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tv   Bloomberg West  Bloomberg  June 22, 2015 11:30pm-12:01am EDT

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emily: apple bows to pressure from taylor swift. will spotify be forced to play by her rules too? ♪ emily: i am emily chang, this is "bloomberg west." coming up, alibaba, we will look at the new plan to win over american shoppers. twitter laid down rules for its next as they could jack dorsey -- force jack dorsey to make a tough decision. sunshine sports solar, all of
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that is ahead on "bloomberg west." first to our lead, we are talking about alibaba. alibaba folding its company, 11 main, into another company called open sky. this is their initial foray into u.s. e-commerce. so far it looks like it has not worked out. joining us right now is the ceo and cofounder as well as jeff richards, long time investors in china. i know that you guys work closely with alibaba. jeff, i like to shop, i have never used 11 maine. it was only around for one year, did it just have zero traction? >> i don't think it has zero traction, but it never really took off and had no marketing muscle behind it. it was mostly set up as an experiment for them to learn and put together a team that could work with vendors inside the u.s. and over time probably
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didn't get a lot of attention. hence the fact that you never shopped on the site. emily: brian, how would you evaluate this? a failure? an evolution in strategy? ryan: at the end of the day it is not a failure and obviously it is not a success. i would say that it is a learning experience probably alibaba. they have essentially trained the chinese consumer how to think about and purchase through e-commerce. the u.s. is a different market. 11 main was their first foray into a principal position that they were operating themselves. they have certainly been more successful in their investment strategy and they have it appears retreated more into an investment path rather than operating path. emily: 11 maine was considered part amazon, part at sea, but there was always this question of whether they were going to try to take on amazon or ebay in that way. do you think that that will ever happen?
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is that any part of jack ma's goal? >> it is mostly focused on the chinese market. emily: but he said that he wants 50% of revenue to come from abroad. jeff: in the long run, but in their home market they are starting to get competition from j.d. and v.i.p. shop the number two and number three players. we are talking about a large market opportunity inside of china and markets in places like india where they have publicly said that they are committing significant resources. place like latin america and southeast asia, so it is not just the u.s. emily: jack mock was recently in the united states and he spoke at the economic club in new york and he clarified of it how he sees the alibaba u.s. strategy progressing. take a listen to what he had to say. jack: we show great respect for ebay and amazon, but the opportunity and the strategy for us is to help small businesses in america sell their products to china.
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emily: what does he mean by that? everyone seems to be waiting for alibaba to have its u.s. answer to amazon, but is that ever going to happen? brian: the short answer is no. what they have been successful at doing is training the chinese consumer to buy through the platforms products that are procured either from china or from the west. if i had to bet where they actually build an operating business it would the direct opposition off of a scaled business. will small retailers find success selling into china? perhaps, but at the end of the day necessitate for direct marketing and brand marketing that is not really going to be a point of confidence for small american read -- retailers trying to sell the 1.4 billion people.
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emily: alibaba has also made investments into snap chat and lyft. how do you see them getting to this 50% international rev mue? jeff: the long-term focus, the 5, 10, even 30 year plan, what you have to think about is that there are certain ways that they are doing research outside the company, making small and passive investments in companies outside the u.s., working with management teams in strategic categories like search, payment, transportation and messaging, different from a u.s. company that does internal research. making investments in the most powerful teams and learning from those organizations as they go. i would expect to see more of those investments, both in the u.s. and in countries like india and southeast asia and eventually you look to see them buying something with an even stronger presence in those markets. emily: like what? jeff: one of the hottest categories in the u.s. right now is the marketplace category, companies like wish, garage
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sale. you look at the mobile rankings that all of us look at in the venture capital community. those are all rising up the rankings. those would be some ideas. emily: jack ma was asked again about this counter it if good issue in russia. this has plagued them. how big of a problem is that for them to expand abroad and develop that trust with consumers, u.s. consumers especially? brian: the irony is that the problem may be tied more to western retailers than chinese consumers. i'm not sure if that is a necessary hurdle for them to expand into western markets where they are not aware of the counterfeit. i would say that it is a monkey wrench in the relationships with western retailers. a lot of the other major chinese
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platforms are running into the same problems that alibaba has terms of legitimate product, so this is an issue of east and west and i think again that where they will find their greatest success is with the chinese consumer selling in to eventually potentially acquire one of the businesses they have invest it in. it is nice to have a billion dollar market cap with billions of dollars in cash on hand to make smart acquisitions in the future. emily: what do you think, what could alibaba buy quickly? brian: i think it they could buy anything from some of the smaller marketplace platforms that jeff mentioned to something fairly larger that they have shares in already, like a first in, to something even larger they are an investor in snap chat and there are probably three to five companies that could buy snap chat today, one
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of which is alibaba. emily: alibaba buying snap chat? that's interesting. brian: i'm not saying that they will, but they are certainly into mobile in a bigger way. emily: what about twitter? brian: i think that twitter has its own valuation challenges and i don't think that alibaba would he ineffective steward of that business. that is a bit outside my purview. probably a better question for jeff. jeff: do you think that them buying alibaba is realistic? jeff: eventually we believe over time that all of these things can merge. mobile, social media commerce. eventually i think you will see a lot of interplay between facebook twitter google amazon, alibaba.
