>> welcome to "bloomberg west," where we cover the future of business. we are following a few big stories. social messaging apps have cost the carrier $32 billion so far, and will cost them $54 billion by 2016. we will dig into that, in light of facebook's massive deal to buy what's up.

aaron levi, the ceo of fox, will join us for an exclusive interview. he weighed in on the debate surrounding the san francisco tech community and inequality. box does have buses from san francisco to silicon valley. he talks about how the buses are efficient and the real problem is not enough housing in san francisco. that exclusive interview later in the show. our lead story of the day -- amazon reportedly in talks with j.crew, neiman marcus, and many more retailers to get them on the site. who better to talk about it than my special cohost for the hour, who may look a little familiar -- the author of "the everything store," the book about amazon, and senior writer for "bloomberg businessweek." what do you know about this? >> amazon wants to be the everything store. the true retailers have always

been hesitant to put their wares on amazon. it is renowned for its discounting. ralph lauren does not want to have its $300 sweater next to a $30 sweater. >> i am a customer. i would love this. does this impact the brands, make them seem less aspirational? >> they worry. amazon is worried -- is pitching, let luxury retailers advertise on amazon, or other websites, and then send customers to the other retailers and allow them to sell their goods, and service it with amazon prime. 23 million members who spend a lot. we will see how that is executed, and whether the deal is sweet enough for luxury retailers to do a deal with the enemy. >> it would be awesome if i could just throw a para genes into my amazon prime card. is my prime membership going to get more expensive? >> the amazon ceo, on the latest

earnings call, brought up the likelihood that they would be raising prices for amazon prime. i do not think he would have done that, were they not seriously considering it was stopped we talked about a $40 price increase. the first rule of retail -- worn high and then surprise customers. >> the cost of the shipping would be paid by the retailers, right? >> the deal with the luxury retailers is separate from the fact that shipping is getting more expensive for amazon. they are larding lots of other services. i do not think the two are related. i think we will see amazon get more sophisticated about different pricing for prime. maybe three day delivery or same-day delivery. they are going to experiment. >> how do you think that would impact the business? prime has been a huge driver of growth and addition of customers. it raised sales i something like 22% last year.

>> it is a big risk. >> what could this hurt, bottom line? >> it is a big risk. there is a pretty big example in cosco, which has raised prices of its membership club over the years. customers have stayed loyal. i think what jeff bezos will try to do is give something to customers as he is raising prime prices. we might see more content in amazon video prime. we might see an improvement in shipping, like same day or next day delivery. we will see. i doubt it will be a price increase alone. >> you mention amazon video, on demand. a report that the amazon set top box we heard they have been working on is coming soon, and could be based on the android operating system. there has been talk of this for a long time. what do you know? >> we broke the story one year ago that amazon was working on a set top rocks. i think they have taken a page out of the jobs playbook,

waiting until they can offer something different. >> we do not know for sure if the thing is ever going to come out? >> i think it is inevitable. i think they are expanding what it can do, bringing in video games. they acquired a videogame studio. the other important point is, amazon prime pilot season. some of the new pilots are quite good. there is one called "transparent," which is getting a lot of buzz. >> i want to bring in jon erlichman. as well as edmund lee, who covers media for bloomberg news in new york. let us talk a bit about the set-top box wars. first of all, if amazon comes out with this, what does this mean for apple and apple tv? what does this mean for netflix?

>> i think it means competition. amazon has been serious, especially in this town, about the originals. they are paying top dollar to make these programs, the same way that netflix is willing to spend top dollar to do our original programs. amazon has clearly learned a lot from the amazon prime video offering that they have. that is available on all sorts of devices, like roku. maybe there is a discussion they make that a standalone service. you were talking about whether amazon prime prices go up. they could say, here is the standalone video offering. you pay a little bit more. you could ultimately get everything tied to prime. it is hard to know exactly how it will play out. >> t rle o

difference in negotiations with programmers. what do you make of that, at that scale is not a factor anymore? we do not see negotiations for programming. >> scale is a factor and is important. i am not trying to contradict what tom rutledge is saying. he is trying to make a more subtle point. when they talk to hbo or viacom and you see the programming guy, this is the scale they get in terms of the fees they have to pay. that does not change until you hit a much bigger array of customers. nu are hitting 25 million, you might get a slight discount. comcast already gets that. 20 million customers and 10 million customers, not a big difference. you still have to pay more you would have gotten in the time warner cable deal. he was trying to downplay the fact that he did not get it. they were not going to get that much cost savings on programming.

some, but not much. he makes a valid point. the other point was, the set-top box, they are trying to create their own cloud-based set-top box that might rival or catch up to what apple tv offers, or amazon. they are working on a webtv box. the competition is, who is going to own the set-top box? will they lose subscribers to apple tv or some other digital type box? amazon now, they have original content. with the set-top box, they have something apple does not have. amazon could be a big player there. >> we recorded that apple had been talking with time warner cable before the comcast thing happened. do we know any update? are the talks still happening now that time warner cable could eventually be part of comcast?

