tv Bloomberg West Bloomberg May 1, 2014 11:00pm-12:01am EDT
>> live from pier three in san francisco, welcome to "bloomberg west." i'm emily chang. i will speak with the ceo of t-mobile to find out how he added more subscribers than at&t and verizon. we'll talk about whether he's going to merge with sprint and whether he's going to run it. facebook may be facing legal trouble in its bid to buy oculus rift. a videogame company says it owns some of the right to the virtual-reality headset. first, a check of the bloomberg
top tech headlines. linkedin has failed to reverse it slowing sales growth. sales rose in the first quarter but it's fifth straight quarter shows sales growth has declined. ebay has settled a lawsuit with a federal and state government over deals with into it. under the terms, you may has agreed to and a nope 02 packed with other companies. ebay will also pay tell forney -- pay $3.75 million. the settlement comes a week after google, apple, intel and adobe settled a similar case. the justice department crackdown
on silicon valley hiring practices is over for now. snapchat has poached a google employee, naming him as the information director. the snapchat conversations will disappear but can be saved and screen shots. you may recall that snapchat rejected a $3 billion takeover offer from facebook. now to our lead story -- t-mobile ceo john legere has made it clear the fourth-place wireless carrier has plans to turn the industry upside down and so far, so good. the carrier added 1.3 million new monthly subscribers in the first quarter, more than the combined total for verizon and at&t. t-mobile is using cheaper plans and promotions to lure customers. this showed up in sales, which rose 47% to $6.9 billion. the company posted a loss of $151 million. the improvements come as sprint prepares to make a formal bid to take over t-mobile. i spoke with john legere, president and ceo of the company. i started by asking but the boom
in subscriber growth and how it happened. >> this is one year since we started tm u.s. with the merger of metro and we added not only 2.4 million customers this quarter, with 6 million in the last year. 1.3 million post paid ads and 3.5 million in the year. we added 12 times as many phone ads as our nearest competitor. the only two competitors, the calculation is infinity. even smart people like you can't figure out how to do that math. it is a vindication that the un-carrier movement is the right one. it has plenty of runway to go and we are excited about it, along with the fact that once you have our numbers, the wireless industry grew into one. it's just hard to see because all the growth went to t-mobile. it's a good start. >> how long can you sustain it? how many customers on the margin at at&t and verizon are that unhappy with their service that
they will cut bait and switch to you? >> we've got just approaching 50 million customers. last time i checked, both of the duopolists have 100 million. there's a lot of runway to go. we are focusing on changes that consumers appreciate and understand and love. at&t and verizon have been making changes to respond to us and they are temporary and in the same kind of bureaucratic short term trickery. it's just not working. i don't care what they do, i'm just focused on making the changes to solve consumer points and their are plenty more. i don't see any reason why we can't continue this momentum. as a relates to verizon and at&t, color me unimpressed. >> this is a true story -- i was in a car with them uber driver who just switched from verizon
to t-mobile. he said it's a lot cheaper but the network coverage to did not compare. he wished that he could switch back. what about those customers and the risks of expanding so fast that you can't accommodate everyone? >> was your driver cory? he is an uber driver now, isn't he? interesting topic -- yesterday, we got approval for the 700 and acquisition which will be building out. our network improvement over the past year from zero pounds to 220, now looking to 220, with the deployment of the 700 megahertz band which will be focused on in building penetration and rural edge coverage. we've got some work to do, but there is line of sight to it and i would tell you that the improvements in the network were directly correlated to why we had record turnout 1.5 are sent,
which is part of why along with moving from 11% share to growth ads to 26% turn moving down as a no contract player. that suggests these improvements are working and we will continue to invest and i am hopefully, vis-à-vis the name of the driver, we will find out what his issues were and we will solve them. that's what i do every minute of the day, on twitter and on my phone is work on individual people's issues and that's working. >> i will see if i can track him down. you are still losing more money than some people thought you would be at this point. how long are you willing to continue to do that? >> let's put that in perspective. when people say we are losing more money than people expected, we shifted our own guidance from what was a range of -- we change
it to 5.8 and that's because in q1, the volume of business coming in was huge. that is a trade off anybody would make. it's not sacrificing profitability, it's an acquisition game and the cost per customer acquisition game -- we front end loaded a lot but our medium-term cash flow targets are completely intact. if not that are than ever, especially with the metro pcs merger going way ahead of schedule on all fronts. >> bloomberg is reporting sprint is planning a formal bid for t-mobile and you are the leading candidate to run a combined company. when i tweeted this yesterday, you tweeted yesterday and my and a smiley face. what does that mean? >> come on. what does it mean? i'm proud of you.
