>> live from here three in san francisco this is "bloomberg west." i'm cory johnson. crude oil starts the week with a big plunge. it briefly fell below $50 per barrel today for the first time since april, 2009. brent futures slid below $55 hitting a near six-year low as oil supplies surges in the russian output is surging in iraq plans to boost crude exports. morgan stanley has fired an employee for stealing data from

as many as 250,000 customers. that employee listed account numbers and other information online for about 900 of those customers. the information has been taken down but morgan stanley has no indication that the clients of lost money and law enforcement has been alerted. the cruiser expanding the search area in the java sea for the remaining wreckage of the air asia flight. critical flight data recorders have not yet been found although possible debris from the till was spotted. bad weather is hurting search efforts and the crews recovered three more bodies 37 victims of navan found. december was strong for automakers. general motors sales were up 19% and toyota was up 13% and chrysler posted a. 20% jump in auto sales. >> people still like the idea of

buying a crossover suv but it is pretty impractical with gas prices the way they are so they are buying tiny hatchbacks. they are selling tens of thousands of them and maybe we will see 100,000 of the jeep renegade this year. >> overall, last your was the best year for auto sales since 2006 thanks to the subprime lending, cheaper gas, and lower interest rates. the holidays are done and that means time for the consumer electronics show in las vegas, the world's largest trade show opens today to the media. last year, 160,000 people joined the crowds there with more than 20,000 new products announced that i bet you cannot remember any of them. there are things like the smart car and the latest wearables this year and the big names will

be there including samsung, sony and a number of automobile makers. some big names won't be there like all. neither will microsoft. rob o'donnell is joining me right now. as well as paul kedrosky from san diego. i want to focus on the internet of things. we have been hearing about -- i could have been talking about any number of things. what is new this year and this notion of a inventive things? >> we are seeing a variety of devices that we have never seen in the past get intelligence. i got press releases about smart toothbrushes and anti-drowning bracelets back until someone is drowning. we are seeing a range of stuff we had never seen before. >> i could've use that. >> what we see happening is you

got a bunch of individual products. what people really want, i think, is the idea of a connected home. the reality is it's more of a disconnected home. i read an article on this subject. you get one device and it's got its own set of apps and another has its own set of apps and you cannot pull these elements together. >> i have been to so many of these shows. i also went when i was in investor because there are important data points i was able to pull out of this. when you look at the show, how do you separate signal from noise. >> by not going usually is the best way. [laughter]

the risk in going is the noise is so overwhelming and it's difficult to separate this incredibly splashy affair with so many lunches are happening and you have connected dishwashers. this not only as lakes for a certain company but all cause problems for other companies as well. we were not anticipating this was possible or whatever the case may be. it's important to have ces stand back and say this has to have importance for an individual company but in terms of growing a company and affecting its stock, it also has to cause damage to other people. i look at both of those things. it's not enough to have the novelty. it has to be >> novelty with consequences for someone else. >>we are showing one of my favorite revis -- ridiculous devices which is the connected refrigerator. someone comes out with a refrigerator with a screen

that's connected that no one figures out how to use. there is something different when it comes to the internet of things right now. because of low-power bluetooth and devices like some of the cameras and so forth that are acting as hubs and they are being controlled through and trigger iphone, is this year different for connected devices? >> i think so. i am usually optimistic about what's happening and you have to look at the feverish pace of product with respect to wearables now. their other guest mentioned one and i will mention the other, a bluetooth wearable thermometer so helicopter parents can monitor their kids temperatures during the night. this seems absurd and crazy for the point is that the notion that this is possible and you can manage it with respect to power consumption is important.

it suggests that wearables will quickly become part of the fabric of everything around you and that's when it becomes interesting and important. i saw another one today that was a ring wearable that could turn you into ironman. it's absurd that the ideas important. seeing that happening with respect to wearable technology is usually important. it probably is good for apple later in the year with their watch product. >> what makes it different this year? what makes it believable this year? >> the point about wearables is a good one. what we see in the wearable market is the fact that we've got a bunch of low cost, pretty high quality sensors that are bringing in a huge amount of information. one thing i think we will start

to see happening this year from this is the idea about data about you. you could have big data about yourself because of all this censored data between health and fitness wearables and the thermometer wearable -- environmental information and combine that with all the tracking happening online and you've got this big data mining opportunity about individuals. it's scary on one hand but the thing that's different this year is about the sensors and quality of the sensors out there. >> you mentioned the damage done and when i went in as a money manager, i would look for the not new opportunities but- the firm i went to work for wanted shares of gamrinrmin. sure enough, their personal navigation devices, i went around ces and found dozens of