>> the talks have slowed down. they have been put on hold because of the merger. that is not to say that comcast is saying anything to time warner, like, you cannot talk te how should we think about this? they have de to get on cable systems to legitimize what they are trying subscriber growth is slowing. can they compete in this new environment? >> we are going to talk a lot about satellite players, dish and direct tv. do they have to come together? they have broadband, the ability to say, we are losing video subscribers, but people still need their high-speed internet.

there has been a lot of hints from both dish and directv about wanting to offer web-based television offerings, which the cable companies are not going to like. that helps to explain why directv wanted to buy hulu. dislikes to be disruptive. you will see more action. >> thanks for weighing in. coming up on the next part of the show, we are going to be talking about the wireless carriers. they appear to be paying the price for more users signed up for social messaging apps. ♪ >> here with our special guest

host, a busy week for us, covering this whole facebook what's up acquisition. have you used it at all? >> i downloaded it yesterday. when you are a technology reporter and download the app after it was acquired, you have failed. >> i did have it on my phone, but none of my friends are on it, so i deleted it. a lot of people in the united states are not used to using it. it is more widely used by people who live abroad to communicate with people in different countries. one of the things i want to talk about today is where the cost of this is going. who is shouldering it? maybe, the carriers. social messaging apps have already cost the carriers $32.5 billion, and will cost them $54 billion by 2016. i am joined by the principal analyst of a consumer services company.

how do you come up with these numbers? >> the messaging figures we produce are a function of several different drivers and variables. a lot of which we do not tell people about. they are confidential to us. but we talked to a lot of operators all over the world. we have many of the tier one customers, telcos, as clients. and we work with them and our model we have on this subject to work out the numbers. >> how much sympathy deal have for the mobile operators, who are seeing sms revenues dried up as customers turn to apps? >> the operators are in a quandary with this particular problem. a good example of this is kpn in

holland, who had a particularly bad experience with what's app in particular, because their sms revenues were unprotected by being in a bundle. if you bundle to subscribers, the revenues are protected. if a telco does not do that, it is very easy for users to make the decision between something that is completely free and something they have to pay for. >> from a user perspective, obviously these services are completely free or almost free. aside from the carriers, is the cost being passed on to anybody else? >> in terms of whatsapp, it isn't. apart from a small charge to

subscribers in some countries, something around one dollar a year, the cost is taken pretty much by whatsapp itself. >> what do you make in the difference around advertising between the app and facebook? two different set of principles here. the founders have basically vowed never to introduce advertisements into whatsapp. >> indeed. i do not think mark zuckerberg is going to make the same mistake as he did with instagram, where he meddled early on in the terms and conditions, which upset the users. i think he has learned by that mistake. i also think jan koon is going to stick to his guns on the no advertising front. to maintain trust with users, i am fairly sure facebook and whatsapp will not be putting

advertising on the application anytime soon. but that is not the only way of potentially monetizing the service. what i think is more in zuckerberg's style is to drive sharing activity on facebook and user connections on facebook using whatsapp. >> right. >> carry-on. >> this whole idea of integrating facebook into whatsapp instead of whatsapp into facebook -- i can it will exist with a business it hates? thanks so much for giving us that update. coming up, beyoncé's surprised self-titled album came out in december 2013. box may have helped. ♪ >> box is reportedly on the

road to an ipo. jon erlichman caught up with the colorful ceo for an exclusive interview at the digital entertainment world conference in l.a. he always wears colorful shoes. he talked about how big names like beyoncé might be using box to keep content under wraps before it is released. >> there was a somewhat popular release of a new album that happened by surprise recently. one of the reasons why it was kept in secret so well was because box was the platform used for managing that content. they were able to decide to reveal the information at the time they wanted to.

