♪ withis is "market makers" erik schatzker and stephanie ruhle. >> pharma fever. joneshis means for doc and other patients -- doctors and other. >> amazons deal picks up the battle between amazon prime and netflix. what is in it for the network it felt? we will talk to one of the creators of hbo go. it the for preparing for kentucky derby. how the company who runs the track has never been more diverse and rest reliance on horse racing than ever before. is friday. >> we are going to end the week

on a high note. next week we are going to be joining you from the conference in a late. >> got to live it up in new york city while we can. time for the newsfeed. federal prosecutors what bank of america to pay a record amount to resolve investigations into faulty mortgage loans. than $13is more billion. that is in addition to the 9.5 billion dollars that they agreed to pay last month for a similar case. [indiscernible] with three small cable tv operators. adding a service on par with traditional networks. here's a be able to search for shows on netflix3. for president it is business, not personal. the president made clear that the u.s. and europe are on the verge of imposing more sanctions on russia over ukraine.

the president also played down reports of animosity between him and latin american. listen to how he answered and usual question. putin ifd say to mr. you were drowning, i would like to think that it in a buddies out there drowning i am going to be a pretty good swimmer. i grew up in hawaii. a little out of practice. >> the president may be out of this. if you have seen the pictures of vladimir putin is not out of practice. >> i have someone near he was an amazing swimmer. big deals in big pharma. busy week for m&a, the judge industry has announced more than 140 billion dollars worth of deals. that is six times last year's total. have good chemistry?

i want to bring in a pharmaceutical analyst. this is a site developed and improving the patient's experience. we times the amount of deals saw last year. why? what is going on? >> there is a race to get focused and bigger. everyone wants to be number one or number two. that is what you are seeing now with eli lilly becoming bigger with animal health. scale,e trying to get to synergy and really dominate each other. sit, when we you look at what happened this week valleiant, it looks like what bill ackerman has was on talk. >> they got the patient and.

they can get her in for botox, fillers. they have contact lenses covered now. it is really important. howor pharma it comes down you look at the industry. i wanted to replay one excerpt that we had with bill ackerman and also mike pierson. >> i think what is happening is the entire pharmaceutical industry is changing. dynamic happening. why there's so much opportunity for synergy? there is a lot of cost. it is one of the few industries that has not been forced to operate with the same kind of economic is a fun as other industries. >> when he talks about synergy, do the synergies apply better? an effort tos have

cut some of the costs associated with marketing. are the jet companies thinking about it differently? is better to be vertical them brought? >> yes. the synergies come from the sales force. you just need one person calling on the dock are. they used to have. he -- dr.. these to have three or four people. the synergies come from the sales force. a lot of these companies are doing duplicate clinical trials. now there is a lot of leverage that comes. pricingkind of power does this give them? if the patient came in for breast reconstruction, the office is arty selling botox. good to offer the

allergan implants. we have to be careful in letting these kind of deals influence our decision. >> what is that dynamic like? it clearly becomes easier for the jet company, for the pharmaceutical, when he, to make its case to you. company toutical make its case to you. >> it is a time factor. they're making the decisions that are best for patients. doctors have favorites of what they like to use and what turns out better in terms of reconstruction. being a big by goliath and taking over the whole industry it'll be problematic. >> do you agree with that? >> yes. out again gives you a discount a you -- allergan gives you

discount if you buy them together. they are trying to encourage a greater sale. they may take a slightly lower margin in exchange for the volume. >> there is a lot less the reps can do. if valiant comes and they're drug reps.t the there are ways of making a much easier for physicians to use one brand. >> walk me through the perks. >> when you go into a physician's office they will botox andoffer people love to get breast augmentation. most women would not say no to those offered for free. it is a very appealing procedure women.ots of

for breast cancer patients is becoming much more, now to have an implant reconstruction rather than no reconstruction. it is really coming forward in terms of what patients want. >> i'm not sure how to add to that thought. >> i think she's picking about cancer patients. i don't think using anyone because goes to an office once implants. >> i think that is what she said. >> when you walk in the door, it is easy to have these things freshened up every three months. if you are going for a follow-up for a reconstructive procedure or breast augmentation, you might have a little botox. >> i'll give you that. >> she's looking at me like "you know where." mike pierson said they have

no integration team. he says they interrogate -- gate -=-e -- enter intergrate with the salesforce. this is the flat organizational structure. there is no middle management. >> show more companies do it that way? the drug companies are moving in that direction. they have cut a lots jobs in layers over the last several years. mostnt has been the direct. reputationtheir among doctors? they do not have a huge r&d budget. three and a million dollars is not going to get one drug to market.

and you talk to oncologists physicians that are treating patients with fibromyalgia they lead mostly at the big names. those are drugs in the pipeline that are valuable. you likeoctor, do hearing mike pierson say it is not our business to develop new drugs. we are happy to take something in phase three and bring it to market but we would rather have universities and other less financially disciplined drug companies to the hardware. >> it is interesting. i think more and more there will be a role for this. it is hard to take an idea of a new drug and bring it through r&d to phase one and phase two trials in through the fda. he is pretty smart. dois saying let someone else that and i will come in when it is an established project. let me sell it to the patent. >> eyelashes, wrinkles, breasts. if he gets erectile dysfunction

and hair, he owns it. thank you for joining us. >> when we come back, a surprise earnings miss for ford. one of the reasons all that bad weather. >> unfortunate. >> get ready to talk racing. the kentucky derby is a week for rom tomorrow. we're on bloomberg television in streaming on your tablet and phone. we are live on amazon fire and apple tv. ♪

