Break into supposedly secure systems . Knows an expert who firsthand about the black market. And greetings from a special look at how youtube is shaking up the Entertainment Industry from the creation of youtube stars to the power struggles between studios and programmers. We look at how the video platform changed the game when it comes to the business of entertainment. I want to start with breaking news. Telecom is willing to negotiate a sale of its tmobile unit if it offers to value at 35 per share or more. Senior managers of Deutsche Telekom discuss at a strategy meeting from berlin. I want to discuss with cory johnson. I think we were sitting wonder what would happen. Financing, as far as we know, has not happened so far. A price only a little bit better, so far, suggests any kind of funding behind it. Mealss is coming behind of softbank. Absolutely. Softbank fell apart. There is a number out there, as cory said. This is a bit of a stretch. Theyre looking to do something, they are to do a deal. A marker out there and says come if anyone else is interested, this is kind of where we are headed. I would basically say, they need to do something here. Is fantastic. We all love that movie and that playing out. The truth with that with the disruptor model can only go on so long. There has to be a move. This is a situation where, going forward, you have got to believe theyre saying, here is the number, you have got to get close to it very it was supposed to be 40 per share. Does this smack a little bit of desperation . Putting a price out there suggesting getting a little bit more. This is a moneylosing business. A business where they have got enormous amounts of debt. The winner of this thing will have to have a lot of cash behind them to support the business. They need to be bigger to do well. He has done some great things to grow the kind of subscribers, in terms of their ability to pay more. Their own plans and the structure of those plants. This is a story we will continue to follow. First, i want to talk about another story we are watching. Time after time, samsung has preempted a major apple event with the announcement of its own. Samsung has done it again with reports apple may unveil a smart watch at its event. Samsung moves up its announcement of the new gear, coming at a critical time. In theirman is Still Hospital since a heart attack back in may. Cori, still with us. I also want to bring in another guess guests from washington. Guest from washington. I want to first of all ask you about the gear asked but also gear s. What is a semito you . This is a move toward what we call the smart wearable kind of market. We expected this. We expected autonomous devices. If the stories are true and this is a not taught amiss project, it really speaks to some of the moves we see carriers make. To your current contract. And allow this thing to be autonomous with three g. Three g, not that big of a deal. It will be bursting small amounts of data. You will probably not make a tremendous amount of phone calls. We think the category will just get started. Maybe about one Million Units starting in 2016 growing to 10 million in 2018. Not the largest category but again, the most pricey category. Reporting they will unveil a smart watch of sorts. We do not know for sure. This would mean apple would be potentially unveiling two new phones, t does bigger phones, and they watch. We hope they are correct in that. It is interesting. We know they have been working on this watch for some time. They have employers working on the watch design. We also know apple will launch it and they will go right up to the front. One of the reasons is ready for the release time, they decided it is not quite right here at we shall see what they announce. Right. Ds point is just they may be a small market, but anything that would launch would look small because the company is so big. We have been talking about what is going on in south korea. The Company Still in the hospital after a heart attack. He has been in this position for a long time. We presume he is ready. You, bloomberg. Ews did a big profile is he ready and what kind of turmoil do you imagine is going on with headquarters with this crisis . This is clearly a difficult time for samsung having to do this now under these circumstances. Ultimately, the way samsung is structured, right now, chile is only the only person to succeed in this position. In terms of, is he ready . We will see in time. Moreually, he will take more of the company starting to report to him. Is behind much of the partnerships with apple and silicon valley. He has really been behind doing a lot of the things that up pushed samsung forward in the smartphone market. Technology, software, services, other things, he is probably well positioned both in terms of his Prior Experience with samsung and his own in terms of going in that direction. Samsung is under global pressure in the meantime because of where the smart phone market is going. Some fascinatingpushed samsung e details, he is a lowprofile guy. He negotiated a deal with steve jobs back in the day to get samsung ships in the phones. How big of a job does he have ahead of him . He has a massive job. Samsung is in a tough situation right now. Going forward as you turn the page, i think the world has changed fast for faster than samsung has been able to change. He could be a breath of