♪ >> live from pier three in san francisco, welcome to the early edition of bloomberg west. we cover the technology companies that are shaping our world. our focus is technology and the future of business. let's get straight to the rundown. apple going to war with its corporate reported -- corporate appointed monitor for meddling in apple's business. netflix ringing in the new year with some big changes, rolling on a new pricing model while it

loses the rights to popular movies. and the drone business is about to get a big boost, the fda selecting six dates for unmanned flight testing. it could generate $82 billion in the next decade. but first, to the lead -- apple engaged in a big fight with this over e-pointed monitor book price fixing. the court appointed a monitor to make sure it changes its behavior and reforms is is is packed this is, but that monitor says apple has been uncooperative and has made executives like tim cook unavailable for interview. he said the company has failed to turn over documents or make executives available. apple has been fighting every step of the way. apple accuses him of acting in an improper manner, saint have been overbilled and refused a claim that they're keeping key personnel from interviews. a request for comment from apple has not been returned. i'm joined by a bloomberg contributed -- contributing

editor, nicholas thompson. i read over this complaint about an hour ago and it's just fascinating. he's saying that apple is pushing back in every possible way. >> apple is pushing back in every possible way as the complaint says. apple has the argument that he has overstepped that they expected from a court-appointed monitor. appointedoment he was to oversee the settlement, he has resisted trade he's being paid $1100 an hour. apple's overall view is that they should not have lost this case and they are resentful there is this guy coming in, monitoring how they are behaving. is clear that apple doesn't think they should have lost the suit. >> this reminded me of when i saw the story of the 23 the

case. they have washington coming in saying you need to comply with this and they say we've got stuff to build. do you really have two the looking over our shoulder? do you need a meeting with tim cook? apple's view is that this case is misguided from the beginning. a bunch of book publishers conspired together and apple's view is that at its worst, it's a case of five mice conspiring against a cat. overall, apple was not making the book market less competitive. that began and that leads to the secondary fight which would add on that silicon valley is getting in their business and you can see where this is going.

>> it is interesting that the big giant in the book, amazon, is hardly mentioned. focused on what steve jobs did -- you call them five small overtures, but it's five of the six that conspired according to the court. they effectively rose the price of electronic books, making them overpay for the books. >> that is the case against them. to go back to the fundamentals of the case, the argument of the prosecution is that yes, this is bad for consumers and there is clear conspiracy. the argument for the other side is the book industry was threatened, amazon it was going to take it over. one companyng to be dominating unless apple gave a price option. it was not a classic antitrust case or as though there was a conspiracy of the big to crush the little.

this is much more complicated than most normal antitrust cases. was a that said, there ruling that apple should comply with the ruling. >> the thing that jumped out at me was where the guy says what remarkable that an hour-long interview would give a loss of market share growth and interference with the development of making new and innovative products. cause themgoing to to lose market share growth? they are trying to litigate it though they have already lost. -- i have been set up and this is what i charge, this is the company with the largest cash reserve in the world bickering over the dollar per hour rate of the monitor

overseeing them. so apple has clearly decided to stonewall. >> this is not his first time through. he was inspector general at the justice department and has been appointed by the court before. he says i've never waited as long as a month to have meetings and interviews. apple says they are concerned about the requests for board members and senior executives and they were very busy. >> again, it is quite evident there. >> apple's litigation strategy, and we have seen this in their patent cases every time they go to court, their litigation strategy is not one of compromise. it is one of fight, fight, fight every single claim and they think they are fundamentally right here and they may have lost the case but they think they are right in a larger sense, so they are going to push back. that's just the way apple operates. >> thank you very much. >> or have been no shortage of c suite shakeups from michael saw

-- from microsoft to zynga. we have a recap of the most notable ceo exits of 2013. what is your number one pick for most exciting ceo shakeup this year? >> for me, it's one that has one foot in the auto industry and the other footed tech. microsoft, even though it has not been completed yet, and even though the auto industry is just rampant --lation run steve ballmer expects to step down by august of next year and wants a replacement in the company and so they're focused on 20 individuals. we are only focused on alan mullally at ford, may be mistakenly, because he says he's staying through the end of 2014 area ballmer has said he could run any company, not just in his industry. plus him a he is from seattle. he admires bill gates and is

advising steve ballmer on ways to change things that microsoft. he says one microsoft is the way to go forward. it's an interesting story to mullally never confirms any of the speculation. he doesn't deny it either, but that just keeps it going on. >> the groupon change -- the power of the company was always with the largest shareholder. the fact he was officially running things -- >> but it was the most fun of all co registration -- resignations we saw this year. hadcally, andrew mason had troubles and tribulations along the way.

the way he conducted the ipo, a lot of investors were not happy with, his pr was not fantastic. he was a young kid who went from playing the drums in the band to being the ceo of a million- dollar company. his resignation letter was fantastic because he basically said i've decided i would like to spend more time with my family and it's the just kidding. i was fired today, which i thought was hilarious. the rest of the letter went on to say things you fell like ceos are saying but they cannot get around this corporate speech. he just went and ditched it and recorded an album instead trade >> which people took seriously but i think it's a piece of satire. >> the letter or the album? lex the album. i will check it out. apparently he is a talented drummer. >> clearly more talented as a drummer that a ceo is what we have seen from him.

