America bbc america. The deal would allow bbc America World wide to keep control of the channel while cutting overhead. Bbc america is available in 80 million u. S. Households and airs shows like the musketeers. Todayr shares soared 20 following a strong earnings report, its biggest daily gain since the day after its ipo. To the says changes made service are working. He says revenue rose mostly because users spent more time on twitter, and the audience for tweets beyond twitter itself is more than twice its active user base. And Edward Snowden temporary asylum in russia is set to expire tomorrow. He has requested an extension. Coming up at the bottom of the hour, an indepth look at how snowdens revelations about federal government spying have impacted business, government, and your privacy rights. First, to our lead story of the day. Amazon make its objectives public in its dispute with a book group over ebook prices. It has been going on since may. Is to lowerctive ebook prices. Amazon argues that if if ebooks were priced at 9. 99 instead of 14. 99, there would be more sales. Amazon also indicated it is willing to expect except the same share of total revenue if hachette agrees to lower the price on most books. Amazon rights, while we believe 35 to go to the author, 35 to hachette, the way this work is we would send 70 of the total revenue to hachette and they would decide how much to share with the author. Joining us via skype is the ceo ebook distributor serving in the authors, Small Presses and literary agents. A self published author of several books on amazon. You have been supportive of amazon throughout this dispute. What do you think of this latest response . Im happy that amazon is finally talk up taught talking about what their negotiation terms are. It confirms everything i suspected just from watching the company over the years and dealing with them as an author and publisher. They went through this in 2010, fighting for reasonable ebook prices. Back then the response from publishers was to form a cartel and collude with their supposedly competitors in order to artificially raise the prices of ebooks on readers in order to protect their legacy print industry, or to make as much money as they possibly could for readers. I think it has been to the great detriment of the authors that hachette authors at hachette that they are fighting for these higher ebook prices. Im glad amazon is finally talking. We are in a weird situation where you say hachette has not returned your calls for comment. It is usually the other way around. Hopefully this will put some pressure on hachette to come to the table and negotiate. It sounds like they have not been doing that. Mark, amazon wants 30 and it also wants hachette and the authors to split the remaining 70 , which is different from the way it is today. I believe authors get 25 today. Can you explain how this differs from what amazon is proposing and what authors actually take away when they sell a book today . Some of what amazon is proposing here is a disingenuous smokescreen. If amazon really wanted to offer consumers lower prices, it would be doing other things differently. Right now amazon for self published authors penalizes the author if they price the book under 2. 99. 35 , rather than 70 list. It reallyamazon makes difficult for authors to price their books as free. The only way to price your book at free is to enroll in their exclusive k. D. P select program kdp select program. I think this is about amazon gaining control over the price, and control over the ebook margins. If you look at what amazon said in their blog post, they are talking about 70 of revenues. 70 of proceeds. They are not saying 70 of price. What he publishers want is the freedom to set their own prices, and earn 30 list and give the retailer 30 list on ebooks. The publisher wants to earn 70 list. It should be the publishers decision what they pay the authors. I agree with many of the critics and i agree with you hugh that publishers are not paying their authors enough. Theyre only paying their authors 25 net, which works out list price. of the if you look at what self published authors are earning, they are earning 60 to 80 of the list price as their ebook royalties. There is a big gap here in what publishers are paying and what self published authors are earning. Amazon makes the argument they use the price of an ebook at 14 90 nine cents. They say if they reduce that to 9. 99, they would sell 74 more books and bring in 16 more revenue. I want to bring in our editoratlarge, cory johnson, who has been looking at this very closely as well. Torrey, is a smokescreen as mark said . Mark is right to point out how cleverly this is written. Can do the exact same kind of mass. They have done their own price analysis. Price analysis like this is never fixed. They dont know for sure that every title will have the same pricing dynamics. They make it seem like it is math set in stone. The other thing were doing here is at the end of their note, which i have tweeted out it is an interesting 1 they try to create another area of focus, which is how much the authors are getting paid, arguing that the publisher should split 50 50. The publishersat dont do this right now. Getting authors ticked off that amazon is a problem for amazon. Amazon is trying to sway their opinion, suggesting there on the side of the authors, and writing that in a blog post. Hugh, what do you think . Do you think amazon cares more about amazon, or does amazon actually care about you . Amazon cares about amazon foremost, the reader secondmost, and the author the reader. The reader. I have never been treated