cory: netflix is poised to eclipse fox, cbs, nbc, and abc as soon as next year. ♪ cory: i'm cory johnson in for emily chang, and this is "bloomberg west." coming up, plans to make match.com public. plus, taylor swift shakes off her beef with apple music. and could a cyber truce mended defenses -- mended defenses between beijing and washington? all that ahead on bloomberg west. now to our lead. netflix may be on the brink of a

milestone. an analyst at capital markets has crunched numbers and figured out that netflix viewers will watch more tv than abc, nbc, cbs, and fox by 2016, next year. netflix is up to 62 million subscribers who stream about two hours of video every day, on par with the big networks. the differences the netflix user base continues to grow, but traditional broadcasters are on the decline. joining us, keith, and our guest host, timothy jones. former venture capitalist. keith, let me start with you. is this about the potential for netflix, a change in behavior, or is it this one service? you are not seeing this with hulu. keith: what netflix is doing is leading through great content. you will see a change to the way consumers engage with content. this is not a bad thing for the networks. this is not an awful thing for

other content makers. this is just a way to affirm that those who make great content, consumers will come to it. and if you give them an opportunity to watch it their way they will reward you for it. , cory: how can this not be bad for networks? keith: it's not bad, because what you are doing is you're putting a premium on good content. what it's showing is the shows -- oranges the new black, house of cards, if you invest in this -- hbo has been doing this for some time. this is not a new thing. 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. and now we have another way to deliver it. cory: jared, what do you make of the success netflix has had in terms of -- these shows -- a lot of them have been good. of course they have had their marco polo's, but house of cards, oranges the new black have been well received. jared: netflix knows they have

to have great content. that is great and they will continue. the other thing is the phenomenon in the media marketplace, we are 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 gen z behind them, they are in a prime position to win the audience numbers. cory: my little girls do not know how to run the cable box. but they know how to get on netflix. timothy, when you talk to netflix guys, what is interesting is that they really described a technology company. they don't sound like bob iger or somebody in the tv business. it sounds like you are someone -- talking to someone who is really thinking about tech. when you look at a technology standpoint, what do you see that netflix has an advantage over its competitors? timothy: one of the things they have done is they have built a platform for creating great content.

it is not just the ability to stream. i would say in many ways the ability to scream -- stream content over a broadband network -- that is almost commodity. what they have actually built is a creation platform. cory: what do you mean? timothy: in essence, what they have done is they have re-architected the content creation industry for television, for broadcast. i think in the background -- i don't think it is an accident that we are starting to see great shows coming from netflix. i think they have assembled a team of great writers, they have built all the technology components beforehand to deploy. the way i look at it is they have become this great content factory. the technology aspects of it that we first looked at netflix for our really commodity. they have become a great content house. cory: i don't understand how they have done such a great job of it. abc was the company on tv that couldn't buy a hit and now they have a strong lineup. you see this over and over again. in television and film.

keith, what are they doing that is right? keith: they have more at-bats. you mentioned marco polo. marco polo wasn't a big success. but if you look at it 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, well done content. they are getting high-quality filmmakers, directors, and writers to bring them their best stuff first. they are becoming a first stop. their process of getting from idea to screen is shorter than the networks. that is the opportunity. >> that's absolutely correct. you have heard the expression the harder the work the luckier you get. the more you invest, the luckier you did. the fact of the matter is netflix is the premium content buyer. for the first time ever the , major markets did not spend all their pilot development money.