>> one of the interesting stories is the money flow we have seen. andmentioned blackberry -- he was ousted in the end it did not get big onus. i'm sure he left with a decent old parachute. but mark pincus that zynga left after the company was driven into the ground. but the ceo who came on comes from the microsoft xbox division and got a $45 million bonus just for joining the company. of story.t kind >> i think both in the case of zynga and groupon, you have those ceos and founders selling hundreds of millions of dollars worth of stock before the companies got out the gate. they had already taken their big collection.

>> at least in the case of zynga, mark pincus owns a majority of the committee. it is one case where the ceo was ousted or at least he ousted himself. >> matt miller, thank you very much. >> happy new year. >> hope you find something to do tonight. rex if got plans area your plans include watching classic movies on netflix, you might be out of luck and we will explain why some movies may not be available on netflix in the coming year.

♪ >> welcome back. i'm cory johnson. this is "bloomberg west." netflix had a big year defying the production of critics. the original shows have been a critical success and the company

continues to add subscribers. the company is making some big changes to close the year, altering prices and losing favorite shows and movies. jon erlichman is back with us from l.a. with more on today's new hollywood. these changes are not small. >> they are doing a lot of stuff. last couple of days, people have been talking about the top- performing stocks for the year. that flexes their the top four that list, up to close to three -- up close to 300% grade that has to do with subscriber growth, the number that drives the revenues dory continues to climb -- revenue story continues to climb. as you look to 2014, the moves they are working on are tied to continuing to grow that this -- that subscriber number, whether it's toying with the price of the subscription or this idea of purging some titles where the license are as -- licenses are expiring. this purging about of some titles.

some of the press over the last couple days about this is your last chance to watch "titanic" moviey johnson's favorite , "top gun." >> i think it's one of the worst movies ever made. >> you know -- >> i've never seen it. i'm interest, but it's true. -- i'm embarrassed, but it's true. is to find strategy all the new stuff. they cut these deals for new tv shows through marvel or dreamworks animation. they want to be the place where you see the movies and the heaters first in that second window. and secondn theaters when does. they're spending a lot of dough on stuff that's going to be exclusive and new as opposed to stuff you've seen the billion times or maybe in a few cases, you've never seen it but heard

of it. on the pricing strategy, they know a lot of people are using netflix and sharing accounts. they are trying to generate more revenue per user, so they are playing with different pricing structures. is this a case of them purging or losing the rights to the movies? that's the big issue with the rise of content costs. are they going to have the depth of catalog they have had a past customer >> they have to be select this, no doubt about it. of the advantages they have always claimed to have is that technology angle. at what they can look people are watching and decide whether or not it's worth it to re-up for that stuff, if you look at the strategy like the house of cards strategy they have been using, that became a big hit for them this year. we don't know how many people are watching, but the demographics of the people using

netflix like this kind of show. it's the kind of show they can continue to market as they move it to the second season. going back to this the a winning year for netflix, the idea of winning at emmy and potentially which ared globes, coming up, sort of feeds into this being the new hollywood story to watch. it is a fascinating company to watch as they go through all these big changes. growing dronethe industry be? we will crunch the numbers next. you can watch us streaming on your tablet, phone and at bloomberg.com. ♪

lex i'm cory johnson, this is onomberg west, streaming

your phone and on your tablet and bloomberg.com. was testingaid he drugs to deliver packages but now the faa has approved drug testing sites in -- in six states. and new jersey are partnering with states to get a part of the action as well. that was -- that will allow the faa to test drug performance in all kinds of environments grade give me a sense of how big this business could be and how you measure it. around industry has been for almost 100 years, but it wasn't ill the last decade or so where the technology has gotten to the point where there was a lot of viable uses for commercial activities. our association came out with an economic report projected within 10 years is industry could be