>> welcome back. it looks like a tough quarter for ford. it shares continued slide down after they reported a egg drop in first-quarter profits. expenses andrranty the boehner matt miller's

bad weather. >> i know firsthand that bad weather did effect afford. if you remember, i ordered an f1 50. it was three weeks late because the trains were not running the cousin of the weather. it is interesting. they have ups -- because of the weather. it is interesting. they have ups delivering. the more interesting thing i think is the warranty and recall costs of $400 million in the quarter. i was in a conference call. the cfo seven it was an it wasly large -- said an unusually large cost item. i think what is going on is they are taking a kitchen sink approach. >> companies have some latitude.

now we know fields is coming in to replace mulally, they are throwing it in. >> ford is taking all their lumps in the first quarter to make it easier for mark fields. the opposite of what gm did with mary barra and so they waited until they hired her and then dropped the biggest i'll monitor. -- biggestopefully bomb on her. this will hopefully make him a better ceo going forward. the margins tell the whole story. or has very high margins for an automaker. .2% is what the margins were. in this quarter, seven point three percent. they say they are still going to get to the eight percent-nine percent level for the full year. analysts were like did you misspeak? their hitaking all of now. they will do better in the next three quarters. >> was there anything on the

call that surprised you? the one thing that surprised me is that they have $9.5 billion in net cash which compares to the gm report yesterday at $27 billion. famous fory is gathering up as much past as he possibly could to make it there any downturn. i'm going to ask off when i talked to him and in our what they plan on doing to raise that. they do want to get more credit lines secured and get more cash war chest in case anything bad to happen. more recalls or litigation costs if lawsuits pick up in america against carmakers. >> no detail, and so when he is rolling? >> no. that is the hot issue. i was hoping to focus more on the earnings. i know the are going to not

comment on that. >> anything on mulally and when he will comment? >> they said no comments. although we all want to talk about it, we know mark fields is coming in. we know alan mulally is going out. is it that interesting? i don't think so. time for youro dopey questions. i care about the auto industry. like i cannot believe that happens. the roles are reversed. onit is switcheroo day here "market makers." >> coming up, time to break out the urban and make some meant juleps. the kentucky derby is a week from tomorrow. the ceo with us next.

exciting two minutes in sports. the kentucky derby is just eight days away. this is the first leg in horseracing's crib will crown -- ple crown. short hills down as a publicly listed company. the ceo rang the opening bell this morning on the nasdaq. good morning to you. >> good morning. >> another thing people may not know about churchill downs, horseracing provides only about a third of your revenue, down from 75% five years ago. explain to people why you have transformed the company the way you have. right.numbers are it probably surprises and a lot of people when they hear churchill downs a think of horseracing. we decided we needed to diversify the business in order to find growth. we love horseracing.

at the same time, there's not a lot of growth opportunity. he started to get into regional casino gaming. we built the largest legal online wager on platforms which takesraces on grass measures on winning. >> are the prospects for horse racing that dem? it has to disappoint some people to think course rating is not a whyth is no spirit why not? it is difficult for companies like yours and others to get more americans interested in horses? >> the biggest problem is there's just too much horseracing. if you look at the numbers over thelast 10 years or so, handle is dropped by about 28%. the number of forces that are available has dropped by about 38%. in the number of races has only job by about 19%. there's too much product chasing too few dollars. they'll have to rationalize over time. i think there is a bright future for racing.

>> what about the image for horseracing. on the big month story about allegations against one trainer over the mistreatment of animals. there have been lots of stories over the years both in print and elsewhere about the usage of drugs to try and juice up a horses performance. its the sport need to clean image? will it help? >> i've two responses to that. that story was a bit overblown. the vast majority of people i know in horseracing are outstanding people in a three horses like her own children. some of this is just the media picking up on a story that was very unpleasant and hard to watch and difficult to listen to. i think it overstates this. >> is there some truth to it? those allegations may be overblown. in parts of the sports, do those things hold true? if they were

eradicated? >> i do not have any first-hand knowledge of those true. i ensure in horse racing there is cheaters just the way there isn't any's work. just as there is in any sport. biggers talk about the part of your business. online gambling is where it is out for you. to what degree would it help churchill downs if more states were able to legalize online gambling? right now there are not that many. >> i think that would be huge for us. i'm pretty confident that is going to happen. the hard part is picking the timing. i'm sure that online gaming whether it is poker or other they of games, i ensure will come to pass in various states. i do not know what the timing will be. >> do you have a better idea of which states are most likely to make online gaming legal? >> i learned a long time ago not to make political addictions or

guess what state legislators are going to do. it is a tough game to play. >> fair enough. where would you like to expand? states with the largest population centers. let's start there. the californias and floridas. >> what about the competition? there are a lot of people that say we want to build a business in online gaming. i what part of the market become saturated? long way to go. if you look at how online gaming developed in europe. it became huge over a couple of decades. we are in the early stages. >> thank you very much. chairman and ceo of churchill downs. the company that runs the kentucky derby. bypstarting the economy using the tax code? we will hear from a former white house chief economist. amazon sticks it to netflix. the implications of the deal with hbo. this is "market makers" on

bloomberg television. we are streaming on your smart phone, tablet, bloomberg.com and platforms, amazon fire and apple tv where we have been for a while. ♪

>> live from bloomberg headquarters in new york, this is "market makers" with erik schatzker and stephanie ruhle. >> you are watching "market makers." does not seen anywhere close to a deal on tax reform. everyone agrees one is needed. many folks have different ideas about how to do it. here is one idea. it relates to corporations. give them an immediate tax break for long-term investments. that plan are set would supercharge the economic recovery. that is with us from stanford university where he is an economics professor. michael mckee is also here.

