>> live from pier 3 in san francisco, welcome to "bloomberg west," where we cover innovation, technology, and the future of business. i'm emily chang. ahead this hour, the ambitious agenda of netflix. the streaming company is planning aggressive international expansion as well as bigger and bolder original shows. this coming after netflix passed the 50 million subscriber mark and posted a big rise in second quarter revenues and profits. silicon valley is becoming a must visit location for potential 2016 presidential contenders. days after rand paul rallied conservative tech workers, former secretary of state hillary clinton is in town meeting with executives from twitter and facebook.

making thursday night football as popular as monday night football, that is what cbs is trying to do as it gets ready to air its first season of thursday night games. the chairman of cbssports tells us the network is devoting more resources to every thursday night game than any game except the super bowl. for our lead story, netflix says it now has more than 50 million subscribers because of hits like "orange is the new black" and "house of cards" bringing in viewers. they added 570,000 domestic customers. they added more than one million internationally. even if netflix began charging new customers one dollar more. as for the earning numbers, sales were up 25% to $1.3 billion. the income rising 141% to $71 million. netflix has ambitious plans. expanding in germany, france, and other parts of europe.

it is also going to sell gift cards in stores for the very first time. cory johnson is with me in the studio. in l.a., jon erlichman. in new york, s&p capital iq senior analyst, tuna amobi. tuna, what stands out to you most? >> i think what stands out to me is really the results speak to the potentially sizable addressable market for netflix. about 50 million subscribers worldwide, you talked about that. what is really striking is the international front where they're talking about 700 million broadband subscribers worldwide. i think the attraction the company is generating, firing on all cylinders, domestic expansion, margins, growth, original programming. you can go down the list and i think the results speak to the

great momentum which the company is generating. >> there has been a lot of focus on the two most popular original shows. jon, i know you have been taking a look at which of these shows has brought in more new subscribers. what are you seeing? >> this company has the benefit of being public and us talking about them all the time. they truly believe that doing these original shows is a great way to get more people to sign up for the service. they claim in the case of "orange is the new black" is helping them in a big way to generate higher subscriber numbers. they have argued it has that even more of an impact in some markets than a show like "house of cards." they are not shying away from the strategy. if anything, they will be spending more on the original shows. i think that makes sense when you think about having a business and wanting to have people getting excited, it is less sexy to say we have a library of old stuff. it is more fun to say we have a

brand-new show, big stars attached. they will continue down this path. they talked about "marco polo," a project they are doing. they signed up chelsea handler recently. >> i like both shows personally, but i think i am more of a "house of cards" kind of gal. cory, you were speaking earlier about content costs. what did we learn? >> this is a great dilemma when you look at the financials. we get a company where we can see the numbers. they can spin all they want, but we can see the numbers. some of the numbers are not on the balance sheet. i think some of the most important numbers. we talk about how much we like the shows. we do not know what they pay for those shows. we know they do not own the rights long-term, just short-term. they're spending on content is going through the roof. we do not see most of those costs on the income statement.

>> if you think about the contract of kevin spacey and robin wright alone. that has to be a lot. >> how much are they going to pay for that in the future or other things? they signed the contracts. what they put on the balance sheet is a question mark. they put commitments and contigencies with no number next to it. you have to dig through the filing. they have $7.7 billion in commitments and contigencies at a minimum going forward. if they do not keep growing users and continuing to find profits, they cannot pay for the content they have already contracted to take. there is a great risk and a looming one. >> jon, did you have something to add? >> i will quickly say this is a company that has more than 50 million global subscribers. three years ago, they were trying to get to the 10 million mark. as much as their content costs are rising, this is a company

that has a lot of momentum. i think it really depends on whether you think netflix has a stronger global reach opportunity than, i don't know, hulu or amazon or even hbo versus what they will have to spend to get there. >> tuna, what do you think about the priority of netflix and how they are spending the money? we don't know how much is being spent on these original content projects but we know it must be sizable. >> the relevant number was $7.7 billion in content obligations. that is the number we keep a very close eye on. we agree the number is relatively high but as long as they can continue to deliver the kind of viewership and the kind of margin expansion and subscriber growth, i think the business model has really validated that. beyond that, clearly, i think the international expansion is very critical at this moment.

