tv Taking Stock With Pimm Fox Bloomberg May 28, 2014 5:00pm-6:01pm EDT
♪ >> this is "taking stock." i'm pimm fox. today's theme is secrets. a well-known secret has finally been revealed. apple is agreeing to buy beats electronics. price tag, $3 billion. we have the details. some of the nsa's secrets were revealed by edward snowden. the contractor's story has now been made into a comic book. unlocking the
secrets to making the perfect toy for children. we discuss all these focus groups, all these tiny workers. let's begin this hour with news on beats. i'm joined by eric cammie. jon erlichman from los angeles. severny johnson from cisco. jon erlichman, i went to begin with you. give us the details of this deal. >> there is $3 billion for the beats business, still relatively a young business. in terms of the reasoning that ,pple is giving for this deal there are a few factors. we talk a lot about technology companies doing acquisitions for talent. in this case, they are bringing very talented music industry players on board. if you think about what beats has been trying to do in its
evolution, going beyond the thephones and now into subscription music business, a business that it feels needed to be reinvented the same way they felt that earbuds needed to be reinvented. if you combine that with what apple has been doing in streaming recently with their radio service, they clearly are trying to say there are a bunch of reasons why we are buying beats. doingc, you have been research about beats and apple today. what have you learned? >> they are trying to bring in new talent. this price is really interesting because their previous largest deal was in the 1990's. that's when they brought steve jobs back to the company. million to get steve jobs back in, and now they are paying $3 billion to get dr. dre in. remember what jobs was able to do. he was able to do deals with the music industry. they don't have him anymore.
iovine maybe the guy they look to to get things done because he is a music industry insider. the real question is, what are the change of control provisions in the beats field, and could they walk from beats as awhole to beats subsidiary with those deals in pocket? do they acquire the rights to stream music? it is also worth noting that in terms of the cost of this deal, in the 21 days since we first heard about this deal until today, apple has earned $2.8 billion in cash if they were earning at the same pace as last quarter. the ability of apple to generate so much cash de-risks the deal considerably. apple and itsan,
itunes store. it is suffering from a decline in the amount of money that people are spending on itunes. is that part of the reason why they're going in this direction? , apple hasive terms made a lot of money since rumors of this deal surfaced. we have seen a shift in consumer behavior or willingness on behalf of music enthusiasts to rent music, not own music. this is a shift from what applebought -- bought itunes on. apple is aware there is a huge opportunity to bring in a couple of well-known players from the music industry who are already thinking more about a future of rented music than owning music. that may be short
term satisfies some concerns about the product side of apple. we are always wondering what their next interesting thing is going to be. now that they have a line up of in-store accessories that apple is already selling which are popular, that is something that will be helping their revenue, even if it's a small part of the overall pie. >> eric? goes,r as the acquisition is there a detail as to whether dr. dre and jimmy iovine go along with this deal? do they assume positions inside of apple? billion for a company, you do want some of that intellectual property they have. >> yes, and as part of the deal they will become employees of apple. they are going to have bosses to report to. it's not clear how much dr. dre will actually be there. as far as what we know, they are definitely coming along with the
company. that is where most of the value is. the software and hardware are not necessarily groundbreaking technologies. it's about these two guys in particular. >> any detail from the lawyers as to whether that change of control provision is already part of this deal? that seems pretty basic to find out. think they want to over complicate matters right now. to get thing we want more detail on is how exactly the licensing works. beats was going out and striking its own deals with music label for same way apple does. whether or not you can have these parallel businesses that are not operating on completely different licensing deals is another story. we will have to wait and see on that. >> i have not heard anything about the competition from companies such as amazon.com. if you are in the streaming business, you have to deal with
not only the other music players like spotify and pandora, but you have to provide some kind of competitor strategy against amazon. imagineave got to amazon was out there, at least kicking the tires on a deal like this. selling digital music was a very important part of amazon business model up until a few years ago. you can see what they have done in the video category, when selling dvd's are so important to them, they launched their prime video service. successfulot had a of and offering when it comes to music. successseen tremendous with beats and spotify. clearly what we see is a real behaviorconsumer towards the licensing of music rather than the owning of music thomas on the steve jobs
