>> live from pier three in san francisco, welcome to "bloomberg west." i'm cory johnson. here's a check of your bloomberg top headlines. u.s. stocks end week on a high note. the nasdaq extending its winning streak to eight days. stocks took off after greece reached a preliminary deal with eu area finance ministers to extend the greek bailouts by four months. labor secretary tom perez is giving unions and the companies in the ports a deadline of sunday to end the lockout of the

west coast ports. if no deal is reached, perez was to move talks to washington. a federal mediator was unable to broker a deal. the nine-month standoff as hit ports from san diego to seattle and up and down the coast and cargo movement cut in half according to the pacific maritime association. uber drivers in paris are on the lookout for a special police unit, the squad is charged with enforcing a taxi law that bans uber writes with unlicensed drivers. since january, 110 drivers have been busted. major league baseball trying to speed up the game with some new rules. this season, batters must keep at least one foot in the batters box. players must return to the field quickly after commercial breaks and managers must stay in the dugout during replay challenges. the average game lester clocked in at three hours and two minutes, up from two hours and

33 minutes in 1981. the giants won the world series. we have a special show. we are calling it game on. deep dive into the rapidly changing gaming industry. the smash hit "kim kardashian in hollywood." how to turn around a struggling business of any kind. first greece reaches a limit or a deal with eu finance ministers to extend its bailout package. the provisional agreement will extend bailout funds to greece for four months. on monday the greek government must submit a list of proposed forms. here is the president of the eurogroup. >> the authorities of today expressed strong commitment to a broader and deeper structural reform process and gave their

firm commitment to refrain from any rollback of measures and unilateral actions that would negatively impact fiscal targets, economic recovery or financial stability, which are the three key cornerstones of the program as assessed by the institutions. the greek authorities have reiterated today they're unequivocal commitment to honor their financial obligations to all their creditors fully and timely. >> the deal removes the threat of the european central bank pulling the plug on greek banks, but it will also force greece's new prime minister to backtrack on his promises to get rid of euro austerity. here is the greek finance minister. >> as of today, we are beginning to be co-authors of our destinies, co-authors of the reforms we want to implement, which we are going to dictate, which we will discuss with our partners and which we are going to use as a weapon against the

deep malignancies of the greek social economy which have been characterized in greece not for the last few years but for decades. >> if eu finance ministers approve the deal, national parliaments across the eurozone next week -- it must clear germany's bundestag. apple appears to be ramping up its plans to build an electric car. apple car could start production as early as 2020. that is aggressive, 5 to 7 years is typical in developing a new car. tesla and general motors have both espoused the goal of making an electric car that can go to heard miles an hour on a single -- can go 200 miles on a single charge. david welch covers the auto

industry for bloomberg news in detroit. >> in terms of who apple's car might compete with, tesla would be a prime target. mitsubishi has an electric car. general motors has one. bmw as well. apple would be targeting anybody who already has apple products. these guys have hard-core fans at apple. anyone with an iphone, a mac, ipad -- apple people love their products. if that apple person happens to be driving a rolls-royce or mustang or some cheap car, they are going to look at apple's car whenever this comes out, assuming they get the project done, of course. >> do carmakers in detroit look at the apple car as a series competitor -- serious competitor? >> probably more bemusement. these guys scoffed at a tesla for many years, saying they

would never get it done. in fairness to the people in detroit who think that way, on one hand tesla has made but a handful of electric car startups over the past 5 to 7 cars have all failed. there is a whole boot hill of companies who try to get into this and could not get it done. on the other hand, tesla did make it. you can't really dismiss a company with $170 billion in cash like apple does. there is bemusement, but they're also kind of wondering ok, do they get this done and if they do, maybe we should really start worrying at that point? >> we had this author on the show yesterday, steve levine talking about the battle to create a better battery and the automaker's desire to create a better battery. there's a fascinating book with a surprisingly a lot of drama around it. one of the takeaways is a company like gm and ford and others in detroit are real technology companies that have spent a lot of time and money trying to invent better ways to

