emily: live from pier three in san francisco, this is "bloomberg west." i'm emily chang. the s&p 500 rose to within three tenths of its all-time high at one point. the standout performer, netflix. shares of subscriptions rose to a high number. schlumberger posted its first

lower profit in four years. the company also says it is having another 11,000 jobs after an earlier announced plan to cut 9000 positions. it is all in response to declining crude prices. it did announce it is paying another quarterly dividend. congress reveals key legislation to boost president obama's international trade agenda. the bipartisan deal allows congress to approve an amendment. it is to smooth over a multilateral trade deal with nations on both sides of the pacific. imf chief christine lagarde warns that greece will not be allowed to skip a debt payment. she spoke to bloomberg in washington. christine lagarde: we've never had an advanced economy asking for that income on delayed payment. i hope it's not the case with greece. i would not support it.

emily: greek officials told creditors it might miss a payment to the imf. he was just warning you as part of the ongoing discussion. wikileaks editor and chief julian assange says the new archive reveals the inner workings of the company at the center of a geopolitical conflict. the documents were first posted online by hackers tied to north korea in retaliation against "the interview," the seth rogen film. and disney unveils trailers for the new star wars. it coincided with an event in anaheim today to drum up enthusiasm for the premier. netflix is up in its number of global subscribers. but the impressive international

growth has yet to result in additional profit. international streaming has actually cost the company $160 million in the past year. also, a threat to the company, piracy. barton, i will start with you. why are you so positive? barton: people are loving netflix. we did a consumer survey that we just got data back on right as netflix was going into earnings and it was telling us that people use netflix as much or more than tv. if you are a netflix subscriber, 49% say they watch netflix more

than they watch tv. 57% advantage he had to choose they would choose netflix over their pay-tv's description. this argues that they can use -- raise rate over time and it is they have a great value, so they can spend more on content where they are already established, which is not so great. once they finish their international ramp, which is the next two years, you will see a real stairstep in earnings. i think what they are doing domestically will be replicated around the world where the market opportunity is much larger than in the u.s. at this point. emily: i am not going to lie. i watch netflix. i like it. is that enough? cory: my kids don't even know

how to use the cable guide. and they cannot say netflix. but they know how to run it. the international expansion, right now, the stock market doesn't care about earnings. this is a stock that a year ago, analysts were looking for $1.40 in earnings. the company comes yesterday with $.38 in earnings and is off to the races. they are spending vast fortunes in marketing. $.12 out of every dollar is going into marketing and now they are shifting a lot of that to international. it is unproven in some markets that they will have to grow into. also, it's a free cash flow issue. there is negative free cash flow and at some point they may need to raise money to sell stock if they want to continue this growth. emily: barton, i wonder how dependent is netflix's success and how much depends on its original programming like "house of cards" and "orange is the new black," and can they keep it up?

barton: they have 320 hours of original content this year, that will double over the next year to about 640 hours. that is more than you will get on the networks. as they have grown this original content, the time people use on this service has increased. subscribers spent nearly two hours a day watching netflix in the first quarter. that was a nearly 30% year-over-year. there is a direct connection between the original and the time people spend watching it. and they also have data about what people want. it puts them in a powerful position where people like their service as much as they like pay-tv, but they are paying a lot less for it. emily: let's talk about piracy.

four new episodes of "game of thrones" leaked online. it is also a big problem for hbo. how serious is it for netflix? and is netflix's beef with privacy different at hbo because of the model? cory: i was surprised at how much time they spent in the conference call talking about that and about the fcc rules. they felt they had an advantageous position because they complain so loudly about it. but it is a question of authentication. there has always been the suggestion that they will offer different people different accounts. but one wonders in order to achieve some of the goals that barton is talking about, raising prices, getting more revenue per

user, in some ways dividing of families like that, and piracy plays into that as well. emily: and i can use anyone's account if i know their password. i could use my mom's account, your account. is that a vulnerability for netflix? barton: it is actually an opportunity. they have been very generous allowing password sharing, but that is stopable. over time, you will see revenue measures grow by clamping down on softball measures like password sharing, and other softball measures like letting you pay more for one plan over straining. if they charged everyone a dollar more per month for using the service locally right now, that would add $750 million to their bottom line. a little goes a long way. odds are good that they will pay that.

