Spotify Gets the Led Out: Bloomberg West (12/11)

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Dec. 11 (Bloomberg) -- Full episode of "Bloomberg West." Guests include Spotify's Ken Parks, Glassdoor CEO Robert Hohman and Postmates co-founder Bastian Lehmann. (Source: Bloomberg)

: live from pier three in san francisco welcome to the early edition of blagojevich -- blog west.

In new york our focus is always innovation and technology and future of business.

Let's get to the rundown.

Spotify gets the lead out announcing a tphunew service and led step lin catalogue available for screening.

Can you live off this?

We showed you how to buy a bitcoin.

We will show you the nuts and bolts of in this works.

Spotify is opening the new free streaming mobile service and partnership with led zeppelin.

On the road to kashmir.

Insert your pun but today in an event it announced a free service meaning customers no longer have to pay $10 a month.

The band has thus far avoided all digital streaming rights but given them to spotify and it is making pandora investors nervous.

They are selling off on the newly robust spotify.

John ehrlichman is in los angeles.

What do you think of this?

I'm somebody who had already been testing the limits of what spotify was offering for free.

Their radio service -- you were not paying?

I'm cheap.

You will hear it here first.

But at its core you think you want the premium subscription.

Let's give them a taste of what streaming is all about.

There are some restrictions compared to what you get if you were actually paying.

But the hope is you will try it and maybe you will become a paying subscriber.

They had told us they had more than six million paying subscribers.

We don't know a lot about the financial story because they are private but there is talk they may go public and they want the business model that netflix has.

Millions of paying subscribers generating review which a lot of it goes toward paying the talent that you are listening to on spotify.

They also are launching 20 new markets.

What does that mean?

It tells you the story of spotify versus pandora.

Latin america, europe.

This is a company that from the beginning the owner said to make it successful i will have to have these specific deals with the music labels.

That became very helpful thinking when tit came to rolling them out around the world.

Pandora is not very international.

It is a company that has operations or offerings in australia and new zealand.

But because spotify goes directly to the labels to negotiate the deals it has had more flexibility on that side.

Obviously everybody has international ambitions.

We had the c.f.o. of pandora who said if they can get better licensing terms they would like to be doing a more spwpl strategy.

Not knowing their financials they did talk about the fact they put something on the website saying they had spent $500 million in the last year paying rights to artists and that is is 70% of revenues.

That would put them at about $714 million in revenues.

Big business and one to watch.

I know you will be watching them.

I was at the event this morning.

I talked to their chief content officer and asked him to describe how the service works.

Take a listen.

It allows free users to experience the service on the device of their choice.

They usually do it on a mobile device.

When we launched in europe it was a different world, clear thing with computers and desks and they were introduced on the desktop and upgraded to get it on the mobile.

The majority are now on board on the mobile device.

It is important we keep themmen beginninged.

It is all about an offering that keeps people engaged.

It also increases what they can access on the mobile devices.

Yes.

You don't get all the benefits of premium.

They get the experience and get the bill collection and play listing and all of those cool features while maintaining the clear benefits of the premium of no ads and off on cash.

They can create their own play list and listen to ads intersperse ed interspersed?

That's correct.

But it is different and better than radio in that if you want to listen to nothing but been marley you can do that.

It doesn't have the limitations that dmca has.

I remember the story that frank sinatra's concept of capital with his columbia contract said he was specific as to medium.

When c.d.'s came around they had to renegotiate a deal.

For a long time there was no sinatra catalogue on c.d.'s. are there contracts like that that you have to wrestle with?

There are some.

Certainly it is a short list of artists that retain the rights to say yes or no.

The vast majority of them don't enjoy that.

For some it is not uncommon to have the approval rights which makes it gratifying to us if they said we want to embrace this model and introduce our catalogue to a new generation of fans.

Is there going to be a time when you don't need a record label?

You are talking about a catalogue but new music is a big thing.

There is talk about not really promoting labels.

You surely get approached by acts that want to go direct.

I think that is exaggerated.

They are our most important partners today.

That will be true for years to come.

It is true that it is easier to make a record today than it used to be but still the label system provides a valuable source of capital to mac records and marketing -- make records and marketing muscle to cut through the clutter that exists.

They are an important part of the landscape.

I can look at pandora's book and know their cost of goods.

I can't look at yours.

I wonder what the progress has been about lowering your costs which you would like to lower and "the artist"s would like to see go in the other direction.

We think the artist deserves to profit and it won't unless it aligns itself with artists.

