>> live from pier three in san francisco, welcome to "bloomberg west," where we cover innovation, technology, and the future of business. i am emily chang. it is a case that could change the future of television as we know it -- aereo against the major broadcasters. arguments have been happening all day long at the supreme court. the golden state warriors purchase land for a new arena in san francisco's mission bay. we will talk to warriors co-owner peter guber.

a top hedge fund manager says there's a clear consensus that we are in a tech bubble. in his letter to clients, david einhorn says companies he is betting against may fall at least 90% if and when the market applies traditional valuation. he writes certain cool kid companies and analysts are pretending that compensation paid in equity isn't an expense because it is non-cash. at&t's profit dropped slightly in the first quarter. revenue was up 4% thanks to a growing wireless business. the company added 625,000 monthly subscribers, up from 296,000 from a year ago. at&t's "next" program which allows customers to make monthly payments on phones rather than signing contracts allows the company to pay less in subsidies. amazon is apparently taking a sales hit in states that collect online sales tax. researchers at ohio state say households have cut their amazon spending by about 10% in states where online sales taxes are collected. amazon sales of items over $300

have fallen by 24% in those states. now, u.s. supreme court will be hearing the arguments today in what could be one of the most important media cases ever. american broadcasting companies against aereo. aereo uses tiny antennas to transmit broadcast signals to subscribers without paying for it. networks say this is copyright infringement since they are receiving no fees. aereo claims they are not subject to copyright laws because users receive it privately over individual antennas. aereo is available in 11 u.s. cities, including new york, houston, atlanta, boston, and dallas. if it loses the case, it is likely finished. joining me now is betty liu who was at the supreme court all day long. i know court just let out. what is happening on the ground? >> moments ago, the oral arguments were finished.

i saw an interesting dynamic play out. the two lawyers from both sides, paul clement and david frederick, came out and made their closing statements to the press. in that crowd was barry diller who backs aereo. he wanted to listen in on what paul clement, the lead attorney for the broadcasters, what he had to say. i guess he didn't get enough information in the court room. i asked barry how he thought things went and he said, i think they went well. he didn't want to make any more statements, but he listened in again on the broadcasters and then he walked off. a lot of people thought that barry who is the most high-profile ceo at this hearing that he would perhaps slip out the back door, but he couldn't help himself. >> tell us who the players are. you have diller and aereo on one side. the broadcasters on the other side. and even the obama administration has come to their

support. >> the department of justice came down on the support of the broadcasters. on the aereo side, lots of silicon valley players, facebook and google, support it. they say it is important for the future of cloud computing. dish network have the sling technology very similar to aereo. they wrote a brief in support of the company saying this is basically what we have which is we allow people to get broadcast content in whatever way they want. it is new technology doing the same old thing that a vcr used to do. >> you sat down for an exclusive interview with the aereo ceo chet kanojia. he talked a lot about what if the vcr never existed. what did he have to say about today? >> it is interesting he didn't want to say anything today. chet kenojia did sit down with

us exclusively yesterday. he said he was optimistic that he will win. he said the law is on his side. >> this thing has been about making sure the consumers get the signal. it is not about making a couple of guys rich. in we come, a completely different technology. a technology based on the roots of broadcasting and antenna. none of them can dispute the facts because in this case they don't have a way to dispute facts because the technology works the way it did. there is all this concoction and false narratives being created that somehow this is a copyright problem -- it is not. it is a business model problem. the world is changing around these guys and they are reacting with what they know which is litigate and kill new companies that come in because they are making far too much money and continue to make far too much money and have no incentive to change. >> can you understand that they

are spending -- cbs, abc, fox, nbc, -- spending millions and millions of dollars in programming that basically you are charging people eight dollars a month to access. can you see though that what they see -- what you are talking about as innovation, they are saying is theft? >> here is the issue -- if we don't apply this technology to a cable channel like hbo, there is a reason why they are called free to air broadcast television. the essential bargain with the consumer and congress is they program in public interest, convenience, and necessity. free to the consumer. they make money -- billions and billions -- with advertising,. that bargain is preserved. 60 million people in america