to some people accounting is chinese. explain >> your proposal in layman's terms. >>-- explain your proposal in layman's terms. >> the goal is to remove impediments in the tax system. the idea is not to subsidize investment or give it a break but rather to remove the current structure that impede investment because it taxes investment at a higher rate than it taxes consumption. the easiest way to see it is this. some income and you spend that income right now, you are taxed on it because your tax when you are in the income. notou invest it, you are only taxed on when you are in the income but when you are in the returns to it or interest, dividends, capital gains. that is an impediment to investment. most people who have studied this, and this is not a new idea, most economists believe

that by removing that impediment you can move the economy in the right direction. >> we have tried this a couple totimes we have accelerated come out of recessions. what has that todd does other than companies timeshift to take advantage of the breaks? the timeshift is significant. that is not the goal here. the goal is not to move things over time. you have to make that a permanent change. are estimated to be quite to the games. there is a large literature on this. it goes back well before my time. many people have estimated that the effect on gdp is anywhere between five percent and 9%. we are not talking small potatoes. this is a big deal. if primary reason is that you put the impetus on giving deductibility to future rather than lowering

corporate tax rates, you put all the power on new investment rather than old. that is a really important point. lowering tax rates would be fine. the problem is when you lower the tax rate to give breaks to investments that were made 10 years ago. you may want to do that for other reasons. it does not stimulate investment. when you allow deductibility, you are putting all the power on your investment. that is the reason most tax like this particular approach over lowering corporate rates. >> if your proposal were to be adopted, i can understand how there would be a stimulative effect in the short term if companies would be able to expand all of this. what would happen over time? if this were to happen now, this year or next or the government would get less tax revenue.

with the government get this under the current depreciation schedule or more? the goal is not to maximize the size of the government. i would not claim this is a tax break that pays for itself. the calculations that we did when i was involved in president bush's tax panel where we actually looked at this, we were able to make it revenue neutral. able to do it by making changes at the same time. do isou would have to create efficiencies in the tax system that changed the way the health expenditures are created. orange duct ability was one of the sacred cows. we do not get near that win. there are some other changes. maximize theot to size of the government. the goal is to maximize growth in the economy, make sure you have high productivity. the reason is not so much to get

a reword to capital. although there is no doubt this does that. even the people on the left agree the only way to get wages up is to make sure that productivity grows. in order to get productivity to grow you have to have higher levels of investment. >> why do we think this is going to promote additional investment because opposed to what question? what do they do with the cash they are not spending? >> it is not that they're going to stop investing. if you look at what happened during the current recovery, this recovery has not been as strong as we would like it to be. investment has not been as strong. can we do something to allow wouldment to revert what the its normal level and then undistorted system? is is not a subsidy idea. "remove the impediments and distortions and then what

you're going to have his higher ."vestment here g you might see it tapering off in the future when you add all the numbers up, you're getting big numbers in terms of gdp growth rate that translates into higher wages for workers as well. the things people complain about when we are talking about tax reform is different proposals treat different industries differently. that is one of the reasons why like theness lobbyists idea of reducing the corporate tax rate. would this not disproportionately benefit atital intensive industries least to the relative disadvantage of those that do not have to make the kind of investments? break that affects your return to capital tends to favor capital intensive industries. that would be true for corporate tax rates as well. this would favor industries that

are involved in new capital investment as opposed to legacy industry. if you are looking at all companies that have made their investments many years ago. would not get the advantages of the treatment to the extent you had the new company. that is the whole point. that is why this plan is better than lowering corporate tax rates. it is different. it is completely neutral. you would allow all kinds of investment, capital investment, r&d. even capital investment should be deductible. it is neutral. those companies that were doing the most investing would be the one that were benefiting the most. >> and lazear here. michael mckee. >> we have a lot more to cover here. coming up, it hbo changes its

strategy on streaming video. it looks like amazon is one of the left you winners here and we will have that and more when we come back. you are watching "market makers" on bloomberg television. ♪

>> amazon won a big battle this week in the war over streaming content. it's prime members will soon be able to stream some of their favorite hbo shows. it is a move to still discovers away from rivals like netflix and hulu plus. there is a lot of talk about all of that with our next guest ed o'brien. he launch of the streaming cap when he worked at the cable ob1.rk during now he runs i feel like every day we are getting more confused. cable,, traditional amazon. we have fire, apple tv. walk us through this model. init has gotten complicated

a relatively short amount of time. there are a number of players .ut there there is a bit of convergence is happening right now. i think there are some early winners. it seemed traditional providers like hbo are putting a stake in the ground. netflix is at 15 million subscribers. 50 million subscribers. then you're seeing yahoo! in a well putting a stake in the ground in the content space. it is still very early. it is also very exciting for all parties concerned. quite how important is exclusivity? netflix.ot include netflix has long coveted the catalog at hbo. there are some deals out there that are nonexclusive. there are some deals that are exclusive. the dynamics are different from content providers and from distributors. explain. >> exclusivity is an important

play. it is not something that traditionally hbo is going forward with. they had tina to be a bit agnostic. i think that would inform us the deal came at a premium. it is a good deal for both parties and hbo. it gets the content in front of an audience that perhaps is not have a lots of overlap. lot to not do a disenfranchise existing operators. it also provides content in an un-sanitized, true to his artform manner. >> what do you mean by that? there will be the advertising. it is a curious set of contents. a lot of the adult fare will be there. than theferent syndication deal 10 years ago with a number of the other networks to syndicate that content. >> you make an interesting point. >> hold on. like when sex and the city is on the ee network. i got it.

