Transcripts For BLOOMBERG Bloomberg West 20160309

The legend they oppose the sale to amc. They will vote against the merger because the price is too low. Those are the headlines on 2400berg news, powered by journalists. Lets look at the markets. Hong kong and china are closed for lunch, but heres how they work trading in the morning. All read right now. Shanghai composite closed with 3 of losses. Here is the picture in singapore and mumbai. Back in half an hour. Time for bloomberg west. Emily i am emily chang, and this is bloomberg west. Coming up, france passes legislation that could affect execs if they do not comply with requests for information. Amazon spending billions to grow prime and compete with netflix. To Mark International womens day, we ask a panel of experts whether there is such a thing as a pipeline problem. A decision in france could give prosecutors the power to force companies, including apple, to unlock encrypted data. French lawmakers are backing a bill that would put execs in jail for five years if they do not comply. In addition, every other person who refuses to share information related to an investigation could face fines and jail time. The government aims for a final vote in coming months. Our paris correspondent has been following the story for us. Caroline france had no less than three terrorist attacks in 2015. The question of access to phone data has become sensitive since many of the attackers used phones with encrypted data. Already, in the wake of the Charlie Hebdo attack a year ago, the chief prosecutor wrote in the New York Times an open letter urging apple and google and other smartphone makers to give better access to data during a terrorist investigation. Since then, we had the attacks in paris that killed 130 people. That made this problem even more urgent. Admittedly, after the november attacks, the government crafted an antiterrorism bill. This amendment will be included in this bigger bill. It includes new penalties targeting directly smartphone maker executives, up to 350,000 euros, nearly 400,000 in fines, and up to five years in jail. This has been approved by the lower house and will go to the senate. The french government is expecting a final vote in the next couple of months. Emily i do want to talk more about this with our panel of experts. Joining us, tara maller, Research Fellow at new america. Jay kaplan, who worked at the department of defense and nsa, and alex webb, who covers apple for us. You were in paris, reporting on the attacks. What do you make on this latest twist in the french government . It did not just support the legislation. Youve got 47432 voting for this. I was culling french media reports today, and there was barely a blip on the radar. There is huge backing for this. I was there after both attacks, Charlie Hebdo and bataclan. They were petrified this could happen twice. Emily what are your thoughts . I know you are on the side of apple. You can understand where the french government is coming from. A company like apple has broad engineering resources. They can force certain people to insert capabilities to give access they might need. What happens to a smaller corporation . You force an executive to comply. What if the people who program the devices or software do not want to comply . Can you put an executive in jail for that . Emily tara, you worked for the cia and joined us on the night of the paris terror attacks, which still loom large there. I wonder how much sentiment is driving that legislation. I actually joined you from that exact studio. French sentiment is probably more sympathetic to the back door policy than the United States. Having said that, i am not sure this is the best approach. You have seen punitive measures being placed on executives. They are taking a different type of strategy. One of the problems is, if there is an imminent threat, what happens if the Company Fails to comply . What if there is a legal battle . I am not sure how it will work in timesensitive cases. In the United States, you saw testimony from director comey and apple. You may see Congress Pass legislation mandating a backdoor entry for the government. It is something the government and Tech Companies need to Work Together on. It will not be solved immediately or perfectly. Emily alex, you spoke about france specifically, but what about the rest of the eu . How does the rest of europe feel about this encryption issue . In the u. K. , there were measures introduced called the snoopers charter to increase access to social media. Germany has a slightly different perspective. Germany has its own Historical Context of fascism and communist governments with huge access to personal lives. There is a fair amount of pushback in germany. It is a complex issue across the region. Emily would this bill put tim cook in jail, if this iphone were used in the paris terror attacks . I imagine there are a number of people at the Apple Organization that would be more likely to become the scapegoat than tim cook. I cannot imagine the u. S. Deporting