they could keep all the controls in one place in the meantime. this is allowing content owners to do more with their information and have more security around it than if they had not gone to the cloud. >> box and beyoncé? >> maybe. maybe not. >> it has been reported you guys are planning to go public. if you can shed on that subject? >> probably not. that is two subjects in a row we cannot talk about. we are trying to build an independent long-term company. that is the path we are on, is staying very independent. >> you are focused on business. dropbox, another company in this area. >> i have heard of it. >> it focused on the consumer. you decided that is not your market. >> we like consumers, but not as a business model. >> fast-growing bay area

companies -- box and dropbox. >> the trademark company also gets confused. >> this competition between your businesses, even if they are focused on the consumer and you are focused on business -- i will go back to the ipo question. >> we think about that race less than people watching the industry think about it. it is not huge priority for us to be in the financial market race. we think it is more important that we build out a robust business. >> the companies you are competing with or get labeled with, the big players in technology -- people like to use the microsoft example. the new ceo -- if i read your twitter feed, it looks as if you kind of have approval of him as a leader for the company. >> i am sure he cares.

>> did you reach out to satya nadella? >> he was one of the first executives at microsoft to reach out to us, a couple of years ago. we usually think of someone reaches out, they have something behind their back. in this case, everything we interacted on felt like it was in an interest of becoming a more comfortable platform. he has been at microsoft a long time. people thought, is he going to bring enough change? he was the change agent in microsoft. >> you bus people to san francisco. do you think about the employee responsibility and what is becoming a touchy subject in san francisco of less room for the middle class because of all the successful technology companies

that have given new opportunities to people who now live in san francisco and bus down to the valley? >> it is efficient. the alternative is to have 75 extra cars on the road. we want to make it so people can get to work more easily. it is from a capitalist intent also. wi-fi on the buses means you can work, so we get an extra two hours of work from people. how do we create the most productivity from our employee base? for society, i do not think buses are the real issue. it is not even a symptom. the issue is that you have not a lot of housing in san francisco. with scarce housing and an increased workforce, all you can do is have some shift in the population. that is super unfortunate. the solution is you build more houses and pay people more. unfortunately, we are unrelated to either of those, so we are

going to keep busing people. >> the box ceo. we will talk about your cover story today. ♪ >> welcome back to "bloomberg

west." with us for the hour, our special guest, a bloomberg businessweek senior writer. you wrote the cover story this week about the invasion of the taxi snatchers. you profiled uber and other competitors like sidecar. when it comes to uber, all the talk has been about surge pricing and the ceo has not seemed to budge when it comes to his philosophy that this is the best way to get drivers on the road to meet demand. did you get the sense he is ever going to waiver? >> absolutely not. they are pretty religious about it.

is it working? he said prices go up over the weekends, snowstorms, and holidays, because it gets more drivers on the road. a bunch of colleagues went out and started taking uber cars and lift cars, because they do surge pricing as well. by and large, we found drivers do get off the sofa and out into the world when the prices go up. >> i have interviewed many uber drivers and find they prefer uber. with lift, the pink mustache thing is inconvenient, especially when it is raining, to get it in and out. some people do not realize these drivers use multiple services at the same time. they might be looking at uber, sidecar, and the list at the same time, and going where the rides are. >> list took even more advantage of the regulatory ambiguity in

many cities then uber did, taking amateur drivers and saying, you can become a cab driver. lift is about to raise over $80 million from investors to turbocharge that business model. i think it is something uber has worried about. it is a reason they are putting so much money behind uber-x. >> we are looking at the pink mustache. is that their thing? can they keep it on every car? >> it does feel a little san francisco. they are committed to it. they have a conference room in the back that is covered wall to wall with experimental think phelps to figure out how to make that thing work better in the rain. >> so they are looking into that. the ceo of uber, his background -- obviously very successful right now.

he has been in the business a long time. he had a business before that did not quite work out, and it trained him into the mindset that he is committed to this philosophy all the way. tell me about that. >> he is a battle or, and it is because of that experience. he had a peer to peer filesharing service in the 1990's, video streaming that he sold. many years of basically not even taking a salary. he has got the battle wounds. it makes him perfectly suited to this, a field where it is hand to hand combat with other companies and entrenched taxi commissions. >> my favorite detail was the blood sweat and ramen on his socks. on new year's eve, an uber driver killed a little girl as she was crossing the street. now, they are in a court case