over 80 billion dollars and contribute to 100,000 jobs in the united states. >> you are just making those numbers up. where do those numbers come from? >> a lot of those numbers are tied to existing aerospace and aviation jobs. we broken down by what it could mean to any individual state grade which is why states like oregon and california do so well in these numbers. but this industry is so new that almost any state cap take advantage and potentially steal away some of those jobs from the other states. be the hub for unmanned aircraft in the future. characteristics would allow that to happen? is it because the drones are ?maller >> a lot of the big companies unmannedinly in the systems game, but for smaller

systems, which is where the commercial market will be for the next several years, the barrier to entry is relatively modest. a lot of these companies are have aall and if you good idea, this is an industry where your ideas are welcome and you could play a big role. >> presumably, you have been working with the faa. what are these tests going to uncover? >> the faa's responsibility is the safety of the airspace. they want to integrate these things with manned aircraft and they need to gather safety data to do that. the creation of these test site create are going to geographic area where these unmanned aircraft can fly and perform different tasks and provide that data back to the faa which will help work toward

building more widespread integration in the coming years. >> i still don't get it. are they just going to fly them around in circles and see if they bumping into an airplane? was the underlying goal? >> commercial activity is ultimately the goal. the faa cohabits all unmanned aircraft to fly for commercial purposes. the industries and companies building these systems are hampered in the united states for flying for agriculture or pipeline monitoring. those barriers do not exist overseas and a lot of other countries are way ahead of the united states and flying unmanned aircraft for commercial activities. sites, they test will allow for commercial activities, but there could be small or midsized aircraft used for farming with these get up. >> do you think there will be any illegal use of these things? i know a private investigator teaching himself how to use drones, but he does not use them

yet because is not legal to do so. i imagine west -- less scrupulous-investigators are doing things like that. >> it's important to differentiate between an unmanned aircraft and model aircraft. it's all about the intention or purpose of the flight. i brought with me here a small unmanned aircraft. this weighs about two used by a it is being number of public safety agencies and farmers. >> is that how you got to the studio today? >> it's not white that big. it has a small lithium-ion battery and can fly for about 20 minutes. but this is where the commercial market is going to be. to be for monitoring crops and doing surveillance and that kinds of things. >> thank you for joining us. hong kong rang in the new year several hours ago. as celebrations take place from

the world, we will look at 2014 at countdown the top five stories of the year when "bloomberg west" continues. ♪

>> you are watching "bloomberg west" where we focus on technology and the future of business. let's get straight to the bloomberg top headlines. people in the northeast bringing in the new year's and several issue -- several inches of snow at the same time. i hazardous weather warning issued for pennsylvania up into new england. forecasters say new york city, long island and new jersey could you between four and eight inches of snow. austin can get nine inches. home prices in 20 u.s. cities rose in october by third team .6% come a the biggest single .ear ain't -- starting tomorrow,

people in colorado will be able to legally buy weed. marijuana is legal a year after colorado and washington voters made the sale of marijuana legal. colorado, with a legal id, you could buy an ounce of hot. aree wrap up 2013, we taking a look ahead at the stories that will make headlines in the coming year. aining me via skype is strategy consultant for eight giant number of fortune 500 companies. good to see you. what you think are the top five stories? >> i'm going to talk about mobile. everyone has been talking about mobile for years. this is the most personal device is in the world. you know where this device is

more than you know where your children are. it's going to be the year of mobile and we will be talking about it a lot more at companies are going to take advantage of all this personal information and how to reach you. that's one of the biggest topics we will see this year and ways for companies to monetize it. you been seeing this on bloomberg west for a long time, but there are many services that will be available on your phone. >> number four on your list is a data. -- big what's the difference between big data and eta? >> big is systems wide. we know how to use it and extract it from a small point on -- orp top or dekes top desktop. we are talking about massive amounts of data companies have available to the c suite. that data andget make sense of it and be able to do predict his analysis of where

customers are going to go and how they react to trim down expenses -- big systems, big data. >> television. you talk about over-the-top television. >> this is one of the hot areas and we work in this area a lot. i like it because of the stuff we do on bloomberg and we haven't already with our bloomberg apps. i'm talking about more and more choices. most young people are not viewing television the way we normally do, through a tv. we are watching on our laptops and mobile devices. there will be more choices, so putting more and more content on those digital devices, that is what over-the-top television, whether through hulu, netflix, many others. you see churches taking advantage of it, including content for their constituents. interesting -- i have

little kids and i don't know if they now defined channels on the tv, but they know how to fire up netflix. >> without question and you are going to have to get to these people more and more. it's why social media is important but over-the-top television will be important as you see more people put or content that make their own channels and stations and tv so to speak on the internet. >> number two, you have small business and i'm excited to see that. >> there are 17 million businesses in the united states. we are moving into what i would call a time of expansion. saying we'rele are getting into the recovery. i think we are moving past that and into expansion at small businesses are the key. there are 17 million businesses in north america alone and we think about the impact of those businesses which think about minimum wage and you see things