make a battery, for example, can apple really compete with the kind of r&d that those guys have already gotten into in the materials science they have dug into for many years? >> they probably can't because they have the money to do it and they have gone to a whole bunch of battery suppliers looking for the best chemistries. they're already using lithium-ion in their consumer electronics devices. they certainly got that expertise. it is not their core competency to develop the better battery although they've got r&d there. they are familiar with the space. automakers rely heavily on their suppliers for advances there. with the automakers having basically cooperative r&d with the battery makers apple already has that as well. it's a different kind of battery. i don't think it would take long to catch up there, especially given the amount of money apple has. >> finally, this timeframe, i find it shocking they think they can have a car in production in five years.

when detroit launches a new car 5 to 7 years why does it take to try to 5 to 7 years to do that? >> i'm surprised to see that figure. the trade companies can get a new car out and 3 to 4 but 5 to 7 for somebody may be who like apple is starting from scratch they don't have a family a supplier network and so forth detroit car companies can get cars out and sometimes two years if they already have a lot of the existing hardware with another model and they're going to create a new model of that existing underpinning set. five to seven is a very long time. five years for a company like apple who is simply studying this at this point, they have done work but they don't have factories and a sort of thing, it's pretty aggressive, yeah. >> that was bloomberg news auto reporter, david welsh. still to come, an in-depth look

this hour at the big business of mobile video games and the ceo behind that wildly successful kim kardashian game will join us as a guest host. ♪

>> this is "bloomberg west." the federal government is finding takata $14,000 a day for refusing to cooperate. anthony foxx says he has requested documents and data from takata. the japanese company has not fully complied. at least five deaths are blamed on airbag defects. reports the central bank was willing to use capital controls could defend -- to defend the euro.

there is a play by battle brewing. -- playboy battle brewing over the playboy domain name in london. property developers heading into court, trying to stop playboy enterprises from seizing the domain playboy.london. michael ross bought the name but an international court in geneva ordered him to turn over the playboy, saying the name playboy was trademarked. speaking of sexy, cisco has been around for 31 years. the company is hoping to capitalize on what john chambers called the dawn of the digital era. chambers says it is an error of unprecedented opportunity, but one that will quickly sort out winners and losers. chambers insists that cisco will not be one of those losers. erik schatzker sat down with chambers for what i thought -- i have interview john chambers many times. that was a great interview you

had with him today. >> thank you very much. john chambers is extremely bullish. there are or there have been periods in chambers' career where he has been bullish and there have been good reasons for it, including more or less all of the 1990's which were extremely kind to cisco and its shareholders, but chambers said cisco has an opportunity today that is almost exactly like what it had back at the dawn of the 1990's, what he calls the information age, which if you think about it and what's is going accomplished ring that decade is pretty remarkable, and almost hard to believe. he is insistent upon it because he said in this digital era, things, technology is transforming at a pace that will create a class of winners, and cisco will be part of that group of winners that will divvy up almost $20 trillion in profits. you have heard that figure thrown around before. it's what he attaches to the internet of things, or the internet of everything, and there will be a class of losers

as well. i will get into that in one second. here is john chambers on what he thinks it's going to take to survive in this new digital era. >> let's assume it's now the digital era. in terms of how every company adjusts to that, it will require dramatically faster movement trade every company will be a digital or technology company with the associated speed. those companies who don't move will get left behind. >> left behind, what does that mean? john chambers predicts that 40% of the enterprise which he defines as companies with 1000 employees or more will not be here in a decade. in other words, 40% of america's large companies will go out of business because they have been disrupted, they failed to catch the transformation failed to hit the wave in time in the space of a decade. i did a quick search for public companies only because bloomberg is extremely helpful in that

