Analysts bet on new seasons of shows like Stranger Things. Elon musk announces his latest startup nuero link, successfully implanting wires into brains and enabling a monkey to control the a computer. The next goal is human trials. We begin with the hearings on capitol hill. Googlek, amazon, apple, all appearing in washington to answer lawmaker questions on antitrust, social media, and cryptocurrency. The first was facebook as the Banking Committee fired searing questions at the cocreator of the social networks cryptocurrency project. We will take the time to get this right. Wouldnt it be easier and safer if people could securely receive money transfers through their smart phones, just like they do for so many other things . Emily the chief was grilled on tuesday. We caught up with the senator after the hearing. I think Blockchain Technology, even the possibly of cryptocurrencies, it has some positive upside, but i think we have to be careful. Particularly when we are talking but the possibility that facebook might dominate this otherwise very disruptive technology. Facebook already has two billion users. It has all of these builtin advantages. We have seen facebook over the last decade plus do what i call catch and kill, where any new entrant into the marketplace, facebook would either copy or go out and directly acquire, and here you have this Blockchain Technology that might be able to come in and disrupt, and, again, it appears facebook is using the same strategic effort to say, lets bring some other players in, create this libra network, and then use their market power to create the wallet, where a lot of the transactions will take place. They call it calibra, and my fear would be they would give their wallet solution a great deal of undue advantages and, frankly, mr. Marcus today, i know he wanted to clarify, but it seemed like some of these questions should have been yes and no, and i came away with still a lot of questions that need to be answered. Emily right. So you were not satisfied with david marcuss answers, it seems. What would your message be to Mark Zuckerberg, the ceo of facebook . My message would be blockchain offers an awful lot of possibilities, but you have a burden of proof, facebook, to make sure, one, that we get it right in creating this new network, two, that it is safe. I thought mr. Marcuss comment that for every crypto dollar, there would be a real dollar or another currency on a 1 1 basis backing it up, thats basically absurd when there is no such requirement in the banking system. It seemed to me, as well, where you have had facebook not be a good steward of so much personal data already, the idea that they would create this new network and not build in implicit and explicit preferences for their own product strains credibility. I was glad to hear him say that were a third party wallet came around, and people do not want to use the socalled Calibra Facebook product but a third party, they would be willing to transfer the keys, transfer the data, do the technical transfers to that third party, that was a good sign. My hope would be that facebook would bring that same kind of supporting approach to the legislation that i put forward for their existing tools. Emily so, look, there were a lot of issues that came up, adjacent issues that facebook has been dealing with, misinformation, election hacking, fake news. Would you like to see Mark Zuckerberg testify before congress on libra, specifically, and again on some of these other issues . Here are the circumstances with facebook. And my office works with facebook on a regular basis, and we are trying to get them, and we have made some progress. They have made progress, for example, on some of the Disclosure Requirements around facebook political ads, the same disclosure around tv and radio ads, but there are technical issues, and my background is in telecommunications. Longer than i have been in politics, so i hopefully bring a little expertise here, where we can bring more transparency to this marketplace, whether it is about data valuation, whether it is about data portability and interoperability. They have yet to be willing to lean in and acknowledge what they would be willing to support. Mr. Zuckerberg has been willing to say that he realizes there needs to be some rules of the road for facebook in its current applications. What we have not seen yet is that level of specificity as to which rules of the road it would actually accept, so before we open up this whole new area that could have transformative efforts on the way we transact business in terms of blockchain and cryptocurrency, facebook has got to be proving that they are willing to accept certain rules of the road or regulation around their existing products before we go into this whole new realm. Emily meantime, you had facebook appearing at a House Antitrust Committee hearing along with google, apple, amazon. Do you think facebook should be broken up . Listen, i am not at that point in time in terms of breaking up some of these companies, but i have not taken that off the table because i think there may be ways to add more competition if we have more of this transparency and data portability and interoperability. I think we could step back from some of the breakup calls if we put in place appropriate privacy protections, the way europe has done already. I think we could have some more forward leaning if facebook was willing to acknowledge, or twitter for that matter, when youre being communicated with by a bot versus a human being. There are things in a legislative area that if we move forward on, i think would take off the pressure, at least vis a vis facebook or google in terms of break up calls. If we do not see them roll up their sleeves and give us some framework and some abilities so that americans or, for that matter, folks around the world have a little more transparency, a little more protection of their data, know what data is, in a sense, being sucked out of them already, and what that data is worth, then i think we have to look at more radical solutions. Emily meantime, investor peter thiel has called out google for what he calls seemingly treasonous work with china. We do not have specific evidence for his allegations, but the president is now saying that the administration is going to look into googles work with china. Does that concern you . Senator warner well, it concerned me when a group of folks at google did not want to work with our Defense Department but were willing to partner with some of the Chinese Tech Companies who were, quite frankly, creating an almost orwellian social credit system, where they monitor the behavior of the chinese population, 1. 