today, according to the national association of broadcasters, uses an antenna. are those people infringing on their copyrights? no. tons of money make money selling equipment and technology like tivo. all these companies make money by selling technology. >> you are more than just an equipment provider even if that equipment is in the cloud. you do want to be more than that. >> the question is what are we on a factual basis. >> let's say you get into original programming. let's say you start developing your own channel, doesn't that change who you are? >> tivo is a great example. you can get a retail tivo box. you can plug an antenna into it and tivo will sell you video on-demand movies. where is this copyright infringement? it is only copyright infringement because i have located the box and made it simpler for the consumer to get it?

>> chet kanojia, ceo of aereo, not backing down. what happens afte today? >> for aereo and the broadcasters, nothing happens. i am sure there will be some drinking done tonight because it has been a long journey for both sides. for the court, it is going to be like any other case. the justices are going to retire to their chambers and discuss the case and vote on it, a tentative vote. at the end of june, that is when we are likely to hear a decision on this case. for more on this, i want to bring in rich greenfield from btig, the media and entertainment analyst because he was in the court room. great to see you today. tell me how you think things went. >> the overall case was very hotly decided. the bottom line is there was no clear one direction. we heard two cases in the court

room. one was slanted one way. you can tell there was fear. how do you write this decision if you were to say aereo is illegal? how do you write the decision without impacting cloud computing? there was concern about how you keep this from impacting other industries. chief justice roberts actually went after the plaintiffs' attorney saying isn't aereo just like using a public parking garage? you go to that public parking garage and you are renting space for x amount of time. how is that different than if you go home and build a garage? isn't that the aereo analogy? you are essentially renting versus buying. i think that is the key challenge the court is grappling with -- is this the same thing as renting versus buying or is there something special about broadcast television? >> those are a lot of questions we expected from the justices. were there any curveballs?

>> probably not. i think there was some concern when you think about what the overall impact could be on why this system is the way it is. there was a comment from justice ginsburg, basically the only reason you are creating millions of individual copies to circumvent copyright law and i would not call that a curveball. the pushing on why this system is built this way -- is it only built this way to circumvent copyright law was another key theme. >> thank you for joining us. rich greenfield, the media and entertainment analyst at btig. emily, back to you. >> thanks so much, betty. we will be waiting for this decision at the end of june. barry diller has said if aereo loses, it is over. experts tell us it is really 50-50. just a note of disclosure -- bloomberg tv does have a distribution agreement with aereo. the warriors fell short in their nba playoff game last night, but the team struck a huge deal with a tech giant today. we have all the details from team co-owner peter guber next. you can watch us streaming on your phone, tablet,

bloomberg.com, and on apple tv and aereo as well. ♪

♪ >> welcome back. i'm emily chang. the golden state warriors have abandoned plan to build a new arena on san francisco's waterfront. they struck a deal with salesforce to purchase a 12-acre site further south, but still in the city. the warriors will own the land outright and plan to build an arena with private financing. warriors co-owner peter guber joins us from l.a. also with us, jon erlichman from new york. peter, not long ago, you were looking at a spot not far from where i am sitting. on the waterfront, views of the bay bridge. you spent like $20 million on plans for it. why this new site in mission bay?

why now? >> because we control our destiny. we own it. our relationship with the city is one as an owner, not as a tenant. we feel the site offers us some very attractive elements because the venue is a venue that is going to be for the city, for the bay area. it is one of the top 25 markets that does not have a venue like this. we believe it can be activated successfully, accessible by all four sides. it offers some strategic advantages. yet, it has its own location. it defines itself. we are going to spend all that money privately, upwards of

three quarters of $1 billion for the retail, office buildings, and the plaza sites, and the venue. we wanted something that we actually own. >> you bought the land privately outright from salesforce. i am curious how that conversation started. did marc benioff personally try to recruit you? >> marc benioff called and we met with him. joe lacob, my partner, met with them. together, we fashioned an arrangement. it was expensive and we decided that this was the place to make the move. it offered us a higher degree of certainty, a timeline that was most effective, and really the kind of accoutrements that were hard-pressed to get at other places. >> when you talk about being privately funded, how do we think about where the money comes from, that whole process? >> did you ever get a rotator cuff injury? you turn your hand and reach in the back pocket and pull it out? that is the kind of money it is. it is all privately financed by the ownership and by the partners involved with the enterprise.