competitors. is that something that is useful to look for? >> i strongly agree. from the standpoint of an investor, that's where to look. who knows what will happen with which products will succeed. seeing that someone will succeed in it will cause consequences for someone else is important. garmin is the great white whale with wrist that act as someone who will inevitably see consequences that's a great example. i see garmin this morning announced three new wearable products. in some way, is reminiscent in the early days of the pc industry. they stand alone and are fascinating devices but it looks inevitably like they will be subsumed by what is happening with new mobile platforms. the days of proprietary wearables will pass pretty quickly because it has to be

made out of the same fabric in the economics just don't work as a proprietary vendor. maybe this is the year that garmin gets her opponent. >> i will not bet against them. how do you pick the losers when you see these new products? >> i think the losers will be the people who try to do things that are a little too outlandish right now. we are in this amazing hype cycle and i think you will see crazy promises and crazy things out there. to me, those are the red flags. people who claim they will change the world dramatically -- i think we will have to see incremental changes for these things to work. when we talk about wearables, we've got the apple watch in the distance. the other thing that's important about this year is that apple gives credibility to everyone else so when apple enters the wearable market, that gives more

credibility to the competition. those are things we have to think about. >> it will be an interesting show this year. are you going? >> i am on a plane and two hours to go there. >> thank you so much. dish network will pick up where aerio left off, a $20 streaming service that stories coming up next. ♪

>> this is "bloomberg west." dish network plans to invalidate first major online satellite company. at $20 per month it will be called sling tv and will feature

espn, cnn, and tnt. i'm joined by paul sweeney in new york. this seems like the dam has broken, that a major carrier of programming is saying screw the cable companies, we are going directly to consumers. >> it really does seem like that. it's not so surprising that charlie ertogun is the one to throw down the gauntlet. you think about these big distributing cable companies and satellite companies and the big media companies and they have all lived and died over the last 30 years or so with us to assess -- with the success of a bundle. now the question is, is that bundle at risk? is there a market out there of consumers that want to pay a much lower price point for fewer channels?

dishes throwing out a channel lineup that interestingly includes espn. they want to see the market is there in terms of demand. >> espn and hbo are the two single properties that people pay up for and get stuck with packages or tempted or whatever. i watched a lot of espn because of the stuart scott coverage yesterday. it was an amazing retrospective of his work on espn yesterday. it spoke to how powerful that franchises for disney but how espn drives the cable business. >> espn is not a cable channel anymore. if you talk to the disney folks and they think about espn, they think about it as a brand but not a cable channel.

it is multiple channels now and it's online and digital and they treat espn as their test as they would their other brands like a disney character. espn is one of the key drivers for any package is going to be brought over the internet direct to consumers that will have to have some major sports component to it. we know that consumers continue to flock to stores. those ratings continue to be outstanding. the college football semifinal games were the two highest-rated cable shows ever. it's extraordinarily important to have sports but the risk is if you are a big media company how much of my programming to i put direct over the internet versus how much do i try to keep them in the bundle? >> it's pretty clear that's where the customers want to be. they like the big-screen tv but the rapid move towards mobile and people watching on tablets and using both screens, it's

clear people want to have access to the content anywhere at they are. these companies are forward thinking to be there. >> they absolutely have to be there. the fine line these big media companies walk which includes the cable distributors is how they protect their existing ecosystem where they are getting 80-100 dollars per month while at the same time recognizing that a big part of their consumer base is getting content outside the package online whether it's netflix or hbo or something like that. wherever the consumers go that's where these big media companies have to be. they have to make sure that they don't suffer the same fate as the music industry 15 years ago. the media companies have to maintain pricing control of their content to make sure they get paid every step of the way whether it's in the bundle or outside. we have seen baby steps and last couple of months. late last year in december, we saw hbo and cbs going over the

top direct to consumers. that is one of the big themes we have highlighted for 2015 is how well with the big media companies manage that transition from the analog cable pay-tv supported bundle to more of a direct to consumer approach? >> companies are going over the top. thank you, paul sweeney. "bloomberg west" ♪ will be right back.

