lot. I dont know. At 1. 5r, we got tagged billion but we have tremendous skill growth. Scale growth. If we hit our numbers, are worth would be exponential. Billion ofoing 1 topline at a 50 margin with an increasing scale, that will be worth as much as twitter i think. Close to generating 1 million in revenue . That is the plan now. 21st century fox bought a stake in your business which got a lot of people talking about what you are worth. Is said that you and wrote Rupert Murdoch celebrated by having a beer in brooklyn. No. What happened is that we were discussing some form of deal and we were at his office and he came in and we talked for a bit. I said, you should see the shop. He said, lets go now. He came out to brooklyn and we went to my favorite bar and we had a drink. A lot of people saw us and he tweeted and that started a whole rumor on a lot of things. That, the deal sort of took a life of its own and then we ended up doing this deal at around a five percent stake. A lot of people wonder about the corporate endgame. You want to sell this business . I assume you dont based on what you said in the past or would you consider Something Like going public . We have to look at everything now. It is a great question. One of the reasons why we did the fox deal people always ask that. We did it to stay independent. We could run the business the way we want it to run. I own 95 of the board. It was a great deal for us and it is helping us expand into india, europe, etc. However, i think you have to look at things if we get the numbers that we believe we are going to hit, we are throwing is so much money, our scale increasing so rapidly. We would be stupid not to test what the market would bear. There was a lot of money in the system. Valuations are high. God knows when the next recession is coming and if we dont take money off the table shane smith, the ceo of vice media. It is time for the bwest byte. What you have for us . We have six. It has been six years since Sheryl Sandberg was that her old job at google but there is still some developments tied to that job. There is that big court case where the Technology Companies made agreements with each other not to poach each others talents. Suggest theying were actually deals in place not to take other talent. With facebook, they didnt have that kind of deal. This coming from the vessel a deposition that she gave. 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