without looking at public funds, we are going to be an active participant in the city and a good listener to the marketplace. we are going to be very responsive. the idea is we are a private citizen building a private venue for the benefit and purpose of all san francisco bay citizens. it really gives us the opportunity to control our own destiny. >> what about what will be unique about this arena? when you're in a position to build one of these things from the ground up, what do you want to be sort of the signature thing tied to this? >> everything is going to be unique. we are going to cast our line over the horizon, not make it a copy of something else. have it really be an original venue. a venue that is attraction and a lightning rod to bring the best and brightest artists in san francisco to the world. it will be a whole theater element of this. a whole public performance element of this venue, too.

the point is we are going to have it digitally fit. we are very successful at oracle right now with this. we are going to bring state-of-the-art sound. we are going have the right kind of visual display. we are going to make the audience not passengers, but participants. we think that we have the know it all and we have the relationship with silicon valley and the business community to really bring those talents. it is going to be -- if you want a metaphor, it is going to be madison square garden out west. it is going to be the kind of venue where artists and performers want to perform at. >> what about the people and the players -- the people inside the golden state warriors organization? how do you see san francisco as a draw in terms of recruiting top talent on and off the court?

>> we are sold out in our current site. about eight or nine miles as the crow flys. we are high up in the league standings in terms of attendance, merchandise, everything. we do very successful. that allows us to undertake this proposition. our audience is drawn from san jose, both sides of the bay, equally all around. remember, the warriors played their first seasons in san francisco. we are coming home in a sense. >> coming back home. warriors co-owner, peter gruber, and jon erlichman. thank you. coming up, at&t is teaming up with media mogul peter churnin to roll out its own online tv service. can they take on netflix or amazon? that is next on "bloomberg west." ♪

>> welcome back. i'm emily chang. cable giant comcast reports big first-quarter earnings thanks to the winter olympics on nbc. a surprise growth in tv subscribers. sales rose to $17.4 billion and profits rose 30%. comcast added 24,000 tv customers in the quarter bucking a broader industry trend and, of course, comcast could add millions more subscribers in its merger with time warner cable is approved by regulators. at&t is getting into the online tv game as well teaming up with the chernin group to invest $500 million in a digital tv service. the chernin group is led by former fox broadcasting executive peter chernin.

the company plans to introduce the service by the end of the year. for more, i would like to bring in cory johnson. >> interesting partners here. they're looking at ways to make deals for live programming and investing in on-demand services. will other traditional players be challenged by this is the question. this is an odd partnership. it is not at&t is a company that needs a lot of cash. >> the partnership began back about a year and a half ago when at&t and the chernin group tried to buy hulu. eventually that option did not go anywhere. hulu took itself back off the block. the partnership had been made at that point. at&t wants to get into content. yet another large company that wants to get into content. we have heard yahoo! recently

wants to get in there. amazon has made a much bigger play. at&t wants to get into this game and who wins? the content companies win. at&t and the chernin group want to get together and potentially buy newer content companies and build this thing up to compete with netflix. >> jon erlichman is in the center of everything because there were so much going on in l.a. he spoke to people like truck drivers and people in special effects and every one is working. pilot season doesn't even exist anymore because there are new shows and pilots being filmed all the time. >> we see companies in this all the time. disney made an offer for maker. relativity media comes out and says they want maker. there are these other media companies. these new start up companies that want to get into online content so that everyone can see it. that is what this bet is. at&t in that game. they own a company that has 5 million subscribers the traditional way. even comcast came out and said, we would get into this over-the-top streaming game potentially if the market dictates that is the direction we are going. >> interesting stuff. fascinating we have the content world changing.

