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tv   Key Capitol Hill Hearings  CSPAN  May 26, 2014 8:00am-8:31am EDT

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>> "dogfight: how apple and google went to war and started a revolution" is the name of the boat. fred vogelstein is the author. he joins us now from san francisco. howard went to the company applegate started? >> gosh, apple has been around for almost as long as silicon valley has been. i mean, apple got started in the late 70s when steve wozniak and steve jobs started the company in steve jobs' garage. from then until the mid-1980s, it was the hottest come to me -- company and all technology is if not the world. i remember, but the iconic soup bowl live that aired right before apple launched the mac
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cash. as soon as the macintosh came out, apple was the hottest company on the planet. ..
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and then pretty quickly thereafter started google, and it's kind of been a rocketship ever since. what's kind of interesting, and i sort of want to circle back to the whole apple example is that in some respects apple and google arguably started at the same time. apple, obviously, started in the 1970s, but then steve jobs got fired from the company in the mid 1980s, and then apple went through sort of a period of, say, 10 or 15 years where its fortunes really declined steadily. and it wasn't really until 1997 when steve jobs returned that apple's fortunes really began to rebound. in fact, it's, i guess, pretty well known among people who pay attention to what's going on in the valley when steve jobs came
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back, apple had about 90 days of cash left before with it was going to auger in. and so in some respects, you could say both companies started right around the same time. >> well, you write in your book, "dogfight," that the apple/google corporate battle is, quote, the defining business battle of a generation. what do you mean by that? >> guest: well, i think that there have been, one of the things that make silicon valley so interesting is that most of the companies here are started by their founders, and as a result, whenever there are fights over things, the fights get nasty and personal very quickly because of each of the companies has been built from scratch by the person who's running it. and so steve jobs takes everything that happened to apple very personally, larry and sergei take everything that happens to google very
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personally, mark zuckerberg takes everything that happens to facebook very personally. and so fights can break out that get, that get kind of nasty. but on top of that, what you're dealing with with apple and google in particular is you're not only -- what makes it a particularly interesting and defining fight is that you don't just have two companies who are fighting over the future of technology, right? i mean, so you've got -- so apple has its iphone and ipad, and you've got google with all its android devices. but it's not really just a fight about technology. these guys are actually fighting about the future of media and really the future of television. it's kind of an interesting evolution that is starting to happen which is that effectively silicon valley is starting to become a media center in ways
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that people are just beginning to get their head around. and i think that that's kind of definitional when you think about it. >> host: so these are content distribution companies? >> guest: they're just -- absolutely. i mean, so one of the things that i think people are just starting to get their heads around is that apple and google together by controlling the end points of all the phones and tablets that we use -- because with google controls the android software, apple controls the iphone software, and no applications get on those devices without their say so -- i think one of the things that is starting to happen is that these guys control so many eyeball withs and so many -- eyeballs and so many, and so much money that people are starting to come to them to help
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them finance some of the content that they want to get out there. so to be a little bit more specific, most people don't think about apple and google as content companies or even as distribution companies, but at this point the eyeballs that they control probably rival those of the studios and the television networks and, and the broadcast networks. and so i think you're going to see going forward them not only using this vast distribution network, but also their balance sheets to try to actually get more, to kind of get more and more content on their networks. i mean, the thing people don't pay that much attention to is that google has about $50 billion in cash just sitting around. apple has another $150 billion
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in cash just sitting around. so that $200 billion, that's about half the value of all of hollywood. and so this my opinion -- in my opinion, i think it's really only a matter of time before these companies actually start to finance the kind of content that we're going to start to consume day-to-day. i can be a little bit more specific if you want. >> host: please. >> guest: so i think everybody paid very, very close attention to what happened with netflix and "house of cards" and "arrested development" and "orange is the new black." what i mean by that is to most people those are just good shows, but to people out here, it's really quite seminal because it's really the first time that somebody other than a cable company or a broadcast company has distributed a hit show. i mean, netflix is a technology