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emily: well, we just stirred the pot a little bit. that is what we like to do. take you both. so, while alibaba looks to gain favor in the u.s., apple is looking to china. c.e.o. tim cook told the chinese language version of "bloomberg businessweek" that his company takes chinese is this taste into account when designing their biggest ticket items. the decision to offer a gold iphone being a nod to chinese consumers loving gold. plus he says he is backing an education program in china that teaches kids about mobile programs, something to remember is that greater china is now the second biggest market for apple making up 20% of sales last quarter. next, jack dorsey may need to rethink his day job at square if he wants to be the permanent ceo of twitter. plus taylor swift tells apple how it is going to treat musicians. what does it mean for the rest
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of the music industry next? ♪
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emily: a story that we are watching, the oracle chairman and c.t.o. since he stepped out of the c.e.o. role larry ellison, fielding questions from analyst and customers, the company announcing 24 new cloud services at an event at coming headquarters in san francisco. they also say that new products are designed to move all the data into the cloud. last week's earnings caused shares to fall by the most in two years, we will have updates throughout the afternoon on what they said there today.
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now, taylor swift takes on apple and wins. the biggest name in pop music calling out the world's most valuable company on tumbler, arguing for fair compensation for artists, producers, and songwriters. she was upset that apple was not going to pay musicians during the free trial of its three-month free streaming service trial, but in less than 24 hours the apple senior vice president for internet and software had a change of heart and change of policy. he sent to twitter saying -- we hear you. but the debate about streaming music royalties is far from over. joining me now to discuss, keith, and jeff. guys, every time that we have a conversation about how much artists, producers, and songwriters are paid, it is so confusing. there are so many different scenarios. whether you're listening on spotify for free or paying premium.
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how should we think about how artists, producers, and songwriters are paid by these services? >> the interesting thing is that they are getting market share now -- spotify, for example, worth $8 billion but loses money on music every single day, the challenge being that they must get licenses to the recording of the song and then for the music and lyrics for the distinct copyright. find out who they are and make those payments. now on a per use rate as opposed to the old model. there is this major transition occurring and apple could conceivably change the market overnight with 800 million credit cards on file and the infrastructure to deliver the music at the click of a button they could literally shift consumer behavior. if the model is not properly set now it could strip mine a culture of for the industry. emily: there seems to be something fundamentally wrong with the culture if apple fought to begin with that they would not have to pay anything to artists, producers, and
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songwriters for three months. i don't get this. >> it is unfortunately the precedent set by the major labels that dates back 10 years. we had inside baseball terminology, free trial subscription. what was wonderful about taylor swift is that she brought this out into the public so that we are now talking about it. you are right, what was being asked was for publishers to absorb the cost of customer acquisition on behalf of a technology company because that is the way it has always. this is not taylor swift versus apple, this is the entire music industry fighting. emily: why are we not hearing from other artists? why isn't everyone complaining? keith: first of all, that is to pays you. you want to be careful about who you complain about. taylor swift is powerful enough to make a statement.
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but the point that just made is a good one, this was set any years ago before the internet, before napster, before all of these things came along, the music industry as we know it is based on two revenue streams, physical goods and digital streams. physical goods are really going away and it really is the digital music business that is the business. it is important to keep in mind that they are running on roads that are really not made for these new technologies. i think that what apple has done in responding to taylor swift, taylor expressed that apple is a partner, which is an opportunity for them to build a bridge and work not just with apple but with spotify and the other streaming services as well. emily: what does this mean for spotify? should spotify be terrified that apple has deep pockets and can do whatever artists want whereas spotify is a start up and cannot necessarily just pay artists to -- when they complain. jeff: this is a time when the model has to be addressed.