As our co-founder mentioned today, we still pay out approaching 70% of review to the rights holders which includes the artists.

We are proud of that.

We think everyone deserves to make a dollar.

The radio stations are paying single digits, right?

One of the cool things we announced last welcome is a new level of transparency in terms of how this model works.

We launched a website that we call spotify for artists and provides a detailed window on how this works.

So check it out.

There's been a lot of speculation that you have spent over $500 million this year paying for million.

Correct.

And $500 million about of that.

This model, we would not have this conversation if this model were not working so well to take users who were not monetized or poorly, radio is one you mentioned and converting them to a much higher valued way of consuming music.

At the end of the day we have to continue to do that and again to go back to a point we made earlier, we are trying to get more people into this.

It is a very efficient way to move people from no pay or little pay to a much higher payback to the industry and that is about getting more people on that efficient conveyor belt.

That was spotify's chief content officer.

Opponents of president obama's healthcare law the koch brothers would like obama care it disappear.

They have turned to the disappear disappearing photo appear snapchat.

They are lobbying through that next.

? this is blagojevich -- blog west.

We talked about the white house p.r. push but one group opposed to obama care is trying to get its message out using snapchat.

Megan hughes has more.

I know the koch brothers will stop at nothing but is nothing sacred?

It is creative and chief.

They call themselves generation opportunity a conservative leaning organization and has funding from the koch brothers.

You probably have seen some of their ads, the creepy uncle sam videos they are demonizing big government and encouraging young people without insurance most coveted by the insurance industry to refuse to sign up and opt out of the healthcare exchanges.

They are moving into the snapchat.

The first disappeared after those opted in received it but it was captured and posted on twitter.

They also released a video on youtube promoting the fact that they were moving to snapchat.

Get this.

The group is planning promo events at colleges like the recent university of miami tail get party they will be hitting 20 college towns and the entire budget $750,000 so not a ton of money when you consider that the koch brothers are involved but they are certainly being aggressive.

The koch brothers partying at the u. i'm interested in what this means for people using snapchat for something almost reselling commerce.

What does it mean for snapchat?

Not a lot of money.

A kevin toughconservative group estimates less thapbn $1,000 but they are trigger to get the message out using the app.

It is just getting off the ground.

They have a new chief operating officer emily white.

They are trying to figure out how po monetize disappearing photos.

That is the challenge.

There are new numbers out that crossed this morning on affordable care act in sign-ups in november.

We have talked about the technological problems.

Now that they are supposedly fixed what are we seeing?

There were good signs that some of the fixes are in place and we got the obama care exchange numbers for november and there was a major uptick.

We saw more than a quarter million last month and that is twice as many as october.

That is largely attributed to the technical fixes with the website.

Catholic kathleen kathleen sebelius is planning an investigation.

I have asked the i.g. to become involved because i think it is very appropriate to look at all aspects of not only the management practices but the contractor expenditures, specs in the contract, payment issues.

I will act based on his recommendation.

Don't get the idea that everything has been fixed.

The website continues to face challenges namely back-end issues including data transfer.

They have improved but still problems.

We will watch that.

Youtube viewers watched more than six billion hours of video each month but one has climb the charts the fox or what did the fox say by a inner waoepblgen -- norwegian duo.

Despite this silly stuff youtube brings some serious numbers.

John ehrlichman is back to talk about the business end.

That is solid stuff.

No wrecking ball but solid.

Yes.

Today they put out enormous numbers on youtube one being that youtube basically has discriminated this year in the -- generated $5.$5.5 billion.

Youtube walks away with close to $2 billion in advertising related revenue.

It that is an increase of 225%. that speaks to the internet gold mine that is video ads.

They are easier to roll out and generally they bring in more dough than banner ads.

Another number that amazed me was that according to e-market er the share of the u.s. video ad market that youtube has is more than 20%. it is a dominant player.

Give me some examples of the programming that is on youtube that is bringing in advertisers.

It is a chicken and egg situation, right?

Yes.

One company we recently checked out in los angeles we will have a profile them on an upcoming show but they saw the market as a great opportunity so they created a youtube channel about teens and reached out to kids all around the world to say if you want to partner with us and create your own channel you can be part of our network and here is a way to get a lot of people going to one destination.

The guy who started it was because his kids were not watching tv.

They were on phones and tablets and watching youtube.

I thought we already had awesomeness tv.

Facebook hack-a-thons are common but how do they come together?

We toured the facebook labs to see.

We are in the boughs of facebook.

