Aereo at the Supreme Court: Bloomberg West (04/22)

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April 22 (Bloomberg) -- Full episode of “Bloomberg West.” Guests include Aereo CEO Chet Kanojia, Walt Disney Studios Chairman Alan Horn, BTIG's Rich Greenfield, Golden Sate Warrior Co-Owner Peter Guber and Magid Advisors President Mike Vorhaus. (Source: Bloomberg)

Quacks live from pier three, welcome to bloomberg west will recover innovation, technology, and the future of business.

It is a case that could change the future of television as we know it -- aereo against the major broadcasters.

The golden state warriors push es plans for a new arena.

We will talk to pete r guber.

A top hedge fund manager says there's a clear consensus we are in a tech bubble.

David einhorn says companies he is betting against may fall at least 90% if and when the market applies traditional about uh and -- traditional valuation.

There was are pretending i'm intention paid in equity is an expense because it is non-cash.

At&t's profit dropped slightly in the fourth quarter.

The company added six under 25,000 monthly subscribers, up from 296,000 from a year ago.

The next program which allows customers to pay on phones rather than having a contract.

Amazon is apparently taking a sales hit.

Researchers at ohio state says household of cut their amazon spending by it -- by about 10%. amazon sales of items over $300 have fallen by 24%. now, u.s. supreme court will be hearing the argument today what could be when the most important media cases ever.

American broadcast companies against aereo.

Aereo uses tiny antennas to broadcast signals to subscribers without paying for it.

Network say this is copyright infringement since they are receiving no fees.

Aereo claims they are not subject to copyright laws because they receive it privately.

Aereo is available on a level in -- in 11 cities, houston, and dallas.

If it loses the case, it will likely finish.

Betty liu was that the supreme court all day long.

I know court just let out, what is happening on the ground?

Moments ago, the oral arguments were finished.

I think an interesting dynamic played out.

The two lawyers from both sides, paul clement and david frederick came out and made the reposing statements.

In that crowd, was barry diller.

He wanted to listen in on what paul clement, the lead attorney for the broadcasters, what he have to say.

I guess he didn't get enough information in the car -- in the court room.

I asked very how we thought things went and he said, i think they went well.

He didn't want to make any more statements but he listened in again on the broadcasters and then he walked off.

A lot of people thought that very he was the most high-profile ceo at this hearing that he would perhaps split out the past door -- the back door but he couldn't help himself.

Quacks tell us to the players are.

You have buried a letter, the broadcast is on one side and even the obama administration has come to their support.

The department of justice came down on the support of the broadcasters.

On the aereo side, lots of silicon valley players support it.

They say it is important for the future of cloud computing.

Dish network has the technology very similar to aereo.

They wrote a brief saying this is basically what we have which is we allow people to get broadcast content in whatever they wait -- they want.

It is new technology doing the same thing that a vcr used to do.

Quacks -- you sat down with the aereo ceo.

What did he have to say about today?

Is interesting -- it is interesting he didn't want to say anything today.

Chet did sit down with us exclusively yesterday.

He said he was optimistic that he will win.

He said the law is on his side.

This thing has been about making sure the consumers get the signal, it is not about making a couple of guys rich.

In we come.

We are completely different technology and technology-based in the fruits of technology and antenna.

None of them can dispute the facts because in this case they don't have a full way to disk beauty -- to dispute facts.

There is all this concoction and a sickly false narratives being created that somehow this is a copyright problem -- it is not.

Is a business model problem.

The world is changing around these guys and they are reacting with what they know which is mitigate and kill new companies because they are making far too much money and continue to make far too much money and have no intent to change.

Can you understand that they are sending cbs, abc, fox, nbc, sending -- spending millions and millions of dollars in programming that basically you are charging people eight dollars a month to access.

Can you see though that what they see -- what you are talking about as innovation, they are saying is theft?

Quacks -- if we apply this to hbo, it is a reason why they are called free to air broadcast elevated.

-- television.

It is public interest convenience and necessity.

Free to the consumer.

They make money -- billions and billions -- with advertising.

That bargain is preserved.

A 60 million people in america today, according to broadcasters, use and antenna.

Are those people infringing on the copyrights?

Tons of money make money selling technology like tivo.

All these companies make money by selling technology.

You are more than just an equipment provider even if that equipment is a mccloud.

-- is in the cloud.

The question is what the factual basis is.

Let's say you get into original programming.

Let's say you start developing your own channel, doesn't that change who you are?

Tivo is a great example.

You can get a retail tivo box.

You can plug an antenna into it and tivo will sell you video and demand movies.

Where is this copyright infringement?

