>> 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. will the un-carrier be acquired after all? after rejecting talks from sprint and iliad, deutsche telekom is open to selling t-mobile if the price is right. samsung beats apple to the punch, announcing a smart watch just days before apple may announce one of the run. the gear s has a curved screen and can make calls without a smartphone. and, the video platform that has

turned everyday people into global stars. later, we look at how you to has turned the entertainment industry upside down, and how hollywood is now embracing it. first, our lead story. deutsche telekom is not closing the door on its subsidiary t-mobile u.s., the nation's fourth-largest wireless carrier. the german company will consider a sale that values t-mobile at a minimum of $35 a share. earlier this month, t mobile rejected an offer from france's iliad and talks for a commendation with sprint. is another company going to get into the mix? cory johnson is with us in the studio, and from new jersey, john butler, an analyst with bloomberg intelligence. john, what is your take on this?

>> look, deutsche telekom has been trying to find a way to sell t-mobile for years. they have wanted out of the u.s. and to carriers within the u.s., is an attractive prospect. this market really cannot support four carriers, four big boys. you have verizon and at&t at the top, and sprint and t-mobile struggling to keep up. >> what is t-mobile's outspoken ceo saying about this? nothing. >> john legere, who has been very vocal about this. his last tweet, hello kitty apparently not a cat. weird day. i would not expect him to have a

lot to say about this potential acquisition for the company. the company that owns two thirds of the business, wanting to get out. he wants to grow the business. they barely made any money last quarter. they are investing so much in growing the network and changing the business model. it will be a struggle. >> what does it mean for him? he was supposed to leave the sprint-t-mobile tie-up if it happened. what does this mean for john legere? >> he really has taken a no-namebrand, in my view, and turned it into something quite cool. he has a lot of followers on twitter. they have denigrate job with advertising. frankly, in terms of just branding, t-mobile, the genius behind it is john legere. >> when you put a black leather jacket on i guess it makes it cool.

who are potential buyers? >> they are limited. this price is outrageous. iliad might not be a buyer. they don't have the financial resources. >> for $35 a share? >> we are talking about $18.7 billion to do a deal like this. as cheap as money is right now, it might be hard for them to get this. they already have an enormous amount of debt. it is not out of the question that they could have more, but presently the company has borrowed a lot of money. you can't just add more debt. >> the question is, can they continue to grow prescribers? -- grow subscribers? everybody thinks that is not really possible, except john legere, who claims he can keep doing it. john butler, who are potential buyers, realistic buyers for t-mobile at this price?

>> it is hard to say. if you look at the usual suspects, the most outspoken has been charlieat dish. reuters said earlier that he is not talking to cable companies, cox, charter, and others, about putting together a bid for t-mobile. beyond dish, there is interest out there. sprint counted itself out. but this has been a very interesting game in terms of the developments. so it will be interesting to see how it plays out. with everyone who has been in the fray, i keep eyes on dish. >> dish has made similar comments to us. >> the sec was clear, he wanted there to be four separate carriers and the u.s. market needed that. at&t want to t-mobile at one

point. that is off the table. >> four wireless carriers for the u.s., for the long-term future? >> until there is a change in washington, i don't think we can expect a change there. with t-mobile emerging as a stronger competitor and seeing a growth in subscribers, i think that is how this will go forward. someone from another industry who might be parallel to this. dish, all of them are so busy right now with other merger plans. >> what does this mean for customers, john? is not much going to change? t-mobile has been shaking up certain data plans, arriving prices down. how long will that continue? >> look, emily, it bought them a lot of success. they are out there as the low-cost provider, and i don't

see that changing. they have stuck to their guns, branding themselves as the consumer-friendly carrier out there, using price as the key weapon, and for good reason. if you look at telecom, it's a commodity service. again, legere is taking the right tack, and i don't expect any changes. >> john butler, thanks so much. joining us from new jersey. samsung is gearing up to launch a new smart watch. and a new leader, with the company's patriarch struggling with a heart attack. next. ♪