regard. there are roughly speaking 2000 publicly traded companies in america with 1000 employees or more, 500 of those will be gone in the space of 10 years. >> if john is right. he's typically a bullish guy. certainly people work there look at the stock price and say nothing has really happened in 10 years, but i think you are right to point out the survival rate for this company. no one is talking about 3com right now. >> john chambers is very mindful of this. we don't need to make reference only to the nortel's or lucent's or 3coms's. there are other large tech companies that survived that are shadows of their former self. think of hewlett-packard. john chambers does not want to happen to cisco what happened to hewlett-packard. hewlett-packard became the target of archivists, ralph

whitworth ended up on the board here at -- board. john chambers is determined to stay ahead of the activist movement. or is john chambers on activism and what it means to him and cisco. >> many of the things other companies would be criticized on we have already done ourselves. we are very pleased with where we are on the market. we are going to become the number one i.t. company. many of our shareholders know we have a good chance of doing that. >> every ceo needs to be his own activist. clearly it's hard to do. you can't look at cisco with a market cap of $165 billion and say it's too large. once upon a time without companies of that size were too large, then carl icahn knocked on tim cook store and had a dialogue with him, and it seems that apple was in some way response into the kinds of demands that carl icahn made. john chambers says that's not

going to happen to cisco because he's listening to his shareholders. >> erik schatzker, thank you very much. >> always glad to be here. >> more "bloomberg west" after this. ♪

>> this is "bloomberg west." the gaming industry, we will dig the been to the constant quest to catch a whale. we will do it all with the help of the ceo behind one of the most popular games in the world right now, kim kardashian halle week -- hollywood.

i'm psyched to have you on. i want to talk about blue mobile. -- glu mobile. you have gone from one hit too many hits. >> we are steering what is a hollywood trend. celebrities are trying to work directly with people like ourselves to reach their fans and cut out studios, labels other traditional intermediaries. kim's the first of many. we recently announced katy perry. >> your company, $225 million in sales, kim kardashian is a big part of that. talk to me about the kim game. my nine-year-old is limited to an hour of screen time everyday. wanted to play with my phone one day and she launched the kim kardashian game and she's like this game is kind of dumb, isn't it? 20 minutes later she is still playing.

talk about the gameplay and how you made that so good. >> pioneering experience. we worked on that engine all the way back in 2011, 2012. it was a great experience without him involved. with kim involved, we have brought to life the transmedia storytelling. kim as telling this narrative about what she's doing every day through social media print tv show, and gaming is the next 10 all that matters. we are a new media company that is helping facilitate transmedia. glu gamers are finding we are part of a world that is bigger than one individual phone. >> so you started the development of the game before kim was attached to it? >> we perfected it before she got involved. we knew the game was going to work. i had a sneaking suspicion that it could be something rather special. >> how did you get her involved

in the project? >> in 2012, i thought long and hard about the future of hollywood and the future of glu. i went to hollywood and did a couple innovative seminal partnership deals. we are doing a james bond movie game, a terminator game, and kim was one of the three deals we did. all of this is impacting now. kim's game launched last summer. kim we started working with probably in early 2013 discussing what the concept could be. i want originally through william morris, her agent. she got the concept immediately. i knew we were onto a good thing because she is an authentic presence with all her social channels. i knew it could be even more authentic through a game, which if you think about it, kim builds a lot of value for twitter and facebook indirectly. her own game is something that is her brand.