emily: what will you be watching, corey? cory: on netflix? when they make the cage, that will be awesome. i'm concerned about content costs and the lack of free cash flow. maybe they have some sort of data magic that they are able to see what people like, but they cannot afford to have a lot of mistakes. they've been very smart in the shows that they have big. -- picked. it is amazing what hbo has done on the content front. if you look across hollywood there are people who are great at programming until they are not. that is the risk netflix is taking. emily: cory johnson and barton crockett, thank you both. commercial planes could be vulnerable to hacking according to a new government report.

we talked to one of the researchers behind that report next. and has meerkat lost its live streaming battle? ♪

emily: i'm emily chang and this is "bloomberg west." still to come, a major warning on in-flight wi-fi. here is a check of headlines. proposed rules would force companies to provide links to at least three rival search engine. however, the french said that the preliminary bill will not hold up and could be removed from legislation in days. this comes after google was accused of abusing its dominance in search.

the former fed chairman will become a senior adviser at citadel. in his new role, ben bernanke will consult on world business matters. the government accountability office reports that hundreds of commercial planes may be vulnerable to cyber attacks through a passenger wi-fi network. many modern cockpits rely on the same wi-fi that passengers are using, meaning a hacker could shut down warning or navigation systems. how can the airlines or the faa keep hackers out of the skies?

we are joined by the director of civil aviation at the gal and he co-authored a book on vulnerability. we also have the deputy undersecretary for cyber security for the department of homeland security. gentlemen, thank you for joining us. obviously, this is something that scares everyone when you hear a report like this. how serious is this threat? guest: it is important to understand we are talking about the potential for this kind of threat. the faa is taking precautions, but we are talking about the future as more and more aircraft he come more internet dependent. emily: how does it work if the plane is on cabin wi-fi, the passenger wi-fi is connected to the cockpit system and that is where you see the vulnerability? dr. dillingham: as we described in the report, the example we

gave is in the cabin, passengers have arrived and available to them. they can upload a program onto their computer and if that program has software in it, and it has malicious software in it, and this is important, if the ip connection at the airport is able to connect with the cabin and the avionics, then you have that possibility. right now, what happens is there are firewalls that prevent that kind of incident occurring. but keep in mind, a firewall is a software, too. and up to date, the faa has special rules for preventing this kind of thing. we are pointing to the fact that 10 years from now when maybe 60% or 70% of the fleet will be like the new aircraft that we see today in terms of the dreamliner or the a350, then there needs to be regulations and standards so

this does not become a special condition. emily: mark, you guys at the chertoff group are constantly examining threats like this. how easy is this to do? mark: i agree with dr. dillingham. we are concerned about technology touching each other. obviously, there is a great concern when you think about the avionics of an airframe or the communications of an airplane being able to touch the same wi-fi or entertainment systems that the in-flight passengers use. as dr. dillingham said, while there may be protections through firewalls or security control devices, those are regularly defeated by bad guys. we have to think about building security into the controls of the design phase.

i posit that building security into the design of an aircraft is just as important as building safety and efficiency features into the aircraft. the world has changed and as things are more and more ip enabled, we have to think about this from a security perspective just as a safety perspective. emily: planes that could be affected, the boeing dreamliner, the a350. what percentage of commercial aircraft are we talking about here? i read somewhere that it was planes newer than 20 years old. aren't most planes newer than 20 years old? dr. dillingham: we don't have a count, and i would note that most planes are newer than 20 years old.

i would say that the fleet is being renewed and what is important now is, as was said, to build in security and to build in cyber. the older fleet had much more separate controls and not as many points of potential contact across the systems. something like a third of those are ip-based, but going forward, it will be 50% by the end of the decade. and that was the point of our report, not to cause concern among the flying public that this was in imminent danger as such, but to point out that cyber security challenges change every day and the faa must, in fact, not only build security in and make sure the manufacturers build security in, but constantly be monitoring it because the threats change every day. that was the basis of our report.

emily: still, worst case, you are saying that a hacker can commandeer the navigation systems. mark, worst case scenario, could a hacker bring a plane down? mark: that is a worst-case scenario and i don't think anyone is predicting that. but we need to keep the systems separate so the potential does not exist. when you think about this, when you have a wi-fi network connected on an aircraft, it's just like a wi-fi connection anywhere else. you could potentially have bad guys on an airplane that could compromise the wi-fi network on the airplane itself. segmenting these networks is incredibly important.