tim cook. Thinking about Roman Polanski emily but apple executives, potentially. What Ripple Effect could this have in terrorism cases around the world . The issue extends beyond privacy. It extends to Technology Companies as a whole being able to secure user data, more broadly speaking. I think the implications of this, we do not know what they will be. But as soon as apple is forced to comply with Something Like this, from a security standpoint, it really gives us chills. We know these backdoors are going to be used nefariously. Emily how much do you think the u. S. Government is following what is going on in france . When it comes to antitrust issues or the tax investigations happening in to u. S. Companies in europe, the u. S. Has not followed suit. Do you think this is something they could follow on . They need to pay close attention to what is happening in other countries. The iphone is used globally. It is not going to be the case there will be different regulations in different countries. At the end of the day, there is going to be some consensus legally or it will not make sense. You cannot have people with backdoor policies in one country and other policies in another country. At the end of the day, as much as we speak about this, we must remember that, when we talk about these things publicly, when we have these debates about encryption and what is going on between companies and the government, it is going to undermine our accountability in this apparatus in the longterm. It is giving terrorists access to information that enables them to understand which apps have access. They will maneuver around those in countries where the laws are certain ways. Emily that coming from a former cia analyst. Tara, jay, thank you for joining us. Alex, you are sticking with me for the next block. This thursday is a key date. That is when the federal government is due to respond to apples court filing. March 15, apple must respond to the government response. All of this precedes a showdown in court march 22, the day of the hearing in riverside, california over whether or not apple must comply with the fbi request in the case of the San Bernardino shooter. Speaking of apple, the first widespread Ransomware Attack on macs is drawing attention to a lucrative corner of the hacking underworld. Hackers can hold information hostage. 6500 macs were infected with Malicious Software designed to make programs inaccessible, and it is not cheap to fix. Users were prompted by hackers to pay one bitcoin, or 411, for decrypted data. One bug could cost millions in damages. Coming up, we will look at how the encryption fight at home may be throwing the foundation of a privacy agreement with the eu into doubt. Also, a longrunning discussion on the show. What does Silicon Valley need to do to create a more inclusive environment for women . It is International Womens day, and we will tackle this very important issue. Emily turning back to apple and its fight with the fbi, in the United States, there is concern it could delay a transatlantic pact with the eu called the Privacy Shield, a framework of draft agreements last month designed to make sure that european user data cannot be accessed by the u. S. Government when it is shipped across the atlantic for commercial reasons. The contentious issue demonstrates distrust between eu regulators and the u. S. Government in the postsnowden era. Here to discuss, danny obrien, and alex webb. I find it interesting this Privacy Shield situation seems a little contradictory. I say this as a european. Europe is not one place. Emily exactly. Germany is the Biggest Country in europe by population, economy. In germany, they have a huge privacy obsession. They also did not have the terrorist attacks that britain, france, and spain has had. On the european level, there are different interests at play. Emily what is the status of the Privacy Shield . The Privacy Shield is set to be ratified any day now. The fact is it is unlikely to really change immediately. What it might mean is that there is a credibility gap. Europeans will say in general, if u. S. Authorities can find a backdoor into a phone in the u. S. , what will stop them from doing that in europe . Emily danny, put this into context for us. The reason the Privacy Shield has been raised is because the original agreement between the u. S. And europe to allow data to move between the two continents fell. The reason why is because the European Supreme Court declared that agreement violated Data Protection standards. To emphasize, those privacy standards are at sort of a constitutional level at this point, embedded in the european charter. This was an attempt to fix that as a commercial agreement. The problem is it is not the commercial sharing of data this conversation is primarily about. It is about the nsa getting access to all of this data. The European Court of justice does not want anyone to have those mass surveillance powers across millions of innocent people. Emily alex, you mentioned, not to overgeneralize, the entire