It builds and designs its own servers and storage systems and networking equipment and the goal is to save money for facebook by making more efficient data centers and making more efficient equipment than they could buy from hewlett packard or dell.

This is where we are doing the circuit board level very detailed work.

We are running american 20,000 servers per technician.

How do you get to the point to do common service with my 10 fingers.

An example is getting rid of screws where it counts.

You see a guy down there with a screwdriver and you use more like a popoff.

You got it.

Google, facebook, amazon.

You do things at such a high level nobody faced the problems you had faced so you have to build stuff that works for you and suited your needs.

It turns out that you have basically made these standards that other companies are building on.

What might seem trivial designing $1 out of the server it has an impact.

This is a server sitting in a vat of oil.

Why?

This is how like the facebook hack er hacker culture applies the hardware.

The team got together and said we have been hearing about oil immersion and it is interesting.

Let's see if we can make tit work.

We bought some minute relyeral oil from a veterinarian supply store.

This is the noisiest room.

This is our oven room.

We have people simulate everywhere our servers might go.

The ovens allow us to create a wide range of environmental conditions including what we call thermal events.

You take like an actual serve are and put it inside these ovens?

We do.

We need to have our own testing not because we are better at testing but we understand our pretty good environment better than our suppliers.

Everybody has ovens.

Most don't test it.

You must have the noisiest work spaces in facebook.

It is noisier than the software developing floor.

That was ashley vance.

It is time for on the markets.

What is up?

I can almost reach out and not quite touch you.

We have a pull-back going on in stocks.

A couple of things are raising concerns or hopes that tapering is closer to becoming a reality.

One is budget talks in washington making progress and economic data we have seen as of late.

In terms of individual stocks, mastercard is upping its quarterly dividend to $1.10 a share and boosting the buy-back program.

With returning cash to shareholders it approved a 10 for one stock split.

We will have this is the early edition of "bloomberg west." you can catch us at 3:00 pacific and 6:00 here on the east coast.

The top headlines the ntsb is holding the hearing on the crash-landing of flight 214 in san francisco in all-. documents show the pilots inadvertently enabled the speed control system and he said he was stressed about landing without an instrument landing.

The sign language interpreter of nelson mandela is accused of being a fake.

It is said that the gestures were meaningless as he allegedly signed for president obama and other world leaders.

The government is investigating how that happened.

Uruguay is the first nation to legalize the growth, sale and use of marijuana.

Weed is legal there.

It was created with prices set by the government.

Pharmacies can sell it.

1.4 ounces can be sold each month.

Supporters say it will suppress illegal drug trafficking.

With the buzz surrounding the bitcoin we decided to celebrate 12 days soon to be a traditional holiday.

Matt miller is here for day three.

You bought three french hens.

I bought some video games with a bitcoin.

I bought four to five.

Call duty ghosts.

I bought battlefield 4. i bought a number of things.

I have shopped at whole foods, gotten a pizza.

The pizza was the first bitcoin effort.

Take us back to the early days of bitcoin.

Explain how it works.

People are starting to pop up on twitter.

You have to exchange dollars orien or euro or whatever currency to bitcoin.

The way you do it is get a wallet a matrix digital wallet on the right.

You use your wallet if you are a consumer the same way you would -- i have a second animation showing this -- to receive money or to spend money.

A merchant uses the wallet more like a cash register or any kind of vendor service provider, someone who is making goods.

Third, you have to make the transaction.

This involves what bitcoin people call keys.

You have a private key and public key.

Everyone has both in his or her wallet but merchants will show you their public key which has a q.r. code.

You take a picture of that and your wallet creates a random number that is the private key and they meet and create a transaction.

So you need both to make it happen?

If you want to get money you need the public key or give money you need the private key.

Does the private key stay with that user?

It is with you.

It is like a passward.

Once you create the transaction it goes into a box with a whole bunch of other transactions referred to as blocks and miners wrap them up -- people who are mining try to some the problem which wraps up these transactions or you can think of it as a page they put into a giant ledge arer book and they get rewarded.

They make it fool proof and ir irreversible.

Each bitcoin is essentially a pile of code that is unique to itself but is verified that it is bitcoin how?

It is all written in the original coat by the person who developed it?

Not only do i not want to get deep in the weeds but i couldn't. it is very complicated and i recommend spending a few days reading about it on read it or you can go to caan academy has a tutorial.

But it is in the very early stages so even though i'm living on it a lot of people don't see it as a currency.

I will forgive all of this difficulty with it because it is new and new things can be difficult.