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the great thing about what taylor swift has done, along with other guys who are managing a lot of different types of artists, they are making us take a look right now while the cement is still wet to go ahead and look at the business model and take a good, hard look at how the model is being cut up, because that is important. let's not forget. yes, it is the music business, but music is an art and it takes artist to make them, to sit in the studios and make this thing work and you have to show respect to that. emily: obviously pre-recorded music sales are declining in -- and taylor says she is making her music from live tours, from performing. what does the streaming music industry look like in five years? jeff: that is the question that needs to get answered right now. spotify is about getting in -- exit. they won a 10 extra turn and there's nothing wrong with that but the problem along the way is -- is this business model the right model or will there be an exit for the technology company
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decimating the industry by setting the bar too low? what is wonderful about what apple did today is that they raised the bar, inadvertently creating a second wave of publicity by saying that they will pay for these subscriptions while looking like a company who has a soul sand a good guy. i can see their perspective, by the way, a great new product with 800 million potential users, everyone on the planet can try this product for 90 days and if they like it it will just continue and suddenly the amount of potential revenue for copyright holders will skyrocket and if the model works correctly there will be more money now through recorded and streaming music than ever before. you asked the right question. what will it look like in three years? right now as the top line goes up for entities like spotify the amount of money on a per stream rate is going down. people are making less money as spotify grows its top line revenue. that scares me a lot.
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emily: keith, you're nodding there. i see you agree. obviously a debate that is far from over. time now for today's edition of status update. this time it comes from twitter as the board searches for a permanent replacement to the outgoing ceo, dick costolo. in a statement they said they hired spencer stewart in the interim. they are considering both internal and external candidates, but the chief executive must be able to "make a full-time commitment to the company." that rules out interim chief and twitter cofounder, jack dorsey if he plans on holding onto his job as ceo of square. why did twitter release this statement today, though? shares didn't exactly pop. in fact twitter close down less that's a little under one cent today. coming up, $20 billion to solar
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energy in india. the next the investment opportunity? we will take a look. ♪
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emily: time now for the daily bite, one number that tells a lot. today's number is 80, that is the number of hours you can expect to work per week as a space x in turn. -- intern. they have cross locations in california, houston, and washington, d.c., reporting that the life of one of the companies 700 annual interns is growing, and the interview process is very unusual, you could be faced with a frightening scenario. if elon says to you that he needs hundreds of one part by the end of the week but the supplier needs three months to make it, what would you say?
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interns are partly compensated well, they get to watch the rockets take off alive and they get to meet elon musk. that sounds pretty cool to me. the heat wave in the solar industry? a $20 billion investment is being made in the india solar power sector between foxconn and they aim to create 20 gigawatts of solar power capacity, about 20 nuclear reactors worth of power. the indian government is actively looking for investment in renewals. here with me to discuss more danny kennedy, the cofounder of the startup accelerator. and our new bloomberg energy finance. how significant is it that you have this trio of billionaires looking to make an investment? >> it is a great use
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particularly to the world. solar is going gang busters this year. we will probably do 55 gigawatts around the globe. last year it was 40. we are growing in leaps and bounds and india was barely a market just a few short years ago. with this announcement it is going to become a substantial market. just a point out, the cabinet only agreed to go for this goal by 2022 that you mentioned, last week. you know, hot on the heels of that the politicians are saying go and the money comes in. emily: it is interesting, the power situation in india is dire. 400 million people do not have access to round-the-clock electricity, but is it really achievable to create 20 nuclear powers worth of solar energy this quickly? >> we'll see. we are pretty optimistic about what india can do. even our forecast is for 75 gigawatts by 2022 and that pales in comparison to what the 100 that the government is
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promising. it is a very ambitious plan but we do anticipate strong growth in india. emily: there is also rooftop and village level installation. danny, can you explain how you see this playing out? >> the goal is to play out 60% of this in utility goals for solar farms. that 40% of rooftop and rural electrification schemes are the really exciting stuff, bringing electricity to the hundreds of millions that don't have it in india. that is where businesses will flourish, creating cell phones leapfrogs in places like india 10 years ago to places having more cell phones per person than there are people. and that's what we're going to see with solar in the coming years. emily: the indian government is not necessarily known for always moving in sync. do you think that this is an achievable goal?
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>> that is going to be the trick, but they have gone from one gigawatts of four gigawatts today. now ramping up. and if china is any measure they went from zero to hero over the last five years with 16 gigawatts in the last year and they plan to do 18 gigawatts this year. can it be done? can you build that many power plants over 12 months? or a five, six seven-year period? yes, you can. will india get organized and allow that? that is of the question. one of the big stumbling blocks is capital, so this was a great start one week into the race to do it, to have $20 billion out of $100 billion committed. emily: interesting, definitely something that we will be watching. thank you so much for being here. thank you both so much. that does it for this edition of "bloomberg west." tomorrow do not miss my conversation with john chen, plus bill harris.
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all of that from san francisco. ♪
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