It is only copyright infringement because i have made it simpler for the consumer to get it?

Chat,et, the ceo, not backing down.

What happens after that -- after today?

For the broadcasters, nothing happens.

I am sure there will be some drinking done tonight because it has been a long journey for both sides.

For the court, it is going to be like any other case.

The justices are going to retire to their chambers and discuss the case and vote on to it.

-- on it.

At the end of june, that is when we are likely to hear a decision on this case.

For more on this, i want to bring in rich greenfield, the media and entertainment madness list -- entertainment analyst because he was in the core room.

Great to see you today.

Tell us how you think things went.

The overall case was very highly decided.

The bottom line is it is not clear on either direction.

We heard cases in the court room.

You can tell there was fear.

How do you write this decision if you were to say aereo is illegal?

How to write the decision without impacting cloud computing?

There is concern about how you keep this from impacting other industries.

Chief justice roberts went after the plaintiffs attorney saying aereo is like using a public parking garage.

You go on back arise and you are renting space for an amount of time.

How was that different if you go home and build a garage?

You are essentially renting versus buying.

I think that is the key challenge the court is grappling with -- is that the same thing as renting versus buying or is there something special about broadcast television?

Those are a lot of questions we expected from the justices.

Were there any curveballs?

Probably not.

I think there was some concern when you think about what the overall impact could be on why this system is the way it is.

There was a comment from justice ginsburg, the only reason you are trading millions of individual copies to circumvent copyright law and i would not call that a curveball.

The pushing on why this system is built as ways to circumvent copyright law was another key theme.

Thank you for joining us.

Rich greenfield, the media and entertainment analyst.


We will be waiting for this decision at the end of june.

Barry diller has said if aereo loses, it is over.

Experts tell us it is 50-50. just a note of disclosure -- bloomberg tv does have a distribution agreement with aereo.

The warriors fell short in their nba playoff game last night but the team struck a huge deal with the tech giant today.

We have all the details from the team owner next.

You can watch a streaming on apple tv and aereo as well.

Welcome back.

The golden state warriors have abandoned plan to build a new arena on san francisco's waterfront.

They struck a deal with salesforce.

The warriors will own the land outright implant to build an arena with private financing.

Peter guber joins us from l.a. and also jon erlichman joins us from new york.

Peter, not long ago, you were looking at not far from where i am sitting.

On the waterfront near the bay bridge.

You spent $20 million for plans for it.

Why this new plan for mission bay?

We control our destiny.

We own it.

Our relationship with the city is one as an owner, not as a tenant.

We feel the site offers us a very attractive elements because the venue is a venue that is going to be for the city.

Is one of the top 25 markets that does not have a venue like this.

We believe it can be activated successfully, accessible by all four sides.

The it offers some strategic advantages.

Yet, it has its own location.

It defines itself.

We are going to spend that money privately, offered to recorders of $1 million for the retail, office buildings, and the plaza sites.

We want something that we actually own.

You bought the land privately out right from salesforce.

I am curious how the conversation started.

Did he try to recruit you?

Mark called and we met with him.

Joe lake of, my partner, met with them.

Together, we fashioned in the arrangement -- an arrangement.

It was expensive and we decided this was the place to make the move.

And offered us a higher degree of certainty, a timeline that was most effective, and really the kind of accoutrements that was hard for us to get at other places.

When you talk about being privately funded, how do we think about what the money comes from the whole process?

Did you ever get a rotator cuff injury?

That is the kind of money it is.

It is all privately financed by the ownership and by the partners involved with the enterprise.

Without looking at public funds, we are going to be an active participant in the city and a good listener to the marketplace.

We are going to be very responsive.

The idea is we are a private citizen building a private venue for the benefit and purpose of all sent chris cook -- san francisco bay citizens.

What about what will be unique about this arena?

You're in a position to build one of these things from the ground up.

What you want to be sort of the signature thing tied to this?

Everything is going to be unique.

We are going to cast our line over the horizon, not make it something else.

Had it really be in original venue.

A venue that is attraction and a lightning rod to bring the best and brightest to san francisco.

It will be a whole theater element of this.

A whole public performance element of this venue, too.

The point is we are going to have it digitally fit.

We are very successful at oracle with this.

We are going to bring state-of-the-art sound.

We are going have the right kind of visual display.

We are going to make the audience, not passengers, but participants.

We think that we have the know it all and we have the relationship with silicon valley and the business community to really bring those talents.

It is going to be -- if you want a metaphor, it is going to be madison square garden out west.

It is going to be the kind of venue where artists and performers watchable format.

-- want to perform at.

How do you see san francisco as a draw in terms of recruiting top talent on and off the court?