i know that the manufacturers are thinking about this. but we need more people, both in the airplane manufacturing and the faa and the government organizations that can think like those guys. think about how they would like to circumvent these security controls. emily: we know the house transportation committee is taking a look at this report and hopefully the faa as well. mark weatherford at the chertoff group, and dr. gerald dillingham, who wrote this report, thank you both dr. dillingham who wrote this report. thank you both. ♪

emily: i'm emily chang and this is bloomberg west. live streaming services from meerkat have been one of the hottest things in tech this year, but just as quickly as they rose in popularity, one seems to be falling out of favor. meerkat has already fallen out of the top 1500 top downloads at the apple store. has meerkat had its 15 seconds of fame already? here to discuss with me, sarah frier. when meerkat cana, i got a pic that opened that said "emily plus meerkat equals boom." is it over? sara: incredibly buzzy, right? just between how much we heard between sxsw and now is pretty stark. that was just a few weeks ago. south by was in march. it is too soon to say it is dead.

in fact, it is so tiny that it was barely significant enough in the beginning to warrant all of that buzz. a chart we posted yesterday on bloomberg shows that less than 1% of iphone users are on either meerkat or periscope. it's very early days for these companies. emily: you would say periscope is not doing very well either. they all have 80,000 followers. which actually relatively is not that much. sarah: we talk about the wars, but it is such a small slice of the overall population using these apps that it is not a phenomenon yet. it is not a big thing yet. they are trying to get there and i know people have used apps like this in the past and said this is so useful and interesting and i'm having such a good time.

whether that translates into the kind of popularity that instagram or snapchat has is yet to be seen. emily: thanks so much. we will be right back with more of "bloomberg west." ♪

emily: this is "bloomberg west," we focus on innovation, technology and the future of business. let's get a check of headlines. russian sanctions imposed by the u.s. and eu are motivated by politics and meant to contain russian development. this according to vladimir putin, who spoke earlier on his annual call in tv program. president putin: sanctions are a political issue and we should not expect them to be lifted soon. it is a strategic issue for our western partners and it is probably not much to do with ukraine anymore.

emily: putin went on to say that despite sanctions and strains on the economy, the banking system remains strong. most economists now expect the fed to wait until september to raise interest rates. 71% of participants in the latest survey see the fed voting on its first rate hike in nearly a decade in september. that is up from 32% last month. the change comes after recent week payrolls and manufacturing reports. full steam ahead for the three largest cruise operators. bookings are up 4.4% from 2014. 23 million people took an ocean vacationed last year, 51% of those were americans. it means confidence is on the rise and americans are starting to spend more. blackstone's earnings doubled in

the first quarter, surpassing $300 billion. the largest alternative assets manager had sidestepped fallout from declining oil prices. steve schwarzman put the firm's strategy in basketball terms. >> we are like a basketball team without a 24 second clock. we do not have to shoot. we do not have to be invested. we just wait for an easy shot. we keep passing the ball around and go for a layup. we only in private equity have to do 10 to 12 investments in a year to invest money. emily: blackstone led a deal to buy $23 billion in assets from general electric last week. jawbone taking apple pay with its own feature. the ceo explains how it came about. >> we teamed up with american express awhile ago about how could we use that real estate to create a seamless payment experience and that is what we have done. i think it is -- forget wearable

payments, it is the easiest way to pay. you take the device and it has a mark that shows where the tag is. you tap it and that is it. emily: the up4 will sell for $200 and ship this summer. nearly a week after apple watch preorder sales began, how successful was the launch? apple says feedback has been positive. so positive you will not be able to buy the watch and store until june. apple's svp of retail and online stores angela ahrendts defended the decision to keep sales online. "it's important to remember that it is a new category. we designed a new approach. we are previewing a product in our stores before it has started shipping."

here to discuss this is analyst walter and from massachusetts, jp. how successful was this rollout in that it differed from typical product rollouts like the iphone. walter: we really do not know yet because the company has not released any numbers. that is not a huge surprise. they have not been announcing pre-ordered for the ipad for the last several models. it was a good marketing event, the watch technically sold out within a few minutes for many models but you do not know what the inventory was behind that. emily: in her memo, angela ahrendts says, "are we going to launch every product like this from now on? no." what is the best strategy for apple? how should they be launching