that is a segment that i think a lot of investors would like to see to attain sustainable profitability. that is not very far off considering they were close to breaking even and launched in lots of markets. i think, all in all, there is really a lot of positive takeaway. the one question we have is the valuation and that is the reason we have the recommendations on the shares. i think we have seen a lot of rally in the stock. one satisfication this quarter is the price increase did not appear to have any material negative impact so we can be confident. >> their operating profits are up 5% which is ok, i guess. before things like taxes and other things. you have a stock trading 136 times earnings. the notion that this company is so dependent on growth, but only seeing growth in subscriber

numbers comparative to the profit margin or even their earnings-per-share growth, not as strong as their valuation. >> we are seeing them reiterate their stance on neutrality, speak out against the comcast-time warner potential acquisition. who would've thought this little rental company would become such a player in washington? >> i think it speaks -- first of all, netflix continues to use every tool they have to the best extent. whether it is accounting, technology, regulatory environment. they say we would support net neutrality. we do not want to do the deal we just did with comcast and verizon to pay to get ahead of our competitors. we do not think that is fair. at the same time, as long as those are the rules, they will use that which we have seen. >> jon erlichman, i will give you the last word. do you have anything to add? anything unique stand out to

you? >> only that the head content guy hinted at bigger costs. there has been so much speculation about whether they will be launch into movies. the per show or per movie budget, i don't think we have hit the ceiling on that yet. >> jon erlichman, tuna amobi. thank you. cory, you're sticking around. coming up, hillary clinton toured silicon valley today. why was she here and who was she trying to win over? that's next. ♪

>> welcome back to "bloomberg west," i'm emily chang.

yahoo! is buying mobile analytics company flurry. terms were not disclosed. flurry analyzes data for mobile phone users to help developers better understand their audiences. marissa mayer has been looking to acquisitions to boost revenue growth and the company has announced at least 12 acquistions this year alone. silicon valley is increasingly becoming a place to be for some of the biggest names in politics. former secretary of state hillary clinton is visiting facebook and twitter headquarters where she is taking questions and meeting with executives. while silicon valley is traditional fertile territory for democrats, republicans are also making a big show here with potential presidential candidate rand paul speaking at a recent gathering and touting his admiration for products like bitcoin and opposition to nsa surveillance. cory johnson is still here with me and joining us from new york is sarah frier. sarah, what can you tell us about these questions and

answers at facebook which is happening now and one coming up at twitter. >> hillary has always been looked at as a person who really gets social media. she has a really large twitter following. she had a really popular tweet during the super bowl. tweets with hillary has become a tumblr meme. she has always felt that silicon valley is a very important place for her to be connected. on the flip side, we're seeing a lot of outreach from these executives. they are just as diplomatic as when they travel around the world, they meet with local government officials, presidents of countries. it is how things work now. >> hillary clinton has such a great twitter profile. i have to point it out. wife, mom, lawyer, other things, former secretary of state, pain-suit aficionado. the picture with the famous text

with hills photo where she has her glasses on and checking the phone. >> the way she embraces the image. she is smart and clever. she is a quick thinker. her husband had the same sort of approach with people. i think it is not just about the money. you see a lot of politicians, as well as celebrities, want to attach themselves with things that are technological because it seems to represent the future. it tells the rest of the world that this person knows where we are going. it goes towards a better future for all of us. just over the weekend, rand paul, who may be her republican challenger, who is more libertarian than your average republican. >> many people in silicon valley