>> i'm cory johnson this is "bloomberg west." we hear about big new themes and technology. wearable technology-a small

public traded company out of rochester, new york has been trying to mind is but got a big boost from intel. it's called viewsics. is that the consumer electronic show and your company has been going after this notion of wearable something or other for a long time and now oculus happened in intel makes an investment in your company, why? >> i cannot really speak to all of the intel reasons for investing in vusics. i would not say we are a leader in wearable technology. it is really here today and it's happening all over. one of the holy grails is wearable display systems. the problem is, most people

don't want to look like a nerd when they are wearing their wearable display system in oculus is a prime example. even google glass has got challenges because you look odd when you are wearing it. the technology that we have been working on is to further that and move it so ultimately these things will look like a pair of fashion glasses. maybe that's part of the reason they have invested in us because that's where we are going. before this year is up, we will have glasses that look just like a conventional or of glasses. >> when i look back at the history of your company, you have managed to stay afloat but from the financials come it looks like you have been spinning plates, staying in existence long enough to get to this spot. talk about this decision this year to sell your tactical defense unit which was promising. i wonder if that is a lesson for something that looks like it

would work but is too far away or taking too long. >> the defense business, our annual revenues were up $13 million. it would go between consumer and defense. the technology we sold that was part of the defense is good for the defense days but it was not the technology that's needed in the consumer space and the industrial space. we needed access to more capital. this is a business that until recently was very difficult to fund. clearly company's like oculus have change that paradigm. the marketplace itself is changing in a big way. we sold the defense division so we can focus our energies into getting this next generation technology out because we knew that transition was coming. >> give me one thing that will change with this investment, one thing you can do now that you could not do before. >>vusix has been making these

smart glasses and it's like wearing a cell phone. they do a great job. we are working with sap, bosch and a list of other companies trying to employ this other company to do field service applications and warehousing. not everybody would wear this walking down the street. the dollars from intel are being used to help move this technology into the marketplace. the other thing happening is we have optics that will replace this giant piece on the end with something as thin as a pair of reading glasses. >> that's neat stuff. vuzix founder, thank you. "bloomberg west" will be right back. ♪ >> gets 26 minutes past the hour

and we are in the midst of a real substantial drop on wall street. the dow jones industrial average is falling 325 points. at the top of the hour, we will have all the ♪ details on this four day slump.

>> you are watching "bloomberg west," i'm cory johnson. apple is promising to deliver its apple watch early this year. it may set the tone for the consumer electronics show that starts today. the new device will start at $350 with a high-end version higher than that. can apple panel a home run with this as it did with the iphone and ipad? gene munster joins me now. this will lead a lot of the discussion that is happening in

las vegas this week. how do you start to size this market? >> we are thinking about the smart watch market but not a broader market. it will be a smaller initial market. we have been serving a lot of people. last year, we served about 10,000 people in the u.s. and asked their interest level on apple watch. some of them knew earlier in the year but did not know what it looked like and some later new. the interest level is very luke -- low, surprisingly low, about 10% of apple iphone users say they will buy the watch. it's clearly the big topic but it will take more powerful apps to drive the value for consumers to understand why they need the watch versus using just their phone. >> i feel like trying to figure

out what this is about -- i've got myfit bit - do you take that a multiply it? what do you attest to this growth rate? >> we think the general wearables market is a good starting point and there is a few million, around 5 million of those are year. it is a good starting point. it shows that this is not the phone market. this is not one billion units per year. the power of the apple watches it will go beyond fitness. it will be a platform. we start with the base level of how many other fit units are out there and think about a bigger number becauseb it will be an expanded size. it with a good way to think about this is a subsection of what the iphone users are. think about this as a bubbly

somewhere between 10-20,000,000 units the first year. that will compare to about 200 million iphones. it will be much smaller. maybe down the road, this could be a 50 million unit type of business that this will not be a 300 million type of unit business. >> ever? >> i think it would be tough. i don't want to say ever. you don't want to bet against it. if down the road that's a possibility but not in the near term. >> what is the thing that will make this say this is taking off? what's the one thing that could change this? >> if you look at the most basic level -- people use their phone as their watch but you look at the watch, the pocket watch was eliminated when the rich wasp -- when the wristwatch came out so

there is utility and having things rentable read -- readily accessible on your wrist. some of that ireland is come from things that can be easily accessed whether it's -- you can go in check into your hotel and you don't have to talk to anybody. you just wave your watch and eventually that will be your card. you can access your home. some of the value on it will be the everyday things that are annoying that you take out of your pocket. you might have to take keys or your phone out of the park it and putting that on your risk -- on your wrist will be the initial big value. longer-term, health and wellness will be something bigger. that's up to the app developers to develop those applications. >> we talk about the price point for the entry-level model. i think this will be a regular quiz for the next few months.