insisted people did not want -- music, something steve jobs insisted people did not want. >> do you think beats as a brand stays up front and center, or does that eventually go away and it becomes an apple product? >> beats as a brand has most of its value in the company. even sources close to beats know that the strength of our company is our brand. if you get rid of that, it's not clear what you have paid for. my guess is they will leave that brand name intact, so it looks a bit fresher for people who might think of apple as an older entity in the music business. jon, does beats make apple a cool company? do we know the demographic of the beats customer? >> i guess you could assume there are a lot of young people who like the beats brand. there will be a lot of conversation about this. i don't think there's any hard evidence out there that the apple brand has faded with
teens. some analysts on wall street like piper jaffray have tried to quantify it, and they would argue that's not happening. we talked a lot about where apple is going, where it's going under the leadership of tim cook, after steve jobs, is that brand fading at all? all you can say at that point is what eric said, which is that the beats brand is a hot one and apple would be foolish to throw it in the garbage. ourn addition to being bloomberg west editor-at-large, you are also a musician. is there a feeling from the side of a producer of music that perhaps aligning yourself with beats, with people from the music business makes dealing with apple a lot more palatable? the relationships that jimmy and dr. dre have in hollywood -- >> you are already calling them by their first names. >> that's how we roll. >> in the business, i understand
that. i remember i had a story in "vibe" magazine, this young rapper snoop dogg was on the cover of the magazine. that was 22 years ago. on notion that dr. dre is the cutting edge of hip-hop is not quite right. that said, the role the jimmy iovine has in the music industry , and the role dr. dre has in the music industry, goes far beyond their roles as musicians. they have long-term relationships in hollywood. that is something that steve jobs did a lot of damage with, and the result which saw the music industry suffer and never really recover in terms of recorded music since they struck those deals with itunes. >> thanks very much, cory johnson. erlichman joining us from los angeles.
>> this is "taking stock." i'm pimm fox. there have been a number of technology public offerings this year. many companies are seeing their share prices fall after the first day of trading. let's get details about the market and investor appetite for ipo plus. -- ipo's. leslie joins us with the managing director. leslie, great to have you here. give us details of what you are learning at this conference. mentioned, there is a
bank of america maryland private conference. are takingrences place of the potential ceo's can get a better sense of what the process is like to go public. i'm here with mitch, a venture capitalist. the focus is on software companies. company, whatolio types of things do you advise them on in the process of going public? what are the key things they need to know before they again this process? >> having been the ceo of three public companies in my own career, i've had the experience, which is that you really need to be ready to behave and perform like a public company. fundraising like venture capital. there's a lot of scrutiny. you have made a real commitment to your public shareholders and you'd better be prepared to deliver. arepeaking of maturity, we seeing companies that are more mature going public these days,
benefiting from late stage fundraising rounds from hedge funds, private equity, mutual funds. what are some of the implications for these non-vc types playing the vc game? >> the past market cycles, those types of interests coming into the market for late stage financing has been a sign of near the top of the market. we have seen some instability in the market, so that may be true. they have different motivations from venture investors. many who are public investing entities are looking to increase their allocations beyond what they can get in an ipo. some of them are very smart investors. i would never question their judgment. >> you said this was a signal of the top of the market. we have seen valuations skyrocket over the past couple of quarters. territory?bubble is it the sign of a potential bubble going back to 2000, when
you were a ceo? >> it's completely different in the sense that although the companies are carrying higher multiples, they are multiples of something. revenue multiples of and earnings. in the last bubble, those valuations were ephemeral. they were not necessarily based on substance or performance. although the multiples that were paid in the market were high by normal standards, the companies are very solid companies. companies that are not solid companies are not [inaudible] >> we are seeing actual business models are performing in the markets, sometimes even profitability. firmventure capital focuses on stock in particular. these companies are trading below their issuing price. is now not au say, good time to tap the public market? >> you have heard it said here
in the conference many times. it's a marathon, not a sprint. the stock price on the day of the offering or a few weeks after the offering is not what matters. what matters is performance over the long haul. that ipo isse them a fund-raising exercise. get thomasou can think of that as the cost of capital. if you are confident in visibility in the future, you should think about an ipo. man.hank you, mitch kertz picker atrg's leslie the bank of america eighth annual private company initial public conference in san francisco. today our theme is secrets. edward snowden revealed secrets about the work he did for the u.s. government. coming up next, i will introduce you to the writer of a new comic book based on edward snowden's story.