are. >> many people in business really identify with the libertarian notions if in theory more than practice. when he was out here, if you want a libertarian white house or washington, if you are backing some of the ideas i support about limited and not zero government. that is what he is trying to do to get money. >> how is hillary clinton perceived compared to president obama or rand paul and people who could be her challengers? >> i think we've seen a lot of tension between the current white house and the silicon valley elite, especially with the nsa revelations. we have had a lot of conversations -- we have seen a lot of conversation between top ceos and obama have not gone so well. it is good for hillary that she

seems to have a lot of support. these kinds of visits really help get companies rallied behind her. overall, in terms of silicon valley, we have seen mark zuckerberg back chris christie quite powerfully. we saw them together a couple of weeks ago at sun valley in idaho. they are always talking, always promoting each other. >> president obama had a famous town hall at facebook and mark zuckerberg actually showed up on a suit. i wonder if a stop at facebook and twitter is a must do on any tour. >> we were with president obama. we were standing 20 feet away when he was at linkedin two years. it is a regular thing in terms of fundraising and the world of book tours.

it is one of the benefits going to places like twitter and google and facebook. we are going to have a speaker series. for the politicians, it is going to give them the ability to get closer to people and wallets and their ideas. >> sarah, what other companies are cozying up to washington and vice versa? >> we have seen google. we have seen linkedin. even venture capitalists have had a seat at the table. obama visited a venture capitalist's home for a meeting as well with other ceos this weekend. we have seen a lot of -- even internationally, we have seen a lot of politicians come and make a stop at twitter headquarters, at facebook headquarters. it has become a pitstop, it has

become something you do when you come to silicon valley or america. you try to build up relationships. >> we're looking at this iconic photo of president obama with steve jobs and mark zuckerberg and eric schmidt. >> that was a hot ticket. >> this was some time ago. certainly, still indicative of what is happening. >> let us not also underestimate -- misunderestimate it. how much campaign practice this is. to be in front of people where they are going to ask tough questions that won't be caught on television. they can get used to the dialogue so they don't become the next herman cain. >> jon erlichman and sarah frier, thank you. rolls-royce is no longer just a name for luxury. the company's new coupe is one of the most technologically advanced cars today.

matt miller gets behind the wheel, next. ♪

>> welcome back to "bloomberg west." i'm emily change. we turn now to our wiring the world series. we're looking at how technology is changing the future of transportation. rolls-royce vehicles are known for their luxurious features, but the rolls-royce wraith is one of the most technologically advanced cars on the market today. matt miller took one for a spin to see how it is fusing high style with high tech. >> this is the rolls-royce wraith, a $400,000 coupe.

it had the incredible classic design, plus it has this super powerful v-12. it is the most powerful engine that rolls-royce has ever produced. there are the little luxury touches that rolls-royce delivers. you have the suicide doors. super luxurious shag carpeting. hand-stitched leather. the starry night sky liners. you can see a rolls-royce umbrella. the doors close automatically at the push of a button. it is actually more high tech than almost any other car on the market today. the most exciting feature as far as the technology is concerned is the way the gps and satellite systems work with the transmission and the headlights.

so, if you were going into a corner, the satellite alerts the gps system, and realizes you are about to turn, it makes a transmission downshift and aims the headlight into the corner to make it easier for you to see. the other cool feature is even if he didn't have headlights that turn around the corner, even if your headlights were off, you would still be able to see a deer or child because it has an infrared night vision system. it illuminates any life forms. it gives you an audible tone if you are on a collision course. one other system that rolls-royce has really perfected for this car is the adaptive cruise control system that allows you to set the car at a certain speed even in bumper-to-bumper traffic. you can use these buttons on the steering wheel to determine how far away you will stay from the

car in front of you and behind you. this kind of technology now that rolls-royce is owned by bmw will eventually trickle down into the kind of cars the average wealthy person can buy. >> bloomberg's very own matt miller riding in style. with israel's ground invasion of gaza getting more intense, military defense technology and advanced alert systems are being deployed to limit casualties on both sides. that is coming up. ♪ the markets.or on i am matt miller. let us catch up on where stocks ended today. down across the board but not

nearly as rough as it had been earlier this morning. points.jones down 125 s&p 500 got a quarter percent. ♪