as well by any publishers as i have amazon financially. It is night and day. Mark is trying to make a different argument about ebook ricing, saying amazon punishes ebook prices that are too low. Amazon just or paste released a pricing rule. Is justt that amazon for low prices or higher prices. They are fraught to mull pricing. What they have right now is publishers charging too much for ebooks in large part because of protecting relationships with bookstores, with their legacy print industry. Over 30king with publishers around the world, and they have told me they cannot lower the price of my ebook because it will upset bookstores. Expert who thinks that publishers are doing a price analysis and making a logical decision that is not how these decisions are being made by publishers. They are being made emotionally, they are made because of existing relationships, because they dont want ebooks to gain penetration because it takes that power away. People who think that publishers are behaving logically here in the best interest of authors for readers have not studied the history of the Publishing Cartel that exists in new york right now. It is not operating in the best interests of its own authors. I hope amazon wins this fight and we get ebooks at a reasonable rate. A Publishing Cartel. We will be watching to see how hachette response to this. Thank you so much, author hugh howey, mark coker, and cory johnson. Could snapchat really be worth as much as 10 billion . Alibaba could be ready to invest some serious cash in the photo disappearing app. That is next, right here on bloomberg west. Im emily chang. This is bloomberg west. Snapchat is in talks with Ali Baba Group for a financing round that could value the photo messaging company at 10 billion. People with knowledge of the situation tell bloomberg the talks are ongoing. The terms of the funding could change, but if it is completed snapchat would join Companies Like dropbox, airbnb, uber with valuations more than 10 billion. Alibaba group is gearing up for a u. S. Ipo and has invested in a number of u. S. Companies recently, including shop runner. Joining us to discuss from new digital,he ceo of tbg and our editoratlarge, cory johnson. Simon, i will start with you. Snapchat has no significant revenue that we know of. 10 billion . Is that fair . It is when you look at valuation approaching 200 billion dollars. It snapchat can take a bite out of that market, 10 billion might be cheap. Offered 3cently billion, which they turned down. Snapchat launched a new product, similar to a stream of information that disappears every day. That is getting one billion views a day. The numbers are getting significant. It could be worth the money. What do you think, cory . Facebook,pare it to which tried to buy snapchat for 3 billion, is this a fair price . The price is ridiculous. There is no revenue. There is no way to imagine how there would be revenue. Before,ave seen this where companies are prerevenue but getting great big valuations. If it happens with this valuation, it would be a bit. Let me offer two ways to think about this. One is the size of snapchat. Million snapchat had 27 users. That compares to 72 million users on instagram. It is in or mislead popular. A third of instagram already. A lot of messages. Numbers i saw from february suggest they are doing 1. 5 billion messages a day. A lot of active use. A lot of the users who are not paying anything for it, neither are they seeing any ads. The other thing that is different is that this being ali baba, it might open the doors to , in the waychina that some chinese blessed companies are allowed to do business in china, where facebook and google are not. That could make this business a lot more valued Thomas Sibley by the fact that it is an investment from ali baba al ibaba. It is interesting also because alibaba has stake in its own messaging app. Think aboutdo you alibaba in particular being part of this potential financing round, and how involved they might be . As cory said, if they can take snapchat out of the billions of people who are in china, it could be a scary prospect for the networks which dont currently have access there. They already have the investment in we bow, which the majority of it is a decent stake. It gives them a few different bets on it is similar to twitter, facebook combination. Snapchat is a slightly different approach, where the messages disappear. It could be huge. Simon, cory, i want to talk about twitters big earning report. Twitters monthly active users up 24 , stemming concerns about slumping user growth. Twitter also doubling revenue, more than doubling red veto on the revenue. The stock has gone crazy. Cory, are the numbers as good as they look . That loss is not as bad as it looks, either. Stock compensation charges, which is a noncash item. Expense on the income statement this quarter, as it does every few quarters after the ipo. Without that, it would have been profitable for the first time. You see from this company is a lot of thing starting to take. You saw an increase in the growth rate of new users. You see an increase in the growth rate of page views. And you see a continued increase in the value of the users. The revenue for 1000 page views hit 1. 60 in the last quarter. It was half that a year ago. If the advertisers are getting what they want and paying more for it you mentioned the user growth rate changed. 6. 