new twist in the edward snowden trial. snowden set down for his first interview with the u.s. television network. he told nbc he was much more than a low level systems administrator. it is no secret that the u.s. tends to get more and better intelligence out of computers nowadays men do out of people -- than they do out of people. undercover worked overseas, pretending to work in a job that i'm not, and even being assigned a name that was not mine.
is now also story the subject of a new graphic novel, a new comic up. it is called "beyond edward snowden," and it is published by one of the top independent makers of comic books, bluewater productions. join me is the writer of the snowden comic book. >> thanks for inviting me. >> we learned about edward snowden. you have a lot of experience writing and producing comic books. >> yes, i'm a lifelong reader of comics. i havewritten comics, worked for d.c. and other publishers, and i have worked as the editor of a comic book site for mtv. comics are my life. >> how does the edward snowden story become such an attractive project for someone who is interested in comics? >> he's fascinating and
mysterious and bold. the question, is he more of a superhero or super villain? the issue that with more information that we receive from edward snowden, that the storyline that you have created continues. will this be a multi-series event? >> i think it has to. there is so much we don't know yet that is coming out bit by bit. >> tell us a little bit about the research you took in order to prepare all of the words and the storyline for the comic book. primaryrted with the sources, like the initial video,an" article and and further out until i got to things like message board postings and blog postings, just trying to get a full picture of the man. >> as someone who has had to re-create his story -- and then there are the copying image --
accompanying images -- do you have a personal sense that you understand what motivated edward snowden to do this? >> i think i do have a sense. it is so hard to pin down. i think some of it is about justice and telling the truth. there's also a lot of stuff under the surface here that i think we just don't know about. i bring up a lot of in my book regarding that. >> indeed, and having read the comic book, you don't necessarily draw any specific conclusions, but you create this character. is it a character-based on your writing -- is this a character that would lend itself to a movie as well as a comic book? >> absolutely. characterize him almost as a classic antihero. fascinating, cryptic. it would be a great movie character. role in this his
, john kerry, secretary of state, has come out and said that snowden can come back to the u.s. any time, but he is a fugitive from justice. as creating the character in this comic book, did you get the sense that he knew that this would happen after he revealed the secrets, or would he be vetted as a hero? >> i think he kind of knew this was going to happen. i think there's a bit more to this story. i think you did not think he was going to go back to the united states and be lauded as a hero. he probably also needs to get out of russia fast. theyll, he tried, but revoked his passport. what kind of success have you had with the comic book so far? >> it has been amazing. the amount of international interest in the book, an increase, it has been
stock" on "taking bloomberg. i'm pimm fox. let's go to my radio cohost, carol massar. get official word that beats will be joining up with apple. it's the biggest ever acquisition for apple. samsung has unveiled the rest and that can be fitted with third-party sensors together a range of health data.
it is called sim band. they want to create a new conversation around the future of health. nhl fans have shelled out a record 10 point $7 million on tickets to see the rangers take on ÷aybe there is some new technology that can assist you. joining me now, gordon yuli, the founder of court said, an investor in the play site smart toward. thank you for "taking stock." thanks for being here.