like obamacare a terms of health care in every thing else, small businesses make a huge impact. every single day, these small businesses are being affected i what's going on in washington dc. they are going to be the group that will save the economy and you will see lots more. >> number one is interesting -- arsenal branding. >> -- personal branding. >> we have seen many examples of this -- pat robertson on doug dynasty, abercrombie & fitch -- go all the way back to the dixie chicks where we say things that we might get misinterpreted sometimes were that are inappropriate or sometimes we say things we believe in the impact that does have on our personal brand and the impact they have on business. i don't think we'll ever see the

full extent, especially with social media. people being turned down for scholarships because they are seen on facebook drinking. we have to watch out for these kinds of things. your personal branding will be very poor to for this upcoming year. -- will be very important for this upcoming year. kind ofmight happen is the opposite, once we can see everyone's warts, which everyone has the cake stand pictures, we become more entered to that and don't have that kind of reaction. the business impact of the technological sharing doesn't have the same impact as it would because it would guess where? could be, but i think what we will be finding is a brand is a promise. i've said this consistently on this show and other bloomberg shows. if you are making comments politically or take that guy from "duck dynasty" -- he's

entitled to say whatever he wants. it's one of our inherent rights of the constitution. as part of that, it is me just because you say it it doesn't have an impact on your personal brand or the brand of the company you represent. there are commercial consequences. him -- i was talking to someone yesterday and he said if -- put a homophobic homophobic knucklehead redneck on tv he's going to say things like that. doesn't mean amd has to employ them or give them a platform to say such horrible things. >> i think that is his brand. he closes every show with a prayer and those are normal things for him to do. god bless them for those kinds of things. at least for what he wants to do and portray himself. but that doesn't mean it doesn't have commercial implications to his brand or those people who will air his show. those are the kinds of things

i'm talking about. we will see more scrutiny about public comment ceos make or executives make them personalities make in 2014. >> what social media has wrought. interesting stuff. >> watch what you say in your tweets about me. >> believe me. i have a whole team of experts that shield the world from my flubs. sidecar, we will sit down with the cofounder of lift to talk about the company's lands tonight and why he's getting behind the wheel himself. ♪

x welcome back. i'm cory johnson. companyeed a lift, your -- you may be with the company's

cofounder. it could be the busiest night of the year for the company, capping their surge prices at 200% tonight. following a backlash by uber who faced a lot of criticism after implementing surge pricing after a snowstorm in december. it is back with more. lex the company calls its pricing plan primetime tips. a sickly when there's high demand, writes will be no more than three times their usual cost. the additional money goes straight to lift drivers. company's cofounder joins me now to talk about his big night of driving. what kind of car will you be driving? hybrid. a jetta >> this feels like undercover boss to me. how often do you suit up? i assume very rarely and why tonight? a lot of the members of the

company get out there and drive. my cofounder does a lot. my first one did qualify because it's a 97 accord. only recently have i had a car new enough to drive on the lift platform. tonight will be the busiest night we've ever had and i want to help get people around safely and help drivers help the community out. >> when you say the biggest night ever, what are we talking about? five to 10t to see times the amount of volume we would see on an already busy night. >> that gets to this issue of surge pricing, as we just highlighted. huber has faced a lot of criticism over at and you've thought a lot about it in how you are going to deal with it. how did you come to the conclusions you came to? very want to be

transparent and open about what we're doing. we forecast about 200% for this night and typically we don't go anywhere near that. tips 100% of the primetime go to the drivers. lift has zero incentive to want that additional mount for prime time, so that aligns us with the rest of the community because we are not benefiting at all. do you think the consumer thinks a lot about that if the driver is going -- if the money is going to the driver? >> i think it is a combination. they don't want because to go higher, so by not having an incentive to make the cost go higher, if the time time incentive is to get more drivers amount ofd, the

drivers on the road means less money. i think it's important they know what it does matter to the consumer that lift is not trying to benefit from this, they are just trying to make the marketplace work. >> somebody who recently used huber went to get their luggage out of the trunk and saw the pink mustache in the trunk. are there a lot of uber drivers we arehting for lift? >> seeing several coming over to drive up the lift platform for a variety of reasons. he experiences a bit different grade the passengers a lot of times jump up front and treat the drivers as equals. is a competitive environment, so there are people choosing to drive out all different platforms. >> before we go, how late will you be out tonight? how much driving do you expect to be doing? >> i plan to be out until 3

a.m., hoping to get people around safely even if it is late. >> let us know how you do. we want to know the financial returns from john zimmer driving around the bay area. >> sounds good. most of the rides up going to do tonight will be free. >> the cofounder of lift come a joining us. we will send it back to you. >> i'm going to call john when i jon a ride tonight. erlichman, thank you very much. you might also need some tonight. delivered ♪