3 if the more important number. They put 24 in the press release. At the sequential change from quarter to quarter, you can really see the company kind of bottoming out in december and then turning around. Those usersate of is growing a little bit faster now. It was a little bit faster last quarter. They have managed to reaccelerate user growth more than 270 million users now. Simon, it is all about User Engagement when it comes to twitter. What does twitter still have to prove . Can they keep this up . They just have to keep continue doing what they are doing in terms of converting the huge awareness that twitter has. Everyone knows what twitter is. Making the experience better for people, based on what they are interested in. They worked the work to get around the world cup, maybe expanding that to other events that people can really engage and find out information about topics they are passionate about. That is what will convert that awareness into user growth, and that is how they will catch up with facebook him a 1. 3 billion users. Simon mansell at our editoratlarge cory johnson, thank you. What is an entrepreneur to do when he has been fired from his last start up . Write a rock album . Travel asia and start something new . We will be back and talk about the former groupon ceos latest detour. Welcome back to bloomberg west. Im emily chang. Could it be a great Silicon Valley comeback . Andrew mason was fired from groupon back in february 2013 after shares plummeted by 80 after the ipo. Since his departure, mason has been doing some traveling, side projects but he has also been working on a new locationbased audio tour app called the tour. Brad stone went on a tour with andrew mason to find out what he has been up to post groupon. It sounds like he was quite entertaining. I would expect nothing less. [indiscernible] [laughter] as we were doing when these detours in fishermans wharf, the great san franciscan tourist neighborhood, walking, listening you go to a specific area. A fisherman is talking. He is very earnest about this experience. Andrew mason has a great sense of humor and dealt with it gracefully. Not the most dignified thing. Audio walking tours. Why . It is a big market. There are a lot of these apps. Other people have tried it. Andrew, who was all it groupon about getting people out of the house and getting to experience their city in new ways, is riffing on his idea in a different way. He has a former couple former groupon engineers working on it. Locationbased phones, gps, all these things can create a better experience. We will see. It is not just walking tours, it is entertainment grade we did a tour of the tenderloin and John Parry Barlow narrated the theeful narrated, grateful dead lyricist. He talks about the hots he likes in the tenderloin. Will see when detour opens up the marketplace and allows people to contribute, how big it can be. My last encounter with andrew mason was chasing him around times square. The bad publicity had already started. What is his postgroupon view . What does he have to say about it . He was pretty up front when he was fired. Thats right. He takes a lot of the blame for what went wrong. He says primarily that they went public way too early. Rapid growth company. Hundreds of millions of billions of revenue in one year. They had new organizational problems. To try to figure that out in public is hard. What you want to address is the relationship with the board. He says, we are great friends. But it is clear that he is joking, and there is tension in that relationship. He made 400 million off of this. Why bother . It seems like he is wellconnected with some of the bigwigs in Silicon Valley. He still has got at least a good reputation among them. Yeah, and i asked him why do this. He said, what else should i do . He is still an innovator. He is young. I dont think it is a quest for redemption. It is like hes trying to build something that enlivens their city. He talked about oculus rift, and he demoed it. He said, when it comes out there will be no reason for us to ever leave our living room. He wants to get detour out and succeeding before we all disappear into virtual reality. That is a good point. We will be watching, and maybe listening to his album of work songs hardly working. He actually made an album. Thats right. It is not clear how tongueincheek that was. He called the best thing he has ever done. All right. Brad stone, thank you. Tomorrow is a big day for Edward Snowden, when his asylum in russia expires. What happens next . How has the revelations of nsa surveillance impacted business . You are watching bloomberg west. Im emily chang. Taking anhour, we are indepth look at the impact Edward Snowdens revelations about nsa surveillance have had on business tom egovernment, and consumers. We are looking into what it has meant to your privacy rights and how the news about bulk phone record collection, internet wiretaps and more has changed the Business Practices of Technology Companies and the broader corporate world. First, it was a little over a year that snowden first exposed the spying tactics employed by the u. S. Government. How there is an nsa reform bill in the senate that has already passed the house. This legislation would stop bulk Data Collection and force stricter requirements from gathering at, and and metaData Collection from phone calls. The bill has plenty of supporters in the tech community, including yahoo , google, facebook, and apple. Here is what those ceos have had to say about nsa surveillance. We need to be significantly more transparent. We need to say what data is being given, how many people it affects, how many accounts are affected. We need to be clear. On us rightg order now. We cant say those things. Do you know google is quite a post along with the other Tech Companies to what we see as overreach by the nsa, and we all think that bugging