you don't have an abundance of natural talent and you have some and you have a lot of desire and you have the discipline. how can you apply technology to those characteristics to become a better player? video analysis is helpful and we've had that in the past but now we have five cameras that actually can tell you so much more than just video. give you statistics, distance, all kinds of incredible things. >> it's almost as if you have digitized and electrified the actual tennis court. >> like a videogame. >> you become someone in the video game. the kind of statistics, the speed with which you hit, whether you fail that drop shots, how many unforced errors. all of this is then compiled but then you have to do something with the data. >> if you are a coach, you have the dated to be able to help them convey what you are having
the players understand. if they are all of a sudden doing this, you tag and tell it to tell you all the unforced errors in the match. the videos are there edited without someone pushing buttons to have it happen. ow that. able to sh >> then you can take corrective action. >> you go back on the court and you do the corrective action and you can see it. you can go on the cloud at night , see your statistics in your video. it's just a home run. >> five cameras and you've installed on 35 quarts and you want to expand. >> everywhere. want everyone to experience the technology and it's kind of like a revolution. we have some great investors. it's very exciting for the future of our sport. >> you mention investors, but
who's behind the questithis? do you think someone like novak use something like this? >> he's a good friend of mine and he stayed with me during the u.s. open. trying to learn more about his own game and how he can improve. when you had had this were growing up -- >> i would have been something special. >> this idea of applying very specific science and analytics to a human endeavor, will this change the way coaches relate to the players? will take time for coaches to adapt the something like this. are going to have such a than juste advantage
saying bend your knees. we have tournaments every weekend. the kids now are getting the same statistics as if they are at the u.s. open. it's mind-boggling. >> price tag? >> $10,000 per court. there is a licensing fee that it's a very affordable. all different walks of life in the game of tennis and by the way, other sports in the future we will be tackling as well. this is is really her first technology. this is heavy-duty, good stuff. >> thank you very much, gordon sitesg, investor in play mark court. let's move from tennis to talk blurs. options and designing testing applications is no child's play, or is it?
junior consultants are in hot demand to try out these apps. 11-year-old elliott is a major player in this industry. his father is a venture capitalist and he helped broker one of the latest deals. i want to welcome them both from san francisco. you started off. sign in what would you as your job title? what do you do? run a focus group testing group at my school. >> at your school. how did you set this up? raise money to get candles for my school. i remember when i went to the capital is -- capital office in palo alto i tested out the new outbound i realized my friends would think it would be really fun and that i could charge the company to come. >> i want to bring in david.
not only in addition to being elliott's father but a partner in a vc firm. the jew expect to have an entrepreneur so close to home? would oneinly hope i day but i can't say i was expecting it to happen so soon. i've been blown away by what elliott and his friends can do if you just that act and let them. he's very fortunate. he goes to a progressive school that encourages them to follow .heir passions did they all know they are going silicon valley. they are all eager to learn about it and participate. >> what makes a great app? what gets your attention? think something that would make a good app is something --t you want -- i don't know
something you want to show your friends or progress in. or the app magic al which allows you to make very nice pieces on the p&l very quickly. wrap which allows you to make a new rap. tell prettyan you quickly whether something that is designed for 11 and 12-year-olds is going to be a hit? is this something you are just able to get almost immediately a sense of? >> no. tohow long does it take you go through this process of evaluation typically? >> i think i have to actually
use the app for a little while, see how my friends use it, use it with my friends. if we like to use it together and if i want to show my friends app wouldt means the probably become viral which means a lot of people would want to use it. >> what do you charge for your services? charge $300 for 2 to 6 kids. >> have you been able to buy all the candles for your school yet? schools.ally changed i was able to buy candles and a 3-d printer and now i'm going for google glass at the school i met now. >> well-done. thank you very much. cowan.and david app labs and bessemer ventures. i speak to the cofounders of one
"taking stock" on bloomberg. i'm pimm fox. the nutrition industry is expected to grow to about $250 billion by 2020 according to "nutrition business journal." one looking to capitalize on the trend, they deliver a monthly package of snacks and goods to its customers and is looking to become a $5 billion company. head around ross join me. thank you for having me. the idea that people would be able to create a subscription model that would send things in the mail that are healthy to
eat, we know this exists in other business. why healthy foods? >> i've been counseling clients and have worked with literally thousands of people. workingotice is after with me, we took them to go food shopping and they were so overwhelmed from looking at the labels, the ingredients, but ofo the markets are so full healthy products, you also could not find everything and it was a very frustrating experience. it was at that moment i realized there is a real problem in the market not only for consumers but also for brands. you have to establish relationships with a variety of companies in order to pull this off. how do you convince them that you are the best it should better for this? the biggest thing that makes us different is we truly are taste makers. we understand the market and
we've been working with that for a long time. we understand the consumer side and the brand side and we're been a good position to pick product and present them to an interested group of consumers. we're are also finding that we are influencers in the market. on average, over 50% of our members by or intended by the products we feature in our boxes after they try them for the first time. when you put that together, it's a really compelling opportunity for brands to be represented by us, featured in our boxes, and develop a relationship with a loyal consumer base. necessarily decide what will go in the boxes? is it based on people writing down a preference, cereal, something to drink? how did they decide if they will get something personal or not? >> we do not personalize the boxes. we look at market trends. we make decisions about where we feel trends in the market are.