by spending more time with somebody like glu, she is building long-term brand equity for herself. >> you talk about gaming as a service. what does that mean? >> we will talk more about it this morning. games today on phones are not single download short s-curve wonders like going to see a movie or going to download a dvd. we are building services that look more like annuities, a web portal. yahoo! is in its 20th year of operating. they have pretty consistent revenue. same thing is happening with big game franchises. glu games and our other competitors in the state have large franchises that will go for many years. wall street is underestimating how long these annuities go. >> stay with us niccolo. also here today, john rick italo

will join us. why zynga may be doomed. ♪

>> you are watching "bloomberg west." i'm cory johnson. we continue with our special focus on the gaming industry for the rest of the hour. niccolo de masi is with us. we are very lucky to have electronic arts former ceo john riccitiello here. niccolo, you are doing the same thing at glu. a lot of corporate executives get a reputation for being turnaround experts. is there such a thing? >> am not so sure there is such a thing as a turnaround expert. turnarounds in the entertainment

or gaming industry are pretty tough. i know a thing or two about them, yes. >> why are they tough? >> had thought to niccolo -- ha ts off to niccolo. when he got there glu was left for dead. four years later, he increased the business 400%. i had to deal with a similar situation in electronic arts. when i arrived, things were a bit of a mess. the kind of thing i was hearing for my board was that our stock was worth maybe 15. what was challenging then was going through this process of cutting costs massively cutting heads massively, while also investing in digital and nextgen. the idea of cutting spending -- investors love that. at the same time, the articles are written through that

process. they were telling me you can't spend and cut. obviously, with the huge contributions of this game like enter wilson, the current ceo etc. there is a schism that goes on that is hard to get at. it doesn't just get there by shrinking. you have got to put the investments in for the future while cutting the things that did not work. >> you used acquisitions to acquire some games. >> it's all about getting the realistic time horizons of what i call light at the end of the tunnel really growing. for glu, that was free to play mobile original ip. john acquired, i have acquired. it is an important part of trying to accelerate growth if you smart about it, but it's not the panacea. >> free to play is a hard model to go to win your finances are in a troubling state. >> you're going to have a

balance strengthening moment. half the time companies get into trouble because they have liquidity concerns. my turnaround for my career had that. john was facing similar challenges when he started. shore up the balance sheet, make sure you have enough runway through them cost cutting. then make sure -- you bet it all on the light and of the tunnel. you send out milestones that you can beat, and beating those expectations to the trough is what gives you credibility in an investment base through tough times. >> you did not mention technology. technology for e.a. at that time was always following the latest console release, but you were working beyond that in other platforms. >> one of the reasons i mention technology is the e.a. was going through something then, similar to what is zynga is going through now. it wasn't just getting ready for

the next console, which we had to do when we invested in. we needed to get ready for digital technology, not just a packaged good or digital disk. we needed to get ready for the online digital business, like mobile and free to play models and that was an investment in changing a lot of the things in the way the company operated but also changing the way we invested in properties. using zynga as an example, they have had to go from social to mobilek, and there is so much difference there. what i'm watching my friend don go through is much of what i went through when i was at e.a. here's the truth. and you go back to a year and a half ago, people were expecting it to go out of business. i talked to major investors who thought it was unfixable. there was no plan that was going to get a great 2014 out of a challenging 2013. yet, people called for his head.

he's a smart guy. he will probably make it work. public markets turnarounds he game markets, etc., they are a hard mix. timing doesn't always line up with external parties expectations. >> rapid advancements in technology rapid growth of mobile -- does that let you make the kind of changes in turnarounds easier, or thing in a business where turnarounds happen faster? >> turnarounds in our space are about building new businesses. glu had to build a free to play mobile business. we ran off an old future phone business. zynga is running off their facebook web business. companies that lasted decades and the tmt space, the turnaround is a series of endless transitions from platforms, business models, new ways of generating revenue, new ways of thinking about the value chain.

it changes quickly. in six months you can go from 0 to 0 or 0 to hero if you have a strong balance sheet like zynga does, it increases the chance they will find new businesses they can ultimately go strong in. >> it looks to people from the outside you go from zero to hero in six months. you put a team together on day one. six months in, that team gels. they will spend six months, a year and a half building the project. the 2014 was planted in 2012. the 2015 they live with was planted in 2013. the mistake that analysts can make looking at this is they can look at the moment now and say, that is a consequence of what they did last quarter. it did not work that way. it never works that way. yet still, that is the illusion you get when you watch some kinds of business do, they look at yesterday's results or today's rumor. >> john riccitiello thanks.

