cory: netflix is poised to eclipse fox, cbs, nbc, and abc as soon as next year. i'm cory johnson. this is bloomberg west. coming up, plans to make match.com public. taylor swift shakes off her beef with apple. that is ahead on bloomberg west. now to our lead. netflix may be on the brink of a milestone.

netflix viewers will watch more tv than abc, nbc, cbs, and fox by 2016, next year. 62 million subscribers, two hours of video every day, on par with the big networks. the user base continues to grow. joining us, keith, and our guest host, timothy jones. let me start with you. is this about the potential for netflix, a change in behavior, or this one service? you are not seeing this with google. guest: what netflix is doing is leading through content. you will change the way consumers engaging content. this is not a bad thing for networks. this is not a awful thing

for content makers. it is a way to affirm those who make great content, consumers will come to it. they will reward you for it. cory: how can this not be bad for networks? guest: what you are doing is you're putting a premium on good content. house of cards, orange is the new black, hbo has been doing this for some time. you have some of the best television we have ever seen in history on television now. the bar is being raised by superior content performance. now we have another way to deliver it. cory: what do you make of the success netflix has had in terms of the shows, and a lot of them have been good house of cards, oranges the new lack daredevil -- guest: netflix knows they have to have great content. that is great and they will continue.

the phenomenon in the media marketplace, we are leaving -- living in an untethered universe. netflix was the first to talk to consumers and invite them to watch content in a way that was untraditional. now with the millennial generation leading the pack, and jen z behind them, they are in a prime position. cory: my little girls do not know how to run the cable box. they know how to get netflix. when you talk to netflix guys, what is interesting is they described a technology company. they don't sound like bob iger or somebody in the tv business. it sounds like somebody who is thinking about tech. when you look at a technology standpoint what do you see? >> one of the things they have done is built a platform for creating great content.

it is not just the ability to stream. that is almost commodity. but they have built is a creation platform. cory: what do you mean? guest: what they have done is they have re-architected the content creation industry for television, broadcast. in the background, i don't think it is an accident we are starting to see great shows coming from netflix. they have assembled a team of great writers, they have built all the technology components before hand to deploy. they have become this great content factory. the technology aspects that we first looked at netflix for are a commodity. they have become a great content house. cory: i don't understand how they have done such a great job of it read abc could not by a hit and now they have a strong lineup. you see this over and over again.

what are they doing that is right? guest: they have more at-bats. you mentioned marco polo. it wasn't a big success. it was beautifully shot. it didn't quite hit it on the story line. you flip it and look at house of cards, it's a very intriguing story, they have worked hard to deliver solid content. and they are getting high-quality filmmakers directors, and writers to bring them their best stuff first. they are becoming a first stop. their process from idea to screen is shorter than the networks. that is the opportunity. correct. you heard the expression the harder the work the luckier you get. necklaces the premium content buyer. the major markets did not spend all their pilot development money.

netflix and amazon over investing in content. the hollywood community is clamoring to get in front of netflix that they overpay for content. it is more important to bring the viewers to get subscribers. cory: the content cost is the thing. that contingency is so huge, $9 billion in the last quarter. $9.8 billion. that is a minimum cost that is not on a balance sheet. i own a bunch of camera trucks in hollywood that are so busy. everybody is working all year long. are the content costs going to start to hurt netflix? guest: when they are buying new stuff, absolutely. they are developing their own originals. when you develop your own

originals you control your content costs. they make smart investments on how they build their stages, how they get actors, they make actors a part of the production, they hold the cost down. they are the future. guest: that is exactly it. they are going to get an economy of scale. they are playing a premium. they will control the economics. cory: tim jones, presidential innovation fellow. thank you very much. looking for love in all the right places, the stock market a lot of love to be had there. a 22 year high today. this has been telegraphed into a single business reporting segment 18 months ago. they put a price tag of $6

billion on the business unit. they are selling less than 10% of the unit in the fourth quarter. coming up, the u.s. may be reaching a cyber truce with china. and bad blood between apple and taylor swift is over. she is putting 1989 on apple music, next. ♪

cory: a story we are watching, violence on the streets as taxi

drivers protest uber. courteney cox was caught in the -- courtney love was caught in the chaos. uber has over one million users in france. the company condemns the violence and its service is not illegal in france. the u.s. may be reaching a cyber truce with china after high-level meetings in washington. both countries are agreeing for the need for cyber code of conduct. the chinese government is responsible for the attack on the office of personnel management. it may have as many as 18 million government employees.

we have timothy jones back with us. let me start with you. the level of hacking is something companies don't talk about openly. whenever i have a ceo, i tend to when i get answers, it is often like daily. guest: i don't think you get many answers out of falsely asked them those questions. they don't want to admit. hacks have been happening again and again. i been in this business again and. it is an interesting atmosphere. cory: what is the view, you got unique access in this thinking of what is going on and what we are doing not talking about what china is doing, not talking about -- what is the sense of alarm about china's role in hacking? guest: in this context i can

speak as a private citizen. i look at this as similar to what we saw in the 1970's and 1980's. when you look at the old eastern bloc, both sides are probing each other to understand what each other's capabilities were. for our own personal perspective that is what is going on. the recent policy moves have been really aimed at trying to establish a to taunt -- which levels were appropriate in which were not. cory: it seems more than probing. we saw the sony had arian it changed the game. is that the thing that really gets business concerned about the cost of these things? guest: i think since before sony no one had an understanding that an attack could result in such disruption.