Angela Merkels phone is pretty stupid, if i can be blunt. Number one question from google. Dont do stupid things. That does not mean we dont need to have a system of surveillance, because we do. That has to be accepted. If you dont comply, it is treason. Much of what has been said is not true. There is no back door. The government does not have access to our servers. They would have to cart is out in a box for that. Out in a box for that. That just would not happen. They did not knock. They did not call. They did not send a letter. They just visited her in visited. [laughter] what request would you make to president obama . Transparency. So we can help our users understand exactly how many requests we are getting, and or the range or types of request as we are getting, and how those requests will be used. Nsa issues are a real issue, especially for american internet companies. Trust is such an important thing when you are thinking about using any service where you are going to share important and personal information, and we continue to work to make sure that we can share everything that the government is asking of us. Do you feel the trust has fallen because of this . Yeah, i definitely think so. U. S. ,t only within the but internationally. Certainly there are other countries that have concerns about what the nsa is looking at. Transparency is something that would really ultimately help us. It is my job and our job to perfect everyone who uses facebook for tech everyone who uses facebook and all the information they share with us. It is our governments job to protect all of us and also to protect our freedoms and protect the economy. I think they did a bad job of balancing those things here. Frankly, i think the government blew it. Mark zuckerberg thinks the government blew it. All of this coming as Edward Snowdens asylum in russia is set to expire tomorrow. Will he be granted an extension . Cory johnson is in new york and joining us via skype in miami is the ceo of immunity, a Software Security company who is also a former Computer Scientist for the nsa. Thank you for joining us. What do you think . Will snowden be rented an extension in russia . I would say of course he is. The russians do not want to set a precedent that they can take in someone like Edward Snowden with reams of classified information in his head and eventually turn him away to the whims of the american prosecutors. Realistically, there is no way that snowden is not going to be granted some form of continuing asylum for the rest of his life. What do you imagine the nsas interest still is in making some kind of deal for his return, and the white houses interest, for that matter . It is really not just the nsa. It really does come down to the whole intelligence community. They still say they dont know exactly what he took. They dont know who he gave it to. A lot of what Edward Snowden says is definitively not true about who he is giving this information to. We know for a fact that he went and gave the chinese newspapers in hong kong a lot of information, possibly very specific information about what servers in china and around china the nsa had access to. And things like that, the specifics of what he gave, are still very interesting to the nsa. Bethis point, they must partially through their damage control, and they must have some idea of how badly they were hit. There is also an interesting areon that germany they interested in having him testify about u. S. Spying on german officials in germany. The notion that he might even be granted immunity there. There is some movement afoot to see that happen. Is there any possibility of that . I dont think so. The germans are a very tight ally, even despite their continual reaching with russia. The fact is that germany already has a very tight Intelligence Association with the United States during states. There is no way Edward Snowden would be foolish enough to venture off into western europe, a place where the United States has deep economic and political ties. He will stay in moscow. He will probably be in that apartment in moscow for the rest of his life. There is still a giant discrepancy between what snowden revealed and what the Tech Company Ceos are saying. When you hear tim cook say there is absolutely no way that they have a backdoor to apple they would have to cart us out in a box before that happened who can we believe . The reality is a lot of that is marketing. Specificor is very language. What they are trying to say is that there are these classes of things they would not do for the government trade but we are definitely not going to tell you about all the classifications of things that we will do and have done in the past for the government. It ishey say a back door, very specific language. What it does not do is provide transparency on their part for what it is they are willing to do for the government. Regulation forced their to do some things, but they cannot say there are other connections. This is probably one of the things that has made it very difficult for them to regain the trust that they really need to do to penetrate the international market. Cisco taking massive hits all last year, and it came down to layoffs. There are a lot of American Companies really hurting because of some of these revelations. It is largely default. There is some nuance in what the ceos are saying. Eric schmidt told me that they did not call, they did not write, they just visited. And you have tim cook saying, this never happened. Is somebody lying here . Are these ceos lying to us, their users . They are being very cagey with their words. It has been and continues to be in