niccolo will stay with us here. ♪

>> i'm cory johnson and this is "bloomberg west." we continue our special focus on the big business of gaming. let's talk about whales the big spenders, gamers willing to drop $10,000 in the name of the game. joining us is the ceo of mobile gaming company cap m -- kabam. i struggled on statistics about whales. in sickness and initial filings, revenue came from 2% -- zynga's initial filings, revenue came from 2% of their users. >> we think of vip's of one of the most critical audiences we can have. it is beyond just spending a lot of money and having a primary form of entertainment in gaming. they tend to play games for years at a time. it's about keeping a loyal

customer base entertained for many years, and really growing that business from their. >> are you seeing the same thing in your business, where you have a lot of users and a few payors but those payors are most of the revenue? >> the model is efficient probably because 99% of people don't spend a dime but that 1% 5% that does spend will play for years they may get part of their daily entertainment routine. you are watching tv. instead of watching tv, you might play half an hour of this game could you probably do it every day as part of what ultimately makes for a great week. >> what do you do to cater to this people? a company -- had one player in japan that was spending $10,000 a month. they dedicated him an employee to make sure that player was happy. it was the equivalent of vegas flying someone in a private jet and making sure they get a big meal. >> is like the person who buys a

luxury box at a 49ers game or someone who pulled -- who will pay for that top concert seat. >> what does this skew in terms of percentage of money spent or percentage of revenues from a small group of users, the whales? >> the home market in the u.s. last year is $3 billion total spent on mobile gaming alone. that is growing up over 30%. it is the fastest-growing form of entertainment today. over 50% of the revenues in the industry are generated by a small number of -- single digits. >> is the top 1% of spenders that glu considers a whale. we have modest 1% spenders. dolphins. whale for us the top 1% is

probably spending $500 to $1000 over a six-month period of time. sometimes $1600. that is what we see in deer hunter, the kim kardashian game, and racing rivals. >> i don't know if it is awesome or sad. these people are so obsessed with the game. >> what do people do otherwise on weekends? there are people with bar habits, plenty of other far less healthy -- >> it's fascinating about this business. when you got into glu mobile was that something you were aware of? >> there is the power of law of hits to not hits non-spenders to spenders. within the spenders there is another power law. the top 1% of the 1% to spend are vip's, the most engaged people, the most enthused.

they are looking at this as a cinema ticket every hour. >> you guys have rapidly developed a game portfolio. when you build a game, do you try to think about -- one strategy might be catast a wide net and eventually you will catch a whale. do you start to create games for the purpose of snagging those whales targeted on those kinds of users, or do you hope to get them? >> the beauty of those businesses is we can cater to a large segment of the population. it's like sports. you have tens of millions of people who will watch the super bowl on tv. you have a small percentage of people who bought tickets and pay the $2000 to see the super bowl and you have the small number of people who are paying tens of thousands of dollars for that box at the super bowl. we can cater to tens of millions of people playing a game. we have over 20 million people playing marvel, conscious of

champions. >> interesting stuff. i love this story. >> we don't design for wales, but it occurs in every part of the design business. >> thank you very much. "bloomberg west" -- we have world news headlines. mexico, the economy is booming. it expanded at a faster pace in the last two years, last quarter, climbing 2.6%. u.s. demand boosted exports. there is also an uptick in mexico construction and services. the royal bank of scotland will take a $6.2 billion writedown. next week the bank reports its full-year earnings. delta is boosting baggage fees, try to take advantage of currency fluctuations. passengers on flights starting in europe will pay 20% more to check their bags.