fresh air. If someone said recently to me, the combination of samsung and particularly google kind of lets a stream. It lets a stream about the possibilities. They experiment and try things. Pick your metaphor. Throw things against the wall. I think the video of the Samsung Galaxy five taking the ice bucket challenge, it is waterproof. Can we show that video . Apple really figures it all out and then says, this will be what you want. No ahead with an application layer and start to experiment. Apple sets the grid very tightly. I think samsung has not really been that dream partner that google may be could use, because they have been so focused on the oldschool way, which is, we build, we ship, we put it out there. Under new leadership, they could even do more experimentation. The trick will be, how do they experiment on a global scale but more profitably and without taking massive risks that they have to take. Maybe they set up a separate division and experiment in new ways. But i think they really have to continue on this path if they will continue to challenge apple in the nearterm. They need to be more current. It cannot be, this is what the general says and everyone marches in that direction. Articleo be, as the says, more democratic. A little more sense is driven. The world has changed. All right area thank you so much. Troy of the korea economic institute. We will be beating the drum to the samsung and apple event in the last couple of weeks. Coming up, Russian Hackers break into the supposedly secure systems of Jpmorgan Chase and four other banks. Can anything be done to stop the hackers . We will discuss next. Welcome back. Im emily chang. Five banks have been hit by Russian Hackers this month. Yet the i is probing whether this is retaliation against russia. How complex is this attack . Could the russian government be involved . Again, a researcher who focuses on computer crime and cyber warfare. You are an expert on the black and gray cyber market. What do you make of the attack . How sophisticated it was . Reports are talking about how the attackers used phone abilities emerge to in order to breach the banks. These are Software Vulnerabilities for which no patch or fix exists in which the affected Software Vendor is not aware of it. Having the knowledge is very exclusive and very important. For it,an ex for it is fairly amazing to me that of all companies, really the only bank out there that i know who had talked about fighting off hackers, talking about how much money theyre spending in that effort, and how serious the problem is for them. Jamie dimon actually talked about the specific amount. Saide read the quote. He by the end of 2014, we will have spent 200 million annually with a profit with possibly 5 safe bye going to be this attack . The fact that the banks have been breached should serve as a cautionary tale for all companies in all businesses. We need to be rethinking our security posture. What do you mean . Are they doing it wrong . The way we think about businesses and have our economy, is to get that product out the money, to have our economy booming with products. We really have functionality in mind first, rather than security we do not necessarily a insecurity from the start. Thanks think about security have a lease of the fact that banks can be breached like this should be a cause for all of us. As we know, they have taken sensitive data, including files and customer information. . Hat happens to the information what are they planning to do with this information . It depends. To be clear, i am not sure if these are folks working for the black markets or if they are other types of attackers. Used fordata can be credentials to try to hack into other accounts and try to hack social engineering attacks or campaigns the list of other contacts the effect the prison might have. We will continue to follow this story as the fbi investigates this attack. Thank you so much. Up, finding fame on youtube. Shaking up hollywood in the process. That is next. Welcome back. Im emily chang. Hollywood heavyweights have their eyes on youtubes biggest, setting the stage for a power struggle setting the future for online entertainment. We are taking a closeup look at youtube. One group that has made it big from youtube is epic mealtime. The concept started as a youtube show in 2010 and now the channel has more than 700 million views. Last year, collective didio up. Tal studios snatched it they now have a cable show. Find out what happens when a youtube sensation goes hollywood. It is a thursday at the stadium east of los angeles. Getting ready to shoot the latest episode of his tv show, epic meal empire. Before epic meal empire, there was epic mealtime, a youtube show which made him an internet sensation. Copinguld not call it a a cooking show. I would call it a celebration of food show. The first video valid hundred 20,000 views in a week. We did one right away in the next week. It got 600,000 views. I quit my job at that point and committed to make the videos weekly. It is clock for years later and we have 700 million views. Request with that kind of viewership, epic mealtime had Big Media Companies looking to cash in on its success. We to get phone calls from hollywood. Discovery, they all wanted to represent us. We just have faith in them. Collected Digital Studio produces an remotes these channels. We got very aggressive