their best interests to cooperate as much as they can with the u. S. Government. The u. S. Government is one of their very largest customers. Obviously they will get special preferences and ask for special favors. Makes ither hand, it harder for them to look at the rest of the world market, which is where the growth is. They have to somehow establish trust in the rest of the world market. What they do not want to see is the internet [indiscernible] so they only have access to the friendly u. S. Countries and they cannot go into china, they cannot go into india. They see that as a possibility. When eric schmidt comes to you and says, im not fond of the u. S. Government and what they have done to my company we are talking about a company where largely the connections between them and the nsa are probably not things they want you to know, but that does not mean that they are not very valuable for their business. Right. And all of these companies do spend a lot of money lobbying in washington. What about this bill that passed the house in the senate to stop bulk Data Collection . Do you think this will pass . Will this make an actual difference, or is the nsa going to keep doing what it has been doing . I thought it was very interesting that you said it. The puckes is move slightly to the right and keep Data Collection in the hands of the telecommunication companies. It has been a weird part of the National Discussion that americans are very upset about the government having access to this information. They are perfectly ok with verizon, at t and tmobile, which is a german company, having all access to this information. The bill itself the senate is sort of gridlocked in a very unfortunate way. It may or may not pass. I do not think it will make a difference either way. Aitel, former nsa Computer Scientist, thank you so much. We are awaiting word as to whether russia will extend Edward Snowdens asylum, which expires tomorrow. Speaking of privacy, should your emails have the same privacy protections as letters sent to you in the mail . Microsoft think so. We dig into this story with microsofts general counsel coming up. Welcome back to bloomberg west. Argentinas economic minister has been holding a press conference in new york after the s p declared he south American Country in default. Argentina was unable to pay 539 bondholders. To this is potentially their second default in 13 years. Carol massar has been following this and is live in new york with the very latest. What is going on . The situation keeps going back and forth here. After meetings between officials and holdouts, no agreement was reached. Argentina will be in default. This is according to Court Appointed mediator daniel pollack. He sent this in an email statement today. S p did declare argentina in default after the governor admits the deadline for an Interest Payment of 13 billion of restructuring bonds. The country could not pay 539 million owed to bondholders after a u. S. Judge ruled the Interest Payment cannot be distributed unless the hedge fund that defaulted the debt has also gotten paid. After weeks this is been going on for some time of avoiding direct negotiations with the funds, successfully sued the company country. That facetoface meeting was held for the first time last night rate that was going on this evening. Though settlement talks with creditors led by Elliott Management continued after a Top Argentine banker and former economy minister official right in new york to make a lastminute proposal aimed at solving this dispute. It has come down to the wire here. Argentina will probably cure the default in the next few days. This is coming from Goldman Sachs. Emily, it has been a fluid situation. It is one that has been going on for quite some time. We did hear from the argentine economy minister. He did go on to say that argentina will keep paying its debt at this point. But the really key headline is that that accord was not met. There have been several parties involved in that. It has been a difficult situation. We know from the argentine economy minister he says argentina will be looking to export all Legal Resources in this debt case. There are several parties involved in this situation. You have got s p declaring the country in default. We will have to wait and see whether or not any new negotiations come up. Goldman sachs seemed to think this will be a shortlived situation. And you are looking at argentinas economic minister speaking in new york at the consulate right now. Carol, as i understand it, there has been a lot of skepticism that argentina really wanted to avoid this. They have been avoiding these negotiations. While default is a disaster, some people are saying, not much is going to happen right away. How are we expecting this to play out . That is a good point, that in terms of they knew what the timeline was here. They certainly knew the financial situation. As i mentioned in terms of Goldman Sachs we will certainly hear from the Investment Community weighing on this they do anticipate that this will be just a shortlived situation at this point. They dont anticipate it will have any major implications for the country. From the senior latin american economist at Goldman Sachs in new york. He says there is the expectation that a deal with the holdouts will be worked out soon. At some point, everybody has to come to the table, take the terms put to them. We will see how this one gets resolved over the next week or so. Much. Ol massar, thanks so we will continue to follow this press conference happening in new york. We do have more breaking news, coming from washington, d. C. Republicancontrolled house