the addition and cost of the addition, how much will the apple addition watch cost? >> we think it can be well above $1000. i would guess probably $1100 or 12 hundred dollars. i think the average price of an apple watch will probably be around $500-500 $50. it will be higher than the entry-level. >> i wonder if apple is not thinking about a different way to market products with the implementation of people from places like burberry and other places. they are thinking about retail of multiple price points and limited runs which is different from the steve jobs approach of one great device for everyone. >> they definitely want to make it so it's personalized. part of that is having the detachable and's and you can dramatically change the look of the watch by changing the bands. as you said, they have gone more

toward personalization than with any other product. i would agree with that. i think this'll want the basic platform and the basic substance of the technology to be mainstream or be consistent across the board. the ability to personalize it is a key. >> thank you so much. from startup to apple rival,xiao mi is one of the largest manufacturers and we have details on that next. ♪

>> i'm cory johnson and this is "bloomberg west. xiaomi has some impressive

growth figures as sales doubled last year to $12 billion. it sold 200 27% more phones in 2014 the previous year and mostly sales have come from within china. can the growth continue outside china where xiaomi faces different problems of copyrights. i think a lot of people including reason investors think they will go across the world with similar ease. >> in emerging markets, there is a distinct possibility largely because of the price points of these phones being lower than the smartphones. in any of the emerging markets russia, india, you could see similar growth rates. >> what is it about those markets? everyone likes a bargain. >> absolutely, but bargain at a much higher quality point, you are getting an apple-like

experience for 1/4 the price which is hard to beat. i was discussing this a few weeks ago and they were selling xiaomi equipment. all of it was sold within six or seven seconds. if you were to look at that level of excitement xiaomi, one of the other things does is they limit the supply of whatever they are selling whether it's a phone or an ipad or a tablet. that really makes it a big deal as well. >> i wonder if they have copyright problems that will make it more difficult to come into a market like the u.s.? >> i think that will be a problem in any part of the western world. >> maybe they are limited in places where copyright protection does not extend?

>> the laws are not as strict in some other places compared to the u.s. the growth market is this low-end smartphone market. the emerging market is the market. how many people in the u.s. need to buy another smartphone or don't already have one? >> among the investors in the most recent round was the ever optimistic uri gelner. he was also in groupon so listen would he had to say in talking about that investment and how he chose it. he said -- i would add that it is probably

on profitable growth and the company has said we offer a top experience because their profits are so small. does that put the future of the company in more risk than it might be otherwise? >> technology companies over the last several years are embarking on making sure they have the biggest mind share possible. they might offer some digital services or gaming or some kind of internet videos on the platform was they have a huge customer race. >> in other words, established the phone as a delivery device not a profit center so you can profit from the goods and services that come across the phone? >> i would say so. >> should we be looking for other investments from xiaomi that are not phone related? >> yes, we have heard rumblings that they have tied up with

baidu and they have another internet tv provider in china that they have a deal with. it's possible they might look into gaming. there's all sorts of top that can be delivered through this particular platform once you have a sizable user base. >> the carriers might have something else to say about that. thank you as always. "bottom line" is coming up in the top of the hour and mark crumpton joins us with a preview. >> we will follow the slide on wall street as the markets are being led lower by the dow jones industrial average which is down over 300 points of this hour. there are concerns about falling oil prices fueling that decline. the managing director and chief market strategist at oppenheimer and company will join me and i will see you in a few minutes. >> that's a real sell off so we will tune in for that.

the world of sports and media is remembering the espn legend, stuart's at cancer at the age of 49. he was a fixture since the mid-90's. he was known for his catchphrases. he was credited with marrying hip-hop language and sports casting and helped turn espn into a cable powerhouse. a moment of silence was held before yesterday's nfl playoff both games. president obama released a statement as well as other stars , all posting online tributes to that legend gone far too soon. "bloomberg west" will be right back. ♪

>> this is "bloomberg west."

