>> live from pier three in san francisco, welcome to the early edition of bloomberg "west." we cover media companies that are shaping the world. our focus is on innovation, technology and the future of business. is the taxman coming for bitcoin? the irs looking at how to tax the digital currency as a major the group to joins say they will not accepted as

payment. out a ferryying service. gavin newsom is waiting in. turned fund investor hollywood heavyweight. i doubt how ryan kavanaugh is using tech to rewrite the rules in entertainment. first, the lead. a new gold rush. the race to mine bitcoin. the value of the digital currencies has surged from virtually nothing to more than $1000 in the past year. there have been wild fluctuations of to more than $1000 and far below. the point has to be mined on computers with very complex algorithms. this comes as ali baba, the chinese e-commerce giant, has shoppinge point on it platform.

the chinese government recently banned bitcoin deposit. asga will start accepting it a form of payment for some of its game. matt miller joins us now from new york. talk about the power it takes to actually mined these things. if the bitcoin community concerned about that? >> this is a big problem with , but something the creator expected to happen. i do not consider myself a bitcoin expert come up but i spent a lot of time on bitcoin forums. them to buy and sell things and go to me that's a lot. a lot of questions that people have is whether it makes financial sense to buy it now make moret, if you money doing that or make more money mining it. the problem is it used to be

possible with your laptop or even nintendo or xbox. now it takes such computing power. it takes such specific equipment , and it is also draining on your energy bills that it may make sense for average people to mine bitcoin. problem init is a the community, the whole point of it is to decentralize currency. it is a democratic currency, a currency by the people for the old. -- for the people. thet cost $10-$20 to cost bitcoin mining rigs and will not get any return on your investment unless you spend 100,000 or $1 million a month then it becomes a problem because only the rich can mine and it amasses this huge

amount of financial bitcoin financial power. >> i know they are calling this a gold rush, but what about the chances down the line that the gold turns to coin or something else that is worth nothing gekko the chance that the asset becomes worth less and less as a risk that everyone i think involved in bitcoin is aware of. if it fails, it goes to zero. will go muchs, it higher than you see it now. i think very sober from second market owing to did out to me, either he makes nothing here or the sky is the limit. sure that people involved in the mining operations are worried about the loss of value, but i am not so

sure the people creating the , i am not soes sure if they are quite the believers that the miners and users are. you mentioned the gold rush. a lot of them say i will sell the pick axes rather than look for the gold themselves. members not such huge and believers in the currency in the long-term value that they are willing to do that. they would rather make money of selling the equipment for which to do it. >> what about other digital currencies? are there others popping up? >> there are a ton popping up out there. and has become a joke. joe weisenthal created one that you can lose -- used to buy lunch with him and a couple of his friends.

there are alternative currencies. ripple is one that a lot of people are big levers and. it does not have the same mining issues that come along with big point. most people that are believers in the bitcoin movement think that these alternative currencies are help whole as a developing tool at best, and may be a hindrance because they are a distraction at worst. matt miller in new york, thank you for the update. the higher rest released a national advocate report raising the question, how should bitcoins be taxed? it was listed as the most serious tax issue. bill mattingly -- phil joins us now. part of the problem is the lack of government interference.

what kind of federal guidelines could we be talking about here? >> i think that is a big question. what we know from the irs is it is still studying the issue. what the report said is basically the taxpayers need guidelines on this. what that will lead to without any type of guidelines is tax avoidance schemes. .his is not binding the irs is still looking at it. numberne issue out of a that washington is starting to engage in. folks that are part of the bitcoin movement can look at this with a wary eye. when you have regulators and law-enforcement officials taking a look at what is going on here, there is a very good chance they will get involved in some way, shape, or form. >> talk about the bitcoin presence in washington.

keepere an active push to regulators out of the way? what bitcoin advocates have picked up is the washington playbook. there is a way in the town that ensures your asset will not be unnecessarily attacked. it going has grabbed onto this. they have hired lobbyists and have trade groups. this is a really interesting way of doing things. it is almost as if they have figured out how the industry's work in this town and are now mimicking it. the problem is it is not one of greed upon group. what we have seen is lobbyists to want to grab the issue and help lawmakers understand it, lawmakers are intrigued by the issue and want to know how it works and it are is a danger there. what you have right now is

people trying to get in front of a move from congress or regulators to restrict this before we have a full understanding of it. they are following it. how effective it will be is how effective it will be over the next few months. >> thank you. what do ces mean for media companies? we have talked about gadget companies but we will not talk about the way tech is changing the way you watch television next.