it took you approximately seven minutes to get to this, which is seven minutes more than i thought it would. and when you say bloomberg, i think it was actually you. if i could have caught you directly, it would have been other than smiley face. you and i have talked about this before. consolidation is one path to work for this company. i'm not going to comment on any individual talks that may or may not go on, but with the growth we've got and options we have, consolidation is one option and our shareholders and owners would consider any opportunity. i'm not privy to what you learned there and the individual speculation about me is you know my own opinion of myself. it would be easy for me to comment on that. >> i should give credit to our deal team. i simply tweeted it. i will say, how do you think i will say, how do you think from a competition perspective
that the industry has changed since at&t tried to buy t-mobile? you are making t-mobile stronger and is that sort of undermine the argument that at&t and verizon are unstoppable duopolists? >> there's a few things. what we are seeing right now that is fun and i'm having a ball with it is a glimpse of competition. the big guys are nervous and trying to figure out what to do. consumers are celebrating the ability to pit people against each other. that is competition. it's great for america and great for the industry and in order to keep that competition, which is a big goal of the chairman of the fcc, a lot of things have to happen. you have to make sure the duopolists don't get far ahead and use their economic prowess. consolidation is thought of one way of scale. when the at&t possibility -- that was a different game.
people were looking at consolidations to aggregate spectrum. right now, t-mobile is a thriving, fun entity with a great path forward. when people look at t-mobile, it's about how to take this maverick approach, take this on carrier revolution and keep it going full out one way you do that is scale and spectrum and this is just one possible theoretical way forward. it is a very different time and different environment. >> you had some hashtags that were things you said about sprint. what were you doing? >> the things i would do differently at any of these kind and eases run them. focus on consumers and stop all the idiocy of looking at each other and just focus in a very humble way on serving customers
and solving their needs. kidding aside, what you did there, social media is nothing more than another way of touching individual customers and listening to them. the difference with me as i listen to them and i walk in and use that as the strategic input into how i run my company. it's not mckenzie, it's not pain, it's individual customers on twitter telling me what's new, creating the next phase of the on carrier and i would do that in any of these big companies. frankly, i just don't know if those companies are ready to change. whether it is sprint, at&t or any company, this is what we do full it's not just me, it's all the employees and all my management team. and we are having a ball doing it. >> john legere, outspoken as always. facebook is paying $2 billion for the virtual reality company
>> i'm emily chang in this is "bloomberg west" on bloomberg television and radio, streaming on your tablet and on bloomberg.com. facebook agreed to buy a oculus for $2 billion. now when videogame publisher is trying to get a piece of the deal. zenimax media, known for the popular fantasy game "the elder scrolls" says it has the right to the technology powering the oculus rift headset. they claim a former employee took their intellectual copy when he left the company and later became the cto of oculus.
they're trying to reach deal where is zenimax would be compensated but were unable to reach a satisfactory resolution. facebook did not comment. our tech editor joins me now with more -- he's one of the 50 reporters and editors here in our san francisco bureau. what does it sound like happened here? >> you have someone who left one company that was building something to go to another company that was building something. those two things happened to overlap in a reasonable way. >> five people from the previous company went to work at oculus. >> right, so you have a defection from zenimax until oculus has this major outcome -- when facebook bought oculus, he didn't really have a product on the market and was no revenue. the thought of it being a $2 billion company was absurd. it's unlikely we would see
anything like this happen without this sort of outcome or until outcome. >> and zenimax has some heavy hitters on its board like jerry bruckheimer, the director. what are they doing in the virtual reality field? if you look at this technology, oculus has eclipsed them. are they trying to profit off of someone else's success? >> today, their titles are primarily on web and multiplatform, but not necessarily this third or fourth screen, if you will. but this is a nascent market and this idea that you can play video games at home with goggles around, this is not a market we've seen kickoff. it's not clear what they were doing in this. presumably, they were making games that would be used on these future formats, but we don't know.