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company based in saratoga in the south end of silicon valley. i mean, and so i think apple and google and microsoft and facebook all looked at the success of netflix with its content and thought, well, heck, we can do that too. and i think you're seeing the beginnings of this starting to happen both at amazon, at microsoft. google, i think, has probably spent with youtube $300, $500 million building out professionally-produced channels. one of the things most people don't realize about youtube is one of the things most people think about when they think about youtube is, you know, dogs on skateboards or other things that you might find on america's funniest home videos. but what's really starting to happen is that it's becoming a
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platform for, it's becoming the newest platform for professionally-produced content. as a way of bypassing the distribution, the distribution mechanisms that comcast and the cable companies have or the broadcast networks have. and so apple and google as the people that control the end points of our devices are going to be really, really big players in that. >> host: in your chapter, "changing the world one screen at a time," mr. vogelstein, you write that the future of hbo will also be a good proxy for how the mobile revolution is going to evolve. >> guest: yes. so one of the things that most people forget about hbo is that most people think about hbo as sort of the home of "breaking
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bad" and "the sopranos" and all the incredible programming that gets produced out of that. one of the things that they forget is that back in the 1970s when hbo first got going, the way that they built their business and their subscriber base was by buying lots of movies from hollywood and then running them on their network so you could subscribe to hbo and get all kinds of movies that you might not otherwise get at the video store or anywhere else. and it was a very convenient way for people to watch movies that maybe they'd missed in the movie theaters. and so for a long time people thought of hbo as the movie channel. that sounds familiar, doesn't it? i mean, it's exactly what netflix is doing with its business model. it's trying to build up a subscriber way -- base that generates money that it can then use to kind of finance original
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lal content and so what's going to be really interesting to watch right now, hbo has this incredible content. but you can't get it unless you have a cable subscription. so in order for me to get hbo, i've got to call the comcast guy, or i've got to call the cable guy to come this, and i have to subscribe to a whole bunch of other channels that i might not want. the great thing about netflix is that you don't have to do any of that. and it's a little bit, and it's a little bit cheaper. i think hbo is $10-$15 a month, and i think netflix is $8-$12 a month if my memory serves. but the most important issue here is that it's unbundled. and so what's going to be really interesting to watch is the pressure on hbo, is to watch the
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rising pressure on hbo over the next couple of years as they try to grapple with whether or not in order to compete with netflix and, for that matter, all the other tech companies like google and apple and facebook who might be -- and microsoft and amazon who might be producing original content as well, what hbo is going to do. are they going to start putting pressure on all the cable networks to allow them to sell their channel unbundled? and so i think watching sort of how that plays out is going to be really, really fascinating, because i think that if h -- if the cable networks resist and refuse to let hbo go its own way, i think you're going to see some tension between hbo and the cable networks. and i think that's going to be interesting to watch.
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>> host: well, mr. vogelstein, how -- your book so ostensibly about apple and google, but how do the comcasts and the verizons and the microsofts and the amazons, facebook, fit into this infrastructure? >> guest: well, one of the things i thought about for a long time before i put this project together was exactly that question. so, for example, you know, is there a way to distinguish between what google and apple do and what facebook is doing and what netflix is doing and what amazon and microsoft are doing, and what i concluded is that there was actually. all of those companies are doing really, really interesting and important things, and there'll be lots and lots of room for what they're doing in the new world. but the one thing that none of those companies have that google and apple do have is control of the end points.
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so apple through its iphone software and ipad software and ituness software controls all the applications and content that people see on their iphones. and google, through its android software on tablets and phones and and increasingly other devices, controls all the content and software that appears on those devices. and it seemed to me sort of akin to sort of the way microsoft controlled the pc industry in the 1980s and 1990 that these two companies would be able to exercise similar kinds of control over the mobile ecosystem that was one notch above what everybody else was, that everybody else was doing.