>> it is happening fast. >> thank you very much. >> we are going to go inside aereo. we are going to show you just how the technology at the center of today's arguments at the supreme court works. you can watch us streaming on your phone, tablet, and bloomberg.com and apple tv. ♪

>> you are watching "bloomberg west" where we focus on technology and the future of business. aereo has made its arguments at the supreme court today where traditional broadcasters are challenging the live tv streaming company, but how does this technology behind aereo really work? jon erlichman went inside aereo to find out. >> at this manufacturing facility in salem, new hampshire, machines are assembling hardware. this is the aereo antenna.

>> we have found a great design and did a lot of work on it. we have achieved great performance for the size. >> aereo give us an inside look at the busy factory where the final product comes together -- product that is revolutionizing the way we watch broadcast tv. when you see how the technology works, it is different than using old-fashioned rabbit ears. each antenna is rented to an individual subscriber, but the antenna is not mounted on top of the tv. they are stacked on boards and then slide into a box that can accommodate thousands of antennas and mounted on rented rooftops in cities. the antenna sends the tv signal to a transcoder and then a dvr allowing you to stream online and pause and rewind and record. >> a standard master antenna for a cable company takes all the spectrum and pushes it down the wire whether you as the customer wants it or not. this is a model where you are listening to what you want.

>> what is the capability of what you can manufacture? >> i think we can manufacture huge numbers, many more than 10 times of what is in the field already. >> they plan to operate in 22 cities by the end of the year and has built the business to accommodate whatever level of demand comes their way. >> as demand grows, we can grow with that as opposed to the conventional model that says i'm going to build it out and hope they come. a very analog business model is not capable of being successful in today's economy. >> jon erlichman inside aereo. for more on how aereo and other services are disrupting the media landscape, i want to bring back betty liu who is at the supreme court. also, cory johnson and mike

morehouse who covers entertainment and media. michael, i want to start with you. what do you think about aereo's attempt to disrupt the traditional tv business? >> i am not a lawyer. it just doesn't seem fair to me. i am a new media guy. cable plays for retransmission. aereo is not just over the air antenna. you can buy that at radioshack. this is a service that goes beyond traditional antenna. >> isn't it just an expansion of rabbit ears? >> it has a dvr. they are taking in content outside of the traditional broadcast channels. >> we had a guest earlier today, a law professor at nyu, who compared what aereo is doing to what cloud storage providers like dropbox is doing. he said if the supreme court rules against aereo, that could put the whole cloud into question.

>> i think they are giving aereo lots of credit. they are trying to innovate around the law. they will find a sneaky way around it, not really trying to find a completely new technology. similar to that, i think while we know that john roberts asked those kind of questions during the questioning today about the cloud and the impact of other businesses if they ruled against it, i think aereo is really just aereo. i don't think the copyright law applies. we will see. >> when it comes to consumers, there are still obviously complaints about the lack of choice and the lack of meaningful competition. we also have to pay for hundreds of channels that we don't necessarily want. what do the incumbents have to say about that? >> it was interesting because i

want to pick up on what cory was just talking about. much of what the justices were discussing reflects what consumers are worried about, what the cable operators are worried about. justice sotomayor, breyer, they were concerned about the future of the cloud computing business. on the flip side, you had chief justice john roberts who came really hard down on aereo. he said, isn't your technology a way to skirt copyright laws? this is what it boils down to. in the hour-long hearing, there really was -- there was no give to either side. there was a lot of pressure on both to really prove their case. it is a hard case to prove for aereo. many of the people that we talked with this morning said that it is very hard for aereo to say we should be able to get off retransmitting these signals without having to pay for them when there is precedence by satellite companies and cable providers that they have to pay

billions of dollars for that content. >> plenty of the biggest technology companies today disrupted a traditional established industry. are there any disruptors out there that we should be watching when it comes to the cable business? >> there are quite a few. we talked about cord cutting, over-the-top tv. there are temptations. that is really important. gaming on the tablets, on the smartphones -- you have so many things you can do at home. tv is not the dominant primary medium for entertainment. it is below the digital devices amongst 18 to 34-year-olds as their number one source of entertainment. tv content is in great shape. more people buying more content and more content is being made,

but the distribution methods are heading towards disruption. >> do you see any parallels about what is going on between aereo and other industries and other startups disrupting traditional incumbents, like amazon did for bookstores and like what uber is doing for taxis? >> i think this is a fairly unique case where some clever people try to find a way around this rule, this law. when the first airwaves were given out, they were given out by the government. these companies can make a lot of money with the promise to provide a service for free. the notion that there is a cost incurred and they should pay for it -- these airwaves were given away for the very purpose of providing a benefit to the community. this seems like a technology invented to get around a law, not just a technological problem. i think they are unique for that reason.