We are sold out in our current site.

About eight or nine miles.

We are high up in the league standings in terms of attendance, merchandise.

We do very successful.

That allows us to undertake this proposition.

Our audience is drawn from san jose, both sides of the bay, equally all-around.

The warriors played their first seasons in san francisco.

We are coming home in a sense.

Coming back home.

Warriors co-owner, peter gruber, and jon erlichman.

Thank you.

At&t is teaming up wito rollout its own cable tv service.

Can they take on netflix or amazon?

That is next.

? welcome back.

Cable giant comcast reports big fourth-quarter earnings thanks to the winter olympics on nbc.

A surprise growth in tv subscribers.

Sales rose to $17.4 billion and profits rose 30%. comcast added 24,000 tv customers in the quarter bucking a broader industry trend and of course comcast could add millions more subscribers in its merger with time warner cable is approved by regulators.

At&t is getting into the online tv game as well teaming up with the chernin group to invest $500 million in digital tv service.

The chernin group is led by former fox broadcasting executive, peter chernin.

For more, i would like to bring in cory johnson.

Interesting partners here.

They're looking at ways to build deals for live programming and investing in on-demand services.

Will other traditional players be challenged by this is the question.

This is an odd partnership.

It is not at&t as a company that needs a lot of cash.

The partnership began about a year and a half ago when at&t and the chernin group tried to buy hulu.

Eventually that option did not go anywhere.

The partnership had been made at that point.

At&t wants to get into content.

And other large company that wants to get into content.

We have heard yahoo!

Recently wants to get in there.

Amazon has made a much bigger play.

At&t wants to get into this game andrew wiggins -- and who wins?

At&t and the chernin group want to get together and potentially buying newer content companies and build this thing up to compete with netflix.

Jon erlichman is in the center of anything because there were so much going on in l.a. he spoke to people like truck drivers and people in special effects and everybody is working.

Piracy doesn't even exist anymore because there are new shows being filmed all the time.

We see companies in this all the time.

Disney made an offer.

There are these other media companies.

These new start up companies that want to get into online content so that everyone can see it.

That is what this that is.

-- bet is.

At&t in that game, they own a company and they have 5 million subscribers the traditional way.

Even comcast came out and said, we would get into this over the top streaming game potentially if the market dictates that is the direction we are going.

Interesting stuff.

Fascinating we have the content world changing.

It is happening fast.

Thank you ray much.

We are going to go inside aereo.

We are going to show you just how the technology at the center of today's arguments at the supreme court works.

You can watch a streaming on your phone, tablet, and ? you are watching bloomberg west where we focus on technology and the future of business.

Aereo has made its arguments at the supreme court today where traditional broadcasters are challenging the live tv streaming company, but how did this technology behind aereo really work?

Jon erlichman went inside aereo to find out.

At this manufacturing facility in new hampshire, machines are assembling hardware.

This is the antenna.

We have found a great design and did a lot of work on it.

We have achieved a great performance.

Aereo give us an inside look at the busy factory where the final product comes together -- product that is revolutionizing the way we watch broadcast tv.

When you see how the technology works, it is different than using old-fashioned rabbit ears.

Each antenna goes to an individual subscriber but the antenna is not mounted on the tv.

They are stacked on boards and then slide into a box that it -- that can accommodate thousands of antennas and mounted on rooftops.

The antenna sent the tv signal to a transcoder and then a dvr allows you to stream online and pause and rewind and record.

A standard antenna for a cable company takes and pushes it down the wire.

This is a model where you are listening to what you want.

What is the capability of what you can manufacture?

I think we can manufacture huge numbers, many more than 10 times of what is on the field.

They plan to operate in 22 cities by the end of the year and is built the business to accommodate what other -- what level of command comes their way.

As demand grows, we can grow with that as opposed to the conventional model that says i'm going to build it out and hope they come.

A very analog business model is not capable of being successful in today's economy.

Jon erlichman inside aereo.

For more on how aaereo is disrupting the media landscape, i want to bring back betty liu who was at the supreme court.

Also, cory johnson and mike morehouse who covers entertainment and media.

Michael, i want to start with you.

What you think about aereo's attempt?

I am not a lawyer.

It just doesn't seem fair to me.

I am in new media guy.

Cable plays for retransmission.

Aereo is nortt over the air antenna.

You can buy that at radioshack.

This is a service that goes beyond traditional antenna.

Collect -- it goes beyond the expansion of rabbit ears.

It has dvr.

We had a guest earlier today, a locker fester at and we yo -- at nyu, that compared it to dropbox.

They says that the supreme court rules against aereo, back up with the whole cloud into question.