>> this idea that it may not accept some of the cable partners because you're reaching and party their amazon but doesn't necessarily have service now, if that is the case, why when hbo want to do a streaming deal with some of its premier content if it is true that there's not that much overlap in theory. they should not be that unhappy. still a very strong business. it is a $5 billion business. it continues to prosper. i think we are on track to have another good year. as we sit here today and the second quarter of 2014 innings all the since the mean world to continue along. in this deal they blew the ball down the field a little bit. it is interesting to see it if they want to make the move it would not be hard for them to do so. >> could this hurt hbo? there are people that got

premium capable specifically watch to watch the hbo program for now they don't need to. >> some of that is true. this is a curated set of library content. it is now three years old. there is a whole suite of really strong pop culture content that will not be made available on amazon's prime service. >> why not make hbo go available without having a subscription and cut amazon out of it? >> direct to consumer? there is a very plausible and strong and vibrant business that hbo participates in right now. it is a large ecosystem underneath the umbrella of time warner and to go it alone would sort of create a lot of problems

that would impact hbo in some of the other networks. >> immediately it would treat problems but over time that is the direction things seem to be moving. to be operating multiple devices at your house. do you have,at cable or fiber? >> i have fire those -- fio, apple tv, xbox, a couple of ipads. >> more americans are moving in that direction. they still had cable. justdo not cut the cord wanted hbo on another advice. >> they are making themselves what really -- readily and widely available. the ability to access and hbo subscription on multiple devices in multiple locations the you're still tethered to a subscription. >> 10 years from now who is the dominant service? >> >> i tend to think the

incumbents are strong competitive positions. i like comcast. they are head of most in a like the categories xbox. it is a slick divine. i really like what apple has done. when it will alter of the box, can i install it like a chrome cast and have it operate right out of the box? >> is a terrific app. >> a little bit. i like it. what else do you like? look. i think netflix has a great lead. what they are doing right now is informed. it gives them a competitive advantage. they've got access to user data. they know how long someone has

watched a show and how long it takes into binge three series. they are using this to inform programming decisions. netflix is ahead of most in that respect. they are taking shows that may appeal to a category like kids or other audiences and profile that with management to inform the programming decisions. >> thank you so much for giving us your insight. it is pretty confusing. >> hopefully there's better content, their average -- then there ever has been. coming up, a $5 billion battle submitting -- soccer supremacy. adidas.sus you are watching "market makers" bloomberg tv. ♪

>> welcome back here and the tribeca film festival is way bigger than the silver screen.

it is honoring disruptive innovations in media, science, and politics. we have brought you some of the ideas and the mind behind them. earlier i said down with one in the honorees. he is the ceo of the start of that produces automative videos. i asked him how it works. text.got the we have the capability of summarizing it automatically, creating a shorter version of the story. the meeting testily analyze the story. this and understand what story is about. with that information am i going to the wires and getting all the relative assets. time for you to grab the new elements and make a new story. images,the latest including finding the most relevant sound bite out of the

two-minute interview. we go to do all the social enrichment. .witter and facebook and then infographics. stock quotes and those are the things. then there are two steps done with this. we have a distributed operation of a network of moderators. it looks like someone is doing a little bit of quality assurance and make sure is what gets into the video is right. he second thing is the voice over talent. can read network that out loud the script. the turnaround is about three minutes. is whole post operation fully automated. the whole process takes about 10 minutes. >> will they replace journalists? >> i do not think so.

there are different startups that are doing automated storytelling. we start from a story that is being told by humans. we are enabling turning it into a video in a much more automated way. >> had you been approached by big companies to get acquired? yahoosory reminds me of acquisition last year. could you be next? >> is a little bit too early or we are trying to build a very big company. we have been there a few companies before. leverage? big brands >> they can be more efficient. we are looking with publishers and brands. it is very simple for brands and publishers. everybody needs more video. there's more demand and supply. we are providing the supply very quickly. brands, delivering messages

to consumers is the best way through video. we are just providing within agile marketing capability to react in real-time to what is happening. content,ou get your how do you get around copyright issues? everything is fully licensed including images and video footage. we just pay for it. the rapid differently and we create a ready to publish content. >> even it is early now, fast-forward one or two years. if you are to be acquired by someone, what company would you love to partner with to get yourself to the next level? is it google? facebook? yahoo!? >> the companies that had to do with consumers eventually, if you think about the next open am, the plan is to platform for everyone to be able to create a videos. think about yourself or anyone else in the world or my daughter

could potentially write a story and create a video for it. everybody will create delicious like this. >> that was my interview with .he ceo of watch it moving on to some exciting stuff in the world of boards. the world cup is not a battle between the world's best soccer teams. it is also a battle between the worlds biggest shoe companies. nike and adidas and the $45 billion market for soccer cleat, uniforms thomas and other paraphernalia. -- uniforms, and other paraphernalia. called lightweight cleat the mercurial super fly. trevor edwards is with me now from the kickoff event. congratulations. everybody thinks it is super cool. explain this technology to me. why does it make them perform so much better? great boots. good afternoon. good to talk to you.

we are excited. this is a really key launch to us. technologyned with for the fastest layers on the pitch. what makes this project so fast is it has a great areas. it really holds the foot down to make sure that it grabs the heel. it helps to get propulsion. it also gives a special stud configuration that helps somebody that wants to go fast. it is a great new projects. we are really excited. >> i promised i will like it, too. his issue for the athlete or the fans? i'm guessing you haven't way more -- you have way more fans than people playing at that high available. >> the great thing about the ball is that it is the never once poured around the world. everyone is intrigued and

excited about the world cup. we're going to create routes for the players. that we are able to bring the product to the marketplace and create lifestyle opportunities. it is part of how we want to grow the business and market. sense for you to make this big of an investment? sponsor ofdas is the the world cup, you are almost in the house and adidas, no? >> it is not about our competitiveness. it is not how we win with consumers. we use the energy of the world cup to win with our consumers and to reinforce our position as the leading brand in the marketplace. for us it is really about making sure we get that message to our consumers. launching this new product we are super excited about it.

it really is truly a revolution. soccerfast is the apparel market growing here in the u.s.? in the u.s. it is actually growing at a pretty good rate. single digit rate. the market is growing. we are seeing obviously more more people get interested in the football business. that is because you are seeing it a lot more on television. day torly it is a big celebrate for you and the whole nike team. last week there has been some conflicting reports around this fuel banned business. can you explain what is happening? the project is trailing the fit bits and other projects like it. fuel band launch the we lost it with one purpose. our objective was to really help everyday athletes do more.