>> is this then indication that mark zuckerberg should not be negotiating deals in weeks? but when he bought oculus, it happened so fast. he is probably learning a fair amount about how to do m&a and building a team to help along the way. one thing about some of these deals is in some cases, they have to happen quickly because you are in this environment that's very competitive. we don't know who was putting forth it's for oculus, but we know it was competitive. at some point, if it's something you want and something you feel like your company has difficulty without, you have to make a bid. >> coming up, we'll go inside pepsi and talk about in-home soda technology and if it could be a threat to the bottom line. ♪
. >> there is concerned that these technologies may eat into their market share. >> in-home soft drink somethinger could be that is a significant force in the future. when that will happen, we do not know. we need to make sure that this category becomes a category in the marketplace. we can supply rate tasting products for all these people. took those comments
to mean that pepsico may in fact be interested in buying a stake in soda stream. it went almost one dollar higher on that announcement. that company has been at the heart of a lot speculation regarding acquisition, including by starbucks. that stock is very vulnerable -- moldable. .- vulnerable >> one of the biggest tech innovations has been out of coca-cola. i don't know if you have seen these machines. you can put together over 150 varieties of: combinations. -- cola combinations.
soft a game changer in how drink committees are going to serve customers. there is the good and the bad. the good is that you get a lot of variety. mixed all these soft drinks together. the bad heart of it -- that part of it is that too much could intoon confusing consumers. she is a little bit -- or she is on that same path with using technology, but she is a little bit worried. >> in terms of their social theirrivalry, let's check twitter accounts. they are almost neck and neck. >> pepsico still has a little bit of an edge.
coca-cola has 2.4 million followers. according to one benchmark, coke has rapidly generated more followers. they have a lot of work ahead of them. pepsico.chor inside thank you. one of the most highly anticipated tech ipos may be delayed. on "bloomberg west." you can watch a streaming on your phone, apple tv. >> it is time now for "on the markets." this comes a day after the dow closed at a new record high. the nasdaq was the best
iposve seen a lot of the perform down. it helps their case to wake until the market stabilizes. what if the markets aren't stable? that is the risk. it all depends on what a company needs to go public for. it could be beneficial for them to just wait. it. will eventually do it is ok to take some air out of valuations. and investors have a renewed appetite for cloud companies. they can afford to wait. they can do their ipo when that happens. other companies do need to do
their ipos sooner rather than later. markets were rocky, they have to do downsized ipos. >> the head of two medications -- ♪ying >> it has less than $1 million in revenue. windows financials are disclose, they have at least 20 seven days to start the roadshow. it gives them as much time as they need to start the roadshow. what they are saying is that they never planned an official start date. they never set a schedule for when they would begin. there was no official delay. they are technically holding off.
you.ank from square to stripe, a growing number of players in digital payments. this is one of the mobile players gaining traction. is it possible that the payment industry as a whole is losing steam? you for joining us here today. tell me more about check. >> 10 million people have downloaded it. it is the easiest way for you to pay your bill. into it - intuit is now trying to buy check.
>> we do not comment on that. what do you think is the future. there is competition in the space. it sounds pretty simple. >> it sounds simple, but it is actually white obligated. you can pay your bill from any account you have. what check has done is make it easy to pay your bill. >> i know you see some trouble here. trillion dollars in transactions going through there. everybody is trying to go after the space. everybody wants to be part of the transaction. it is not clear how you can win in the space.
>> there have been reports that square is looking for a buyer. about a company like square? >> it is a very innovative company. ist they are trying to do fight with players like themselves. that is a tough battle to win. >> what is so tough about it? i see a lot of merchants out there. what is toughest the existing value system. to keephem want economics. square has to convince one of them to create value for their consumer. system about the payment question mark is it always going to be paypal?
