emily: earnings hocus-pocus from the magic kingdom. but this time espn delivers. ♪ i'm emily chang, and this is "bloomberg west." coming up square is getting , close to setting its price range, will investors pay up? facebook shares climb into the record books, following a seller -- stellar earning point.

we look at the reality of a virtual currency come back. let's check in on first word news. we want to start with u.s. stocks, ending trading lower today. investors were hesitant to make a large bets before the jobs report. a bank rally helped erase decline marked by a selloff in valeant pharmaceuticals. commodity weakness also holding back stocks for the second day in a row. united continental ceo says he will return to the airline next year. he suffered a heart attack a month after joining the carrier. now, details of a sweeping pacific rim trade deal are out. the transpacific partnership agreement runs hundreds of pages long. it lays out plans for handling trade from railway sleepers to

live eels. it also sets the stage for extended debate in u.s. congress before ratification. nasa's mars orbiting spacecraft has discovered the sun likely robbed the red planet of its once thick atmosphere and water. scientists say erosion of mars's atmosphere increases significantly during solar storms. it would have been enough to get the atmosphere from a moist, warm place capable of microscopic life to a cold, dry desert of today. that is your first word news. we have more on this and other stories 24 hours of the new bloomberg.com. now to the lead, walt disney shares, flat after fourth quarter earnings. sales rose to $13.5 billion. profits increased to $1.6

billion. the results follow earnings this week from time warner and 21st century that reignited fears that the pay-tv industry is losing ground to services like netflix. there was a selloff in media stocks with a warning about subscriber losses. take a listen to what he said about espn. >> we feel bullish about espn. and their business. we like the environment because we think long-term it gives us opportunities. i should also add that i espn has been at the forefront of technology to create more compelling product for its consumers and to be present more on platforms. emily: enough to calm wall street nerves? joining me now, george zachary. our editor at large, cory johnson is here as well.

and from the ucla theater, film and television lecturer, tom noonan. it appears yesterday and delivered. -- espn delivered. cory: they pared back some of the expenses with announced layoffs. the commentary around espn that really put a big scare in the sector -- when the numbers came out and they talked about a subscriber loss, that freaked out the media sector. suddenly cable was going away, netflix was the champion in the future. that caused concern. the reliance of espn and disney cannot be overstated. it was 41% of revenues -- if you think of all of the stuff that disney does, in terms of profit

is more important. in terms of profit in this quarter, 47% of profits. 50% going back to the last few quarters. the numbers were not too bad. emily: there has been a bit of drama at espn over the last few months. bill simmons is leaving. shutting down grant lands by surprise. george, are you a fan? george: no. emily: i thought everyman was a grant lands fan. what do you think about the future of disney coming given that espn -- disney, given that espn is such a huge part? george: the cord cutting argument has been a win will will enough content the online into one service. they came out with a new apple tv launch. everyone said, when will it be great? i think it is not great. because they don't have enough

, content. a lot of that shows up in this disney issue. emily: we saw media stocks slide earlier this week from time warner earnings. tom, what did we learn about cord cutting from this latest report from disney, and the future of the industry, not just the company? tom: i don't think we are seeing a huge impact yet from cord cutting. i think it was wise for the experts and disney to warn wall street about expectations. so far things looked strong for the big media companies. cory: the real issue going forward will be cord shaving. people who can select a certain bundle. emily: are they well positioned for a future unbundle? cory: "antman" and "insight out" will be valuable content to someone.

tom: my kids have the -- have watched both quite a bit. cory: they spent money on antman. the other thing is, sports is different. in my household, and many of the espn subscribers, there might be three people in the house who want to get rid of espn, but one of us will not. you cannot timeshift like other things. emily: let's talk about "star wars." this is the last earnings report before the official release. they are starting to see an impact on the business. let's listen to what eiger said. eiger: we are still six weeks away from releasing the first new film in a decade. you can already see the impact and value of that franchise in various businesses. we have star wars products in numerous retail categories, especially toys and games.