>> welcome back. i am emily chang. t-mobile said they added more than 2.6 million quarters last year -- to him .6 million customers last year. the ceo says they will pay early termination fees if they leave their current carrier. here is what he told bloomberg earlier. everyone. for

doing thingsnjoy that cause pain to at&t. >> he was kicked out of the at&t party earlier this week. he also said the record straight on whether he was indeed kick out. and wantedacklemore to see macklemore play. i was surrounded by a sea of humanity that kicked me out. i am sure i would have done something different. tell you one thing, i prominently was displayed right next to kim kardashian's photoshoped selfie. i have arrived now. >> legend the client to talk about merger speculation with sprint, saying the company can compete with or without consolidation. samsung is the world's largest

manufacturer and has dominated television smart phones and tablets. home appliances are next. sam grobart took an idea of what it is like to have samsung in your kitchen. ces has always been about things like tvs, mobile products, but lately you can add list,r product to the kitchen appliances. the home has become a world of opportunities. one of the big players is samsung right now. they have pretty ambitious goals. they intend to be the worlds largest manufacturers of appliances by 2015, which will be an uphill battle he cuts they will have to increase revenue i six oh yen dollars per year to replace the current leader, whirlpool. new have a bunch of products they are displaying in las vegas. this is the chef collection

refrigerator. the target price of $6,000. it is not for everybody. this door has buttons on the top of it. one says fridge, one says freezer. ort chamber comes a fridge freezer for as long as you need it. that water dispenser still or sparkling. let me show you what is going on inside of the oven. out, you haves one giant cooking compartment for your biggest turkey. have the asparagus appear at 275 and the pork loin at 275. different temperatures at the same time. samsung is already a big name in dry years, but they are bringing new technology to that category as well. you want a bigger washing machine, that means the tub to

get deeper which means awkward to get things out of it. samsung has made their tub not so much deeper but wider. how about the big ambition to become the world's largest manufacturer appliance -- appliance manufacturer five 2015? a big old but it was not that long ago people said samsung, smartphones? >> that was sam grobart. we will be right back. ♪

>> this is bloomberg "west." i'm emily chang. ces is not just for tech companies. up with onen caught

l.a.-based giant about how it is using technology to rewrite their roles in hollywood. john is with us now from l.a.. hollywood in the world of silicon valley and technology are very close right now. ryan kavanaugh is a really heeresting person in l.a. started in the hedge fund business and then started financing films. question right now that there are new technology firms. does that make it easier to make >>ey in the film business? what we're seeing today is probably the single greatest demand for content. creation content between netflix and google and now you have at&t.

from everywhere you look, whether it be traditional suppliers, over the top suppliers, digital suppliers -- there is content friendly. opportunityed an where we can give the content that the consumer once over the platform they want to have as the cost they want. other studios are still stuck in the legacy of putting this out moreay and a little bit potential. >> what is the deciding factor to whether you go to one of these first? you obviously have lots of options on where you can put your film and television first. how do you decide? there is really know first. our model is giving the consumer

what they want. until us, part of our model, but guys that are 15, 16 years old that are running the studio. they say ok to a concept. people that are developing the concept. they go higher 50 --year-olds to theythe concept and then go and tested to a bunch of 18- year-olds and say what do you think? they say we do not like it and they spend $30 million trying to fix it. our model is to do the reverse, which is to use every means them -- medium available. being exclusive is tough. it means we are not giving the consumer what they want. it means we are not doing ended a way that we are forcing them to have it. i would say netflix ironically,