>> you are watching "bloomberg west." i am emily chang here with cory johnson. the israeli ground assault in gaza is escalating with death tolls climbing on both sides. more than 500 palestinians, mainly civilians, had been killed since the israeli offensive began last week. the ids has lost 18 soldiers. how has technology helped in the efforts to avoid any more casualties? the red alert app creator joins us now from jerusalem. it is an app that warns israelis of an incoming rocket strike. we are joined by a man who led

israel's missile defense system for nearly a decade on the phone. thank you both for joining us. uzi, i will start with you. we heard a lot about the technology and sophistication of the iron dome which helps prevent israelis from rocket attacks. can you explain how this works from the technological perspective? >> it works like an air defense system. you have radar or another sensor that sees the target. and calculates the trajectory of the rocket. it intercepts the missile. it shoots it and kills it. the principle is simple, but implementation is quite difficult because it is like hitting a bullet with a bullet. the incoming missile is flying about twice the speed of sound.

you have to find it. you have to find it in the sky and hit it. easy to say, difficult to be done. >> uzi's missile-defense system was a response to other failures in the past using new technology. what new technology are you using with red alert that was not possible in the past? >> basically, red alert when i created two years ago before i started working here, it is very basic technology and technology that any developer could use on a daily basis. we are not using anything so sophisticated here. as the numbers of people who are subscribing to our app, we see that the technology, we have to get the notification out as fast

as possible so that's a real technology challenge. trying to get to all these people and it has to be fast because it is saving lives. >> what kind of pickup have you seen in activity since the latest escalation? >> there has been a sharp increase in downloads, especially in israel. we had around total 80,000 downloads. mainly in the south from people bombarded. because everybody is a target here in israel -- we have over 300,000 on android, ios also over 300,000. we have an ios in the states thanks to the israeli ambassador. that is seen a large increase in downloads there as well. there has been a huge demand, unfortunately.

>> when it comes to the effectiveness of the iron dome, i read differing reports -- some say it is 90% effective in terms of intercepting rockets. some say it is more like 30% or 40%. what would you say? >> i would say this -- the numbers speak for themselves. if it was 30% or 40%, we would see a lot more casualties in our cities than you see up to now. i am talking about places in the city. let us hope it keeps that way. 40% is impossible. hundred of rockets every day -- they should've landed some. the tel aviv area and cause damage and casualties. they are getting blocked.

the whole purpose is to find out. some of them are going to hit and some of them don't. we decide which one is the dangerous one and the close ones. up to now, i would say the iron dome is an effective way of defense. it can prevent what could be serious casualties. we saw interceptions. we saw the heavy blast. this is not 30% or 40%, it is close to 90%. >> let me ask you a question and maybe it is not an easy one. you've written your app in ways to try to help people be safe, but i wonder do you consider the fact that it also makes it easier in some regard for the state of israel to sustain these rocket attacks and go on the offensive in gaza and the terrible suffering of the people in gaza, many of whom who are

civilians. does your app make it easier for israel to go on the offensive? >> my partner and i created this to save lives and notify people. you have to understand -- the other side is targeting civilians. i was a chain commander in the israeli army. we always target terrorists. we are not targeting anyone else. it is unfortunate that innocent people were killed. we are only targeting terrorists. sometimes, we have been in cases that even our lives might be in jeopardy in order to save these people's lives. i know that firsthand. thankfully, they do not need this kind of app. we need it because they are targeting civilians. on the other hand, they are not looking at the civilian so much. >> a number of civilians have

been killed in gaza. a number of children have been killed. uzi, i would like to ask you the last question. if they have such sophisticated missile defense and missile detection technology, could this technology at all be used to better target places in gaza where children are not playing on the beach, for example? >> unfortunately, errors will happen in war. there will be civilians who get in the way. i want to point out an important fact. hamas has sent its rockets inside civilian installations. there is no way to hit them except by hitting --

concentration. let me stress this point. every rocket that comes out of gaza can be traced where it came from. that place can be hit and destroyed. we could've stopped it in one hour, but the cost of human life would be tremendous. so we do not do it. that is called human shielding. that is what they are doing. >> i appreciate you sharing your perspective. the red alert app creator from jerusalem. thank you both. elon musk is not the only one working on high-speed tube transport. we spoke to an organization that can shoot you from new york to beijing in just two hours. that's next. ♪