that is because of places like netflix and amazon over investing and buying the content. where i come from 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 the thing that worries me. when i look at the financials for netflix, i find that their contingency for content is so huge, $9 billion in the last quarter. $9.8 billion. that is a minimum cost that is not on a balance sheet. but it's something they are going to have to pay. anecdote -- i own a bunch of camera trucks in hollywood that are so busy. because everybody is working all year long. it's not just about pilot season anymore. are the content costs going to start to hurt netflix? >> when they are buying new stuff, absolutely. however 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 their actors to go they make actors a part of the production, they hold their costs down. they are the head of the game and the future. cory: the jones, the last word? 10: -- tim that is exactly it. : they are going to get an economy of scale. they are playing a premium. as keith mentioned, eventually they will control the economics. cory: tim jones, presidential innovation fellow. thank you very much. tim is going to stay with us as well as jerod moses. looking for love in all the right places, the stock market a lot of love to be had there. shares of the the internet conglomerate hit a 22 year high today. on news that it will do an ipo on its bundle of taking -- of dating service. this includes match.com, okcupid, and tinder. they put a price tag of $6 billion on the business unit.

they are selling less than 10% of the match group and they expect to complete the transaction in the fourth quarter. coming up, the u.s. may be reaching a cyber truce with china, but could this really prevent more breaches? plus bad blood between apple and taylor swift is over. the musician says she is putting 1989 on apple music, next. ♪

cory: a story we are watching, violence on the streets as taxi drivers protest uber in france. courtney love was caught in the chaos. uber has over one million users in france. uber tells us the company condemns the violence and its service is not illegal in france. we will keep you posted as that story develops. the u.s. may be reaching a cyber-truce with china after two the days of high-level meetings in washington. both countries are agreeing for the need for cyber code of conduct. this comes as u.s. officials are saying the chinese government is responsible for the attack on the office of personnel management. the attack may have exposed social security numbers for as many as 18 million government employees. how big of a deal is this?

david joins me now with more. we also have timothy jones back with us. david, let me start with you -- the level of hacking is something companies don't talk about openly, but whenever i get a ceo in front of me, i say, how much is your company get hacked? when i get answers, it is often daily. david: you're better than me, i don't think you get many answers out of asking them those questions. they don't want to admit that. hacks have been happening again and again. i have been watching it over and over again as an investigator. i am now working with cheneytanium to help prevent these things in the future. it is an interesting atmosphere. cory: timothy, what is the view -- you've 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? timothy: in this context i can

only really speak as a private citizen. i can say that i look at this as being similar to what we saw in the 1970's and 1980's, when you look at the old eastern bloc and nato, both sides are probing each other to understand what each other's capabilities were. i think in this particular case, from my own personal perspective , that is what is going on. a lot of the recent policy moves have been really aimed at trying to establish a detente, some level of understanding of which levels were appropriate and which were not. cory: it seems a little like more than probing. what we saw with the sony hack really seems to have changed the game. is that the thing that really gets business concerned about the cost of these things? bigger than the target hacked and all the other ones we have seen? david: i think since before sony no one had an understanding that an attack could result in

such disruption. i think the interesting takeaway there is that every attack we see even by financially motivated attackers could in -- and it 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 poaching what they are trying to poach. >> that's why when you compare it to the security situation between the east and west in the 1970's and 1980's. 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 began to see a shift from tactical intrusions to strategic intrusions. we are seeing the same thing now with security.

moving from tactical, let's say greed-based intrusions to more strategic intrusions. where there is a belief probably that the greatest value is in the long-term, persistent access and 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: david, do you feel like business can lead the way the business risk is so great, for both countries, and businesses in both countries -- that business people can say hey knuckleheads, cut it out? >> i think it is going to take more than that. we need to protect ourselves. the real challenge here is that 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: i guess i wonder also, if we both say we won't do it anymore, if they say they want to do it anymore, is that really going to stick? they haven't even been doing it in the first place. >> 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 what types of hacks are occurring to governments type entities, to military type secrets. that is what governments typically do. they need to limit that to keep people from hacking into corporations, things of that nature. cory: this is my point of a detente. getting to that level of understanding that both sides are going to try to create cyber capabilities -- that's just the evolution of technology -- but certain things are going to be perceived as a direct strategic threat to national interest and other intrusions won't be. those lines need to get established. from my perspective as a private citizen, i think that is what is