>> somebody can integrate the whole value system. i think of this is not the similar to the music industry. it was beneficial for everybody. we have to have somebody do that with mobile payments. ? paypal has an early lead eerie -- paypal has an early lead. >> what about apple? google? they are the two giants, or potential giants. winner, id to pick a think apple would be the eventual winner here. i think they are the 800 pound gorilla. they own the consumer experience. they have the wallet. they will be able to come out
>> i'm emily chang, and this is "bloomberg west." just two days after suing the federal government, spacex has won a temporary injunction barring the government from buying russian rockets from the joint lockheed martin venture. spacex accuses the government of creating a monopoly by shutting it out of the market for
military satellite launches. and they also warned that using russian rockets my violate sanctions against russia following the invasion of the crimean peninsula. it's only one of the bureaucratic battles elon musk is facing. he's also challenging various branches of the government with his electric car company tesla and his solar company, solar city. all three of these companies have benefited from substantial government support for the development of their technologies and ongoing tax incentives. cory johnson spoke with the author of "big bang disruption." he started asking if there should be government subsidies for emerging technologies like those musk receive for tesla. >> i think a really early technologies, university level research, it makes sense to fund that because otherwise it may
not get started. but once it has gone commercial and solar has reached that point, it doesn't need this level of government involvement anymore and it has become counterproductive. >> have his businesses needed government involvement or used government money inordinately? >> they have all used it and at certain points, they've all needed it. you can't imagine doing space exploration in the 1960's without the leading government in the world. >> doing it in 2014 and depending on hundreds of millions of dollars and nasa grants to get the business up and running. >> now we have reached the point where may be in space exploration, still some, but not in solar and not in electric vehicles. there's no need for government incentives. they are getting in the way. >> tesla, the business he's best known for, makes a really cool car. but it's a car for millionaires.
the average sales prices over $120,000 last quarter. and a car that has elicited from hundreds of ilion's and government grants and subsidies. >> yes. the fight has come down to how i gets sold and destroyed it. he's running into regulations that were put in place may 100 years ago to protect car dealers from aggressive manufacturers. but we all know car dealers are not protecting consumers consumers. maybe even congress is slightly better beloved than the car dealers as far as consumer protection. it's gone from protection to protectionism and that's what's behind the fight he's having in other states like new jersey and texas. >> we discussed tesla and the grants they've gotten him about what about solar city?
>> solar city, when carbon fuels were not as scarce as they have become, it needed some help. it needed some research help. that time has long since gone. we do not need the grants or tax incentives. we don't need the direct investments of solyndra -- >> which is ironically two doors down from tesla. >> these are not any longer good uses of the regulatory regime and in fact, they are now interfering because you have companies like solar city so focused on maximizing tax breaks and subsidies that they've built the entire business around the way they have leased rather than selling the materials to the consumers. they're so focused on maximizing the revenues from the government that they are no longer in the business of disrupting energy and that's what we want them to do now that the solar power can be built cost-effectively and as
carbon fuels get more unpleasant and unpopular it scares to use, they are on a trajectory. they don't need that much level of help and help has become counterproductive. >> does elon musk run the risk of biting the hands that feed them by suing the military for the way they award a contract to lockheed martin, for suing pieces of the car industry when he's trying to get his cars sold in places where they are not allowed to be sold? >> sure. this happens all the time. no one takes it personally on the part of the government you're dealing with when you are litigating and the part of the government when you are dealing with when you are getting services are so far removed. it's not a big risk. it's part of a way of disrupting this industry, but you have to go the other route if you are going to break it open and do it
>> welcome back to "bloomberg west." i'm emily chang. google is trying to make it easier to get products on youtube. they've announced a new presentation to advertisers in new york. jamie byrne explains what it is. >> advertisers have always told us they want us to help them by advertising, so we created google preferred, which is the top 5% of channels on youtube in
14 different categories. what that really does is help advertisers find the content that is most popular, the content shaping pop culture and the content growing fastest on youtube. >> youtube says it's going to invest heavily in building up the brand of its various youtube stars with billboards, tv ads and more. streaming service hulu also presented to advertisers this week and announced its own innovative tools. jon erlichman is in la with more. >> it has been a busy week for the new media and technology companies to touch themselves to advertisers. it's not just about the content or the shows, it's about different ways you can advertise, including this initiative between pizza hut and hulu that if you are watching hulu, through hulu you can actually order pizza. we talked to peter naylor of hulu about it. hear him explain how it works.
