emily: amazon shares spiking after-hours. the secret behind jeff bezos' surprise -- profits up 17%. -- surprise profit -- shares up 17%. ♪ emily: i am emily chang. this is "bloomberg west." coming up, pandora shares also rallying after-hours. the company optimistic. at&t looking to drive growth. we will ask former fcc chairman bob mcdowell if they should be able to buy directv.

youtube would have been crushed without google. i bring you highlights from my studio 1.0 cofounder chad hurley. all of that ahead on "bloomberg west." first though, we are talking about amazon, out with a much better than expected quarterly report. shares surgery -- surging. revenue jumping 20% and returned a surprise gain of $.19 per share. analysts were expecting a loss of $.14 per share. amazon's second-quarter sales also got a lift from its cloud computing business and efforts to lure more customers with online video, plus faster delivery of amazon goods. right now, shares are up 17%. with us from new york, the senior equity strategist for amazon and the vice president of screen media ventures, and from seattle, our guest from a joint -- jonah venture group and an

early amazon investor. matt, i want to start with you. let's talk about what is happening with aws. matt: they are just rocketing. they are up 80% year-over-year. they are one of the most profitable, if not the most profitable section of amazon. they are now 8% of the overall corporate revenues. you saw them at $23 billion for the quarter and they are just building the stack and making progress. emily: david, i want to bring you in on some of the things we're seeing with online video. "transparent" was a big hit. are we seeing that replicated? david: i wish they would "show the numbers" of how many subscribers are subscribing to amazon prime and what they are doing with it, but the free shipping has really enhance the service to consumers and we sell to amazon and we do very well with our products. they are promoted properly and they are doing a really good job. they do not get the attention they deserve.

netflix steals the headlines. but amazon, i would be interested to see what their numbers are. netflix is at 50 million subscribers. i would not be surprised if amazon was at that number or above that number. emily: let's talk about the surprise profit. how surprised are you? it is not that big considering they are bringing in $23 billion in revenue. still, it is a profit. matt: they were up to one point $8 billion in revenues on aws, and that had 17% profit margins in revenues with aws, which had 17% profit margins last quarter and you take that grows with the heavy profit, and that accounts for your profitability right there. there are other, newer investment areas, like david said, like twitch, that has been very successful for them. there a lot of the second quarter engines. i think they will have a big impact and be positive.

emily: let's talk about that. jeff bezos says the amazon is the first company to use the golden globes to sell toilet paper. what are amazon's real ambitions here? david: i love the toilet paper analogy. their ambitions are to be everything to every consumer, they want to be a one-stop shop, from toilet paper to movies to games. amazon prime, amazon fire, the tv service that is competing with xbox, roku, playstation. prime is giving a real run of the money to netflix. winning that golden globe does not get enough attention. i think amazon is a serious player in this space. emily: let's talk about prime. what do we know and what do we not know? we still do not know a lot of information about just how many prime customers there are,

aside from me. guest: that's right. prime has crossed 50 million members. more importantly, the economics of a prime customer is superior to a regular customer. that is why you see them investing aggressively in prime. having the prime day content, etc. that continues. i have to say this quarter is the best quarter we have seen in a while. they outperformed on the top line and the bottom line. i was just kind of parsing the numbers, and it is hard for me to frankly see any negatives in there. the highlight has to be amazon web services. that division is on track to hit $10 billion revenue faster than we thought. the margins crossed 20% for the first time. i think it is remarkable what they've done in this quarter. emily: prime customers are now getting cash back from amazon in the form of credit, yet at the same time, retailers

online and off-line are stepping up their game. i just spoke to jet.com, a new company that is trying to drive down prices as much as possible so they are the lowest price option out there. it certainly seems like amazon versus everyone else. how big a threat is everyone else? >> the landscape has gotten more competitive, whether you look at the traditional retail landscapes -- notice what walmart and target did when amazon announced their prime day, you look at the content. it is the same side. netflix. they are stepping up their game , and i think amazon, to be sure , has taken it the next level. i love all of the underlying innovation that is going on. i think it is really coming together. emily: ok, tuna amobi, david,

matt -- amazon shares still up 17% in after-hours. we will continue to follow it. thanks, guys. google successfully by youtube -- bought to you tube back in 2006 4 $1.6 billion, a steal in retrospect, but the founder says he does not regret not holding out for more. he says in fact, if not for the deal, youtube would have died. take a listen. >> we were lucky enough to be acquired by google, who in my mind, took a chance on us, and really, youtube would not be here today or what it is today without their support. emily: since leaving youtube, chad hurley went on to create a mobile video platform that landed him in legal trouble with kanye west and kim kardashian. i asked him to explain his side of the story. chad: i took some video and the -- posted it the next day after