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you know, in the 1990s we, many of us have forgotten, but microsoft through controlling all the software that was on every pc essentially controlled the desktop. and there were all manner of fights between companies like aol and netscape and adobe and all the other companies just to get prominent placement on the desktop home screen whenever you turned on your computer. so i still remember in the 19, late 990s the -- late 1990s, the fights, the negotiations that aol and microsoft had, for example, over where aol's icon was going to be when you turned on your computer that was controlled by microsoft. and aol, which at that point was a very big player and a very powerful player, at that point
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aol and microsoft were really going at it. but ultimately, aol had to cave because microsoft controlled the desktop. i mean, microsoft ultimately had a 40 knoply there, and it -- monopoly there, and it completely controlled what people could and couldn't see when they turned on their computers. i think we're sort of seeing a little bit of that right now which is that apple and google both control the desktop or the screens that we see when we turn on our phones and tablets, and going -- over who's going to be where on those screens when they're first turned on. one of the things that i write about in the book a little bit is that facebook experienced this firsthand in about 2010.
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in about 2010 it was negotiating with apple for, over a way to kind of more deeply integrate facebook into the iphone so that, for example, you could take your phone contacts and compare them with your facebook friends automatically, for example. well, that teal went to twitter -- that deal went to twitter, as many people will remember. and a lot of people at the time, back in 2010, were going what's up with that? because it seemed like twitter came out of nowhere to get that deal. well, the answer to that question is that facebook tried to negotiate with apple, and apple said we don't really want to negotiate with you. we're just going to go to twitter. and if you talk to people at facebook, they'll tell you in a grudging way that when they negotiated with apple the next time, they were more flexible.
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>> host: so how seriously do these two tech superpowers take this war? >> guest: i think that they think about it every single day. you know, they try to poach each other's employees, they try to figure out ways to beat each other because the reason they take this so seriously is both of them are worried that what's going on here is a platform war. so what happened, and in platform wars there's really only room for one big winner. ask so both these companies are worried -- and so both these companies are worried that if the other company wins, that they're going to wind up not only losing, but they'll wind up
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losing really big. so this is one of the peculiarities of the way technology works, is it tends to kind of create these what you might want to call rolling monopolies. what i mean by that is that if you look at -- we all know the microsoft story. microsoft came out with its windows operating system, and by putting it on every single pc, ultimately wind up pushing apple and all the other new operating systems for computers aside. i mean, most of us don't remember, but in the early 1980s there were many different operating systems that existed for computers. and microsoft, as a result, created this enormous monopoly because, ultimately, people started using windows because everybody else started using
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windows, what in the economic literature people call network effect. the thing about, the thing that most people don't realize is that this is really the history of how silicon valley operates. so there were lots of auction companies in the late 1990s when ebay got going. but thousand there's only one -- but now there's only one auction company. why? because, ultimately, ebay but allowing use -- by allowing users and buyers and sellers to talk to each other, came up with a feature that everybody liked. and, ultimately, got such a huge chunk of traffic and buyers and sellers that, ultimately, people realized that if they wanted to get the best prices, they needed to go there. so you wound up with a situation where people used ebay because everybody else was using ebay. this happened with google in
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online advertising. most people forget that in 2004 people actually thought that yahoo! was going to beat google in the online advertising world. but ultimately, google created a network effect with its search engine and search advertising that, ultimately, allowed it to take better than 80% of the market. the last example was probably the most recent which is facebook. there were, there was friendster, there was myspace, there was ning, i mean, the list of social networking companies out there is pretty large, but now there's really only one. why? because everybody uses facebook because everybody else is using facebook. apple and google have looked at this history, and it's hard for
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any of them to come up with a -- you could come up with a compelling argument for why it won't be this way, that this will, that in the apple/google fight it won't end up the way microsoft and ebay and facebook and google ended up, but i don't think anybody wants to take that risk. and so the reason that they're fighting so hard is because they sort of feel like it's an all-or-nothing game. but on top of that, the size of the pie is bigger than it's ever been. so this isn't really a fight, as i said earlier. this isn't just a fight over who's going to be king of the hill and high-tech in silicon valley. you're talking about who's going to be king of the hill in the content industry. well, that's like about $250 billion every year.