the interesting take away is that every attack we see even by financially motivated attackers could in that way. they choose to steal information or data, and it is lucky they are greedy. cory: is the probing about the beginning of the understandings? one of the things we see is a new level of patience where whoever is doing the hacking they get into a system and stay there for long periods of time figuring out when the weakest operators are on, and then ho ching -- poaching. guest: in the early days of the post-world war ii period there was a mad scramble to get capabilities. no one knew what the other side was capable of. we saw a shift from tactical intrusions to strategic

intrusions. we are seeing the same thing now with security. moving from greed-based two more strategic intrusions. it is a believe that the greatest value is in the long-term, persistent access on the information that comes from that persistent access. therefore there is no need to hurry or grab something and run out the back door. i would expect to see more of this strategic intrusion as part of this probing by both sides of the equation. cory: do you feel business can leave the way, the business risk is so great for both countries and businesses in both countries, business people can say cut it out? guest: i think it is going to take more than that. the policy is going to help. we need to better protect ourselves. china is not playing fair with the u.s.. lots of countries perform hacking operations to gain competitive intel.

china is one of the ones focused on stealing information related to industry. that is what they have to stop. cory: if we say we won't do it anymore, is that really going to stick? they haven't even severe doing in the first place. guest: i don't think you're going to get it to stop entirely. what the administration should be focused on is narrowing the scope of the hacks going to government entities, to military type secrets. that is what governments typically do. >> this is my point of a detente. both sides are going to try to create cyber capabilities. certain things are going to be perceived as a direct strategic threat to national interest and other intrusions won't be. the weinstein to be established. my perspective, that is what is

the discussion is about now. cory: last question. is it important this is happening now? guest: i think it is important is happening now. after everything we have seen the last few weeks it has been a lead up to that. i hope that will get a chance to find those more detailed laws or rules that are necessary for rules against between the u.s. and china. cory: thank you both. taylor swift is bringing her 1989 album to apple music. she said this is simply the first time it has felt right in my gut to stream my album. thank you for your change of heart. eminem will be the first on the apple radio station beats one. apple is also fixing things with

music publishers. the company will pay .00 two cents per stream during the trial. compared to spotify which pays .006 cents. your mobile wallet, the lowdown from mastercard. and data centers. how many gallons it takes to keep servers running. google map goes vertical. look away if you are afraid of heights. climbing street view to a new level. ♪

cory: time for the bwest byte. 158000, the number of olympic swimming pools you can fill with the water needed to keep 800 data centers cool. california has more data centers than any state, not counting in room. data centers are the biggest water users, that would be the agriculture business. a midsized data center would use between 80 and 130 million gallons of water every year. 100 acres of almond trees, three hospitals. the drought is showing no signs of letting up. doesn't seem as if it is not if

but when your data gets stolen? what our banks and credit card issuers doing to make that happen? still with me, tim jones in san francisco. you guys have got more risk with data than any other business in the world. how do you stay ahead of the bad guys trying to still information? -- steal information? guest: i'm often asked what is the answer? there is no silver bullet to security. a big stuff is going to be the move to chip cards in the u.s. within the next couple of months. cory: not least of which because of the change in the rules that merchants have to deal with in terms of who will hold liability when a car gets stolen. >> that is right. whoever has not invested in the

chip technology will be responsible for any resulting fraud. if your card has a chip on and you use it as act if the merchant terminal is upgraded the card is not the bank issuer that you got your card from will be responsible for the fraud. the real mission here is to drive the fraud out of the system. the real objective is to have a chip card at a chip terminal and no fraud. cory: there is so much innovation in the world of payment. what do you make of this guest:? chip cards -- this? guest: chip cards, it is interesting we are getting chip card technology years after europe has had the technology. one of my concerns is that as we bring chip cards to market in the u.s. we think it is innovative when in fact in other parts of the world threats have

evolved to deal with chip cards. we need to separate the actual physical card from the transaction. i think the technology is going to need to evolve for the individual transaction has some atomic level identifier which can span physical representation. it may be a chip card, some devise, the sim card of your phone, but i'm concerned that we are taking the victory lap on chip cards when the technology is mature. guest: yes. what we said about the move to chip and you are right, it was about the upgrade to the next generation of payments. it wasn't strictly about putting the chip in cards. it was about establishing this dynamic infrastructure. there is unique data created with every transaction. it is that in concert with other technologies that we will employ as we digitize cards into

multiple devices that will create this heightened level of security. cory: in europe, the technology decision was the with the chips. with u.s. it was data analytics to understand if cory is buying gas in san francisco, he is probably not buying doritos in florida. that was a software development. it was a combining of the two on both. guest: it absolutely is. what we saw but to your point the shifting of fraud. what we saw was that cows counterfeit -- what we saw was that as counterfeit activity increased we have to address that disproportionate nature of

the counterfeit fraud. we need to come to some you bit what is global payment system because as global consumers travel into the country and out of the country it is best that we are on a common platform which is about the next generation of payments. cory: thank you. one more story, jack ma is on a buying spree. he has purchased 20,000 acres in the adirondack mountains. only $23 million for the property. tomorrow on bloomberg west, i will be here with josh element of greylock partners. we will talk about the meerkat what they are doing with periscope, that is all tomorrow on bloomberg west. have a great evening. ♪

mark: on the show tonight, boom goes the supreme court. who is your winner and loser in the scotus ruling? john: my winner is barack obama. he has had two successful supreme court challenges to his signature law both of which could have destroyed it. he has a clear sailing