i saw quite a few other people at posted videos on instagram, so i did not think it was a big deal. after it got out there and got a little attention, kim and kanye wrote me the e-mail. the rest is history. emily: they sued you. what happened? chad: they are still suing me. we will wait to see what happens when this actually airs, but it has been ongoing. emily: video of their engagement, he posted it. for more of my discussion with youtube cofounder chad hurley, catch studio 1.0 tonight at 7:30 p.m. eastern and pacific. coming up, pandora shares rallying after the company says apple music is no big deal. details next. plus 10 scientists from montana , pocket $2 million in the latest x prize challenge. their research is next. ♪

emily: breaking news -- airbnb is close to hiring blackstone's lawrence josie -- tosi as cfo. he has been the cfo of blackstone since 2008. last month, airbnb received another round of financing. the company is projecting revenue of $900 million this year up from two under $50

million in 2013. in 2015.illion representatives from airbnb declined to comment. i want to get to pandora now, also reporting, shrugging off apple music, and investors celebrate. they do not expect much in back from the new competition. joining me with more, amy in new york and the capital founder in l.a. amy, i want to start with you. some of the highlights, raising and listening, hours flat. what are the highlights for you? amy: monetization. the rpm's really nice and beat our estimates. so, i think the key story is monetization and closing the gap with traditional radio broadcasting. emily: we saw the reveal of apple music. we recently sat down with pandora founder tim westergren

to talk about how big a threat he thinks it is. take a listen. tim westergren: there is a lot of novelty in this space. they are compelling, but they do not become habitual products. we tend to shed those in a hurry. ultimately it is about simplicity. people want to hit a button and hear stuff they love without too much fuss. emily: the founder of pandora does not think apple music is a big deal. adam, what do you think? is this a threat to pandora? is it a threat to spotify? adam: tim said the word product. pandora is an amazing product. the big difference here is that all the other services have much bigger revenue streams band pandora -- van pandora per user. pandora per user. they did a great job on revenue

this quarter, but they went from 11 and a half dollars per average user and maybe it is straining to 14 or 15, where is spotted by gets 120. pandora had a moment if you years ago where there the only one on all of these devices. now you have spotify, all of these other services on deck, and now they are in a box because they did this. they did this settlement that makes them only be a radio station. the major bet is, where do they go from here? do they go beyond just being a radio station? emily: pandora talks about how its users are loyal users. amy, i wonder -- they have been ramping up their sales team, but they are also spending a lot to get that sales team to build out to increase ad revenue. what about the concerns adam is talking about? amy: i think adam made good -- makes a really good point. but i think again, the key story for q2 is revenue and monetization of the user group. it is unclear how that is going to trend in 2016 and 2020 ahead of the royalty fee coming up in

the next four years. emily: adam, how do you see this play out? let's say a year or two years from now, how does apple music, pandora, and spotify evolve? who are the big three? adam: you can include amazon in there. my kids just got the amazon echo and they keep talking to alexa. they asked her to play music, and it just starts playing music. i think the big issue here is what is the tieback -- apple has devices, amazon has huge membership. if you look at spotify and pandora, spotify, 75 million users, pandora at about 80 million users, but spotify has this multiple billion-dollar valuation higher than pandora. i think it goes back to what tim says. i think pandora is a product, but music is a part of media. it is a part of the bundle that you get. i know we are in this process of unbundling, but music is not -- absent of television, you have

spotify trying to do video streaming and verizon is coming into the market. i think it will be who delivers the music and how easy it is to get it. emily: all right, adam and emily. thanks to both. pandora shares up almost 7% now in after-hours trading. this week, scientists from sunburst sensors won $1.5 million from the x prize challenge. we sat down with them and the x prize ceo. >> at the x prize foundation, we look at some of the world's biggest problems that are not being solved, and we put out a large cash prize, in this case funded by our benefactor. i do anyy husband and philanthropy, we are looking for transformational change. eitherg a system that is not well understood when it was

developed, or we know could be better, and we use data to do that. the problem we are tackling is oversimplification. -- ocean acidification. we get more than half of our oxygen from the ocean. i invited 25 marine scientists to join us in washington and talk about, what do you mean? -- need? what device would you need measure this phenomena and that no one can see? >> teams had only about a years time to design devices that could affordably measure ocean ph. before, the cheapest device was $15,000. and also very accurately at deep ocean depths of 10,000 feet down, or at the coastline , measure what's going on, because if you cannot measure it, you cannot take action. >> sunburst sensors is headquartered in montana and they love to say, we do not have an ocean there. but we are ocean scientists, and