the fuel band has been very successful in connection with consumers. we believe that >> we can actually bring that >> -- we believe we can bring that experience to more people. we have our objective is to take that to 100 million. we're making sure that we work with more partners to expand the opportunity to more people to use what we call the fuel band experience. >> you are not shutting feel band down? you are laying off a lot of people who work on it? the engineers? >> you have to keep on putting resources in the right places. definitely focused on expanding the fuel band experience to more partners. we actually just put in in san francisco, the fuel band --

it is actually a lab in san francisco. we are able to expand the instruments we are working with to a lot more partners. >> a keeps me moving. thank you for joining us today. one request -- we want to see you again before the world cup rid you have more product to unveil. next time, there better be a seat next to you. are you hearing me? >> you prefer to see him, what are you? >> i am not saying you cannot come, but there better be a second chair next to you for rinaldo. enjoy your time in madrid. congratulations. nike brand president, trevor edwards. >> we will be back with you in just a moment. coming up, a variety of problems adds up to an earnings miss for the ford motor company.

♪

>> live from bloomberg headquarters in new york, this is "market makers," with erik schatzker and stephanie ruhle. >> amazon on a spending spree? the biggest online retailer is pouring cash into the business at the expense of profit. we will look at jeff bezos' strategy. >> ford gets hit by a perfect storm. troubles in south america. the ceo, bob shanks, will be with us. >> you saw the finale of "raking bad." now find out why a sugar substitute is becoming so popular. welcome. i and stephanie ruhle. >> i am erik schatzker. it is time for the news feed. we will bring you up to speed

him is happening around the world. bank of america may be on the hook for $13 billion to settle an investigation over its mortgage bond underwriting. they are accused of misleading investors over the quality of the bonds, fold by merrill lynch and countrywide. they have already paid to resolve similar claims with the fhfa. there is a settlement in that silicon valley hiring case. intel, andle, adobe will settle a suit by employees. they charge that they conspired to suppress salaries and sought $3 billion in damages. and football players at northwestern university will decide today whether to change the face of college sports. there whether --they are voting whether to join a union. they say that players are employees and eligible to organize. >> there's one thing we know for

sure about the proposed merger between comcast and time warner. there will be winners and losers. we will figure out exactly who they are. hn.h us now, peter co he isn't with the blackstone advisory group. >> thank you for having me. >> walk us through this time warner consortium. what makes sense? what does this mean for consumers? >> there are a lot of moving pieces. it is a tremendous deal. i think everybody is going to come out a winner and a loser. there has been a natural tension in the cable industry for years between the networks, the cable consumers. >> will this resolve the tension? >> no.

i think this will increase the tension. what has been happening for years is that companies are getting bigger and more competitive. there is more money being put to work. ultimately, somebody has to pay for it. it is almost a zero sum game. you have cable operators carrying the networks. the bigger the cable operators get, the tougher it is with the networks. obviously, they are passing everything to the consumers. when those consumer start screaming uncle -- >> does the consumer even understand what is going on here? they understand necessarily what is happening it need deal. they will understand what is happening in their cable bill every month. every month, you pay for video, phony.peed data, telecin

as that number goes up, people start looking around to see what expenses they can cut. there is a lot of money coming out of the consumer right now. there are a lot of entities looking to get paid by the consumer for various forms of programming. >> when comcast testified before a congressional panel a couple of weeks ago, the message they were trying to deliver is that this is no big deal. it sounds to me that we should not buy that at all. >> there has been a natural tension for years. i'm sure that the government will be very careful to make sure that nobody wins too much. you have a couple of big themes playing out. as the big give bigger and the smog of smaller, you lose the leverage in your door negotiations.

there is new technology coming into the ecosystem. that forces people to up their game. consumers are being hit on all amazon, netflix, plus fox, plus bloomberg -- you have to make sense of it all. everybody wants to get paid. >> make sure your cable service provider has bloomberg tv. leave it on all day. >> how much more leverage would comcast have over content creators like viacom, cbs, time warner? >> i think -- the bigger getting bigger. what you're seeing is, with comcast and disney, those two are really pulling away from a lot of the rest of the pack. these are big companies.

viacom, cbs, time warner -- but disney and comcast are getting bigger. negotiate against these big behemoths? >> are all the big guys winners by virtue of their size? >> i think they -- there is so much change in media. you need to be big to have a seat at the table, to manage the media model. the media model is really changing. it is not just time warner, comcast, and disney. appleamazon, netflix, and who have tons of cash. they are just now beginning to dip their toe into the water around content distribution. >> why haven't we seen google? amazon certainly is. google play is hardly a content play.

why haven't they done more? >> you would have to ask them. they obviously have a lot of things going on. the real question is, when do they begin to spend the cash? >> content is google. >> it is. it is not the curated content like "breaking bad." they are trying to do that and put money into it, but what you are getting is more choice. how do you break through the clutter? that is what -- that is the power of the incumbent right now. >> it is clear that there are so many choices. this is so confusing. when we talk about regulators who need to regulate the banking industry and do it in a smart way, they say they do not know what to do. when we look at the cable industry and regulators and lawmakers, do they know what to

ask for here? >> that is an interesting question. of course they know what to ask. what is really challenging the ecosystem is the rapid pace of technological change. four years ago, there was not an ipad. >> i can't imagine that. >> think of what that has done to media. whether you are a magazine or newspaper company -- you cannot legislate technological change. you just have to kind of hope that you put a fairway in place that people can operate within. and that works for consumers. if it does not work for all the players, you have to change. >> that makes me feel it the consumer is going to lose. the regulators will never keep pace with these companies. they are the ones who should represent to the consumer. i feel it the consumer will say,