>> welcome back to "bloomberg west." megan smith is the top candidate to be google's new chief technology officer. smith has served as vice

president of google x. time after time, samsung has created a major apple event with an announcement of its own. now they have done it again. with reports apple may unveil a smart watch september 9 in cupertino, samsung has upped its announcement of the new gear s. its global smartphone share is slipping, and the chairman is still in the hospital after a heart attack in may. joining us is the senior director of trade at the korea economic institute. i started by asking crawford what he thinks about the new wearables. >> this is a move toward what we call the smart wearable market. we expected autonomous devices.

it speaks to the moves we are seeing carriers make. add another sim to your contract, and allow this to be autonomous with 3g. 3g will not be a big deal, because it will be bursting small amounts of data. more about notifications. we think this will just get started, one million units in 2015, to just under 10 million by 2018. not the largest category, but the most pricey category. >> we just got the official invitation to apple's event. reportedly they will unveil a smart watch of sorts. we don't know for sure. this would mean apple is unveiling two new phones and a watch. >> we will see.

hopefully they are correct. we know they have been working on this watch for some time. over 100 employees at headquarters working on the watch design. but we also know that if it is not right, they will not launch it. one reason they are so secret is that they will frequently pullback products right before lunch if they are not quite right. this might be a small market, but because the company is so big. >> back in south korea, the head of samsung is still in the hospital. the heir apparent, we presume he is ready. but we did a big profile on jae lee, who is set to succeed his father. is he ready, and what kind of turmoil is going on at

headquarters with this succession crisis? >> clearly, this is a big time for samsung, with the head being in the hospital and having to do this transition under the circumstances. the way samsung is structured, right now jae lee is the only person in position to succeed. in terms of is he ready, this is something we will see in time. he is going to take more and more of the company reporting to him. he is behind much of the partitions with apple, doing things that have pushed samsung forward in the smartphone market. in terms of where samsung needs to go in the future, technology, software, services, he is well-positioned both in terms of his prior experience and personal predilections going

that direction. >> meantime, samsung is under global pressure because of where the smartphone market is going. jae lee is a low-profile guy. he negotiated a deal with steve jobs back in the day to get some chips in the phone. how big of a job does he have ahead of him? >> a massive job. in a very tough situation going right now, but going forward, the world has changed faster than samsung has been able to change. he could be a breath of fresh air. someone said recently to me, the commendation of samsung and google lets us dream. they experiment, they try things. >> the watch is one thing. the first device was panned. >> and we have video of the samsung galaxy s5 taking the ice bucket challenge. waterproof.

obviously a feature the iphone doesn't have. >> apple figures it all out and says, this is what you will want, then start to experiment with it. apple sets the grid very tightly. samsung has not been that dream partner google could use because they have been so focused on the old-school way. we build, we ship, we put it out there. under new leadership, they could do even more experimentation. the trick is, how do they experiment on a global scale, but more profitably and without taking massive risks? maybe a separate division. maybe they experiment in new ways they really have to continue. on this path if they will challenge apple. it cannot just be, this is what the general says and everyone marches in that direction.

they have to be more democratic. they have to be a little more consensus-driven. the world has changed. >> coming up, finding fame on youtube. some of the brightest young stars have skyrocketed to fame on the video site and has shaken up hollywood in the process. that is next. ♪

>> welcome back to "bloomberg west." i am emily chang. hollywood heavyweights have

their eyes on youtube's biggest stars. today, we look at youtube, with special coverage we call "greetings from hollytube." one group that has made it big is "epic mealtime." the channel now has more than 700 million views. last year, collected digital studios snapped them up, and now they have a cable show. felix gillette found out what happens when a youtube sensation goes hollywood. >> it is a thursday at san manuel stadium east of los angeles, and he is getting ready to shoot the latest episode of his tv show, "epic meal empire." before, there was "epic mealtime," a youtube show that

made him a youtube sensation. >> i would not call it a cooking show. i would call it a celebration of food show. it was an internet show i made four years ago in my backyard. the first video got 120,000 views. next week, 600,000 views. i quit my job as a teacher and committed to making the videos. four years later, we have 700 million views. >> it has a media company looking to cash in on the success. >> we started getting phone calls from hollywood. maker studios, they wanted to represent epic mealtime. we had faith in them. >> collected digital studio produces and promotes youtube channels. >> they were already established.

we got very aggressive. the vision was always that this is the kind of property that is multi-platform, really strong. >> he sees a new role where stars generate audiences online. >> we are in a place in the industry world where we realize they are not as mainstream as they think. the mainstream is sitting in the halls of youtube. >> they take a show from a backyard to the mainstream media. >> we have a tv property. a number of brands they have long-term agreements with. a bacon sponsor. >> with all that money, there is always the concern of losing creative license. >> it is not that we lost creative freedom. we are definitely a little more censored. on television, there's a lot more censorship involved. >> but it also means bigger budgets.