google wants to push deeper into your living room, announcing google cast for audio. it will allow you to stream video from the respond directly onto speakers. it works like google chrome. google is working with samsung, lg and others who develop special speakers. it will be available in the spring. sales of downloaded albums and songs plummeted in 2014 but vinyl is making a comeback. but vinyl records posted $9.2 million in sales in 2014 which is a 52% increase from the previous year. streaming services grew sharply. a 54% increase from 106 billion in 2013 but paid downloads of songs declined by 12%. album downloads are down 9%.

helping us figure this out from manchester in the u.k.'s mark mulligan. so streaming is growing almost as fast or just a little bit faster than vinyl. is it back to the future? >> it's not quite back to the future. vinyl sales have seen great growth from a low starting point. vinyl is still a niche market and is just capturing the spending of the hipsters. about half of the people under the age of 25 would by seven inch singles but don't have a turntable. they buy this is a way of expressing their fandom particular artists. the decline in downloads is the big story because we are in a transition process. this is almost exactly the same thing that happened 10 years ago

when the itunes was kicking in and people stopped buying cds. base topped up buying cds and now we see a similar transition of download buyers beginning to sign up to music subscriptions. >> about five years ago, the most important and powerful business in all the world of music was apple music. and itunes and steve jobs famously said that people want to own their music. they bet their business on that. is this proof he is wrong? >> no, he's not wrong is just what ownership means is changing. ownership does not mean having a physical copy of something residing on your shelf. it does not mean having a digital file sitting on your hard drive. ownership is being reinvented with streaming. it can mean having permanent access to your playlist.

ownership can mean being always able to get to that -- to it at the swap of a finger. steve jobs made his reference in the time when ownership meant having an holding something. strictly speaking, yes he's wrong but by the language of today, and by the language of today's digital nature, without meaning to, he got it right. >> the access to something on a permanent basis is actually fleeting. there are recordings that i love on spotify that have disappeared from spotify. i assume they lost the rights. do the rights of certain tracks start to become a more valuable item? what about the experience of those who lose those rights? >> that's an important point.

these are the teething pains of streaming. we went through this with downloads. several old bands, ac/dc - >> where are they on spotify? >> they only got into the game a few years ago. they are conservative i comes to digital. these artists who made their money when life was really simple you shelled -- use old shiny discs and that was it but now it is more complex. you look at the way taylor swift makes money and their careers, they have to be thinking about 6-7 8 income sources simultaneously. without being critical of the old guys change typical and technology can look unnerving

particularly when you jump into the unknown which is happening with streaming. ultimately, give it a few years, more and more of these artists will finally understand that streaming is where it's at whether it's the future they want. it's where the future is. consumer behavior cannot be resisted for too long. ultimately, people will go for a illegal solutions. these are just teething problems. >> i wonder if we will see that the big holes might be digital media. i remember the ship to d.c., led zeppelin and frank sinatra were the big holdouts and they got some pretty sweet deals by holding out. -- i remember the shift to cds. thank you very much. we focus on one number that means a whole lot and sarah friar joins us now with the

bwest byte. >> the number is 74 which is the number ranking of the end of power on amazon.com. that is the book that mark zuckerberg picked as his first to read of the year. his new year's resolution was that he was going to read something new every couple of weeks and he has had the oprah effect on this. it is all sold out. >> will gail be in the book club with mark zuckerberg? what's the book about? >> it's about power has shifted from military and government to individuals which is part of mark zuckerberg's theory of connecting the world and giving people more power. we have the first interview with the author of the book who said he was completely surprised. he had no idea this would happen to him. he is overjoyed and cannot think of who to thank. >> will these sell at a fast

pace? >> yes. >> what are you reading right now? >> i'm reading "the marissa mayer book." >> i have written a couple of book reviews and instagram of all things. they have had some great feedback so maybe i will get back to that. there is no way to do short form interviews. he boasted of writing a share letter -- a shareholder letter on his phone. >> it does that with facebook messenger. >> thank you very much. you can get the latest headlines anytime on your phone on bloomberg.com or on bloomberg radio. we will see you tomorrow ♪

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>> from bloomberg world headquarters in new york, i am mark crumpton. this is "bottom line," the intersection of business and economics with a main street perspective. to our viewers here in the night and states and those of you joining us from around the world, welcome and happy new year. we have full coverage of the stocks and stories making headlines on this monday. she'll be holiday has highlights from time magazine's 100 best-performing hedge funds. peter cook looks at challenges to oust