>> welcome back to "bloomberg west." we turn back now to our wiring the world series where we are looking at how technology is shaping the future of transportation. elon musk envisions as hyperloop transportation system as a way to get to cities hundreds of miles apart very quickly. one organization has an even bolder plan. cory johnson is back now with more. >> it is called evacuated tube transport technology. et3, space travel on earth, they call it. it is a vision for tube transportation. it could get you from new york to beijing in just two hours. it sounds like a great idea. darryl, the ceo joins us. talk to me about this -- when elon musk introduced the system, i admitted it was ridiculous. will you tell me i was wrong? >> actually, traveling in an

evacuated environment is the most proven form of travel in the universe. all of us have been traveling this way our whole lives without realizing it. in orbit around the sun traveling 67,000 miles every hour of our lives. the average human travels 300 billions miles through space through their lifetime. travel in pipeline is also proven for cargo. there is more ton miles of stuff moved through pipelines -- more than trains and trucks and aircraft combined. >> how long could such a route feasibly go? >> et3, if it is built to the same standards in every country, the same diameter tube, and then it could be networked together on a global basis that would allow a person to travel from south america up across the

united states, across canada, across the bering strait, across siberia, across china, through india and across europe, and across the strait of gibraltar, to africa in four hours. >> what does it feel like to be in such a thing? what would you imagine it felt like? >> et3 is designed to be as close as possible to the best form of transportation that we can come up with so far. cars have won the global transportation market so we have adopted car-sized vehicles that the market has already determined to be the optimal size. it will be like traveling in your car. instead of accelerating for a few seconds to get to 70 miles per hour, you can accelerate for 20 seconds to get up to 400 miles an hour. or you can accelerate for three minutes to get the 4000 miles per hour and then you can coast.

the ride would be very silent. it is like a leer jet where it is almost silent. >> it would seem to me that any -- when i drive in a car and i run into potholes which should not exist or whatever -- would any injury to a tube cause a catastrophic event for the transport, including the people? >> of course. et3 is subject to the same type of geological forces that roads and bridges are subject to. occasionally, there are major earthquakes and acts of god, acts of terrorism that we can do really little about. they are just focused randomly in different areas. fortunately, less than 1% of transportation related fatalities come from those types of sources. most transportation fatalities result from failure to control the vehicle or failure to control the conditions of travel

which travel in an evacuated environment offers more protection and much safer and much less reliant on mechanical systems such as magnetically levitated. >> the ceo of et3. interesting idea. we appreciate your time. >> i cannot wait. sunday and monday football are hugely successful, but football on thursday nights have some hurdles. we are talking about cbs and its big bet on the thursday night package with cbssports chairman sean mcmanus. ♪

>> welcome back to "bloomberg west." i'm emily chang. cbs is home to sporting events like the masters and march madness, but this fall it is the new home of thursday night football, adding to its lineup of sunday games. jon erlichman caught up with cbssports chairman sean mcmanus

to talk about the network's investment in thursday night football. he is joining us now with more from l.a. >> this is a story we hear all the time -- these big battles between the broadcasters for sporting rights. the case for this deal for thursday night football, cbs comes out a big winner. they will share the rights with nfl network. the first question i had for sean mcmanus was what was your reaction when you were awarded these rights and what was the reaction of the investors? >> i remember when we finally got the call, i gave leslie a hug, what he said to me was -- and now the real work begins and he is right. it is a lot of work launching a new franchise. we still do up to seven games every sunday of nfl football. we have to do that in addition of thursday night. since wednesday after the super bowl, it has been 85% of my job just on thursday night football.