i guess my bill keeps going up. >> i'm not sure about that. what all of this is doing is making everybody up their game. television programming has never been better. you have to have great content to make sure that you get carriage with these providers. the cable providers are doing really interesting things in the set top box with things like x affinity. that is helping consumers. actually think that all of the things that have been disruptive to really help consumers. think about the information i her fingertips. in media, whether it is "breaking bad" or the huffington post or bloomberg, you can just get it a lot of times for free. that has been great for consumers. there are a lot of people looking for cash from the consumers. how that gets managed is a big issue. >> some argue that the reason it

has gotten so much better is that the playing field is level. but the fcc is operating under a court decision -- that it willeed not be a level wingfield. it will be one way in for everybody and then another lame for people who pay more. >> that has a lot of implications. it is not done. there will be a lot of people who will fight against that. but, that kind of goes back to the question of -- do you have scale? can you pay to be in the lane? do have the content that should be in that lane? >> that will be passed onto the consumer for sure. >> there is so much of the pie shifting around. there are many more alternatives. as you mentioned, the playing field is getting more level.

the barrier to entry is much lower than they ever have in. your game has to be much better. a lot of these companies worked in quasi-monopolies. they could do whatever they wanted, whether it was the cable provider or local newspaper. now you don't need printing presses. you can go to hulu for television shows. an amazon see hulu waste their money now that the barriers to entry are so much lower. everyone is desperate for content. they may say yes to putting out products that they never would've done. look at the money that yahoo! is paying for original programming. today even know what good programming is? >> we will find out. netflix did a great show. that sort of gave everybody confidence. >> that is a great point. >> time warner spends $5 billion

per year on content. some serious number. it is like what i was saying before. a lot of these companies are experimenting. they're putting a couple hundred million dollars toward google and youtube. until you start putting serious money and having success, the incumbents are still in a good place. >> what do you use? >> everything. it is part of my job. but -- >> what do you like best? >> netflix and amazon prime. i watch tv, a lot of sports. that is the benefit of being a consumer. you may pay a lot more, but you get more choice. >> think you for joining us. n,ackstone's peter cohe breaking the phone down. >> sales are storing at amazon. so are they expenses, though.

>> and shares are lower today. ford missed estimates. we will talk to their cfo. this is "market makers." you are watching bloomberg tv. we are streaming live on your phone, tablet, and bloomberg.com. ♪

>> welcome back. for our media headlines. -- t-mobile ceo is notorious taunting his counterparts at at&t and verizon on twitter. it turns out he is getting paid. him $29 million last year, compared to $23 million for at&t. company,-commerce

alibaba, maybe the biggest ipo ever. they're talking about increasing the number of shares in their deal. that would put them past $20 billion total. 2010 wason in agricultural bank of china. and this is for anyone who does not like the boston red sox. there is a photo of the most famous errors in boston history. 1986,me losing mistake in that allowed the mets to win the world series. the boston globe, which runs the website, says it is trying to add some levity to landing on an error page. new york fans must love it. >> have many of them are going

to boston.com? >> i'm into it. we did not introduce you yet. you cannot talk. your in our house now. >> he ran the boston marathon and raise money for a cancer institute. >> now i feel bad. >> the dignified pocket square -- this is cory johnson, are "bloomberg west" editor-at-large. >> it is cold in here. >> it is friday. >> amazon reported some results in the numbers look great. that maybe is where the good news ends. >> the entire focus is -- there are two lines. the stock fell. i think there are two things that they focus on.

not with the rest the world focuses on. they focus on the revenue number and capital expenditures. they want to grow this business everywhere. they will keep spending everything they taken. >> have we reached a point where investors are beginning to judge amazon the way they judge other companies? for a long time, they were willing to buy that jeff bezos was shopping. the bigger we get, the more scale we have. ultimately, the more power. we can use that to raise price. >> there has been this long-term fantasy of a market. amazon would turn on the prophet switch. it is pretty clear that that is not the plan. >> jeff bezos has been open about that. that is way confuses me. shares start to dive.

why? didn't he tell us this is how i am running my company. why would one expect to see grooming -- booming profitability? >> this is a substantial fall. he has had that same message throughout. >> i don't get that. >> that is the market dreaming of something different. when you look at the equity return of assets, you think things are getting better for amazon. they continue to build. they have spent a lot of money on amazon prime. will cost money. we are nothing big margins on their services. how sensitive is bezos to the stock price? if this keeps hammering, will they change their strategy? >> do you really think that they those is influenced by that? >> i don't think so.

cory knowsy. -- better than me. >> i think that jeff does not care. but i think the employees care. some of the top talent hopes to get rich in stock options. they live in crummy weather for a good part of the year. it could have a significant effect on senior management. >> that is interesting. >> the salaries stink. the working conditions -- some people love it, but some people don't. they hope to get rich, but the salaries are not great. when the stock does not perform, it will be difficult to retain talent. >> what about this alibaba ipo? is it too much to buy? >> i can't wait to read this file. >> what a nerd. >> i love it.

i cannot -- >> what he really loves is the boilerplate. >> it is hot. >> that was funny. >> the banking fees are going to be a mess. i hear that the banking may be unique. we don't know what it will be, but they stand to make a lot more money on this deal. not just because of the size, but the arrangement they have. we will have to see what that means. what percentage will he get paid. >> what banks are representing alibaba? >> we don't know. it will be such a big offering. i expect a lot of names. >> usually, the larger the offering gets -- the lower the fee. >> alibaba needs this deal to happen so desperately.

they're really trying to shove this thing. >> shove. >> i am going to guess if you are a bank, you need to get this deal as well. not having your name on it, it would be hard to get around. >> we hope to see a filing this week. maybe next week. i hear monday is not likely, but we will see. >> thank you. >> pleasure to be here. >> safe travels back to the west coast. cojo. >> it happens. it looks like a tough quarter for ford. they reported a big drop in profits in the first quarter. they dropped 39%, well short of estimates. they blame expenses and the bad weather. matt miller is standing by with their cfo, bob shanks. >> thank you very much.