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so the stakes are higher, and both companies realize that if one company wins, there might not be room for another. >> host: dogfight is the name of the book, how apple and google went to war and started a revolution. the author is fred vogelstein who is also a contributing editor for "wired" magazine. so you've got a major chapter in your book about convergence. remember convergence? it's happening now. >> guest: i do. >> host: what's the, what's the thesis in that book, in that chapter? >> guest: well, the whole point of the, the whole point of that chapter is that essentially what's -- for many, many, many years the essential question in the world of high-tech and media was at some point the pc and the
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television are going to wind up converging. and that at some point we're going to, there's going to be one device where we do all our computing and watch and get all our entertainment. and this this has actually beens debate has been the source of all manner of speculation and business deals over the course of the past 20 years. i mean, the most famous be convergence deal is the aol/time warner deal which didn't work out for anybody. but there have been many others. and so over the years the idea of convergence has come to actually get a really bad name. it kind of makes people in the media and technology industry shudder when you use it. and rightly so, because they see money just flying out of their
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pockets whenever people get too excited about it. but it's actually happening. what's happened is that while everybody was in the media and tech business were still debating whether or not the pc or the tv was going to be the convergence device, you had the smartphone and the tablet showing up and actually solving the problem. and so the smartphone in particular allows you to do all the things that you might do on a computer such as e-mail, surfing the web, etc., etc. and then if you happen to be on the bus and you're bored, it also allows you to start watching a movie or a tv show. so in some respects it's kind of the perfect convergence device because it actually allows you to do work and fun at the same
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time. without feeling like you have to change the way you approach things. and it's always with you. this is really -- this has really started to take off when the ipad came out because the screen's big enough that people in the media industries looked at it and said, well, heck, i can put my magazine there. well, heck, i can put my tv show there. well, heck, i can put my movie there. and all of a sudden people are starting to realize that by putting all their content on these devices, they're finally solving some of the costs of distribution that have been bedeviling them for years and years and years and years. i mean, if you don't actually have to send, if you don't actually have to send books anywhere, ship movies anywhere,
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if everything you can send to people can be digital, you cannot only lower your costs of distribution, but you can explode the amount of shows that people can watch. you know, one of the things that -- and it's a wonderful thing for advertisers because, you know, now advertisers can truly reach consumers wherever they are. because of the fact that all of us have a phone or a tablet with us at all time. and so i actually think that this is turning out -- i think this is turning out to be a much bigger deal than people, than people really expect because i think that, ultimately, we're now at a point where, you know, five years ago if somebody said i'm going to go watch tv, that was pretty -- that was an
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unambiguous statement. everybody knew what that meant. well, if somebody says i'm going to go watch tv today, it actually generates as much confusion as it solves, 'cuz if i'm watching "house of cards" on my iphone or ipad, it sure feels like i'm watching tv, but i'm not at all. in the traditional seasons. and -- sense. and so we're sort of moving to a world where the tv is just, we're just talking about screen size. so when you talk about tv, are you talking about 3-inch tv? are you talking about 7-inch tv? are you talking about 25-inch tv? and so i think the convergence of the tv and the tablet and the iphone into sort of this seamless is set of devices that
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can all play the same content at any time depending on sort of what you're doing at the time is an amazing change that i think we're just beginning to get our heads around. >> host: dogfight: how apple and google went to war and started a revolution" is the name of the book. the author is fred vogelstein of "wired" magazine. >> you're watching booktv on c-span2 with top nonfiction books and authors every weekend. booktv, television for serious readers. >> next on booktv, "after words" with guest host jeffrey rosen, president and ceo of the national constitution center. this week justice john paul stevens and his latest book, "six amendments: how and why we should change the constitution." the retired u.s. supreme court justice targets gun violence, the death penalty,
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gerrymandering and campaign finance in amendments he believes would better protect and empower citizens. the program is about an hour. >> host: welcome, justice stevens. on behalf of the national constitution center, it's so great to see you. you honored the national constitution center a few weeks ago by visiting us. the constitution center, as you know, is the only institution in america that has a congressional charter to disseminate information about theing constitution on a nonpartisan basis. and i can't think of a better i book to discuss in connection with that mission than your wonderful new book, "six amendments: how and why wets" should change the constitution." you've proposed six constitutional amendments on topics ranging from campaign finance and sovereign immunityfa and political gerrymandering to gun control and the death penalty and the aco


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