the huge global response to the brief glimpse of the new merchandise be revealed in september, suggests the demand will only grow with the release. emily: some tidbits, what clues are we getting about just how big "star wars" will be for the bottom line? tom: i don't have any concrete clues. i can tell you my students at ucla, none of whom were born when the original came out, are practically climbing all over this. not only for tickets, but they are also buying the classic merchandise already available. emily: are your kids into this as well, george? george: yes, when can we go? emily: in the end, what does disney do afterwards? cory: the question is, how much will they spend on marketing? they did not answer that on the call. any movie can get a box office

if they spend enough on marketing. as far as it goes first "star wars" the question is, what does they spend this quarter mean for the next two movies? secondarily, how can they get through the rest of their franchise. i think we will not be able to tell until afterwards. emily: we are all waiting for the force to awaken. corey, tom, and george thank you. facebook shares rose to a record high today after the social network posted another quarter of sales beat estimates. the stock jumped 4.5% to the highest level since it's 2012

ipo. it is larger than johnson & johnson and ge. they have face more on marketing recently. they announced yesterday that it now gets more than a billion daily visitors. plus 900 million users are on whatsapp and more than 700 million on messenger. up next, jack dorsey gears up for another ipo roadshow. we break it down, the hurdles ahead for square, next. ♪

emily: jack dorsey is preparing

to woo wall street in the ipo roadshow for square. it is an industry that has become increasingly crowded in the six years since square came to be. what is the advantage? back with us, my guest house, george zachary. gil luria has been looking closely at the industry. in new york, alex has been out there. alex, what are the high points we need to know? alex: the high points about square is it was really the early mover in this space. you had customers paying in merchant stores in restaurants for ages. they came in with this simple, easy software for smaller customers, which is where the majority of the customer base is. they really build it out in the last 5-6 years since they have

been around. that is what they have going for them now. of the customers that are bringing in under $125,000 in gross payment volume per year, that makes up a lot of their merchandise. they built this niche for themselves in this crowded industry for payment processing. they also have that brand recognition. people know it, they know they can firew up an iphone and have people paying. emily: gil, you called the business model brilliant. how do you see that playing out in the next two years? gil: they will continue to grow. within that niche of small retailers, they really are the leader. they control that niche. there is a lot of room for them

still to penetrate that niche, not forever, but for a few years longer. they are also selling other products in that category which will help them grow as well. emily girl george, what is your take? -- emily: george, what is your take? george: it is not great. about every dollar of transaction revenue has about $.60 of cost. compared to paypal, it is $.30. it is not a great business at the core. emily: what about the other businesses? george: the starbucks deal is horrible. they need to expand to some the more interesting. they cannot alienate the core base. they have adopted this business

model to basically expand into the core base. i think the square ipo will be somewhat dim -- difficult. you might have the numbers pop in terms of share price, but the most interesting statement that has occurred among the number two shareholder decided to get off of the board before the ipo. i am a venture capitalist -- emily: isn't it typical? george: i know that when i get off of the board of a company that is about to go public, it is because i want to sell shares in the company and not be restricted during the trading window. emily: gil, how do you respond? one of the things we pulled out was if they did not add any new merchants they would still make hundred percent revenue the following year. gil luria: i agree with roger, it is a great business. they could be a great stop it

does well for years, they are looking more at the $8 billion evaluation, that is four times their comparable. i do not think that is doable. they will grow fast, it is a good company. it is a matter of how they price the ipo. they're constrained by the fact that the last valuation was $6 billion. that limits to where they can go. ideally for them they would go to a lower valuation, take a step back and welfare. -- well from there. emily: who else is out there? first data is one we saw ipo in the past month. alex: that is a big one. they do more than point-of-sale. square makes 95% of the revenue from point-of-sale and payment processing. vantiv also does point-of-sale terminals and technology for small businesses. paypal is one who has also been pushing into this space. they are focusing more on their

core payment product. you good on the line, you have startups like shopkeepers and other players. the bottom line is a busy space. the point of sale business has a low barrier to entry. they have this core business, the real weston for investors will be, to these add-on services really work? can you really find higher-margin services that customers find value in? what will they do moving forward to make him a leader when they do not have the scale that a first data does. emily: we are waiting for square to set the terms any day. thank you so much. gil, i want your thoughts on this next story. bitcoin -- everyone's favorite online currency is back. the price is up over 100% in the last month. the price of one bitcoin rose as far as $500 yesterday. the question is, why now?