more "bloomberg west" next. ♪

>> i'm cory johnson. this is "bloomberg west." the faa finally propose new rules for commercial drawing use. drones must weigh less than 55 pounds stay in line of sight of the operator, and fly only during daylight hours. this may not be good news for companies like amazon and google. it could be a benefit to smaller drug companies. sky catch develops a drone for use in construction agriculture, real estate, and the like. niccolo de masi is still with me from glu mobile. what do you think of these rules? >> the rules are great news for

everybody but the way you have to think about it is this is just the beginning of many iterations of these rules. even more important is remembering what is the source the main driver of all these changes. a year ago when you talk to the faa, the messaging was very different from today. >> a year ago was what? >> a year ago, the messages were a lot stricter than today. the main driver is how many big companies construction, mining, getting involved in this new market, using the drones not only for r&d, but using them for operating purposes. >> are the rules any more liberal than the radio controlled airplanes? you have to be line of sight. does that give you room to do more than what you could? >> is correct. -- that's correct. we are one of the few companies

that were granted extension 333. >> some companies are doing work in hollywood as well. >> same extension. you have to have a commercial pilot fly the drone. that was too steep for a lot of these companies. finding a commercial pilot is too hard to find. what they're doing today is changing it so you can basically go to the dmv and get the equivalent of a drivers license. >> i won't name any of your customers, but there are some big companies build in corporate headquarters, flying around. isn't the automation of that kind of thing where you can say, i want you to go around this building every day at noon so i can look at the progress -- >> correct. >> programming that, shouldn't that be the great advantage of business? >> absolutely. going back to earlier, huge progress from a year ago. a year from now, this will be different trade we believe the

faa is working closely with these companies to allow for this kind of thing to happen. our drones are fully autonomous. it flies out and lance, collects light data, puts it in the cloud, without the need of human interaction. we have another product which allows people to use our drone and turn it into a work tool and provide services for construction, mining. >> do you think regulation will be more liberal in europe? is this the stem cell situation repeating itself? >> absolutely. a lot of these countries see the faa as the main guy for the rules, including europe. you see a lot of progress in the space, and france, germany london, you can actually be certified just like you do at the dmv. take a test, a certification, and you can operate commercially. the faa is making changes

towards that. >> some companies in europe having a hard time. other ones might find it easier. >> i'm also concerned about -- it seems one of the great businesses that could really benefit from this is a salmon nation of pipelines, something required by pipeline operators. flying cessnas with especially quitman to detect leaks in pipelines. >> 55 pounds is pretty heavy. you can carry a really good camera on that. a pretty big enough battery to last pretty long. you can actually make that work with the new regulation. granted it is going to evolve and get easier and better over time. with the science regulations we have today, you can operate and to a lot of the stuff that helicopters and cessnas do today. >> will these rules help you grow fsateaster? >> a lot of these companies move

away from the r&d stage and operating on drones because they see the value they get from this data. >> asia is a big piece of glu's business. is it easier than europe harder? >> the growth we're seeing is exponential. last year a lot of these companies were in r&d mode trying to test things out. the amount of companies is just gigantic. the amount of request and e-mails were getting, it's hard to keep focus. that's why we believe this will be a big industry not just for us, any drone company that was to jump in space. >> thank you very much. it's time for the "bwest byte." guess what niccolo de masi has. >> 400 million. if the number i said on the earnings call we will exceed by the end of next year in terms of total social followers supporting glu celebrity games.

over 400 million. we are at 240 million with katy perry and kim kardashian. the next couple of earnings calls, you will see exciting announcements. not counting james bond for that. i'm talking direct celebrities over the next 18 months. >> how can you predict such a number? >> we have a track record at glu of beating all the numbers we have given. we might have a few more million in the bag that has not been announced yet. >> the phenomenon of gaming is an amazing thing. i told you it would go by quick. >> i know you had drafted somebody who was good-looking with emily on, so here i am. >> thank you very much. always get the latest headlines all the time on your phone tablet, bloomberg.com and on bloomberg radio. ♪

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