3 billion people, in ways that are, frankly, the antithesis of everything that we in the west would support. I think that is one of the reasons why you have seen 2 Million People a few weeks ago in hong kong go to the streets rather than have the Chinese Communist party system and that kind of orwellian network take over hong kong, as well, so i do think there is some explaining that google needs to make. I have met with the google ceo, he said they are backing out of some of those partnerships, and they are willing to continue to work with the u. S. Government, so i think mr. Thiels and mr. Trumps statements are a little overthetop, but i think it is incumbent upon these companies to frankly go the extra mile to earn peoples trust. The truth is these Companies Got so large, so quickly, i am not even sure they fully understood the full ramifications of what they were dealing with, and, quite honestly, the regulators and those of us in government have been slow to catch up, and instead, we have seen a foreign nation like russia come in and willynilly use youtube, facebook, twitter to massively intervene in our elections, and they continue to massively intervene in trying to pit one american against another, and they have been, these companies have been slow to acknowledge that and be a more active participant in bringing about these kinds of appropriate regulations and appropriate rules of the road. Emily virginia senator mark warner. Coming up, netflix and no chill. The Company Reports underwhelming secondquarter earnings, losing subscribers for the u. S. For the First Time Since 2011. What this means as the competition turns up the volume. And if you like bloomberg news, check us out on the radio, on the bloomberg app, and on sirius xm. This is bloomberg. Emily netflix reported a surprise loss of u. S. Customers for the Second Quarter. The earnings renewed concerns about Growth Prospects at a time of looming competition. Netflix lost 130,000 customers as a result of higher prices and a weak slate of shows. It signed up 2. 7 million global subscribers, also missing projections. We broke down the results wednesday. I hate to bore lucas because he actually tweeted he is tired of talking about this. I think price increases probably drove the subscriber loss of domestically. I think they are probably bumping up against the ceiling on what they can charge and continue to grow. I personally believe they will keep 80 of their domestic subscribers as high as 20 monthly charge, but the last 10 million subscribers are probably middle income households and they notice when prices go up a couple bucks. And i think you are going to continue to see continued defections as content migrates away and competition starts to materialize. This new plus in the fall, warner and comcast next year. More content leaving so i think middle income households will probably have to think about whether they subscribe to one, two, or three plans. Yes they can cut the cord and afford all of them, but the fact is netflix saw a decline and that is what Fuels International expansion. They are about to lower prices in india. So i do not see how they are worth the 450 price target my competitors have on the stock in todays correction makes a lot of sense. Emily to avoid being boring at all, you did tweet you would be talking about the big whiff and that you would be duking it out, so bring it. What is your take . Is this a blip or a longterm problem. The Second Quarter has been a problem in the past. Second quarter 2016 they missed forecasts by quite a bit, though not as much as they did today. If they had warned everybody that this would be a light one. So is this a onetime phenomenon or something where we cannot trust their forecast . Netflix is response to this is that we have forecast 7 million and are still on pace for the biggest year yet, but as weve seen, their forecasts cannot always be trusted. So if they miss again next quarter, which comes around the time disney is introducing disney plus, that becomes a real problem for investors, especially if growth slows overseas. Which has been the engine for the past few years. Emily lets talk about the Current Quarter where they say they will add 7 million subscribers, a huge jump. This quarter, we know that Stranger Things is back and last quarter they highlighted dead to me and murder mystery, but does this mean it is dependent on an individual strangerit like things, and does that make it more challenging . Subscribers really depend on a huge hit. Sorry, go ahead. Emily michael, you first. I honestly think what lucas said is right. I think this is a blip. I think that subscriber growth will be like movie box offices. When there is lots of great stuff, they will see an increase in subs. The numbers on Stranger Things is pretty impressive, it is a really good show. That a handful of really great handful of a really great content or i think they will probably hit the sub number. The problem is next year when there is competition and we saw a preview of the quarter. Next year, you have a couple quarters where they lose subs. Emily can the hits keep coming . The other issue i see is that look at the volume of shows they released. I know they did not have Stranger Things or orange is the new black. They would have something new come on every day. Sometimes, they would have