new graphics, new music, new technical facilities. we are using more equipment on each thursday night game than we use on any other game on cbs other than the super bowl. it is a huge commitment for the network. >> in terms of numbers, the thursday night game on the nfl network last year was averaging somewhere between 6 million and 8 million viewers. thursday night on cbs are pulling in much larger audiences than that. do you have any expectations on how many people will tune in? >> i think the ratings will be really good. we have terrific divisional matchups. i think we will have healthy ratings. it depends on how good the game is. if you have a competitive game at 11:00 in the fourth quarter, the ratings will grow. >> thursday night for cbs is a one-year deal. you guys were totally fine with that. is there anything that would

prohibit you from say even during the season to discuss with the league possibly extending this if things go well? >> possibly. we talk to the nfl almost daily. any time the nfl wants to talk to us about extending the one-year deal, we will make ourselves available. i think we will talk a lot during the season. we will adjust production as the season goes along. it is important to remember that we are producing the second half of the season for nfl network. >> beyond broadcast, talk a little bit about cable. every broadcast network today has a complementary cable channel, sports channel. cbs, nbc, abc has espn, fox has fox sports one. what do you want to do long term with cbssports network to make it unique, to stand out? >> long-term, it will be a fully distributed viable sports network. it is not fully distributed right now.

we have not taken the path of investing hundreds of millions of dollars in programming because that is not our business model right now. i work for a man who doesn't like losing money on sports. other companies have decided to create their sports channel as large leaders in the near-term. good for their company. we haven't gone out and inquired major league baseball, nascar. we have a different plan and some point we will get there and we will be competitive. we don't want to invest so much money that we lose a lot of money. it will be very viable and very relevant. it will be a good sports network for the duration. >> in the month to come, the nba rights, those will be potentially up for grabs. there has been some reports of negotiations taking place. does cbs have an interest in the nba as a tv destination? >> i love the nba.

i think it is a great product. espn and turner has been a great job showcasing it. because of our schedule with golf and college basketball, we do not have room in our schedule right now for a full slate of nba games. unless you are willing to make that commitment, i think we are probably not going to be able to bid on it. i would love to, but we have golf on a lot of weekends from january through the first week in april with the masters. we have college basketball in december, february, march, including the tournament. for us to program as many nba games probably is not in the cards. >> fox get everybody's attention by showing strong interest in time warner. what was your reaction as somebody in the media business to that announcement? >> i do not like to comment on other people's acquisition plans. i think what is interesting is that whenever somebody talks about a big acquisition or merger, sports is always

somewhere near the center of those talks. the fact that turner has -- time warner has as many good sports properties as they have, i am sure that was some kind of factor in any discussion that will be had going further. >> cbssports chairman sean mcmanus with jon erlichman. jon, how much money does cbs make from nfl games? do they share that info? >> they will share that it was profitable which is impressive when they're spending $1 billion alone on sunday football. it is a combination of ad dollars. they generating more fees from the pay-tv operators. he said last year of the top 30 rated shows on television, 28 or 29 were football games. i think they feel like it was a calculated bet. >> jon erlichman, hang on. it is time for the bwest byte where we focus on one number that tells a whole lot. cory, what do you got?

>> it is the number seven, lucky number seven. it better be for nba all-star new york knicks small forward carmelo anthony. he has formed an investment fund to invest in technology startups. it will be called m7. >> everyone and their mother, literally. >> come on in. the water is warm. he is partnering with a guy named scott goldfarb. a former board member of a couple of companies. >> a former executive vice-president of nbc. he is active in l.a. >> you don't even have to go look into the companies. just stay courtside like at the warriors game. >> no outside investors or lp's at all. >> good luck, melo. >> m7 tech partners. thank you all for watching this edition of the show.

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