>> the first episode cost $70. now they cost $20,000. we made a full car that i could drive, and we ate it. >> felix gillette, joining us now from new york with more on his cover story. the hollywood-ization of youtube. i cannot decide if i am hungry or i don't ever want to eat again after seeing that. >> a lot of bacon. >> what money are these guys making? >> the big stars are making good money now, but the challenge with the ecosystem is it is incredibly fragmented. so many different talents. it's a vast universe. there's millions of channels out there, so the challenge is trying to figure out, with all the inventory, how do you

organize it to make sense for the creators, for the advertisers, and make sense to turn it into big business. >> who are some of the biggest stars on youtube? >> there is freddie wong, he's huge in this videogame business. summer, with a show that subway paid for that has done well. it's not hundreds of stars, it's tens of thousands of stars. >> we will be speaking to freddie wong himself in a matter of minutes. with disney buying maker studios, dreamworks investing in awesomenesstv. what does this say about the future, and who was going to own it? >> right now they are still making lots of money in

television and movies, but there are signs of weakness. the summer box office has not been great. the upfront advertising market was pretty weak. they have cash, and what you do with that? they are looking at this parallel universe on youtube, and right now that has a huge amount of attention. lots of young, rabid fans, but it is not making that much money. these independent companies have done a lot of the initial hard work, organizing this ecosystem and trying to figure out how to make money from it. but they have not made a lot of money yet. big media companies like dreamworks and disney find now is a great time to buy in, because you can snap up these independent networks for not much money, and you have this growing audience of young people. >> felix gillette of "bloomberg businessweek." much more to come in our special coverage. we will be speaking to one of youtube's biggest stars, drawing

over one billion page views. freddie wong, up next. ♪

>> live from pier 3 in san francisco, welcome to "bloomberg west" where we cover innovation, technology and the future of business. announcing the latest smart watch after reports apple could -- >> i am joined by felix gillette.

and rocket jump founder himself, freddie wong. thanks so much for joining us. i have been watching some of your videos. hilarious. how did you get started doing this? winky realizes could be a career? >> i started with youtube in 2010. we started doing a lot of direct to dvd films and other things. there was ahat shift in where people are watching things. youtube was a platform where we could put out a video and get a response and build our audience without having to go through a lot of the traditional hollywood hurdles. from that point on we sort of dedicated doing everything that we do online with the goal of opening an online audience, exploring this new distribution platform for entertainment. >> how did you come up with the ideas? thingsg you jumping over that are exploding -- shooting a

gun? >> a lot of it just comes from brainstorming, driving, showers are good place. a lot of it comes from a lot of videogames and videogame culture. stuff that we grew up with. and also comes from a love of movies, "star wars," "the matrix" -- the new generation of filmmakers, you are not finding them in hollywood, you are finding them online. >> you guys recently signed a deal with lions gate, the hollywood studio. what effective for you? >> lions gate was a big moment for us. we'veto this point been doing a lot of short form. in terms of how to get something that is higher production value,

something that costs more to make than your typical short due to video, is difficult in terms of where to get the financing. this gives us an ability to do these longform television like, future like projects, the kind of things we have always wanted to do it have been working toward without having to worry about the intricacies of all the different places we get funding. it lets us make longform television, it is something we are very excited about because we can tell longer stories and engage our audiences in a much deeper way. >> what you know about the commitment of your audience? couple ofn, look at a videos, i don't come back for another month. how do you create and cultivate an audience that keeps coming back home and that you can rely on? >> it really depends on -- it is a generational thing. people my age and older, we treat youtube like we treat wikipedia.

