And mind games. Elon musk flames new technology can read a rats mind. Elon musk announces his latest startup neuro link, successfully implanting wires into brains and enabling a monkey to control a computer. The next goal, human trials. We begin with the hearings on capitol hill. Facebook, amazon, apple, google all appearing in washington to answer lawmakers questions on antitrust, social media, and cryptocurrency. The first to be raked over the coals, 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 today . That is what libra is about. Emily the chief was grilled on tuesday. We caught up with the senator after the hearing. Sen. Warner lets start with the fact that i think Blockchain Technology, even the possibly of cryptocurrencies, has some real positive upside, but i think we have to be careful. Particularly when we are talking about 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 they go out and directly acquire, and here you have this Blockchain Technology that might be able to come 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 today, it seems. What would your message be now to Mark Zuckerberg, the ceo of facebook . Sen. Warner my message would be blockchain offers an awful lot of possibilities, but you have a burden of proof, facebook, to make sure, one, that they 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 onetoone 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 if a third party wallet came around, and people do not want to use the socalled Calibra Facebook product but wanted to a third party, they would be willing to transfer the keys, transfer the data, do the other technical transfers to that third party, that was a good sign. And my hope would be as somebody who has Bipartisan Legislation im about to drop that will talk about data portability within their existing networks, my hope would be that facebook would bring that same kind of supporting approach to the legislation that i will bring 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 . Sen. Warner 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 facebookbased political ads, the same way we have disclosure around tv and radio ads, but there are technical issues, and my background was 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 kind of 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 they 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 today along with google, apple, amazon. Do you think and lets start with facebook, do you think facebook should be broken up . Sen. Warner 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 can 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 a little 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 some of the break up calls. But if we do not see these Platform Companies actually 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 may 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 this concern you . Sen. 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 two 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. Thiel and mr. Trumps statements are a little overthetop, but i think it is incumbent upon all these companies to frankly go the extra mile to earn peoples trust. And 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 saw 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, candidly, these companies have been slow to acknowledge that and be a more active participant in bringing about these kind of appropriate regulations and appropriate rules of the road. Emily virginia senator mark warner. Coming up, netflix and no chill. The streaming 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 topping earnings news this week, netflix reported a surprise loss of u. S. Customers for the Second Quarter. The streaming giants earnings renewed concerns about Growth Prospects at a time of looming competition. Netflix says it lost 130,000 customers as a result of higher prices and a weak slate of shows. It signed up 2. 7 million global subscribers in the period, also missing projections. We broke down the results wednesday with analyst Michael Pachter and lucas shaw. Michael i hate to bore lucas because he actually tweeted he is tired of talking about this. I think that price increases probably drove the subscriber loss of domestically. And i think that they are probably bumping up against the ceiling on what they can charge and continue to grow. I personally believe that they will keep 80 of their domestic subscribers as high as a 20 monthly charge, but their last 10 million subscribers are probably middle income households and they notice when prices go up a couple bucks. Which they did in january. And i think you are going to continue to see continued defections as content migrates away and as competition starts to materialize. Disney plus in the fall, warner and comcast next year. More content leaving this year and next year. 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 just do not see how they are worth the 450 price target my competitors have on the stock and i think todays correction makes a lot of sense. Emily to avoid being boring at all, you did tweet you would be talking about netflixs quote, unquote big whiff and that you would be duking it out, so bring it. What is your take . Lucas i think the big question is is this a blip or a longterm problem . The Second Quarter for netflix 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 again a onetime phenomenon or is it something where we cannot trust their forecast . Netflixs response to this is that we have forecast seven million and are still on pace for the biggest year yet, but as weve seen, their forecasts cannot always be trusted. They miss on these a lot. So if they miss again next quarter, which comes around the time that disney is introducing disney plus, that becomes a real problem for investors, especially if growth is not only slowing in the u. S. , but 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 seven million subscribers, a huge jump from 2. 6 million. This quarter, we know that Stranger Things is back. As for last quarter they highlighted dead to me and murder mystery, but does this mean it is so dependent on an original hit like Stranger Things, and does that make it more challenging . Because subscriber additions really depend on a huge hit. Lucas sorry, go ahead. Emily michael, you first. Michael you know, i honestly think what lucas said is right. I think this is a blip. I think that Netflix Subscriber growth will be like movie box office. When there is lots of great stuff, they will see an increase in subs. The numbers on Stranger Things are pretty impressive, it is a really good show. They have a handful of really great content, so i think they will probably hit the sub number. The problem is next year when there is competition and we saw a preview of next year with this quarter. So i think next year, you have a couple quarters where they lose subs. Emily lucas, can the hits keep coming . Lucas the other issue i see is look at the volume of shows they released. I know they did not have Stranger Things or orange is the new black. I was doing some research, they would have something new come on every day. Sometimes on fridays they would have five new projects. A documentary, anime, a new movi e. If none of those are moving the needle and it really is only a handful of shows, that is a little bit concerning because of the volume and how much they are spending. That being said, they do have a pretty good track record of coming up with a new big hit every few quarters. And 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 a lot about the hit shows, we have not talked about the shows that are truly not great. I have seen some of those. Michael, how good of a Business Model is it to throw everything at the wall and producing a lot of stuff that is not that great . Or is the hbo model of very few, more highquality content, is that better . Michael by my count, netflix produces about 10 times as many shows as hbo and they get about the same number of emmy nominations. So, throwing stuff at the wall, throwing 10x 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. Either watercooler shows like breaking bad and Stranger Things that we talked about, or good enough content, high quantity of ok content. And that is the real acid test. Do they have enough stuff that is good enough to keep us coming back . I actually think all these metrics they are giving us on the crap shows tells us that people are willing to watch whatever they throw at them because they are running out of really great stuff to watch. So you get 40 Million People watching adam sandler, which shocks me. But it happened. [laughter] emily i thought it was pretty good. Lets talk about international. They are saying in q3, seven million additional new subscribers. 6. 2 million of which will be outside of the United States. They talked a lot about india, introducing a cheaper, mobileonly plan. Reed hastings has said they could get another 100 million subscribers in india. Where is the growth going to come from if not the United States . Lucas i think 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 of course does not break be of this out, which would useful for analysts like michael and reporters like me. But longterm, they are definitely looking to asia and have invested a lot of money in additional programming in the region. Particularly in ngf. And this mobileonly plan is a big deal because they have been testing lowerpriced plans in asia 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 in that region. It is the first price reduction we have seen netflix take because they are raising prices almost everywhere else. Emily michael, lets talk about the other parts of the story. You have got 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 . Michael i think barry diller said it very well a couple weeks ago. Netflix has won. They are not going to go out of business. They are not going to lose a material number of subscribers. The question is, can they grow into their valuation . And i dont think so. International, sure. 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 cashflow positive . No, not with the current model. Emily coming up, microsoft has beaten earnings per share. Didnt deliver this time around . That is did it deliver this time around . And elon musk seeks to merge human brains with ai. More on how his neural link neural implants are already working in rats and monkeys. This is bloomberg. Emily microsofts earnings out thursday, driving the market value up to 1 trillion in recent months largely due to the success of cloud computing. That is at the center of analysis of secondquarter results. We talked to former microsoft executive and current ceo of cloud reach aaron painter and bloomberg intelligences anurag rana. Aaron we did not find anything negative so far. The big deal is going to be guidance and seeing how they can come up with firstquarter numbers and also some kind of color about the next fiscal year for them. Emily aaron, the big question is can microsoft keep it up . Now that expectations are so high, can the company continue to deliver in a new tech economy . Aaron i will tell you, cloud reach was a first provider to amazon and google. We have exp