of representatives has voted to sue the Obama Administration over the implementation of a 2010 health care law. House Speaker John Boehner saying the president violated the constitution by delaying when employers have to comply with that law without getting approval from congress. More of bloomberg west after this break. Im emily chang. This is bloomberg west. We continue our look into privacy and how much life has changed for business, government and consumers since Edward Snowdens revelations. Microsoft general brad smith says, the u. S. Government cannot force american Tech Companies to turn over customer emails stored exclusively in Company Data Centers in foreign countries. Microsoft argued that very point at a hearing in federal court tomorrow. By brad smith, microsoft general counsel and executive Vice President of legal and Corporate Affairs from Company Headquarters in redmond, washington. Thank you for joining us. This all came out of a specific government request. Tell us what exactly was the government asking you to do, if the government asking you to do, and why are you against it . The u. S. Government is seeking to serve a search warrant to obtain emails in our data center in dublin, ireland. The point we are making is that we believe that the emails that you store in the cloud are entitled to the same kind of Legal Protection as the information you put on paper. Ae government can serve warrant, but a warrant only reaches the United States. It does not reach another country. Is of the concerns we have if the u. S. Government uses warrants to reach into other countries, other countries are going to do the same thing. The British Government has already moved in this direction. We know that the American Public does not want its emails stored in the United States to be subject to warrants served by other countries. Everybody wants their own laws to apply. The government says it is the interests in of Public Safety. How do you respond to that, . If the public is at risk that, if the public is at risk . We need a world in which Public Safety is protected, people privacy is protected, and technology can move forward. There are ways to do that. This is in ireland. The u. S. Has a good treaty with the irish government, Law Enforcement worked together all the time if the u. S. Government wants to access data in a data center in ireland, the proper approach is to go through that treaty, work with the irish Law Enforcement, and then get that data under irish law so it can be turned over to Law Enforcement authorities here in the u. S. Earlier this year microsoft got a lot of heat for reading an employees hotmail account, or reading an email from a hotmail account in order to track down a microsoft employee accused of corporate spying. I know you changed your terms of service after that. We have been talking about the relationship between the nsa and government and Technology Companies. How can we be sure you are not going to snoop in our emails . How can we be sure there is not a double standard . Dothe first thing we need to is be principal. That is what we believe we need to do at microsoft. I think you are seeing this in other Tech Companies as well. A first principle here is that peoples text messages, instant messages, voice conversations, emails, the documents they store all are entitled to strong privacy protection. Bottom, people will only use technology if they trusted. Trust it. Creatingensure we are processes that are worthy of that trust. When the question arose as to what some of our investigators were doing, it crossed my desk, it just took a day to say, this is not what we should be doing. This is not what the government should be doing. Lets be transparent with the public through our terms of service. Lets change our terms of service so that people have confidence in us, and we hope in others too. John chambers has been courageous enough to come out and say that the nsas policies are hurting ciscos business in china. What has the impact been on microsofts business . I believe it is a problem for all of us in the tech sector. Its a problem for us, its a problem for other companies that are focused in particular on Cloud Services or devices that connect to the cloud. It was definitely brought home to me when i was in europe in may. People look for precise numbers. I dont know that we can quantify it that precisely, but i remember having a cio from one of the german states look me in the eye. He held in his hand the decision that had been issued by this magistrate in new york that had to prove the governments warrant that we are now contesting. He said to me, if this decision is not reversed, there is no way that my State Government in germany will ever be able will ever be able to put any of its information in a data center run by any american company. It is a simple as that. I was one person, one day. But we are seeing this around the world every day. Brad smith, executive Vice President and general counsel. You will be in court tomorrow. Our johnson, editoratlarge, thank you as well. Thank you all for watching this edition of bloomberg west. Get all the latest headlines on your phone, tablet, and bloomberg. Com. Welcome to money clip, where we tie together the stories, videos, and interviews in business news. I am adam johnson. The car business is one that has a lot to lose. Dick parsons shows us his playbook for the l. A. Clippers. This is a bloomberg exclusive. And an investor shows us how to take care of business in venture capital. And finally a bird, a plane . Actually, no. Putting you in the middle of the mayhem
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