we will go one, sees videos, and that is it. but we have an entire generation it in ars that approach different way, that approach channels and the people who create almost like celebrities. people they follow and come back to, keeping tabs on using all the means they have. has always been about creating good content, creating stories, telling stories, using that as a baseline. the principles that movies and televisions have always followed. it is no different than on youtube. >> freddie, when young youtube creators come to talk to you, what kind of advice do you give them in terms of how they should develop their careers? >> i think that there's a lot of things that you can do, a lot of trends you can change. the world of youtube has absent

flows -- has ebbs and flows. things can go viral one week and no one remembers that the next. my advice to creators is to work on the fundamentals of visual storytelling and filmmaking. do what you want to do and what you love. you will find a not against for, and hopefully that audience is big enough to support what you want to do. the goal always comes from do it is organic to you, follow those principles of visual storytelling and filmmaking. befreddie, i'm going to totally rude and nasty how much money do you make? multimillion the that hollywood stars make, versus being a "hollytube" star? what be honest, it is not a traditional celebrity makes. we are not going around and getting brained endorsement deals and getting flown around the world. an online audience, an

audience that everyone is figuring out how to properly monetize. it has moved away from television, no longer have cable subscription. whole makess a enough to support our company up in burbank. employees working on how of our projects, but it is nowhere near the huge number of traditional entertainment. over time, i think that will change over the next 5-10 years. >> rocketship and youtube star, freddie wong, in felix gillette, thank you so much for joining us. we'll talk a little bit more about how the dollars are flowing to tv. up next, are those clicks turning into cash? how are advertising using youtube? you can watch a streaming on your phone, your tablet, bloomberg.com, apple tv, and amazon fire tv. ♪

>> there's coffee inside of my computer! get away from me! thehat was a clip from totally awesome youtube viral video campaign for the movie "carrie." if you are just joining us, we have been talking about the business if youtube. "greetings from hollytube." google owned by form is also drawing interest from major advertisers. the new york based viral marketing agency behind that video also carried out youtube campaigns for "the walking de ad." for more on youtube marketing, i am joined by the gizmodo cofounder. i memberrie" video --

it when it came out. it is astounding. how big an impact did the video actually have on the marketing of the movie? >> it is part of digital marketing. they did it along with traditional tv spots in movie posters. when it comes to digital marketing and youtube, it is extremely effective. they are in the business of creating highly shareable, branded content that promotes a movie. in this case it was "carrie." we reached about 60 million people on youtube alone. but the way we measure success is not by the view count, it's really by the free media that you can generate with that. traditional media use morning shows to talk about it. we have created a huge amount of buzz for the movie. now, i actually didn't remember it was made for the movie. i had to look it up.

i did see this video. how much does that matter? are the views converting into customers? >> that's a great western, and it matters a lot to create buzz and excitement for a movie, especially reaching those were the target audience. people who are sharing this on youtube and putting it on their facebook feed. they are plugging in that message, of hey, check out this amazing promo. it is a nonbranded video but in the end the messages out there. it is done in the ferry digital way -- very digital way. we create highly shareable content that people convert to and ad. >> some of your other hit videos -- the times square iphone hack -- what is the secret? what goes into creating one of these things? is there a formula? >> a lot of people try to make a

science out of it, try to create a formula, try to converted and replicated, applied to other projects. but what it really comes down to is a great idea into great execution. there is a right way and a wrong way. what makes us unique as a creative agency in the space is that we do it with, in most case, highly original ideas and without -- everything is organic, we don't pay for placement, we don't five views. -- don't buy views. it is designed to go viral. we kind of pride ourselves on that. >> here's the thing. your last two videos got over 100 million views on youtube. getting $67 billion worth of advertising, just $4 billion for digital.

how much is that going to change and how fast? >> we would like to have a chunk of that. eight shakeupup in this field -- a big shakeup in this field. it is being taken seriously more and more. recognizing are studios where there is great value, reaching consumers this way. it's different. it is something that is shareable, that didn't exist before youtube was created. to do it creatively and flexibly is the way to go. i just can't help but laugh at some of these videos that you guys have produced, incredible. how much does the viral ad campaign like the one you made for "carrie" -- how much do these things cost? >> it varies per project.

but usually things start around $500,000 and can go up to $1 million. one of to do things -- the signatures of our videos is that we don't do cgi. we don't do something that is generated in the computer way. we do it for real. what differentiates us from others. people like seeing the effort and it, the work that went into it. it works really well. >> how long does it take? >> sometimes we get called in last-minute because the marketing initiative failed and we have to step in and save the day. then we have a very limited amount of time to pull something out. we prefer acases longer turnaround time.