continent, i should say. I should bring in on what has been happening on a countryspecific level with facebook. Germanys antitrust regulator is looking into whether facebook abused market dominance by forcing users to allow the use of their data. Googles sided with facebook, saying antitrust issues and privacy issue should not be mixed, perhaps an example of brewing distrust the eu regulators and u. S. Tech companies. Connect the dots for us. Google and facebook have a different role from apple. They are lumps of information you can track over time. You can see what people are writing over months or years. You do not record a phone call in retrospect. Emily are eu regulators unfairly targeting facebook or is this really a privacy issue . It is easy to couch this as a difference between eu and u. S. Regulatory environments, but there is a disconnect across all of these different markets. When we look at this strange contradiction between france simultaneously wanting emily the government to have access to data and not wanting us to have access. Exactly. What you see is war between branches of the government. There are some parts of the government that understand the importance of privacy to commerce and want to protect peoples ability to keep data private, protect the ability of Companies Like facebook and apple to say, your data is safe. Law enforcement and other groups within the government who want access to the data, no matter what it does to the value or ability of these companies. Emily where does the Privacy Shield go from here . I think it will be completed. Emily ok. It is just to the extent to which Privacy Shield is credible to normal europeans. I think the real point of credibility is whether the European Court of justice thinks it is going to pass. There has not been any reform of mass surveillance in the u. S. Emily danny obrien, thank you for joining us. Alex webb, you will be back on the show a lot. Competition heats up in the digital video streaming space. How the Major Players stack up. Emily amazons foray into video continues. They will launch style fold live, a ramped up version of qvc. It is free and will not feature advertising, but will offer viewers the opportunity to buy featured items within episodes, another way amazon is trying to improve its standing in the fashion industry. Staying with amazon, the company is spending billions of dollars to expand its prime video offerings. Cory johnson caught up with the head of amazon studios, roy price, on the relationship between amazon and the viewer. People tend to get more engaged with amazon. It works out for them and amazon as well. That is the formula, from making a show to buying a toothbrush which will arrive tomorrow. Emily how does Amazon Prime Video stack up against competitors . Cory johnson took a look at the prime numbers. Can streaming digital video best the sale of physical goods . Video was added to prime service in 2011, allowing prime customers to watch online movies, tv shows, and original amazon content like man in the high castle. Liberty and justice for none. Cory amazon is spending fortunes on content. 1. 3 billion in 2014. 1. 9 billion in 2015. An estimated 2. 6 billion this year. That spending has led to a big user base. Amazon prime video has 31. 4 million users, an increase of a third from last year. Netflix is the obvious comparison. How do they stack up . When it comes to tv shows, netflix has 2600. Amazon, 1900. Netflix has 6200 movies. 18,000 for amazon. The story of their offerings is digital revenue. That is in addition to amazons subscription price. Amazons offering is quite different. You have netflix and hulu with subscription levels and hulu doing broadcast tv. Then you have live broadcasts like the state of the union. That is what makes me hopeful about the future. Cory you also have the rentals and downloads. It is a unique offering. All three are getting interest from hollywood. Netflix won four emmys last year, and amazon took home five. Quality matters. An addictive show leads to a sticky customer, which can spend up to 140 more on amazon. In other words, a successful prime video business could lead to a bigger business for all of amazon. Cory johnson, los angeles. Emily we will bring you corys full interview with roy price later this week. It is International Womens day, and we are focusing on the gains women have made in the Tech Industry and what work needs to be done. Find fantasy shows. When it comes to the things you love, you want more. Love romance . Get lost in every embrace. Into sports . Follow every pitch, every play and every win. Change the way you experience tv with x1 from xfinity. Is 12 30 in hong kong. Donald trump is projected to have won the republican primaries in michigan and mississippi. John casey is the runner up in michigan. On the democratic side, hillary sandersdefeated bernie in mississippi. Voting in michigan is tighter and too close to call. Shares of rio tinto fell in sydney after heavy selloffs. Mining and Energy Shares getting hammered after