of trying to get in business with them because this is the kind of property that is multiplatform. A new world where stars are self generating audiences online. We are at a place where we are now in the mainstream world and we started to realize maybe theyre not as mainstream as we started to think. Mainstream is sitting in the halls of youtube. Questec a show like epic mealtime from a backyard to the mainstream media. Property, tv property. They have playstation, a bacon sponsor. Is all that money, there is a concern. We are a little bit more centered. The internet is no holds barred. On television, there is more censorship involved. It also means bigger budgets and more bacon. The First Episode cost 70. Now the meals cost 20,000. We made meet cars once. On tv, we made a full car i could drive and we ate it. Lau. More on his cover story. If i am hungry or if i do not want to eat ever again after seeing that area it is a lot of bacon. Lets cut to the chase. What kind of money are these guys making . Really big stars are making good money now. The challenge with the whole ecosystem is it is still incredibly fragmented. There are so many different talents. It is just a vast universe. Channels millions of out there. The challenge is trying to figure out, with all that inventory, how do you organize it to make sense for the creators and the advertisers, and to make sense to turn it into a business. Who are some of the biggest stars on youtube . Guy is ae wong, hootie new one here he is huge in the video gaming business. A show this summer that subway pays for has done very well. Not hundreds of stars. It is tens of thousands of stars. It is really on a different scale than television. We will be speaking with freddie wong himself and a couple of minutes. Dreamworks investing in awesomeness tv. What does this have to say about the future of entertainment and who is going to own it . What it tells you is right now, the Big Media Companies are still making a lot of money in television and movies but there is still signs of weakness. Has beenffice sluggish. Advertising market has been pretty weak. A lot of cash, but what do you do with that . Right now, youtube has a huge amount of attention. And a lot of young fans. It is not making that much money. The companies that have popped up in the last couple of years, have done a lot of the initial the work organizing ecosystem and figuring out how you go about making money from it. They have not made money yet. Media Companies Like stream works and disney decide it is a great time now to buy in. You can swap of these Great Networks for not that much money and you can use their talents and you have a growing and big audience of young people. All right. Stick around. In ourre is to come special coverage, greetings from holly to. Hollytube. Up next. You are watching bloombert west and i am emily chang. Today, we are talking about the business of youtube in a special. One of youtubes most popular channels has almost 7 million subscribers. Has turned founder making youtube videos into a fulltime career. The digital movie studio specializes in original web content that mixes special effects, humor, and a love of videogames. Im joined once again by felix gillette, who wrote this wiis cover story on youtube and from l. A. G thank you for joining us. I have been watching some of your videos. Hilarious stunts. How did you get started and when did you realize this can be a career . Leslie started getting going with youtube in 2010. My friends and i have been doing a lot of directv and films and there was a shift in where people were watching thanks and youtube, we could get a response and build an audience without having to go through with the traditional middleman. We dedicated doing everything we do online with the goal of holding an online audience and exploring a new Distribution Platform for entertainment. How do you come up with ideas for these videos . We are watching you jumping over something exploding and shooting a gun in the process. A lot of it just comes from brainstorming, driving us, long showers. It just comes from a love of videogames and videogame culture, the stuff we grew up with, stuff in our videos, gaming and gaming influence. It also comes from our love of movies growing up. My generationtuff grew up with. New generation of filmmakers, youre not find them in hollywood, but online and on youtube. He recently signed a deal with lions gate, the hollywood studio. What does that do for you . Prior to this point, we have been doing a lot of short form content. How do you get something that costs more to make than your typical youtube video, it is difficult in terms of where to get the financing. An ability to allow us to do these Longform Television length and feature length projects, the kinds of things we have been working toward without having to worry about the intricacies. It lets us make a longer form featurelength projects because and we are excited because it allows us to tell longer stores and engage our audience in a deeper way. What do you know about the commitment of your audience . Youtube, i may log on and look at a couple of videos and i do not come back for another month. How do you cultivate an audience you can rely on and keeps coming back . It is a generational difference. Older, weage and treat youtube like wikipedia. We go on and look at stuff, we see videos