what is causing the largest rally since way 14? -- since 2014? one reason could be china. there has been a surge in demand partially due to the drop in the stock market. other people are pointing to goldman sachs and morgan stanley taking an interest. gil, what is behind this rally? gil luria: you have a long-term drivers, how much is it used for real uses? transferring money from the u.k. to kenya, buying stuff off-line, those are real uses. getting capital out of china -- that is a real use. that is driving the price up. there is also temporary drivers like less regulation in china. different regulation in europe. a lot of buying and selling in a fluid market. you have a combination of both.

long-term fundamental drivers, and short-term training -- trading drivers. emily: thank you so much. george, you're sticking with me. we will talk about twitter next. that is coming up on the next part of "bloomberg west." ♪

emily: welcome back to "bloomberg west." we were just talking to george about jack dorsey earlier and square. you are in early investor in twitter. i am curious to get your thoughts on how optimistic you are with jack back as the ceo. george: jack has gotten better as eeo. -- ceo. i knew him when it was jack and evan at the beginning with little ability to execute on anything.

emily: he is more mature. george: he is more mature and a better manager, for sure. at twitter, they have a whole host of issues. coming up with a product that everyone wants to use. emily: how confident are you with his ability to innovate the products significantly. we have seen the hearts and stars. george: those are marginal. in reality, the original product was a fusion of evan's ideas, jack's ideas, and a couple of people who are not known to be founders. emily: what would you like to see twitter do? george: no one knows what the product is. the user growth has been stalling because they have gotten into the power user group. new user growth is also stalling because people are asking, what can you do with this besides the current use? it is interesting the facebook growth is continuing to

accelerate, while twitter continues to stall. no one knows how to solve that. emily: does it matter if twitter's growth does not read accelerate, but remains part of the conversation? does it become something -- george: people are comparing it to facebook. and saying it should be all over -- all of earth. the numbers are being put up economically are fantastic. that is due to adam and dick. they are counting on jack to come up with a great product. it needs to be a great product. it is not marginal tweaks. emily: i went back to a time when -- 1.5 years ago when we talked about the bubble. you said before anyone else, yes, we are in a bubble.

george: thank you for remembering. emily: this is from april 4 of last year. george: we are in bubble territory. emily: you're the first. george: no one wants to say that. everyone wants to cash out before it is over. emily: you are the first to say that to me at least. if you -- if we were in a bubble 1.5 years ago, what is happening now? george: we are at the beginning of a bear market. it is typical that when the market indices peak, the that doesn't mean a continuing bull market. the risk is coming out of the market and it is affecting private markets. it is affecting prices, terms, and evaluations of late stage private companies. we are seeing terms being applied to late stage private companies to protect the downsides.

emily: you're talking about the ratchets. george: exactly. those are creating false valuations. when someone says i want a billion valuation, the late stage investers are saying and have that, but i am getting all of these extra. emily: they call that unicorn fraud. george: it is. emily: what are the consequences? george: if you go public, these copies will get extra warrants to go public, which means the valuations are fake in the previous round. if your ipo price is lower than the previous round, those investors will get a lot more shares and you will be severely diluted. emily: it is not some pretty. george thackeray, we will

continue with you after this break. how expedia's purchase of home away could impact you. that interview is next. a new startup aims to clear the way for drone pilots flying blind. ♪

emily: i am emily chang, this is "bloomberg west." timeout for a global business flash. the largest maker of graphic chips posted third-quarter profits beating estimates. they say the gaming graphics business continues to grow, but they want to expand. they say extending the company source of revenue could offset the multi-year pc slump. shake shack is reporting third-quarter profits topping estimates. the company says same-store

sales are up 17%. the burger and fries chain has been opening stores outside of its east coast market. walgreens says it is the first retailer to combine its store loyalty program with apple pay. the company says the partnership will let customers earn and redeem loyalty points or purchases without having to scan their physical card. more than 85 million people use the walgreens loyalty card when they check out, including me. adobe says it plans to buy a digital analytics business to add to its cloud offering. they're streamlining operations ahead of its $732 million acquisition of rent track. they're aiming to be a bigger player and media companies. expedia has agreed to buy vacation rental company, home away for about $3.9 billion in cash and stock. home away features more than a million home listings, vacation