a drop in Commodity Prices ranging from copper and gold to oil and iron ore. Investors are also worried about slowing demand from china. Profit beatcs estimates. Net income jumped, 90 , to six billion hong kong dollars. Cheaper fuel and fares saw passenger numbers jump almost 8 . Tokyo electric says it will be 2020 at least before the cleanup power plant isa completed. Contaminated water remains the greatest challenge with more than 700,000 tons of liquid stored at the plant used to cool the reactors. Those are the reactors from Bloomberg News, powered by over 2400 journalists. Lets check on how the markets have been trading. Here is shery. Shery asian stocks headed for the biggest lost in a month. Several factors, stretching over the largest economies, japan and china. Also retreating oil and a slump in wall street. In asia for cheer investors. China on the lunch break but the shanghai composite fell 2 in the morning session. The first drop in seven days. It halted the longest winning streak in eight months. 0. 6 . Ng seng down japan continues to fall, down 1. 2 . A stronger yen is hitting exporters. Also down 0. 1 despite a weaker korean won. That is not being felt. Gaining 0. 6 . Stocks in new zealand, also gaining. Counting down to the reopening hong kong and china at the top of the hour. Do stay with bloomberg tv. Emily it is no secret that women are underrepresented in Silicon Valley. In a spirit of International Womens day, we are looking at the state of women in technology. Over the last year, i have spoken to leaders in the industry about this issue and heard different responses. What we are not prepared to do is to lower our standards. But if there are fabulously bright, driven women who are really interested in technology, hungry to succeed who can meet performance standards men and women get discouraged from leaving. They are not seen as serious as they go home to be with a child. Not every workplace can be that flexible as facebook or version. Virgin. I am not sure you are right. There are some companies, but most of the Head Office Type of jobs around the world, they can offer flexibility. We could all do better. We have one female general partner at gd. We have not succeeded at finding people, finding women for that role. Emily women make up only 6 of Top Technology ceos. 3 of founders. Here with me to discuss these jarring numbers, Katherine Zaleski and leslie miley. You are focused on treating diversity. You have been very outspoken on this issue. Especially while working at twitter. Why do you see a continued dearth of women in technology . Thank you for having me. I do not think it is a pipeline program. When you look at the number of women graduating from stem programs and it doesnt reflect women in technology roles, when you look at the leadership in engineering, it is predominantly male and because it is predominantly male, you are biased toward people who look like you and who come from your networks. That may be the first part of it that is harder to break out. I also think you need to have more women founders, more women in the roles, just like you need more ethnic and racial minorities in those roles. Emily so it becomes a vicious cycle. Catherine, you have been outspoken about this issue, including your own personal ceilings. You wrote an article where you said, quote, i am sorry to all the mothers i used to work with. I did not realize how horrible i had been until i had my own daughter. What is your take on the why, why, why is this such a big problem . Leslie hit the nail on the head. We have an empathy problem. The people that you had on the screen keep talking about having people who need to integrate. They are doing nothing to change that culture to bring in more women and diversity. They are setting a bar for white men. We really need to look at how people, who are at different stages in their lives, mothers i had no idea what it was like to be a working mother. Now that i understand, we dont a company around that. There are all sorts of ways we need to figure out how to walk in other peoples shoes. We do not do that enough. We continue to face problems because we are trying to mirror ourselves. Emily Everybody Knows the numbers of women in the Tech Industry are horrible. Melinda gates was on Bloomberg Television talking about how the Tech Industry has been leading on a number of diversityrelated issues. Look at the technology sector. They have decided that if they want to keep their best women in the workforce, they are offering very generous paid family leave policies not just for women, but for men. You need to have it for men to say it is ok to do it, to take time off. It did not decrease competitiveness in california businesses. Emily maybe facebook and google have flexible policies, but it is not reflected in the numbers. Their numbers are no different than any other tech company. Less than 20 of women are in technical and leadership roles. The companies have to do more outreach. They have to increase diversity. Women, ethnic and racial minorities, from