we were the first studio to sign up with them. that just means for a certain time frame, netflix has the movies on a subscription basis of the only studio that can also show our movies on every other service. consumer electronics show, you see international companies, chinese companies when you think about how important it is becoming too hollywood, very important. you guys in a lot of ways have been leading the charge. talk about relatively. >> i was just at another .onference was why wethat i got left china. the truth is, the chinese media market is the fastest growing media market in the world by

multiples. when i started working in china in 2006 we put out a movie called forbidden kingdom. ayer adding about 14%. have video-rting to on-demand type services. so i have personally spent a lot of time going to china and working with chinese media finance and less, political companies, which is what you have to do. the chinese like doing business one-on-one with the head of the company. that is really tough for a bigger studio. >> that make sense. i wonder, what are the parallels between having a film business, tv business and gaming business, will we see more of that?

>> for us, it is very strategic. we have a fashion agency. we have another gaming company called the major league gaming. .ou do a lot short form content the idea we have been putting together for years, which is called my everything platform is that we are set up today to be the only platform for a content supplier that can give a 360 degree view of content. you turn your tv on and turn on a relatively platform. you have 37 television shows that have aired already on cable or satellite. if the pilots that are original. short form content. have long formed. 11 series on the air with short

starts. they are the world's most known sports players. we started envisioning it. it can be a free or subscription-based or advertising-based platform. >> relatively -- relativity our jono with erlichman. 26 minutes past the hour. time for on the markets. off the session lows. the s&p is off by only one point. watching a couple of individual stocks we want to highlight. the first is ford. the company said the increase is driven by last year stock performance and improved liquidity. goodyear tire & rubber selected former cia deputy director tackle morale hoping to bring a

strong global perspective. this comes days after they were taken hostage in france during a union discussion. more on the markets and 30. ♪

>> this is the early edition of bloomberg 'west." i'm emily chang. bloomberg top headlines coming chris christie has fired the aide who ordered lane closures on the george washington bridge last year to get back at a local mayor. at a press conference he said he is embarrassed and humiliated by conduct of members of his staff and apologized and insisted he knew nothing about the closure. president obama will call for tighter letter of -- limits on u.s. spying by foreign leaders. therestrictions are part of plan to curb nsa surveillance.

the proposal could be announced as soon as next week. job market is improving. claims dropped by 15,000 last year, hitting the lowest level in a month. this comes ahead of december's jobs report that will be released tomorrow morning. companies have come to the center of recent protests over income inequality for protesters. twitter was given big tax breaks to stay in the city. what responsibility do critics have on this issue? jack orsi recently spoke out on the subject, to say it is really disappointing and a ways on everyone. i think the most important thing happening right now is there is a conversation, a social responsibility that all companies have. >> on the latest edition i spoke to cory johnson.

california lieutenant general tommy gavin newsom. what he had too say. >> twitter in particular. i was mayor at the time we started negotiations. fulfilled their commitment and our expectations have been exceeded because of the success in the areas changing for the better. responsibility comes from tremendous success. there is no one better in this city than the founders of salesforce.com. it is right to celebrate the success of the companies and the tax benefits. it was the right thing for the city to do at the time and i think it has paid great dividends. guys like mark did not necessarily seek out.

a guy gets it in this context. a lot of the tech guys say we are creating jobs. what more do you want from us yeah so the guys understand we need to step up in a much bigger way. real conversations with these leaders that have made fortunes and now understands the responsibility in a much deeper way than just creating a job. likehat about companies facebook, apple, that are not based in the city of san francisco but make it easy for employers to live here and commute down there. >> one of the issues that touches on all sorts of things but the issue of income inequality. this creates economic risk. you see that in this story in some way. when the growth part of the economy, the spending of the economy is only happening why the richest people, that could

be so disrupted by a stock , itet crash or slow down creates greater risk to the economy. we can see that visually. san francisco, that is a big difference from 1999, the income inequality in that city and so many others. to 1000e close employees. one thing i know is businesses cannot thrive in a world that is failing. at the end of the day, we are in this together. if the stock market drops down, the fed changes the policies that are moving the markets, all of a sudden the face of this can change, and we will not have the ability to come out of it. i do not want to say it is code red, but we are getting to a point, and these are just symbolic flashpoints, the google at the point, but