>> at google, amazon and even ebay have launched local same- day delivery and in some cases, even hourly livery of goods. commercefrancisco e- startup is delivering wine and

cheese for free. we have champagne and cheese and a bit of bread -- this is a business? delivering wine and cheese question were >> right to your doorstep. >> i'm really interested in this because there's a big question in the world of technology whether it's going to be big, amazon, walmart or whatever or if it's going to be vertically focused. uber, opentable -- tell me why wine and cheese? >> we wanted to focus in a way we could compete with other players and work with economic margins that were with wine and cheese. so we could get margins that allow us to have free delivery. >> restaurants usually double the price of a bottle of wine. what is your margin question were >> lower than that, but in the 20% range. as we work with more makers, it will improve from there. >> to you carry inventory or do you do deliveries from other

companies question were >> we do not carry inventory. we just connect makers and merchants with their customers. thislk about takers like one. >> i mean makers and merchants that do things like that together the platters. at cheese plus puts these together and works with other makers to put these together. and some cases, we will deliver directly from makers as well. this is all local cheese ranging from cow and sheep cheese. the bread is local as well. the wine is from the jug shop where local sommeliers select the wine. >> how big do you imagine this market is? what cities are you thinking about question were >> we're looking at major markets right now treated the wine and beverage market alone get to $200 billion in the u.s.. california alone, about 20% of that market.

california, a city like san francisco, it could be easier than a city like los angeles which is spread all over the place. >> it is to a degree but algorithmically, you just get into delivery zones. we do the same thing in san francisco. we have a zone for the peninsula and downtown. l.a., you will have the santa monica zone and hollywood's own. -- hollywood zone. >> tell me how it works. >> you look at the map as a grid and optimize your delivery routes to bring your cost down. we think delivery costs will plummet to about five dollars a delivery or even less overtime because we are optimized to get six plus deliveries per hour per driver. cost per delivery will decline. >> is there a technological capability you have that did not

exist five years ago? >> a big part of it is what you see with people with lift doing the driving, with smartphones -- there's a lot of sophisticated status thing around this around failed deliveries -- people weren't home or those kinds of things. you need to have smartphones deployed in cars to make all of this work. it's just leveraging network infrastructure. are you right now? >> just in san francisco. >> do you have a rollout plan and will adjust stay with wine and cheese? >> we are aggressively focus on the bay area. we have huge demand on the peninsula and we are doing huge deliveries now. your focus on the east bay and north they and then moved on to los angeles and southern california as fast as we can. >> and you are focused on wine and cheese? >> yes. >> when i was in high school, i was always trying to get somebody to deliver booze.

is this legal question were >> the laws vary by state. we have a good law firm helping us navigate this and that's part of the technology. have a signature and put the money into an escrow account and licensed vendors take their money first and these kinds of things. >> i feel like we should be eating and drinking area it's midnight somewhere. thank you very much. we really appreciate your time. the bwest byte is where we focus on one number that tells you a whole lot. what do you have for us? iti have one and four as 2014. when the ball drops in times where tonight, there'll be a big flash in 2014. the one and the four rob 2014 will lose -- will use philips holds that you can use in your home connected to an ios or android device. phillips says they will use a smart vice to control them

tonight but some of the other bulbs are not as technologically savvy. it's more of a pr stunt, but it's cool you can control lights roughly speaking with your phone. >> no dim bulbs here. as soon as the booze shows up, the bwest team is going out of the newsroom. happy new year to all of you. it has been a great year for all of us at bloomberg west. you guys down and l.a. will have to fend for yourselves. i know l.a. is capable of doing that. >> absolutely. a special happy new year to emily chang as well. >> wherever she is. viewers, wef our appreciate your support and watching the show. we will continue to try to make more good shows in the coming year. happy new year to everybody.

♪

>> live from ebay headquarters in san jose, california, welcome to a special edition of "bloomberg west: inside ebay." it started as an auction site, but in the nearly 20 years bay has become much more. a massive online marketplace, a major player in online payments through paypal, even a titan of event tickets. along the way, the company has transformed from it scrappy upstart to a silicon valley leader, bringing in billions annually. today, "bloomberg west" is at the center of it all, inside ebay. welcome to ebay headquarters in san jose, california for this special edition of "bloomberg west." i'm emily chang.