top to bottom. They cannot initiate a policy and expect women to flock to them. One of the things i have been thinking about maybe you go to places that have a higher ratio of women in technical roles and open offices there. Come to cupertino, mountain view, san francisco. If these are places that are already inhospitable to women, why would they want to join . They are like, sit into our culture. They want people to fit into a culture that is not welcoming. Emily katherine, how much is the burden on startups right now . At a company like google or twitter, it is difficult to move the needle when you are that big. Do startups need to be taking this on at an earlier stage . What is going to compel them to prioritize diversity . Changing the culture is also about changing how your office is set up. We have a completely remote team, we are 95 women. Our cto is a woman in los angeles. We have a culture that welcomes women from all backgrounds including one in saudi arabia that works for us. Remote workers allow companies to be more efficient. They are not spending money in Silicon Valley in Office Spaces and local recruitment. Our policies are friendly on the diversity front. As a huge opportunity for startups. The Bigger Companies are doing it to be competitive with each other. Extending Maternity Leave is wonderful, but lets think about when they do come back to the workforce. Some will have take your dog to work policies, but no childcare. We have to think about these things more expensively than just maternity or paternity policies. There is a bias when people see resumes. I have been in a hiring committee where somebody asked, why did this woman take 10 years off . They did not ask, did she have a family issue . They used it against her. Some things that companies should do is try to obsess you obfsicate the hiring process. They are not looking at mens faces and womens faces, not looking at schools where they are 75 80 male and a certain discipline. That is one of the reasons why i joined the company that i did. The more companies do that, the more diversity they will bring in. Emily i ensure we will have this conversation for years because theres so much progress that needs to happen. Im very grateful for your leadership or thank you so much for joining us. When we return, can iheartmedia deal with its download . We look at the radio broadcaster. Emily pandora among the worst Internet Company stocks on tuesday. Analysts noted the forwardlooking fundamental maybe concerning as the streaming music race goes global. They launched a new service to increase artist to fan communication. Spotify is also improving its social gestures. Pandora shares are down about 22 this year. Iheartmedia is going to battle with its creditors. They said it received default notices from bondholders. Lenders claimed they broke their debt agreements on a transferred half a billion of shares to a subsidiary. I want to bring in our media reporter to break this down for us. It seems that they have a mountain of debt to the tune of 20 billion. Can you break this down for us . The structure of this company is not easy to understand even for a sophisticated investor. When iheartmedia was acquired by private equity firms right before the recession, it inherited more than one of the last lbos, close to 21 billion in debt. It has found ways to postpone paying off the debt and increase liquidity, finding ways to stay solvent while they try to find ways to try and grow the company. They have pretty much just pushed off the payments on the debt, they have not reduced it. That is what this is all about, this latest news is than trying to move assets around within the company, within subsidiaries to make it stay solvent. Emily how serious are worries about whether or not they can pay this off . Lucas i would assume they have come to some resolution. They have found ways to just keep going along. At a certain point, it will become unmanageable. Their biggest debt payment isnt at the end of this year they have a big one in 2017 or 2018, with a bigger one down the line. Management has postponed payments. At a certain point, they will run out of time. Emily how are they doing in the broader we talked about pandora earlier how are they doing . Lucas i heart radio is still the biggest terrestrial radio owner. They took the name of their streaming radio app. They say that they have 80 million users, they dont say how many are active. It has been very infective effective getting installed in cars. Emily our Bloomberg News entertainment reporter in los angeles, thank you. Now to something worth geeking out about, a showdown of man versus Artificial Intelligence. Googles Artificial Intelligence takes on the champion in the ancient chinese game of go. Reporter this professional south korean player will take on an Artificial Intelligence program. I said i am confident because i thought it would be difficult for the computers Artificial Intelligence to read human senses like intuition. However, i felt that the program may be able to