-- that is what the discussions are about right now. cory: last question. is it important this is happening now? >> yeah, 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 we will actually get a chance to sit down and find -- and define some of 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 tweeted out the news today saying, "this is simply the first time it felt right in my gut to stream my album. thank you, apple for your change of heart." it's not just taylor -- eminem will be the first on the apple radio station beats one. the dj posted this photo of the pair ahead of the interview. apple is also fixing things with music publishers. the company has agreed to pay

.002 cents per stream during the trial. compared to spotify which pays .006 cents. coming up -- your mobile wallet. we will get the lowdown from mastercard. and an unexpected water guzzler in the california drought -- data centers. we will look at how many gallons it takes to keep servers running. also, google maps goes vertical. look away if you are afraid of heights. climbing street view to a new level. 3000 feet in the air scaling el cap at yosemite. -- without leaving your desk. ♪

cory: time for the bwest byte. today's number is 158,000, the number of olympic swimming pools you can fill with the water needed to keep more than 800 california data centers cool. so much air-conditioning. california has more data centers than any state, not counting in-room with server rooms and local businesses. data centers are not the biggest water users, that would be the ag business. but a midsized data center would use between 80 and 130 million gallons of water every year. that's equal to 100 acres of almond trees or three hospitals. 218-hole golf courses. -- two 18 hole golf courses area -- golf courses. the california drought is

showing no signs of letting up. does it ever seem as if it is not if but when your data gets stolen? arizona governor jerome powell called for safer banking systems. what our banks and credit card issuers doing to make that happen? still with me, tim jones in san francisco. welcome to bloomberg west. you guys have got more risk with customer data then probably any other business in the world. how do you stay ahead of the bad guys trying to steal customer information? >> first it's about layering technology. i'm often asked what is the answer? there is no silver bullet to payment security, but a big step in that is going to be the move to chip cards in the u.s. within the next couple of months. cory: it will change the rules that merchants have to deal with in terms of who will hold a liability when a car gets stolen. >> that is right. on october 1, whoever has not invested in the chip technology will be responsible for any

of the resulting fraud. if your card has a chip on it and you use it at a merchant that is not upgraded, a resulting fraud of merchant will pay for that, and by a result if the merchant terminal is upgraded but the card is not, the bank issuer that you got your card from will be responsible for the fraud. i should just note -- 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: right. tim, there is so much innovation in the world of payment. i wonder what you make of this. tim: chip cards, it is really interesting that we are getting chip card technology years after europe has had the technology. one of my big concerns is that as we are bringing chip cards to market in the u.s., we think it is innovative when in fact in other parts of the world threats have already evolved to deal with chip cards.

i think we need to separate the actual physical card from the transaction. what i am saying is i think the technology is going to need to evolve to where the individual transaction to have some atomic -- has to have some atomic level identifier which can span physical representation. it may be a chip card, some other physical device, it might even be the sim card of your phone, but i'm concerned that we are taking the victory lap on chip cards when the technology is relatively mature. >> yeah. look, 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 chip transaction. as i said about layering technologies, 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 technological decision was made to go with the chips. that's where we'll get safety. in the u.s. it was data analytics, so we can understand if cory is buying gas in san francisco, he is probably not buying doritos in florida. that was a software development. it wasn't as pronounced in europe. it was a combining of the two on both continents. >> it absolutely is. what we saw, much to your point, is the shifting of fraud. what we saw was that as counterfeit activity became easier in the u.s., 40% of the world costs fraud originated here whereas only 20% of transactions did. we have to address that disproportionate nature of the counterfeit fraud.

we also need to come to some ubiquitous global payments 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 really about the next generation of payments. cory: carol from mastercard, thank you, and timothy jones thank you as well. one more story -- alibaba's jack ma is on a buying spree. he has purchased 80,000 acres in the adirondack mountains. ma only paid $23 million for the upstate property. the land was once owned by a rockefeller heir. tomorrow on bloomberg west, i will be here with josh element of greylock partners. he will be here with the meerkat ceo. we are going to talk about meerkat what they are doing with periscope, that is all tomorrow on bloomberg west. have a great evening. ♪

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