where people will have to step up to the point and address the issue. >> what do you think of the fairies in particular? >> it is an old idea. this has been a long time in the work. .his did not just happen >> the consequence is there is not that public transportation. i do not work for google. if i want to get to silicon valley, it is very difficult. >> there are two compliances, homelessness and how lousy the public transportation system is. >> public schools. >> you are absolutely right. we do provide a world-class transportation system within the city. equivalent of the the population of san francisco. it works remarkably well despite the fact it could be better. we have the bay area rapid

transit system. the east bayto into san francisco. it does not necessarily have that direction down to san jose. that is being worked on. why we have limited transportation. that is why the buses are necessary. why not take advantage of mother nature? they are funding it. the are getting people off roads and out of cars. now providing additional service with berries i think is a very healthy thing. a google blimp. that i would like to see. newsom along with cory johnson. coming up, delta pilots will documentstching oaky for microsoft surface tablet in

the cockpit. why the surface over the ipad? we will talk about that next. ♪

>> welcome back to bloomberg "west." more and more airlines are using tablets in the cockpit, which means they can get rid of heavy bags and save fuel in the process. and american airlines and several others have been using ipads. hit the flight deck to find out why. years the captain has been looking at 38 pound re- case. maps, on the charts, operation manuals, the essentials for every flight. now, a tablet that weighs barely two pounds is about to lighten her load. >> i think the tablet is one of the biggest steps right now because it will make everybody's

life easier. while other airlines have started using ipads in the cockpit, delta chose the microsoft surface. that is right, the surface. >> it is sleek, a gorgeous display. split the screen. light weight. they plan to rollout the tablets to all of the pilots by may, years behind other airlines but major shift that is estimated to save $13 million worth of fuel costs each year. >> the whole flight. now i can just look at it and it is right on my tablet. i have it right here. the surface is a piece of technology, and that means there could always be a risk. technology is overall has been a huge safety improvement.

but there are times when the new safetyogy can create issues. >> do you think it will be any less safe and you make the switch to tablet. >> no, i do not. pilot,s not just one there is too. sometimes there are four. if my device with dale, i have three more. went, wee technology will just use the captain's phone. we will use our piloting skills to get it down safe. theor more on my delta tech surface over the ipad, i want to bring in the corporate vice president of u.s. enterprise partner group at microsoft headquarters in washington. first of all, how does it compare to the ipad in the cockpit? what can it do that the ipad cannot?

sleek deviceted a that could integrate with the back end systems. it was a business-class device that had high reliability and ran windows so they can run the applications that they might run on other machines on the surface device and it gave them a long battery life and a long life. so we see this a lot where businesses say give me a business-class device that has the 6 -- weakness that we want in a tablet but the reliability and capabilities that we need in the business world. >> tell me how this deal came about? say we court them and can provide you all of these things, who cares about the ipad? has always been an innovative airline and have always looked at how they can think things to the next level.

the first thing we did in the airplane was in the cabin the flight attendants use windows phones to do transactions, get information about passengers and to get menus and products they can sell passengers. first they did that. then they looked at how you can take the cockpit into the new era and use technology to take it forward and have the benefits you heard. it really started in the cabin and moved. it goes in line with the desire to be innovative and use technology. are some of the future possibilities now that they are them up, what can it help do down the line that they cannot do now? >> that is one of the reasons they chose it. the future opportunity for the surface. now they can connect to all of

the backend systems very seamlessly. are all kinds of applications they can do. now that they have taken the flight bag and been able to eliminate the 38 pounds and put it in a less than two pounds surface tom and now what they can do is look at different applications so they can get out to the pilot, flight attendant through the cloud services. that was one of the clouds power , what they can do for them going forward. >> any other airlines using the surface? >> there are. emirates airline is using windows eight. surface is not the only windows eight device. an hp that is being used within the emirates airline to well.customers there as one of the powers is the fact that you have surface, but a big ecosystem. if you want to market devices

for going door to door, you have the choice that really is unprecedented in the tablet market. microsoft vice president, thank you for joining us. netflixlooking to match success with original programming. we are talking to the original head of development.