I think they are giving aereo lots of credit.

They are trying to innovate around the law.

They will find a stinky way around it, not really trying to find a completely new technology.

Similar to that, i think while we know john roberts asked those kind of questions during the questioning today about the cloud and the impact of other businesses if they rule against it -- i think aereo is really just aereo.

I don't think the copyright law applies.

When it comes to consumers, they are still obviously contained -- complaints about the lack of choice and the lack of meaningful competition.

We also have to pay for hundreds of channels we don't necessarily want.

What to the incumbents have to say about that?

It was interesting because i want to pick up on what cory was just talking about.

Much of what the justices were discussing reflects what consumers are worried about, what the cable operators are worried about.

Justice sodas -- justice sotomayor ywwere concerned about the cloud computing business.

On the flip side, you had chief justice john roberts who came really hard down on aereo.

He said, a senior technologist a way to skirt copyright laws?

This is the -- this is what it boils down to.

In the hour-long hearing, there really was -- there was no give to either side.

There was a lot of pressure on both to really prove their case.

It is a hard case to prove before aereo.

Many of the people that we talked with this morning said that it is very hard for aereo to say we should be able to get off the retransmission these signals without having to pay for them while there was president by satellite companies and cable providers that they have to pay billions of dollars for that content.

Plenty of the biggest technology companies today disrupted the traditional established industry.

Are there any disruptors out there that we should be watching when it comes to the cable business?

There are quite a few.

We talk about cord cutting, over-the-top tv.

There are temptations.

That is really important.

For gaming on the tablets, on the smartphone -- you have so many things you can do at home.

Tv is not the dominant i marry medium for entertainment.

-- primary medium for an attainment.

-- for entertainment.

Tv content is in great shape.

More people buying more content and more content is being made, but the distribution methods are heading towards destruction.

You see any parallels about what is going on between aereo and other industries and other startup disrupting traditional incumbents, like amazon or did for bookstores and like what uber is doing for taxis?

I think is a fairly unique case were some clever people try to find a way around this role, this law.

When the first airwaves were given out, they were given out by the government.

These companies can make a lot of money with the promise to provide a service for free.

The notion that there was a cost incurred and they should pay for -- these airwaves were given away for the very purpose of revising the benefit to the community.

This seems like a technology invented to get around a law, not just a technological problem.

I think they are unique for that reason.

Daddy, how do you feel about that?

-- betty, how do you feel about that?

If aereo were allowed to live, it puts the focus -- it puts into focus at that is cable television broadcasting retransmission model -- it is not so much that tv is dead or dying because you see a lot of digital content migrating to a television platform.

It is that whole retransmission model, is that going away?

His cord cutting going to eventually replace that?

One of the things i thought about as i was reporting is you can get your aereo, you can get your netflix or your amazon, all the shows that you want and instead of paying $300 a month for your cable bill, you pay $25 a month.

When consumers start to really figure that out and they start to get access to that technology, more and more, that is where this whole entire business model is going to be in danger.

Betty liu at the supreme court.

Mike morehouse and cory johnson, thank you.

Disney hits the box office jackpot with frozen ranking in more than $1 billion worldwide so far.

The man behind the music magic and the secrets about the blockbuster success next.

? i am emily chang and this is bloomberg west on bloomberg television and streaming on your phone and tablet.

Will leonardo dicaprio be the next hollywood star to play steve jobs?

Danny boyle has approached we in honor dicaprio as starring as jobs.

Boyle is set to direct the movie that is based on the autobiography and has a script written by aaron sorkin.

Now to the series of how technology is changing the business.

Since chairman of walt disney studios, to disney films have topped $1 billion in worldwide ticket sales.

Ironman three and frozen.

Jon erlichman sat down with foreign today -- with horn to ask about the secrets of this kind of box office success.

Alan horn has been a very busy guy since he joined disney.

He oversees the marble and the pixar brands.

Within a few months, they bought lucasfilms to get their hands on star wars.

We start with frozen because it breathes new life into the animation unit at disney.

I asked him about the financial success of the company.

I will say that, not that we don't care about money, it has been really a phenomenal success.

It is the highest grossing film -- number six of all films of all time.

Is the number-one animated picture, up to about $1 million worldwide box office.

The biggest before that was toy story 3. this is a gigantic success.

Albums sold, it is number 11 and -- have you guys seen frozen?

Can you get that song out of your head?

? don't borryther me anyway ? are you going to make a sequel?

We haven't talked about a sequel because we have announced that we are making a broadway show in new york.

The next priority will be for us to do a musical.

We have the music, we just need four or five new songs.