about this. the plaintiffs are saying the driver was distracted by the app, which was shining in his face. >> some of the challenges around the uber model are background checks, insurance, distracted driving. the tragic situation on new year's eve in san francisco gets all of that. the mom of this child says she saw the driver with the cell phone reflected on his face, looking down. uber said he was not really driving for them because he did not have anybody in the car, even though he was clearly looking for a fare. background checks -- she had a previous citation 10 years ago for speeding. you compare it to how the traditional cab industry would have handled this. maybe not all that differently, but it does show that uber has work to do to prove to its customers it does stand behind its drivers. >> are we in san francisco too optimistic about the possibilities here? are these accidents or bad

people, exceptions to the rule? can this work on a broader scale around the world? >> for context, you need to realize that a driver for any service company can get distracted with technology in the car. the companies have identified a supply-demand inbalance in the car service industry. because of medallion prices, cabs are hard to come by in many cities. they have exploited regulatory ambiguity. the regulators have to catch up. >> what is next for uber? are they going to be delivering my laundry? they have delivered my christmas trees, kittens. are they going to be delivering my laundry? >> i think that is a long way away. the expansion -- so many cities are going to china. they still have a lot of work to do in the united states.

they are focused on that. >> check out brad stone's story on the cover. it is really interesting. then you for telling us about it. i want to turn to a different kind of transportation -- skateboarding. a popular hobby for decades, but a new company called future motion has come up with a high-tech electric skateboard. we hit the street to see it in action. ♪ >> i am the inventor of one wheel. one wheel is the first electric skateboard. it creates a feeling of surfing a wave. you lean toward your front foot to accelerate. you lean toward your back foot to slow down or stop. you lean to your heel or toe side, like on a snowboard, in order to make turns.

>> the technology is similar to what is in a segway, but our market is different. the ability to take it with you is something you could never do with a segway. you do not have to be a skateboarder or snowboarder. the key to writing one wheel is just relaxing. our goal on kickstarter was to raise $100,000. in three weeks, we raised $630,000. we are gearing up to make tens of thousands of one wheels. i think we are going to see sidewalks looking different if we take a picture five years from now, with people zipping around on one wheels. >> we will be right back. ♪ >> welcome back.

i am here with special guest

host brad stone. we are talking about fitness right now, and the health and wellness software divider mind-body, which has helped raise $50 million. the company helps jim's and health clubs manage their class schedules. they book appointments through their web and mobile apps. rick strohmeyer is with us in the studios. tell us a little bit more about what you do? >> we do all the services that enable you to live a better life. we are talking about personal trainers, nutritionists, so once you go to. these are all the kinds of businesses we serve. >> what does the funding enable you to do? >> this will enable us to accelerate our development of web and mobile products.

we have assembled the largest network of health and beauty product for petitioners in the world, and more than 100 countries. these folks are doing about 25 million sessions a month, worth about half a million dollars a month. we are marketing and bringing out a set of consumer apps. you will see mind-body connect. it will enable you -- if you go to yoga, you can manage your schedules, as well as the hair salon you go to, the day salon. perhaps you want to engage a personal trainer. >> i found that some of the smaller businesses have been slower to be by new technology. do you feel there is a real opportunity? why has it taken so long for it yoga, for example, to end up with technology that makes it easier for people like me, who really have to be convinced to work out?

>> it is a rapidly growing industry, dominated by a lot of mom and pop businesses. it has taken a bit longer to get the flywheel spinning, but it is much more durable. our largest client is only a fraction of a cent of our revenue. we are enabling the success for local entrepreneurs all over the world. >> have you been having success with chains like 24 hour fitness? what do you feel are the limits of bringing technology to the gym? some people say it can be quite disruptive. >> we did not focus on the big brands. we started in the garage. we wanted to focus on people who can make a quick decision. the larger the business, the more difficult to make a business operating system

change. fitness together is a chain of 500 fitness studios nationwide. equilibrium -- excuse me. equinox learned our system for yoga and pilates. it is a standalone solution for smaller businesses, or we can bolt on to their internal systems. on the second half of your point, technology has all kinds of wonderful things to offer. we see an opportunity to create a network that connects all the stakeholders. the practitioners and consumers, and ultimately people paying for health care -- most importantly, employers and the government. >> there has been a proliferation of wearable hardware like the jawbone. any chance of some integration? i need to be reminded, this is a good time to work out. there is a class right now. >> we are working to see the effects of a workout. when i went to this yoga class,

this is what it did for my calorie burn and how well i slept. it will help people manage their minds and bodies with the alacrity you manage a car and other technology. >> faster, smarter, more connected phones. the latest and greatest mobile technology will be revealed next week. we spoke to one company about the superfast technology that could be showing up on your smart phone. ♪ >> welcome back.