bob shanks is joining us now from the ford motor company. thank you very much. let me start off by asking him -- a lot of people call this the kitchen sink quarter. you move forward as many negatives as possible into the inst quarter to get them one place and out of the way for the past forward. >> absolutely not. this was a solid quarter for us. we were affected by three factors around exchange rates, weather, and adjustments. for a $7ll on track million profit. >> how come analysts got it so wrong? what were they looking at? what were they missing that you guys saw? the positive side, we came in stronger than expected. much stronger, frankly.

the loss in europe was better. >> i am talking about the eps. you posted $.25. the street was looking for $.31. >> we had a little bit more bad news on the ballot sheet exchange. we had guided to 300 or 350. in venezuela, we picked up that news in argentina. we had weather issues and then $400 million in warranty reserve adjustments. that is the part they messed. >> let's talk about that warranty adjustment. how does that $400 million breakdown? are you planning for future costs? this is for issues in the first quarter? >> it is not for any particular problem. we actually reserved for every vehicle we sell. it is based on history.

we make adjustments twice a year, first and third quarter. it was a typical adjustment period. based on the history that we have seen in product recalls, we had to tap up the reserves. >> when you say you're trending to a more conservative path -- no, absolutely no change whatsoever. this is a process we have been following for years. sometimes they go up and sometimes they go down. this was the normal process. >> let's talk about the weather. everyone is concerned about the snow in winter. i know firsthand that you guys had some delivery problems. my f-150 came late. had you get to these weather costs? >> it is still 50-50 between a premium for eights and logistics costs.

to keep the plants running, we had to expedite components. we also had to make a production that was lost and pay overtime costs. together, brings that $100 million tip. >> i heard you say and show a slide for net cash of $9.5 billion. it seems light. do you have plans to beef up the cash? >> if you look at the gross cash, i think gm was $27 billion. the absolute gross cash is actually quite similar. ours, butt more than not materially different. it is a very strong liquidity.

we also have $27 million in facilities. >> always talk about things that are positive -- torating cash flow is up $1.2 billion. i think you mentioned it is the 15th quarter in a row where you have a positive figure there. how key is that for people who have not taken accounting 101? >> that is the blood of the company. i think the fact that we are generating positive cash flow, despite what has happened in emerging markets, despite increasing investments for future growth -- this is a set up your for resulting years. that is very encouraging and shows the earning power. >> in europe, do you see recovery there? you have a stagnant market

share. is that getting better? >> absolutely. europe is in recovery mode. the industry level is rising faster than expected. we increased our guidance for the full year. our share was up. we are seeing positive results and we feel positive about the turnaround there. we are on track for profit. >> china is growing like gangbusters. coming from a lower bar. do expect that to continue? high double-digit? >> we will still see continued strong growth. lants underr p construction. there is more capacity coming on stream. we will add more products. the brand is embraced by customers. we have a lot of growth ahead. >> all in all, with the

exception of investors, you're set up well for when mark fields takes over? >> we are set up well for the balance of this year and going into 2015. a think that we feel very strongly about the guidance we have given. i recall mark mentioned we are guiding to in 8-9% margin. we may be able to get to that top half. >> can you hint when you will make the official announcement? >> no change to anything we have set in terms of succession. that is the news. >> i tried to get it out of you, i really dead. bob shanks there from ford. thank you so much for joining us. back to you. >> thank you, matt miller and bob shanks.

now, if you are shocked by those headlines about rising food prices, you will be mad at the grocery store. ♪

>> two skydivers jumping off the top of the world's tallest building in dubai. it is 2700 feet to the ground.

>> what is the red? >> a smoke trail. >> the bummer is to be the camera guy. they are just as rad and get no play. >> wild. >> and amazing. >> cannot do that in new york city. >> that is pretty cool. we have to switch gears. we are going to the west coast. the california drought has everybody talking about skyrocketing food prices. michael mckee says that before you get too worried, maybe you should check out the grocery store. do you think these headlines are wrong? you know that i love going to the grocery store. >> i did not know that. you would know that what i'm about to tell you is true. food prices are not rising as much as people think. >> at the whole foods in tribeca -- than in generless

al over the past year. and significantly lower than the cost of living and cost of food over that period. you probably have noticed that --f, pork, and chicekn but not other things. fruits and vegetables we were worried about. they are only up 0.4%. grain prices are way down. breads and cereals are not as much. >> alix steel is not here to defend herself. you're dogging on the headlines that she shared with us. are they wrong? >> it is too early to say. >> me prices are way up. >> you do have a problem with that. the biggest thing that people are concerned about his fruits

and vegetables. we did have a bad winter and a california drought. there is a possibility we could see some bad news there. of arizonastudy out state university that says we could see some enormous increases in vegetable prices in the coming year or so. that is way ahead of the increase. this is a worst-case scenario. >> and there is no guarantee. i was in california, talking to farmers about planting and theyher the a drought -- expected to make money off the drought. they said we have less yield, but we can charge so much more. makers.riced takers, no >> it influences behavior. we may import more food. it may change what they plant. less water intensive crops. those things could influence.

and people are not talking about el nino on the west coast. that means more rain. that could you alleviate the drought. usda has to evaluate. >> the alleviating the drought will not help the farmers in the short term. >> the usda will evaluate all of this. they came out with their forecast this morning and they have not changed it. they see higher food prices. 2.5% to 3.5%. >> are they good at forecasting? >> not too bad. there's a possibility that this could influence food prices. what you're getting is scare headlines, not real price headlines. >> thank you. >> erik also likes to cook. >> he is a griller. >> he makes his own mayonnaise

and vitamins. he does. >> and these are more expensive. -- eggs are more expensive. >> the people who want you to throw your sugar substitutes away and pick up stevia. ♪