five new projects. If none of those are moving the needle and it really is only a handful of shows, that is a little bit concerning. That being said, they do have a pretty good track record of coming up with a new big hit every few quarters. If they can keep that going, they will be fine. But they do seem to have a volume issue. Emily and that is a good point. We have talked about the hit shows, we have not talked about the shows that are not great. I have seen some of those. How good of a Business Model is it to throw everything at the wall and produce stuff that is not that great . Or is the hbo model of very few, more highquality content, is that better . By my count, netflix produces about 10 times as many shows as hbo and get about the same number of emmy nominations. Throwing stuff at the wall, they are going to have their hits. I actually think that subscriber growth is going to be based on one of two things. Watercooler shows like breaking bad and Stranger Things that we talked about or good enough content, high quantity of ok content. That is the real acid test. Do they have enough stuff that is good enough to keep us coming back . I think these metrics they are giving us on the crap shows tells us that people are willing to watch whatever. You get 40 Million People watching adam sandler, which shocks me. Emily i thought it was good. [laughter] lets talk about international. They are saying in q3, 7 million additinal new subscribers. 6. 2 million of which will be outside the u. S. They talked a lot about india, introducing a cheaper, mobileonly plan. They said they could get another 100 million subscribers in india. Where is the growth going to come from . In the shortterm, you are still looking mostly at europe and latin america. Brazil, united kingdom, france, germany, these are the biggest markets according to most analyst reports. Netflix does not break any of this out which will be useful for analysts like michael and reporters like me. But longterm, we are definitely looking to asia and have invested money in additional programming in the region. And this mobileonly plan is a big deal because they have been testing lowerpriced plans the past few months. This is the first time they are committing to rolling one out. It suggests that either they think it will work or that they need to do something to boost growth. It is the first price reduction we have seen netflix stake take because they are raising prices almost everywhere else. Emily lets talk about the other parts of the story. You have disney, apple, warner media, all of these other companies trying to take netflix on. Disney is offering cheaper and has a huge library of classics that people keep coming back to over 50 years. How big of a threat is this competition . I think barry diller said it very well. Netflix has won. They are not going to go out of business or lose a material number of subscribers. The question is, can they grow into their valuation . And i dont think so. International, if they add 100,000 subscribers in the countries they do business, that is 20 million a year and they could do that for another 10 years. Can they continue to grow domestically . No. Can they turn cash positive . No. Emily coming up, microsoft has beaten earnings for the last a quarters, did it delivered this time around . And elon musk seeks to merge human brains with ai. Here is a look at how his neural implants are already working in rats and monkeys. This is bloomberg. Emily microsoft earnings out thursday, driving the market value up to 1 trillion largely due to the success of cloud computing. That is at the center of analysis of secondquarter results. We talked to former executive painter. The big deal is going to be guidance and seeing how they can come up with firstquarter numbers and some color about the next fiscal year. Emily the big question is can microsoft keep it up . Now that expectations are so high, can the company continued to deliver in a new tech economy . Was a firstch provider to amazon and google. We have expanded it to amazon in the last few quarters because there is such enormous demand for the services they are providing. This is only the beginning of an incredible boom that will continue in azure. Emily it is not a zero sum game . Absolutely. Every study tells us we are in the early weeks of a long game. Microsoft is on the verge of becoming the corporate cloud. Fresh off the last few days of their biggest summit in vegas and cloud reach is a partner, but the big theme is trust. Not just trust with partners but in the enterprise relationships to expand those. Which frankly is a differentiator from google and amazon. Emily that said, when you are the most valuable company in the world, and microsoft does have a trillion dollar market cap, what are the challenges . The macro concerns are the only thing that could provide provideany kind of headwinds, but other than that i agree with aaron. The market with Cloud Services are so large and we are just seeing the tip of the iceberg. The market potential in the enterprise space is enormous. And microsoft is better positioned than any other company. Emily beyond the cloud, pc sales are still a big part of microsofts business. What is happening between the United States and china is a huge issue given the supply chain. Given that you worked in china for many years, what do you think the u. S. China the trade war, how will it impact commercial sales for microsoft in china . Microsoft is very focused on seven billion. They keep talking about the reach. At the conference, you feel they are leading the world in cloud. They feel like they know they can and they focus a lot on the incredible reach of every Single Person in the world and how they can tap them with some sort of cloud service. It is hard to ignore china in that context. Emily if you cannot ignore china, what could a potential impact of the trade war be . This seems not to be subsiding, so if tensions remain, what does that mean . The strength in china has been arou