and that is it. But you are looking at an entire andration of viewers content consumers that approach it in a different way. They had showed they approached channels and people who create who are almost right. Ties in their own using all the various means teenagers have on smart phones and social media. About, it has always been telling stories and using that as the baseline. The principles movies have always created to tell stories. When Young Youtube creators come to talk, what kind of advice do you give them . There are a lot of things you can do and trends you can create for what is popular online. Things can go viral one week and no one remembers it the next. My advice to creators is always ofk on the fundamentals filmmaking itself. Do what you want to do and do what you love. The way the world is, you will find the audience for it. Do what is true to you and what is organic to you, and follow those principles of visual storytelling and filmmaking. I will be rude and ask you how much money you make and if it is ever going to be or if it is already the multimillion dollars that hollywood stars make versus being a holly to start . Not whathonest, it is traditional celebrities make. We are not going around and getting rand endorsement deals for what we do. What we do hits an online audience there it it is an audience where everyone is trying to figure out how to properly monetize. An audience that no longer has a watchingcription things online. My company as a whole, we make enough to support my company up in burbank. But it is nowhere near the huge numbers you will see with traditional celebrities and traditional entertainment. That will change over the course of the next 510 years. All right. Both so much for joining us. We will talk more about how the dollars are flowing from cv versus digital. Next, how are advertisers using youtube . Watch us streaming on your phone, tablet, bloomberg. Com, amazon tv, and amazon fire tv. That was a clip from a totally awesome Youtube Viral movie. Ampaign for a we have been talking about the business of youtube in a special. While youtube stars have caught the eye of hollywood studios, the platform is drawing interest from advertisers. A viral Marketing Agency behind that video has carried out youtube campaigns. In newe, i am joined now york. Michael, this video, i remember it when it came out. It is astounding. Have big an impact did the video have on the marketing of the movie . There were other marketing done. But when it comes to Digital Marketing and youtube, it was extremely effective. We are in the business of sharing content that promotes the movie. Dixie millionut people on youtube alone are the way we measure success is not by the view count on the video but the free media we can generate with it. News morning stows shows talk about it. Huge was for the movie and did really well. And look itgo back up. I did not watch the movie but i did see this video. How much does that matter . Intohe views converting customers . A good question. It matters a lot. Especially reaching the target audience for the movie, people watching it and tweeting about it on twitter, they are plugging in the message, check out this amazing promo for the movie. Video, butut as a hey, this is a clever ad for the movie. It is done in an engaging way and that is what we do. We create highquality content and people do not realize their sharing and add. New york city, the time square iphone hack. Goes into creating one of these things . Is there a formula . A lot of people try to make a science out of it and create a formula out of it and replicate it and modify it. What it really comes down to essentially is a great idea and a great execution that comes with it. There is a right way and a wrong way. We do it with highly original buying anyithout media. Everything is organic. We do not pay for placement revenue and we do not buy views. Everything is organic and it is designed to go viral. It has the right ingredients and recipe. Your last two videos, hundred million views. Tv is still getting 67 billion dollars worth of advertising. How much will that change and how fast . We would like to have a chunk of that, i will tell you that. We are seeing a big shift in the field. The Digital Marketing field is being taken seriously more and more people are recognizing agencies and movie studios where there is great value in doing this. Also, it is different. It is something shareable and it did not exist before youtube was created in 2005. It is the way to go. Laughing athelp but some of these videos you produce. Incredible. How much does a viral ad Campaign Like the one with kerry, how much does Something Like this cost . It is based on the complexity of the project. Usually, in our price range, things start at 500,000 and go up to 1 million. To do things for real. One of the signatures of our videos is that we do not do cgi. It for real. O we create a real stunt, the real thing, and it really flies. Fromdifferentiates us others. People like to see the setup. It does really well. How long does it take . It sounds intensive. A great question. Sometimes we kind of have to step in and save the day and then we have a limited amount of time to pull something off. In most cases, we prefer a 12 week turnaround time. Andre fast production wise post production wise, we do everything inhouse. Talented people to help us create