we are building ocean monitors. we were high school friends, husband and wife. -- had high school friends, husband and wife, who had a very small business. the incentive of the prize itself takes it off the drawing table and brings it into reality. >> we are living in a time where entrepreneurs have access to all of this information on google, access to ai, robotics, cloud printing, incredible technologies that only governments and large corporations had just 20 years ago. it's about finding the nonexpert who comes up with this novel idea like why can't we do it this way? ms. schmidt: these tools will be in the hands of lots of people, on ocean going vessels, on shores, and in the hands of scientists. all the people who have participated have given us learning, and the door is wide open for all of those teams to develop their product in a growing market.

emily: wendi schmidt there. coming up, at&t beats and t-mobile's fight for airwaves. we will bring you the latest. plus, nasa may have discovered earth 2.0. we learn about a distant planet that is a lot like our own, next. ♪ emily: time now for our daily

byte, one number that tells us a whole lot. 1400. that is the number of light years between earth and another planet that could be our cousin. nasa's kepler telescope spotted it today.

than 1.5 times in radius as big as earth, and it circles a sun like star for 385 days -- just a little longer than our year. the planet is located in the star's goldilocks zone where water can exist on the surface of a planet. nasa's next task is to determine the mass of the planet to see if it is rocky. meaning it could have active volcanoes and an atmosphere similar to earth. this discovery is one of 500 planets captured by the telescope. let's get back to earnings. at&t reported a few minutes ago. the second-largest u.s. wireless carrier adding 2.1 million net adds. operating revenue in line with expectations at $33 million. -- billion. i want to bring in jonathan chaplin and former fcc chairman robert mcdowell to discuss. give me the good, the bad, and the ugly. at&t is a company that has been struggling to drive growth.

jonathan: results are overall better than expected. i am fairly impressed by the headline numbers. they beat on eps. they beat on ebitda. they beat by a little bit on revenue as well. if you look at the online transnational thing, there are reasons to be concerned, but the core of the value lies in the wireless business and they are still losing customers in wireless. they reported ads, but most of those are tablets being sold to their existing customer base. the total number of customers is declining as they lose share to verizon and t-mobile. let's talk about t-mobile, because jon ledger, the ceo has made it is job -- his job to ruin at&t. how big a threat is he? is john linder getting it done? jonathan: he has done a phenomenal job of the last few years. they have taken a tremendous share. at&t and verizon have ceded a

fair amount of share to him. he started with a big disadvantage with a worse network, a damaged brand. it has been a spectacular turnaround. over the long term, he absolutely is a real threat to at&t and verizon. if he can get his hands on more spectrum. emily: let's talk about spectrum. i want to bring in robert on this spectrum issue. the fcc is about to reject a request for more spectrum to be reserved for smaller carriers. robert, how does that affect t-mobile versus at&t? robert: i think the fcc will set aside maybe 30 megahertz of spectrum, which is quite a bit. if sprint is not going to participate in this upcoming auction next year, we don't know if it will for sure, but that could be good news for t-mobile , whether they want to have more spectrum or not. they bought metro.

-- metro pcs. they did a fantastic job of integrating that network. they have some fantastic engineers. they are not to be underestimated. they are a threat to all of the carriers. it is a competitive marketplace. it is a great time to be a wireless consumer. emily: also potentially good news, fcc chairman tom wheeler signaling yesterday that the deal with directv should go through. what does that mean for at&t? robert: that is a shot in the arm for at&t. that is good news for them and video suppressors. -- video subscribers. the fcc probably feels that deal provides a nationwide footprint for a stronger national competitor against comcast, time warner, and others. it's good for competition. emily: let's talk about comcast, comcast getting a huge boost from new films out. jurassic world, furious seven. are we going to see the film

side of the business getting more attention going forward? jonathan: the film side of the business was spectacular this quarter. they blew away everyone's expectations. reported phenomenal growth year-over-year. unfortunately, the cable side of the business was a little ho-hum, and that is the piece we tend to focus on most. the cable side of the business did fine. they are continuing to take share. and the broadband video business is continuing to improve, but they did not beat by nearly the magnitude that they did in film entertainment. emily: comcast now has more broadband subscribers than cable viewers. mcdowell,robert thanks to both of you for breaking that down for us. that does it for this edition of "bloomberg west." don't forget to catch the latest episode of "studio 1.0" tonight, my discussion with youtube

founder chad hurley. ♪

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