these products? jp: it was important, i agree with angela ahrendts that they teach people what this product is about. there has been a wearables market for a couple years now. presumably, apple has just sold in 6 days more smart watches then have been sold until that point over a period of two years. for them to do that they have to teach people why do i want this and what is it capable of doing. if the early adopters do not understand the device, they will run into problems. it is a logical strategy. emily: walter, you say the rollout was typical? walter: when they launched the product, you had the product selling out as far as preorders. a typical apple thing. we do not know what the inventory is but there is a reflection that there is strong demand. i doubt apple sold out of a couple hundred thousand watches. there are probably preorders in the millions. that has been typical for apple. the delivery dates get pushed out very quickly after going on sale. emily: there's always a question

whether apple is trying to increase demand by holding back supply or whether they just cannot make enough for everyone who wants to buy one. what is your take on what is going on, with the watch in particular? jp: in this case there are supply chain concerns. they are not easy to verify but the engine, the haptic feedback, the vibration mode, there have been questions about how quickly they could get those made. also the display being used was a concern. all of that said, i agree with the other guest, this is typical. apple likes quick sellout dates, it creates more buzz. emily: how do you expect demand to evolve? there are surveys out there, one saying 11% of iphone users will be buying the watch. walter: those are based on people you have never touched or used the watch or seeing their friends use it.

the initial surveys should be taken with a grain of salt. you have to see how the product gets used in the market. in the u.s. alone, which has a lot of disposable income, there are 100 million active iphone users. globally it is 500 million. and a lot of customers have a product that this is an extension of. keep in mind, we are in the june quarter as far as the products selling. if they sold 5 million during the quarter, that is $2 billion in revenue on an estimate, that is $45 billion. the numbers are not going to make or break it is an extension of the ecosystem. it is tim cook's new product category as a ceo. emily: interesting to read all the reviews. some of them are conflicting some of them are confused and people do not seem to know how they are going to be using this thing yet. have you tried it out?

should we want one? jp: i have tried it on. the thing that is noteworthy is how physical a device it is. is something that you can use to pay for goods at the star with apple pay. you can get on your airline flight using it. you can soon open the door to your hotel room at starwood hotels. there is a very physical aspect that i think is. unusual that people are not familiar with it is worn directly on the body and that is something people have to get used to. having a computing device that close to you at all times is a learning curve. emily: walter? walter: i hope another function will be a remote control that controls the apple tv with new functionality that gives me an alternative to the $120 i am paying directv. that could be another function for the watch and a precursor to new product categories apple can get into. i have also tried the watch.

when i first tried it, it felt very glitchy. my more recent test of the, it was performing flawlessly. some of the criticisms online have been focused on uses of the watch like scrolling through twitter feed that most users i do not think will be using the watch for. there will be ways that people use the watch that are just not thought about today. we are very positive on what the potential is for the watch. emily: if you have not ordered it, you can get it in stores in june. walter and jp, thank you both. up next, a trip to seattle to see how the chief technology officer is tapping into mobile tech talent. new york's own cto is giving payphone booths a lease on life as wi-fi hotspots. ♪

emily: this is "bloomberg west," i am emily chang. we hear from the chief technology officers of seattle and new york on their tech agendas. the chinese scooter company ninebot is aiming for a u.s. ipo in the next two years. the news coming a day after announcing it bought its u.s. rival segway. the company has seen a sales growth rate of 400% since 2012. gopro founder might be the highest-paid executive in the u.s. he was granted 4.5 million restricted stock units last year, giving him the number one spot on bloomberg's ranking of highest-paid u.s. executives.

if you have not heard, the concept of a city having a chief technology officer is gaining steam in the u.s. there is a national cto in washington, d.c. other major cities have followed suit, from new york to chicago and seattle. that is where we went to meet michael mattmiller. one of the youngest municipal ctos in the country. bloomberg shows us how the former microsoft strategist is wiring his world in the pacific northwest. >> seattle, washington, the emerald city has roots in nature. high tech is pushing it to grow silicon branches. enter michael mattmiller. >> the bus leaves in two minutes. >> ex microsoft and now seattle's chief technology officer. before dawn, he's online.