>> in the case of pizza hut, you can be watching your show, the ad pops up at dinner time and you say let's order pizza. while you transact within the ad, you don't have to click away or open another browser. you place an order and when you're done, you close it up and resume watching hulu. it's a nice, commerce-enabled ad unit. >> do you want to make up any yeses about how much pizza will be delivered through hulu sales? >> it's about serving the on demand audience. they want their content when they want it and they want to buy what they want when they want it. i think it's going to be popular. >> when you hold an event like the upfront, clearly marked as upfront compared to some media players. because of your ties to television and the belief that the shows you guys are doing our very high quality, is that right?
>> the language we are using and calling our event upfront is about the fact that we are competing for television dollars. the majority of our content is longform. we get it from broadcasting providers, cable providers and we make rate originals like "deadbeat." so we are competing with television competitors head to head would we go and chase marketing dollars. that's why we are saying up front because that's the market we are playing in. >> the number of people paying subscriptions for hulu has been climbing. i believe it's up to 6 million. then there's the advertising dollars. i believe in 2012, the goal had been to work with it on a thousand advertisers and then double that amount. what is the goal now?
>> our current number, we are over 1600 advertisers. i don't really have a goal to grow the amount of advertisers, but i do have a goal to grow the volume we get out of those advertisers. we work with the fortune 500 and fortune 1000 marketers you see on broadcast and cable television. so i don't need to necessarily go deeper into a mix of advertising, i want to go to the biggest marketers in the world and continued your they're sure. >> as you guys bring the ad supported version of hulu to mobile devices, that does in the --open the door to try a lot of interesting things. tell us about some of the stuff you are working on like the 360 experiences. >> the 360 ad is something we are partnering with a company called immersive media on.
that is something you are consuming hulu on, say a tablet or smartphone, and it almost places you in a virtual world. the first proof of concept we have places you in the front seat of an automobile. when you take your device and look around, it is as though you are looking through the lens of that licensing the interior of the car. it's a really interesting way to take advantage of mobile devices and present a form-function commercial that fits the device. >> at the end of the day, would you say we are at a point where you are in the position to take advertising money that would have traditionally gone to a broadcast network -- obviously you still have strong ties to that world, but is the money coming to you guys that in the past might have gone to traditional television? >> i think companies like hulu that we are taking money from conventional television budgets. i also suspect some of the
budgets are being sandpapered away from segments like display advertising and even from print to a certain degree. >> that was peter naylor of hulu, who i spoke to from the f8 conference yesterday. >> i want to talk to about the latest on the clippers situation. i know you've got one number that tells us a whole lot and that has to do with what's going on with the team. >> yes. so our bite will be five. no fewer than five big names that have come up in the potential bidding for the clippers. the latest name, irving azoff, a well-known player in the world of music, a longtime manager of the eagles, confirmed he would he interested in bidding. you see pictures of oprah and magic, larry ellison's name has
has come up and david geffen's name has come up. everyone is positioning themselves for the potential sale of the clippers. >> any fan favorites so far? >> maybe that's what they are doing -- putting it out there so they can see the reaction will be like on twitter and gauge who should team up with two. it does feel like you might see a variety of names that team up. it might not be unlike the we saw with the dodgers here in town were he have some big financial investors and an established people in the community like magic johnson. still early days though. >> game six tonight -- the clippers are in the lead. we will be watching. jon erlichman, thank you so much. thank you all for watching this edition of "bloomberg west." we will see you later. >> the following is a paid
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