>> betty, how do you feel about that? >> if aereo were allowed to live, it really puts into focus -- it puts into focus this cable television broadcasting retransmission model. it is not so much that tv is dead or dying because you see a lot of digital content migrating to a television platform. it is that whole retransmission model, is that going away? is cord cutting going to eventually replace that? one of the things i thought about as i was reporting is you can get your aereo, you can get your netflix or your amazon, all the shows that you want, and instead of paying $300 a month for your cable bill, you pay $25 a month. when consumers start to really figure that out and they start to get access to that technology more and more, that is when this whole entire business model is going to be in danger. >> betty liu at the supreme court. mike morehouse and cory johnson, thanks. disney hits the box office

jackpot with "frozen" raking in more than $1 billion worldwide so far. the man behind the movie magic, alan horn, and the secrets about the blockbuster success next. ♪

>> i am emily chang and this is "bloomberg west" on bloomberg television and streaming on your phone and tablet. will leonardo dicaprio be the next hollywood star to play steve jobs? danny boyle has approached dicaprio about starring as jobs. boyle is said to be in talks with sony pictures to direct the movie that is based on an biography and has a script written by aaron sorkin. now to our special series on how technology is changing the

entertainment business -- "wiring the world." since alan horn's arrival as chairman of walt disney studios, two disney films have topped $1 billion in worldwide ticket sales. "ironman 3" and "frozen." jon erlichman sat down with horn to ask about the secrets of this kind of box office success. >> alan horn has been a very busy guy since he joined disney. he oversees the marvel and the pixar brands. within a few months, they bought lucasfilms to get their hands on "star wars." we started with "frozen" because it has breathed new life into the animation unit at disney. i asked him about the financial success to the company. >> i will say that, not that we care about money, it has been really a phenomenal success. it is the highest grossing film -- number six of all films of all time. it is the number-one animated

picture, up to about $1 billion worldwide box office. the biggest before that was "toy story 3." this is a gigantic success. millions of albums sold, it is number 11 on the charts. have you guys seen "frozen?" can you get that song out of your head? ♪ fox, don't bother me anyway ♪ >> you have done yoda before. now we get you to sing. are you going to make a sequel? >> we haven't talked about a sequel because we have announced that we are making a broadway show in new york. the next priority will be for us to do a musical. we have the music, we just need four or five new songs. we haven't really talked about a

sequel though i do have a title for a sequel which was not embraced by the fellas. "thaw." [laughter] >> i'm so glad you picked this forum as the place to reveal the plot specifics of the "star wars" film. i know everybody is excited. you just told us you are heading to london. you know, "star wars." to look at the -- >> production design, the score and screenplay, the director. i have to be very careful about "star wars." if i say, for example, there will not be skateboards in "star wars" then the internet goes,

"star wars" bans skateboards, says disney movie chief. even something that doesn't happen gets news. we really can't talk about it yet but we will be able to very soon. we have all the confidence in the world in our director. i think we are in very good shape. >> there will be no skateboards in star wars? [laughter] you have said a couple of things. you said casting is almost done. is casting now complete? >> it is almost complete. [laughter] we are not prepared to announce it, but we will be very shortly announcing it. >> you have said that shooting has started. does that mean -- >> we did second-unit work in other places because we have all these locations we have to film. we have to give it that "star warsian" look. we need to go to different