i am emily chang. mobile world congress coming up next week. we are expecting a few big announcements from samsung. mark zuckerberg will be on stage. it looks like tim young will be joining him. >> it makes it a little more

interesting. some of those points of discrepancy around advertising, collecting customer data -- david kirkpatrick, the facebook effect author, we'll get into those issues. >> also a bloomberg contributing editor. seeing them on stage together, one of the things that shocked me most is that he is joining facebook's board. kevin fischer does not have one of those. >> it is probably a sign of how heated the competition for whatsapp was. mark zuckerberg said there was lots of competition. they were able to drive a good deal. not just the price, but saying independent. getting the board seat. it will be interesting finding out why they sold. they were adamant about remaining independent. >> what was it about mark

zuckerberg? >> intellectual property -- nobody has brought that up. you have some really entrenched competitors. was it an issue, expanding into asia and europe, where they needed a sponsor to help drive growth? >> also at the mobile world congress will be brought, -- broadcom, who are introducing a chip that is twice the speed of everything on the market today. this is an interview with cory johnson. >> we have two press releases out today. one talking about reference designs and turnkey designs as new customers. this is for smart phones that will be $300 and under. another announcement is out today. this is 300 megabits per second, twice as fast as anything you can get today. >> is there a different approach you think will make this more

successful? >> i think this is competitive stuff. we do not believe -- and there is maybe one other company that could do the chips we are doing right now. a lot of r&d focus. execution. we have been working on strategy for a number of years. we did a demo which is pretty interesting, which is with a carrier in finland, and infrastructure player. doing it in a live network, as opposed to a lab. this is a live network, out in the field. >> that makes a difference. >> it shows it is real. you have a carrier willing to put it at risk. it is twice the performance you get on lte today. this is twice what lte is today. >> i have trouble understanding what is going on in terms of the

smartphone. >> apple makes good products. >> i am having trouble making sense of the way smartphones that have great capabilities are going very low price, and where that leaves the current producers in the market. >> i think we are seeing a depreciation. there is a desire for everybody on the planet to have a smart phone. we subsidize phones in the united states. if you buy a lot of high-end smartphones, they cost 5, 6, seven, $800. the new phones are coming out at price points that are affordable for a broad set of the population. you are still going to see uber cool smartphones, but reaching more people. >> will the feature set be so different? previously, whether it was samsung or apple, the feature set is so different than the low-end smartphone.

>> i think the smartphone will get defined as the reasonably large display that can browse the internet. it will be able to run applications. that price point is running way down. what you are going to see on the high-end is people start innovating in terms of more capabilities, faster processor, faster connectivity. sensors, people will start using this for other things. we call it a smartphone, but people do not make phone calls anymore. they browse the web. they play games. i think they will be integrated into their lifestyle -- health, fitness, those kind of things. that is the likely thing next. >> the broad calm -- broadcom ceo with cory johnson. it is time for the bwest byte. that is your job today, brad. what is it? >> $91 and $.60 -- $91.60.

>> why would you take money out of bitcoin? >> you cannot. that is the problem. one of the biggest point exchanges has had horrible technical problems ever since a recent office move. lots of management problems. very bad communications. we are seeing something called escape selling. they are basically just taking the dollars out, because they do not trust that that exchange is going to be there. there are other exchanges around the world where the price is much higher. still lower than the $1000 price range earlier in the year, or there was so much enthusiasm. but the problems are destabilizing the currency. >> i wonder what is going on within the bitcoin community. we have talked about china, india, russia, questioning this virtual currency.

are people getting scared? at what point are they going to say, maybe i do not want to put my money into this? >> there is a lot of anxiety. bitcoin has had so much volatility over the last few years, and these people are believers. he did a cover story earlier in the year. that was the one thing i took away. these guys are long-term investors and have an almost religious belief in the power of his currency. >> how do they feel about bitcoin in l.a.? >> i bought them for family members for christmas and they probably hate me now. the more people that are using them and the more places that accept them -- that is where it becomes the story, away from how they feel. the jury is definitely still out on that front. >> i have $10 in bitcoin. that is all i am willing to bet on it. we will see. thank you for joining us, and thank you for watching this edition of the show. ♪

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>> today on "political capital," governor maggie hassan on obamacare and new hampshire politics. breaking down ukraine and the minimum wage. john sununu and david plouffe debating obamacare and the next elections. we begin with new hampshire governor maggie hassan. let's start with health care. every state is affected by that. you are going to have the medicaid expansion and said you were going to sign the bill.