mimic the intuition of humans. Go is an incredibly complex game. In chess, the number of possible moves is about 20. In go, it is about 200 and a number of possible board configurations is more than the number of atoms in the universe. He is not sure he will win all of the games, but perhaps he is being optimistic. The program has wiped the board against the european champion last october. At this point, the project becomes more than just a game. The number of highprofile thinkers from elon musk to Stephen Hawking are warning of the risks to humanity from creating artificial super intelligence. The creators consider the technology itself neutral but what it is used for is up to society. Certainly, we worry about lots of these things. We are thought leaders on the ethics, how these systems should be used in a way that will benefit the many and not a few and will benefit society for the good. Reporter the winner of the contest will take home 1 million. Emily after the break, we will look at the changing landscape for advertisers and the rise of automated ad sites. Emily an update from the Deutsche Bank media conference. For the eventualities of the everchanging world, our core business is strong. I have not seen advertising this strong from the network and local businesses in many years. Obviously we had a rough front last year not in terms of cvms but in terms of volume growth. Third quarter, fourth quarter, first quarter, unbelievably strong. Emily more as the conference continues. Gone are the days of mad men bidding for advertisements. Automatic bidding for ad space is set to totally change the landscape. Three years from now, the market could be worth 37 billion up from 10 billion in 2014. The majority appear on google and facebook. The biggest agencies are rushing to purchase inventory. Angie lau is in town from hong kong in san francisco. Great to have you. You have been taking a closer look at the story. Is Programmatic Advertising capable of taking over all of advertising . Angie that is the trend, you are seeing it here in the United States and globally. The don drapers of the world will have to find a new job because it is the robots that will be taking over. Programmatic advertisement buying that really specifically takes a look at who the eyeballs are going to see. Instead of people figuring out what the parameters are, the humans put in the parameters for the algorithmic buying and take a look at, ok, is it man or woman, how old they are, their social standing. It is going to be that specific. Emily do the robots need a don draper to direct them . Angie there is always going to be the don draper but perhaps his department is going to shrink, right . It is going to be the marketing departments of the Global Brands that are going to be taking a look exactly at what their ad launches are going to look like, the agencies are also excited about this because they can be very specific. At the end of the day, when you have Digital Online ad space that is growing by leaps and bounds, it is going to change the way in how you and i as consumers figure out what brands we want to buy. Emily i am curious about how it is playing out in china. Facebook and google on the market that they are not available in china. Angie the google of china, baidu, and alibaba, which is trying to rival amazon in ecommerce, they make up 90 of programmatic ad buys in china and that is only expected to grow. This year alone, it is going to be 48 . It is going to slow down in 2017. As you know, chinas slowdown that would definitely have an impact. Emily how important is mobile in programmatic at markets . Angie if you think about it, 1. 3 billion chinese, 600 million internet users, but 80 of those users access the internet through mobile. They skip the laptop. If you are a marketer and you want to match your advertisements with consumers, you are going to want to communicate to them in mobile spaces. The problem is, in terms of realtime ad buy in, there is no universal cookie that exists. That makes it problematic. As hard to determine you, emily, looking at your mobile home and doing searches to pinpoint exactly what you are browsing versus if you are using a laptop with cookies. They do not have that. These algorithmic programmers will have to figure that out. Emily poor don draper. Thank you so much. That does it for this edition of bloomberg west. Bend me shape me, any way you want me as long as you love me, its alright bend me shape me, any way you want me. Shape the best sleep of your life. Sleep number beds with Sleepiq Technology adjust any way you want it. The bed that moves you. Only at a sleep number store. The following is a paid presentation for the byebye foundation collection, brought to you by guthy renker. Announcer imagine having skin that looks this beautiful, this flawless, without having to wear foundation. Imagine a product that covers everything, but looks and feels like you are wearing nothing. Imagine one product that is clinically shown to make your skin younger looking in just 10 days