places that give us the right look and feel. we did have second unit work shooting already but we haven't convinced the main part of principal photography yet. >> the primary location, pine wood in the u.k. and abu dhabi is another location. >> yes. >> when you take all these movies, the global audiences that are available to you today which is a larger number of people than ever, should we assume that strategy helps to offset an industry sore spot like declining dvd revenue? >> it is true. dvd revenues are down 50%-60% in the last five or six years and that is really painful to us. when we greenlight a movie, we get estimates on what it could generate from the revenue sources. the dvd component of that revenue stream has been cut in half. >> we know that dvds have been a tough market for the film studios. in music, we know cd sales have struggled. there is a trend in which vinyl has been doing quite well. we went to one of the few

remaining vinyl manufacturers in the country to find out why. long before there were digital downloads, this is how you made an album. and at rainbow records, the recipe has not changed from plating nickel on discs to the vinyl pellets melted down into bubble gum. >> it is a process of heating up the dye, the hot vinyl and the hydraulic pressure. it goes under about 1800 pounds of pressure to squeeze it out. kind of like making waffles. >> we are inside one of just a dozen facilities in north america still making records. rainbow records was down to producing just 5000 lps a day a few years ago, but now -- >> our average day is about 22,000 to 25,000 records today. >> you are producing upwards of 25,000 records a day? >> six days a week. >> last year, 6 million lps were sold in the u.s.

that is 144% growth in four years compared to 54% growth for digital albums and a 44% drop in cd sales. if you want to know why vinyl is hot, look no further than rap artist macklemore. a year-and-a-half after the release of his hit album "the heist," rainbow is manufacturing the final version. when you buy the physical today, in certain cases, they will give you the digital copy as well. >> that is very common. >> macklemore made the lp available at retailers like whole foods and urban outfitters where it quickly sold out. >> they're not only selling those units, but they have a 12 inch by 12 inch picture of themselves in a store that speaks to their brand. >> with music fans feeling

nostalgic, rainbow is scrambling to meet the new demand for vinyl with old equipment. its newest record press is 35 years old and album testing takes place on a vintage turntable. >> this is a cd centering machine that was converted for vinyl. >> this is a cd machine that was converted for vinyl. >> that kind of tells you where we are going. >> jon erlichman there, our senior west coast correspondent. coming up, we will be right back with more of "bloomberg west." ♪

>> welcome back to "bloomberg west." electric car maker tesla has delivered its first car to customers in china. ceo elon musk was on hand as the cars were delivered to eight people in beijing. musk told stephen engle that tesla has big plans for the world's most populous nation. take a listen. >> what we see right now is pretty strong demand. i think probably more demand that we can fulfill this year. i think long-term we will have hundreds of service centers in china.

and my instructions to the team in china are to try to build those as soon as possible. so, we are going to build them at a very rapid rate. >> in addition to service centers, musk says he hopes to build teslas in china in three to four years. time for the bwest byte where we focus on one number that tells a whole lot. cory and jon are both in new york having lots of fun without me. cory, what do you got? >> how about 5706? the number of miles jon erlichman and i had to travel to be together in new york. emily, we took a tesla, elon musk was in the backseat. it was like "thelma and louise," but different. >> when the hyperloop happens,

you will get there in moments. >> what are you doing in new york? >> there are a lot of stories going on right now that are relevant to what we are doing. you guys spoke about aereo. a big software component to aereo as well, but i think there is a certain amount of software -- >> i was at the bloomberg technology conference here in new york. >> cory, i have a question for you. what is going on with the beard? >> playoffs, baby. in my culture -- >> is this allowed? is he allowed to do whatever he want? >> the boss may have had a comment about that earlier. the beard will be here for long. i was at vacation last week and it just kind of happened. >> you guys have fun out there. i will try to hold down the fort. >> all this fun could happen anonymously. >> emily chang and william shatner making me blush within a two-week stretch. that is impressive. >> william shatner, love that

guy. jon erlichman, our "wiring the world" series in new york this week. cory johnson in new york this week as well. thank you so much, guys, for a great show today. thank you all for watching this edition of "bloomberg west." we will see you later. ♪

>> this program is a paid advertisement for the united states gold and silver reserve. >> from a guarded vault facility of the united states gold and silver reserve, this is an important announcement.