that's essentially the way we are looking at a market and the boxes. >> what are some of the items that people can get and what are your favorites? >> we pick anywhere between eight and 10 products that range either nutrition or wellness. our boxes tell a story. august will be back to school. there are themes that makes it better for marketing but also great for the consumer. >> what kind of brands? >> stonyfield, very big brands, but also these small, newly emerging brands that cannot really get out there and we are a great way for them to spread the word. >> do you have any favorites? >> so many. we have featured hundreds of brands and i love them all. every month i'm in love with these products. >> what's the scale of the
company right now? how many are you sending out and what would you like to do? >> we're pretty pleased so far. we sent 15,000 in this year we are projected to send 60,000. don't have tolly take inventory. >> we do, but the good news is that we have outsourced the fulfillment end. andocus mainly on marketing selling and third parties to help us with inventory and development. >> thank you very much. wed stowed -- besto cofounders heather and ross bauer. deal for beats electronics. we have more details coming up. ♪
joining us, former apple executive george blankenship. he was apple's vice president of real estate from 2000-2006 and played a key role in the growth of apple's retail strategy. most recently he was an executive for tesla motors and now we have west coast correspondent jon erlichman. john blankenship, i want to get your thoughts on what this deal will do to the footprint of apple stores. think this is probably another step along the way that apple is looking at of thatbling multiple things most people today don't recognize as being a collection of things you can put together which will then turn into something that will go into the stores, go into a customer service-oriented product that most people don't see yet that will then be a product up the stores can leverage to continue
a great existence for the customer. i don't think most people are able to see what that might be at this point. beyondare saying this is headphones and beyond streaming. it's something that isn't out yet. >> apple i think is a company that's among the best in the world that looking at trends and sort ofng on assembling pieces and parts of what other people see as fragments. back to july 2000, they bought sound jam. six months later they came out with itunes software and a year later the ipod. then by 2003 they were selling one million songs per week. me, this is something along those lines. yes, they have headphones. yes, they have a subscription service. who knows what they have in the r&d world that this point.
if you put that in the home with 20 megabits per second plus, tv, lots of things going on, there could be a product here that we don't recognize that could land in stores that could be a huge hit. >> george, i'm wondering if you can speak about jimmy iovine and dr. dre. >> i think both of them are experts in the industry and they got behind beats to improve sound quality. about quality all forever. that is what they are about. you have jimmy and dr. dre and put them together with creative folks over at apple. again, think about taking what beats has and then giving it, i don't know, 100 $50 billion in capital, look at that turn into? very hot brand.
george, do you think apple's brand needs a boost right now? i walk through the mall, it sure does not look like it. there's tons of people in every apple store i walked past. it's always the busiest in the mall. i think what it's doing will leverage the fact that they have 6000, 7000 people going through every week. when you have that kind of traffic and a new product to , it that kind of traffic mushrooms immediately. others have to rely on people searching on the internet or coming across it or someone telling them about it. at apple, you have 8000 people a week in a normal store to introduce a product to. whatever they do come up with next can have a leveraged effect immediately that other companies just cannot match. blankenship, is there
a particular apple product you would like to see come to market? >> i would like to see them take everything they have the ,ogether in the media, video and really accent apple tv. really come up with something that would leverage the ability to take all of what they have in that realm and put it together in something. i have an apple tv and i use it, but i think what they might be able to do a great job that would make my big-screen tv even , fighting andd doing music, movies, all the other stuff, i think something visual for the home would be really great. >> george, you think this deal was worth $3 billion? >> absolutely. for aess than google paid
thermostat and a smoke detector, you know? i thought it was a good deal for them because it starts to get them in the home. $3 billion is not a lot of money when you have $150 billion. for them, i put a lot of faith in the leadership there to spot trends. i think maybe six months, one year, 18 months from now the rest of us will be stepping back and saying "wow." just like we did when they were selling one million songs per week. >> george blankenship, do you think beats will be around as a separate rant than 12 months? -- separate brand? >> that's a tough question because they don't know what else they have in the background. apple and beats together could be pretty good. following thatng appreciates sound, headphones,