>> welcome back. apologizing finally for the breach. the power of the one little word. they also released an update for the feature that will allow users to link their phone number with their username. like house ofits

cards, orange is the new black, but hulu wants them to. they just unveiled a new slate of original programming. we spoke with a woman who runs hulu original and asked her how they decide which shows. >> i think we have the luxury of serving many different audiences as opposed to adhering to a broader target demographic. the beauty of the service is we get to look at different projects and consider who is it for? are a lot of them using hulu right now. there. take it from >> how do you determine if the show is a hit? what is the way to decide that? >> i think it is a qualitative and quantitative judgment. we are very curious about how it is received by the press and the community in terms of the caliber itself. lex what is the process of green

lighting a show for hulu? months, weeks, faster than that? weeks to months and try to make it as painless as possible. it is a negotiation of process. lots of financial parameters to define as well as the rules of the road. particularly when you do coproductions. you want to make sure everyone is clear on what the role is before you start so expectations are managed. >> when it comes to budgets and how much these shows may end up costing or what you are willing to put into a show, what is that process like? an unlimited budget or do you have to weigh the pros and cons? >> we have to think about the audience and how much you need to get great production value. a variety of factors that go into the equation. you think about this level of

talent in writing and think about how much it will cost to do that right. what you just said and put it into the lineup of 2014, how does that compare? >> 2014 we spend more than ever, which is great. i think the coproducing and cofinancing partnerships are critical in raising the bar. it meant we could leverage the risk and have creative relationships. the new shows i am most excited "deadbeat" and "hote t wives." great innovative spirit about them. i think audiences will love them. a guy can try. >> better to be a hot husband on another show that not one i would say.

>> i would like to see that. we will be right back. ♪

>> welcome back. i am emily chang. coming up, could peace between apple and samsung be ahead? find out why the apple ceo tim cook has agreed to sit down with samsung executives. that is on the late show. 56 minutes past the hour, which means bloomberg tv is on the markets. olivia sterns has more. we are talking about the market for pot. marijuana has artie been made legal in colorado and washington and has been brought -- brought

in some serious business for those states. a new and controversial method has some in the marijuana business worried. trish regan went to colorado to investigate. is a new twist on an old hide. high. >> really clean. very pure. >> he uses a blowtorch to get a simple concentrated hit of thc, the chemical in marijuana that makes people high. >> along the side you will see these. >> adjoint is made up of flowers which has anywhere from three to as high as 20%. the extract we have here today is around 90%. as crack is to cocaine, davin is

to pot. same drug, just made more potent through chemical engineering. inhaled, orextract marijuana flowers are rinsed with a solvent in the lab. .> it goes in through the tank it comes out of the bottom into the collect your number right here. what is left the hine is a sticky, almost pure glob of thc. >> this is the concentrated part. it will heat up until it is red- hot. he will put a doma on it. the doma a sickly captures all of the smoke. dome captures all of the smoke. coloradonow legal in and now washington state. the mayor water -- marijuana

rationalization is it is safe. as the striking video show, amateurs have cost explosions while trying to make it in home kitchens. reports ofave been passing out from intense highs. that has some worried about what this means for the newly legal marijuana business. >> asked crack is to cocaine dabbing is to marijuana. >> that seems a little much to me. also getting up marijuana stocks. do they look legit? >> i do not know how widget that is. i am not sure it will spread as quickly as crack cocaine. as far as regular pot, which we are pretty safe to assume people will use that as the main source going forward, it is priced a little bit higher than medical marijuana in colorado

come up but less than what you get on the gray lacked market here in new york. charging about $45 for an eight. medical mayor water was going for about $25. >> thank you very much. matt miller. back again on the market than 30 minutes. ♪ >> welcome to "money moves" where we focus on alternative assets. i'm deirdre bolton. we show you what investors and entrepreneurs are doing as well as what is going on hedge funds, private equity, real estate and more. today, private equity fund kkr rating $2 billion for its distressed equity fund. more than even the firm in-