It is interesting to have an understanding of how it works.

I'm surprised who is involved in the speculation like minors or guys driving yellow lotuses with the license plate bitcoin but this morning i talked to somebody who sis speculating that it is a purely speculative instrument.

He thinks of it more as a commodity than currency.

I heard the pay past president say the same thing.

A lot of people would say he might have kind of a little bit of skin in the game because he has his own electronic payment system on the internet.

But not his own currency.

He says he thinks of it as a commodity, not a currency, yet.

He's long bitcoin and thinks it will get there.

But he is long bitcoin.

He holds it at least that is what he said.

If you look at the price graph it has been very volatile.

This is the kind of thing people say you can expect in the early days.

It is not the kind of thing people involved in it think about on a day-to-day basis.

You have to look at it on on a decade-to-decade basis.

Do you think people are not watching this?

I think they are watching the price of it but the people involved in the inner circle of the community i don't think they think about it like we think about it just dollar signs.

They are thinking about it as a revolution.

It will change the which -- the internet created a way to transfer knowledge from one place to another anywhere in the world instantly and almost for free and this does the same thing but with value.

When i think of you i think dollar signs because you are money.

Thank you so much.

Still ahead, the best tech company to work for?

Glass door says it is twitter.

The largest city in north america has suffered another major cell phone outage.

Thousands of customers lost voice service 81 minutes after the largest carrier had a network failure.

It is the latest problem and at least two other widespread outages hit the company the past two years.

Twitter has grabbed the top spot in the best places to work in tech.

This puts it ahead of linkedin and facebook.

It is a career website where employees share information secretly about the company they work for.

John ehrlich machine has -- ehrlichman has more.

The reviews from twitter employees range from admiration for the culture and management style.

The c.e.o. of glass door gives us more on the findings.

22 tech companies on this list.

Very briefly give us the back story on how you make the determinations.

These are the best companies that are chosen by employees themselves based on reviews they leave on glass door and they are like the employees' choice awards for the best companies to work for it the united states.

The three top tech companies based on those employee findings twitter, link dedin and facebook.

Is there any commonality.

They are all social networks.

That is not a coincidence.

The commonality is that these companies are unique in this employees literally have their work affect hundreds of millions.

It is incredibly empowering for employees.

Given twitter is number one this year i want to jump to some of the common responses from employees.

You have highlighted global impact, users come first, humble talent team.

Opportunities to work on different projects.

I don't see too many comments like hey, twitter is going to go public i will be a millionaire, baby.

I would have to think some of that goes into getting the number one ranking but you tell me.

There is certainly a certain amount of pre-- i.p.o. excitedness and a post-i.p.o. honeymoon.

We will get to see whether twitter with sustain this.

But there is no doubt the culture that has been built is one that is laser focused on doing what is right for the user and is humble by valley standards and a very transparent culture.

That has engaged employees to a very high degree.

It does open the door to a question about twitter versus facebook.

Facebook had been number one on kwruryour list several years.

Has anything changed based on comments you are reading?

Facebook is definitely struggling as they are growing.

The common -- we should say first off they are the number five overall best place it work on the whole 50 and they are an amazing place but they are feeling a little bit of the growth pains.

Employees site the difficulty maintaining that scrappy hacker culture, that made them what they are.

There is this constant exodus of amazing talent from facebook post-i.p.o. there have been 113 start-ups created in the last couple of years by ex-facebookers.

Great for the valley, great for the economy.

But challenging for facebook.

Before we go, ebay is on your list i believe for the first time.

We did a special on ebay and went inside the company and highlighted the fact that perks, free food and that stuff isn't really part of their culture.

What were employees saying about why they like working there?

They focus on the ability to -- the company is focused on reenergize ing reenergizing innovation and mobile.

But while perks are important what is really important to employees is culture and career opportunities.

Employees will say that with the possible exception of salary those are the number two and until they most important things for a company.

Robert, always appreciate your time, c.e.o. of glassdoor.

People want to check out the ebay special it is on line and on your mobile device.

Before amazon and ebay a company leads the way in same did i delivery.

That is next.

? this is blog west.

Microsoft says sales of the xbox one consol is selling.

It is sold in 13 countries and a spokesman says it is selling pretty much every console.

The playstation four has sold 2.1 million, on sale in 32 countries.

Consumers may be buzzing about rapid delivery.

Buying stuff online and getting it the same day is not new.

Another company has been providing same hour delivery since 2011. i'm joined right now by the c.e.o. of the company from san francisco.