>> you are watching "market makers."

it is the sugar substitute that made it big in the finale of "breaking bad." we're talking about stevia. they have been gaining market share since 2008. here with us is their ceo, robert brooks. so, "breaking bad." have a good deal was a? >> has the product improved since then? >> it was not the greatest use case. any news is good news. >> how did i happen? -- it happen? how did you get in there? >> they did not run it by me. they threw it in there. stevia is something -- less than 15% of the population knew about it three or four years ago. and has reached that tipping

point where greater than 50% of people know about it. you see at and cafés and resta urants. >> one of the largest producers is cargill, a privately held company. they do agricultural manufacturing. where you stand in the echo system ? >> they are the kind of group that we would want to supplyu to.; currently, all stevia is derived from overseas. that is due to stevia being a crop -- >> for those who do not have the volume on, they will think this is a weed segment. plant.s is a young stevia it goes up to one meter tall.

they harvest the leaf and dry it. extract and peer if i it. -- purify it. it has different taste properties. ist everyone knows as stevia one of those forms. >> what if you like that leaf? >> it is commonly used that way. >> there is a problem with it. some people find that it has a better acid taste. it does not taste enough like sugar. i have read about efforts to optimize them to produce something else. do you believe that we will take stevia to a place where it tastes more like sugar? >> if you have not tasted it in

a while, tried again. dhe next generation, like rev rare.v m are very we are a company that is pioneering fermentation technologies. along with enzymatic processing, we use native enzymes. you convert a low value extract to a more desirable taste. >> the thing i wonder about is what cargill has run into. what point does it cease to be natruaural? more people will become afraid of it. >> it is hard to please everyone. we're trying to provide more zero calorie options and reduce sugar consumption. guidance toproposed

less than the amount found an ingle sugar loaded beverage. you have to make those options available. >> for those who are part of this massive, cut out sugar from your diet movement -- are they turning to stevia? or are they trying to avoid? >> stevia is really gaining momentum. there are products like vitamin one that hove over -- have over $100 million in sales. se past equal, sweden low, -- weet 'n low. >> what about splenda? >> they are an artificial sweetener, discovered in the lab years ago.

stevia is a more natural substitute. there has been widespread consumer acceptance in japan since the 1970's. >> are you exploring other options, other natural sweeteners -- the stuff that you get from other sources? the sweetening agents that people also don't find taste like sugar? >> no. stevia -- has so many technical characteristics that make it unique. it out competes all of those sweeteners. when you talk about all of the next generation sweeteners, they go further than any other sweetener to make the most sugar like substitute. >> let's try it. bring it. i will try it. here we go. i just eat it? >> yep. >> it is tasty. i like it.

it does taste like a leaf, but a sweet leaf. there you go. tried it. not a weed segment. come back to us. we will have more for you here on bloomberg tv. ♪

>> that is going to do it for "market makers." what a great week it was. >> next week will be even better.

we're taking it on the road, headed to the west coast. monday, we will be at the global conference. .a. with anin l all-star lineup. >> steve schwarzman, ruth porat, and nouriel roubini. >> for now, we are on the markets. scarlet fu has more. >> u.s. stocks are ending on a down note. declining intimately with the margin markets. they cut russia's credit rating. joining now to consider the options angle is scott bauer. he is a senior market strategist who joins us from the cboe. there is a move to safety. we see this in stocks and bonds and commodities. before the weekend, with ukrainian tensions ratcheting up, to what extent do you see that and options as well? >> you mentioned to the emerging

markets. are emergingtf markets. that is a huge marketplace for options traders. we have seen, what is really interesting is the opening position of 40.5 strike, which expires today. huge fires today. a lot of unrest and uncertainty. that is the cause for buyers coming in. >> are these guys safe havens? >> i am seeing some upside. may be trying to take advantage of some of the weakness. overall volatility, which adds to the premium, is definitely elevated. premium onng more both sides of the markets. >> what about the vix? could we make a run for 15 or 16

next week? >> they really struggled to rally this time. it took a lot to get out of the 13 handle. i would be surprised if it trades over 15, unless something catastrophic happens overseas. >> let's talk about companies. amazon reported earnings yesterday. revenue rose, but expenses climbed as much. the stock is down nine percent. is that pessimism reflected and options trading? >> it is. we see implied volatility get hit and go back to the norm. implied volatility is down 3%. not as much as it typically is after an earnings announcement. that is little cause for concern and tells me that amazon is ere.g to move from h whether it breaks down below 300 or rallies back, you can expect

them to deviate from this 305 area. >> brace yourself for large moves. your trade today is a herbalife, nutritional drinks maker. they will report after the bell on monday. what do you think that they -- bill ackman is sounding off on this company. >> this is a trade, not a long-term position. it seems like the floor has been set. we had all the ackman news. a floor has been set. i want to take it vantage of the upside and the misplaced volatility. ll and byl the 62.5 ca the regular may expiration. that is two weeks out. do that at $.70. that is my max risk. but, if the stock does rally -- they will report decent earnings in the face of all the bad news out there. if the stock does rally, the may

2 calls, the volatility is through the roof. they will disintegrate quickly and leave me long there.the upside play >> all right, thank you, with a short-term trade on herbalife. that does it for today's options insight. we will be back on the market later this afternoon. in the meantime "lunch money" is up next. have a great weekend. ♪ .

welcome to "lunch money." i am adam johnson. in sports, paper play. northwestern football players vote to unionize as the entire ncaa watches. today's investor, warren buffett response to david einhorn. gmt tire, for this time, not . water, water, everywhere. the challenge is cleaning it and then you have to get it to the people who need it.