>> are they going to cover e-mail archiving? >> pushing his digital initiative. >> this is our dashboard, where the public can get information on the government. >> performance seattle is the centerpiece. launched in february, open public data shows the state of the city. >> with metrics from nine city departments, departments from the police department to our utilities. >> home burglaries, car thefts potholes, all here. [sirens] >> seattle police, 911. >> coming from here and other departments every 15 minutes. michael mattmiller: the public gets a real-time view of what is happening, how is the city reducing crime? how are we doing at responding to fire 911 calls. >> mattmiller is one of a growing number of cto's has

across the u.s. from new york to los angeles in washington, d.c. a sign of high tech's importance in good governance. michael mattmiller: every year we award between 300,000 dollars and $500,000 to community organizations that offer literacy trainings or access to the internet. >> i'm so excited to see the results of your effort and i cannot wait to use them. >> innovation by the people, for the people is another digital push. michael mattmiller: we have a huge technology community. what a better way to engage the public to be part of finding the great app or piece of technology that will help people make better decisions. we will work with government data and provide traffic information alerts. we are going to build better buses. i can click in this and i can see what is going to happen with the ferry. >> at the end of the event, the winners. helping people in wheelchairs, helping drivers carpool, and

choosing the best methods of transport. michael mattmiller believes technology is key to improving the lives of his citizens. michael mattmiller: best thing about being cto is the ability to work with passionate people who care about working with the public and also using technology to improve our city. emily: bloomberg there. "bottom line" is coming up. ♪

emily: i am emily chang. this is "bloomberg west." we visited seattle to see what the city's cto is doing to wire the emerald city. let's find out what new york has in store. last year, new york appointed its chief technology officer with a mandate to develop a strategy for technology and foster the city's tech sector. here she is, joining us from new york. new york's first chief

technology officer, what is your number one priority? minerva: my priority is to make new york city the most tech friendly and innovative city in the world. while we care about cool technology, we also care about closing the digital divide. it is probably the modern issue of our time. emily: you want to turn old payphones into wi-fi kiosks. minerva: this is something we are excited about, linknyc. we are turning all of the old payphones in new york city into free wi-fi hotspots. there are a couple cool things about it. who uses a pay phone anymore? second, we are using the existing infrastructure to make

them into this modern, sleek and beautiful device which is going to provide wi-fi access for free within 150 feet radius. it is going to have a tablet installed in it so even if you do not have a device you can make a free phone call in the united states using that tablet. it is going to have digital advertising on the site, which is paying for it and it is not going to cost taxpayers money to have free wi-fi instead of payphones. emily: one of the things we learned about seattle is they have a digital dashboard. they have a lot of data sets about what is going on. new york has something like that as well. what is the most exciting thing you have discovered? minerva: new york city has the largest open data portal in the

country. we were one of the first to put it out there and we plan on expanding it as well. we are going to continue to grow. we created this hackathon around the data. more surprising is the creativity of new yorkers to use the data for themselves in creating their own dashboards. emily: what about financial investment? everybody is interested in technology but what kind of investment is the city going to be willing to make to take advantage of some of these technologies? minerva: this is sort of a twofold thing. we see the importance of the tech sector to new york city. in terms of growing that, we just announced a $150 million investment in life sciences. that is money and lab space. we are investing in health tech. we have all the industries in new york -- fashion technology

food technology and government technology. technology that governments use. so that is another area we are very focused on. i was just in a session on civic technology with the u.s. cto. i have met earlier this week with the executive director of digital for the u.k. government. there is a growing trend in using technology across governments to deliver government services better and also help everyday citizens' lives be easier. emily: minerva tantoco, chief technology officer for new york city. thank you for joining us. we will follow you as you make your way through new york city. time for the bite, one number that tells a lot. kojo -- cory: two. yesterday, richard branson was at the chicago bulls game against the atlanta hawks. he was part of the entertainment when he knocked over -- a

64-year-old billionaire -- he knocked over two giant fake bowling pins. emily: oh, richard. just two? cory: his first nba game ever, he is in chicago opening a new hotel. you and i were talking about unicorns. there are a few people, he has created seven. he also sold 80% of his interest in virgin active. a cool $1 billion. emily: he's game for anything. cory: i had a blast with him in phoenix last week. a fascinating guy. a tech entrepreneur pushing all kinds of boundaries and thinking about how his businesses change lives. a really interesting guy. emily: thank you for watching this edition of "bloomberg west." all the headlines on bloomberg.com and bloomberg radio. see you later.

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♪ emily chang: by now, you know his story. the kid who started the social network in his harvard dorm room, grew it to 1.4 billion users, and became one of the wealthiest men in the world. but mark zuckerberg may not be done changing the world just yet. since taking facebook public his bets have only gotten bigger. spending billions expanding his empire into photos, messaging, even virtual reality. internet.org may be his most audicious bet yet. featuring an epic battle with google, drones, lasers, and