What makes your business not under up like web van or cosmo.com or all the companies that tried this over the years?

Great question.

I believe that the main different differentiator is we charge a fee.

Where are you rolling out?

We are operating in san francisco and seattle and new york and as of yesterday in washington, d.c. how does the service work?

If you think of post mate a great analogy is the most powerful app you have on the iphone or android.

It allows you to summon every good in your city to your doorstep within a couple of minutes.

Any kind of goods?

It seems like it is similar to what ebay is doing though more partnerships with retailers but the ebay marketplace isn't happening at all or anything.

They are just providing a delivery service.

The main fake is food from restaurants.

A lot of beautiful restaurants don't deliver.

About 80% of our volume is from restaurants.

80%? yes, 80% of what we deliver is prepared food.

That is interesting.

So, is that too much or are you trying to get in other verticals or do you think food will carry there?

For us food is a great thing to get to and drive an extreme high amount of volume into a market and that gives us a lot of density and keeps the fleet busy which is important and over time it allows us to explore other verticals such as groceries, catering.

Interesting.

Talk about growth in the city.

How do you under up in a city or choose a city?

What is the growth rate like when you get in?

Lets look at new york for example where we lunched four months ago.

It grows three times as fast.

It grows roughly 60% the last three months combined.

And we are choosing cities based on the density and income and based on existing similar services, based on popularity of similar services.

I wonder whether you make of the amazon drones.

Look, you can't operate in a space without ignoring the elephant in the room, amazon.

But i don't think there is anything wrong with treating them as such.

The experience at post mate is on line and magical.

Everything we know from amazon it is a website that you browse and an endless catalogue of product and i don't think that regardless of the delivery method it has been long time that someone got excited about purchasing groceries on amazon.

It is interesting to watch the way they are thinking of growing their business by getting closer to the consumer.

What do you think is the biggest mistake you made when you first rolled out?

In regard to post mate?

Yes.

It is hard to tell.

I think it did a lot of things quite right just now.

I understand your comment about amazon trying to be closer to the consumer.

I like to argue that postmate is part of a city because we are using the city as a warehouse and not trying to build an additional warehouse.

Thank you very much.

More " welcome back.

Coming up at 3:00 pacific we will ask how venture capitalists can help build with a new mentorship program.

We will have an exclusive interview at 3:00 pacific.

Right now it is 56 past the hour and that means blog television is on the -- bloomberg television is on the markets.

Julie hyman has more over there.

Over here in the newsroom.

Let's look at where stocks are trading.

We see the pull back, second day.

A lot of investors talking about tapering by the fed and think that if there is a budget agreement in washington that could be something that could lead the fed to taper sooner.

In terms of individual stocks, let's talk tech and groupon.

Upgraded to outperform at wells fargo that says it well positioned to gain in the local commerce market as it transitions to model that pulls customers to the site.

Another stock is home away rising online vacation rental becomings bookings may move people toward the most expense suffer deal in over five years.

For more i'm joined by someone who has been looking into there potential acquisition.

Not everybody knows what homawaye away is.

Explain what it does and how it is different from price line for example.

They have online vacation rentals.

If you are going it maui and want to stay on a house on the beach you can look up the house and figure out how to set it up.

It is like one where you can stay in somebody's apartment but it is a little fancier and higher ticket and more luxury.

Is that the idea?

They are typically higher end homes and they can charge more than normal rates to book them.

They have been around longer and have a larger customer base.

Is that what is attractive to a potential acquirer?

Is it the customer base or brand?

What is drawing people in?

As more people go online to book vacation rental homes this industry will be increasingly important.

For someone like a price line or expedia that is looking to get an entry into the industry home away would be great way because they have a strong business.

What about price?

We mentioned it could be the most expensive deal in the industry in five years.

Would that be a hurdle to getting a deal done?

It is expensive but when you look at the inventory it has it would take a long time for something to build.

So if you look to take advantage of the growth buying it could be a good way to do that.

Price line would be one potential acquirer.

Who else is talked about?

You could look at expedia or trip advisor integrating home away data on their website could give them that one-stop shop for vacations that people are looking for.

I know you have been talking to different people but who thinks home away will be there kind of target?

I have talked to analysts who are looking at the inventory and progress it is making and growth prospects.

It has had a couple international deals and is getting bigger there.

There are opportunities there.

We will be watching it to see if anything hams.ppens.

We will be on the markets

This text has been automatically generated. It may not be 100% accurate.

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