these things. We are pretty quick. I cannot wait to see the next viral video. Thank you for joining us. Now for a look at what is coming up at the top of the hour, Mark Crumpton joins us from new york. What are you following today . Of elements in the ukraine are fluid at this hour. A de facto russian incursion is taking place, it is said. It is not involved in the unrest and nato says otherwise. We will have latest details at the top of the hour. Back to you in san francisco. All right. Cannot wait. Looking cory johnson is at a startup with an interesting spin on Artificial Intelligence. Yes, no. Coming up next, you may recognize their cars from last year when he appeared on stage. We will take a look next. Welcome back. I am emily chang. Expanding. The company Just Launched its service in 24 new cities, many of them College Towns like georgia, charlottesville, virginia, indiana, and oxford, mississippi. The company also launched services in the new zealand capital and australia gold post. 35 of they says worlds top 100 cities still do not have the service. Uber has been facing a lot of heat lately lately with aggressive steps for drivers. From black heart is robotic cars, a driver pushing the intelligence with toy racecars. Race toyws players to cars using these devices. Cory is taking a test drive right now. Who is winning. I am sure i am getting destroyed. There is a very Interesting Technology behind this thing. I am getting my but kicked. Artificial intelligence allows the cars to stay on the track and celebrate performance. He is destroying me right now in this game and he joins me now. What is the latest on the game . One of the most unique things about it is even though it is a physical product, from the time people bought it, it has an. Xtended we have new characters. We can redefine every element of the game play software. You are one of the Artificial Intelligence ceos is. I wanted to see Artificial Intelligence. What is it about this that is Artificial Intelligence and how is it cuttingedge . We have a videogame and sorry inside of our phone. The phone understands everything that is happening. Even though we are playing here, we have Artificial Intelligence controlled characters. It becomes a videogame. I understand how that is intelligent. What is going on here that is different years from years ago . These phones end up being the brains behind all these characters so we can play against opponents nobody else is controlling but the game is controlling. They become intelligent. They have their own personalities. What do you mean . Each is unique. One is aggressive and one is more defensive in nature. Parameters . Ogram exactly. They evolve over time. You upgrade and the cars drive faster. That is all part of the platform and the ability to bring the video games to life. We are programming a videogame by using the combination. Using the parameters for the types of development that might happen, you let the method run amok . That is right where it is not too different from videogame. Were using ai to synchronize with the physical world. Fine robotics. By theving a rematch, way. Every one of the characters, you understand where theyre located. They can move very precisely. That means we can have them think and decide what to do in order to compete and win. That is not going on here, it is going on the phone. It is both. , but is a computer here most of the brain is in the phone. Because the phone understands everything happening in the game, we can make these characters very intelligent. When i hear and read about Artificial Intelligence, it creates parameters. My definition of robotics is the extension of Computer Science in physical form. Have something that understands its physical environment, you can give it purpose and personality. For us, reinventing toys and physical gaming is a great way to start before we move onto other things. All right, who better, him or me . [laughter] you are pretty tough last time. Absolutely. I am competitive. All right. [laughter] we have time for the bwest byte, one number that tells a whole lot. Robotics, funny 6. 8 billion. Tell me about this. You brought the study to our attention. What does it tell us about the future of robotics . The number is almost entirely Industrial Robotics and highend nonconsumer robotics. We have effectively gone from zero to what will be a number focused on the consumer market. 42 billion in 2020. The reality is the degree of computation and sensors and overall ability to understand the physical world, has opened up all of these applications. Artificial intelligence is such a buzzword. How will it impact our lives on a daily basis . Robotics takes many different forms. It could be something physical that moves around like this or even just the science of understanding multiple data streams and being much more intelligent about what your products are telling you. A rematch now. Another round here . Here we go. [laughter] thank you all for watching this edition of the show. Lets ride it out. I am in blue. From bloomberg World Headquarters in new york, this is bottom line. President says Russian Troops across the border. Cbs enters the red zone and looks to score with thursday that put all. And how a backyard production grew into an empire and youtube. To our viewers in the u. S. And those of you around the world, welcome. We have full coverage of the