we are quite fast, production lines. -- production-wise. we do everything in-house and use a great pool of very talented people to help create these things. we are pretty quick. >> i cannot wait to see the next viral video. thank you so much. >> thank you. isup next, cory johnson looking at a start up with an interesting spin on artificial intelligence. cory, wh=atat are you doing? >> yes, no. ah! >> i think i'm betting on cory. coming up next, you may recognize their cars when boris appeared on stage. ♪

>> welcome back to "bloomberg west." the ridesharing app lugar keeps on expanding. the company just launched its service in 24 new cities, many of them college towns like athens, georgia, charlottesville, and virginia and oxford, mississippi.

it launched services in new zealand's capital and australia's coast. luger is now available in 200 and five cities -- 205 cities. but many cities don't have the service. lugar has been facing a lot of heat lately from the aggressive steps it takes to recruit drivers. wem cars to robotic cars, turn to a company that is pushing the limits on artificial intelligence with 20 racecars. the company was featured on apple's wwdc. it allows players to raise 20 cars using ios devices. cory is taking a test drive. who is winning? >> i'm sure i'm being destroyed. it is very interesting technology. it is a kids game. and yes, i am getting my butt kicked. this thing is powered by artificial intelligence.

it allows the cars to stay on the track, accelerate and improve performance. the ceo was destroying me now. what is the latest on this game? from the game that you first launched. >> love the most unique things is that even though it is a physical product we are reinventing every aspect. it has expanded with new gameplay, a new track, . we can redefine every element of the software. >> you are a carnegie mellon guy. the reason i wanted a happy one as i wanted to see artificial intelligence. what is it about this that is artificially intelligent? >> the unique thing here is that even when we are controlling these cars, we are playing a videogame inside of the phone. the phone understands everything

that is happening. we have abilities and personalities. even though you and i are playing, the characters are driving themselves. >> trying to kill me. >> it becomes a game. how is it like -- >> how is it like intelligence? thatat's different is these phones into being the brains behind all of these characters so that you and i can play against opponents that nobody is controlling. they have their own personality and sneak up behind you. they compete against you in the way you would expect. >> they have their own personality. >> each of these characters is unique, one is aggressive, one is defensive. i probed them then -- i programm ed them. >> you programmed aggression. >> you cannot grade it and it will drive faster. that is all part of the

platform, the ability to ring these video games to life. it is like programming a videogame, using a combination of systems. >> you create parameters for the types of development that made happen and let them laugh run amok -- let the math run amok. >> we are using robotics and ai to synchronize the game. >> define robotics for me. rematch, by the way. >> these characters can move very precisely. we can have them think and decide what to do, to decide what to do and when. >> so it's going on in the phone. >> there is a computer inside here which is going on on its own, but most of the brains and the phone. the phone understands everything that is going on in the game. we can make them intelligent. thinkn i hear about ai, i

about how much creative parameters the computer has. robotics istion of just the extension of computer science to physical form. the moment you have something that can understand its environment and interact with it, you can bring software -- you software to bring it to life. we are reinventing toys and physical gaming -- it's a great way to stop. -- to start. your competitive. [laughter] the bwestave time for byte, one number that tells a whole lot. robotics,topic of about $26.8 billion. they predict that number will go up. tell me about this.

what is it safe in the future of robotics? >> that number is almost entirely industrial robotics, nonconsumer robotics. we have gone from zero to what is going to be a massive number focus on the consumer market. i think it might be another estimate it has the reality is that we have confrontation in thatrs and overall ability mobile devices have enabled. buzzword now, artificial intelligence. how is that going to impact our lives? >> robotics takes many different forms. it could be something physical, or even just understanding multiple data streams into being more intelligent about what your products are telling you. wantne another round? -- another round? >> here we go. >> thank you all for watching this edition of the show.

let's watch. ♪

the following is a is fishing for super smile. none of the testimonials or the dentist shown have been paid. >> a bright and healthy smile can be your against asset. it is one of the first things that people notice about you. if you are embarrassed about your smile, it is hard