We haven't really talked about a sequel though i have a title for his people which was not embraced by the fellas.

I am show should -- i'm so glad you pitch this place to reveal the plot of the star wars film.

I know everybody is excited.

You just told us you are heading to london.

Star wars.

To look at the -- production design, the score and screenplay.

I have to be very careful about star wars.

If i say, for example, there will not be skateboards in star wars then the internet goes, star wars, exec says the skateboard is disney movie chief.

Even something that doesn't happen gets news.

We can't talk about it yet but we will move very soon.

We have the confidence in the world.

I think we are in very good shape.

There will be no skateboards in star wars?

[laughter] you have set a couple of things.

You said casting is almost done.

Is casting now complete?

It is almost complete.

We are not prepared to announce it but we will be very shortly announcing.

You have said that shooting has started.

Does that mean -- we did work in other places because we have all these locations we have to film.

We have to give that that star warsian look.

We need to go to different places that give us the right look and feel.

We did have a second unit shooting already but we haven't convinced the main part yet.

The primary location, probably in the u.k. and abu dhabi is another location?


When you take all these movies, the global audience that is available to you today which is a larger number of people than ever, should we assume that strategy helps to offset an industry source spotlight declining dvd revenue?

It is true.

Dvd revenues are down 60% for the past five years and that is really painful to us.

When we greenlight a movie, we get estimates on what we could generate from the revenue sources.

The dvd component of that revenue stream has been cut in half.

We know that dvds have been a tough market for the film studios and music.

We know cd sales have struggled.

There was a trend that vinyl has been doing quite well.

We went to one of the few remaining vinyl manufacturers in the country to find out why.

Long before there were digital downloads, this is how you made an album.

And rainbow records, the recipe has not changed.

It is a process of heating up the hot vinyl and the hydraulic presses goes under about 800 pounds of pressure.

Kind of like making waffles.

We are inside one of just dozens of facilities in north america still making records.

Rainbow records was down to producing just 5000 lps a day a few years ago now -- are average days about 22,000 record today.

You are producing up to 22000 and a? last year, 6 million lps were sold.

It was 144% growth in four years compared to 54% growth for digital albums and a drop in cd sales.

You want to know why vinyl is hot, look at macklemore.

A year-and-a-half afterward -- after the release, rainbow was making the final version.

When you buy the physical today, in certain cases, they will give you the digital copy as well.

That is very common.

Macklemore made the lp available at retailers where he quickly sold out.

They're not only selling those units but they have a 12 inch by 12 inch picture of themselves in a store that speaks to the brand.

With music fans feeling nostalgic, rainbow is strangling to meet the new demand for vinyl with old equipment.

Its newest record press is 35 years old and album testing takes place on a vintage turntable.

This is a seedy centering machine we have converted for vinyl.

This is a cd machine that was converted for vinyl.

That tells you where we are going.

Jon erlichman, our senior west coast correspondent.

Coming up, we will be right back with more of "bloomberg west." welcome back.

Electric car maker tesla has delivered its first car to customers in china.

Elon musk was on hand as the car was delivered to eight people in beijing.

He told stephen engle that tesla has its plans for the most -- of the world's most populous nation.

What we see is pretty strong demand right now.

I think probably more demand that we can fulfill this year.

I think we will have hundreds of service centers in china.

And my instructions to the team in china are to try to build those as soon as possible.

So we are going to build them at a very rapid rate.

In addition to service centers, he says he hopes to build teslas in china in three to four years.

Time for the bwest byte where we focus on one number that tells a lot.

Cory and john are both in new york having lots of fun without me.

Cory, what do you got?

5706. the number of miles the jon erlichman and i had to travel to be together in new york.

Family, we took a tesla, elon musk was in the backseat.

It was like, and the weeds but different.

When the hyperloop happens, you will be there in moments.

What are you doing in new york?

There are a lot of stories going on right now that a rebel -- that are relevant to what we are doing.

You guys spoke about aereo.

A big software component as well, but i think there was a certain amount of software -- i was at the blue mark -- bloomberg technology conference here.

Cory, what is going on with the beard?

Playoffs, baby.

In my culture -- is this allowed?

Are you allowed to do whatever you want?

The boss may have had a comment about that.

The beard will be here for long.

I was at vacation last week and it just kind of happened.

You guys have fun out there.

I will try to hold down the fort.

All this fun could happen anonymously.

Emily chang and william shatner making me blush within a two-week stretch.

That is impressive.

William shatner, love that guy.

Jon erlichman, wiring the world series in new york this week.

Cory johnson in new york this week as well.

Thank you so much, guys.

Thank you all for watching this edition of "bloomberg west." we will see you later.


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