rentals, in 100 countries. the company also owns a portfolio of other rental sites including the rbl, vacation rentals.com, bed and breakfast.com. i sat down with the ceo today. i asked them why they decided to jump to this acquisition. >> we have been very much attracted to the home away inventory. home away has unique inventory in the vacation rental home space. we have always thought that inventory would be attractive to our travelers. we have been working together for about two years integrating inventory into destinations, especially resorts type destinations where the inventory we think would play well. we have had some good experiences working together. i think the teams respect each

other. travelers proved to be a pretty interested in the supply. that led to the company's coming together. emily: we talked a few times in the last few years, you have been upfront about the competition. that is airbnb. i use both companies for the same thing. the immediate reaction to so many people -- to this deal, was you guys are trying to suspend the threat of airbnb. how much do you think about competition from them? >> it is always important to stay on your toes and worry about, competition. we have competition from other companies as well.

priceline, trip advisor. frankly the greatest competition is local competitors in the various countries in which we operate. i would say that sure, this gives us a little more firepower than airbnb. the big business news for us is the fact that we were going to announce if this deal did not go through what we announced last night, we are shifting the business model. we are taking our business fully online by the end of 2016. airbnb coming into the marketplace has something to do with that. they have proven that consumers like that kind of booking experience. we will get the rapidly. we also announced yesterday that we will be introducing a traveler service fee. most people do not appreciate the fact that home away bookings are actually well ahead of airbnb. there are bigger numbers. our take rate has always been lower because we on average charge about 3.5% and airbnb is in that 10% range. with that business model change, that will vastly change the economics of home away.

the deal with expedia is more about us building a better company and the space we already operate. the vacation rental space is still a space where we are the leader. if you get a vacation markets, you will find more inventory for home away than airbnb. our focus in the next few years is doing a better job in that space. does this create an additional opportunity for us to go into urban markets? we think it does. expedia has a lot of demand for urban markets. we have a company and operating machine that can bring in individual homeowners. i think we will get more aggressive there, but airbnb was not the main reason why we did this. emily: you guys have a big position in the hotel business already. some would say that home away's business might compete with that. do you think this is a different kind of customer. why is bigger better? dara: we found customers

actually -- based on the different occasions will look for different types of accommodations. if they are traveling midweek and they are going to an urban location, let's say new york or boston, they typically look for a hotel. if they're looking at a weeklong vacation, over the summer, especially with the family, we have found that this kind of accommodation, a whole home, is something that our travelers find quite attractive. our business is about bringing all of this inventory that you might need from a travel perspective to travelers all over the world. we think adding in the home away inventory as part of the offering for hotels.com, expedia, and travelocity, make those brands better. we do think from a home away owner perspective, having that

additional distribution through hundreds of millions of unique users coming onto the brand also make him away a better proposition for homeowners as well. we think the traveler wins. the homeowner wins. hopefully that synergy can be brought to bear. emily: airbnb has been talking about more of a traveler experience. do you see partnerships with uber? brian: we do have a partnership with uber. we have a unique piece of software that almost serves as a guide when people get a house. they contain key codes, how to use the stereo, the television, it hasn't services like insta cart. we are pursuing lots of partnerships that start to make the experience easier. i think the hotel business has a concierge, a rental business you

are often left with keys and you have nothing like that. we have been forced to innovate, ahead of the hotel industry on some of that stuff. we do know that dara is working on local services, ticketing and things like that. dara: we have a significant tour tourism aspect that has been growing. we offer little cars, we are holding out a rail product. we do have a complete suite of services, i do think we could do more. but we can offer more and more as a buildout technology. emily: could you guys see a partnership with airbnb? brian: i would say that most of the inventory is unique. we did a study in the united states recently, only 10% of the inventory overlapped with beer -- airbnb. under the right conditions, we

would be open to doing something. my personal belief is the way you give consumers the best range of choice. there is unique inventory on both sides. it is not something we have been active in discussing. emily: what are the key markets and areas for international growth? are you looking at bigger or smaller markets? dara: we are looking at all markets. we are very focused on the asia and pacific region. japan is a great destination with the yen weaker. the japanese traveler has been a big part of our outbound travel. we are also seeing latin america grow quickly. it is coming online. mobile penetration is helping travel come online.

we announced an investment and partnership with a significant player there. eastern europe is a nice bargain market for us. we continue to get out there. emily: brian, you and i have talked about valuations over the years, airbnb had a valuation north of $20 billion. i am curious, being in this business for a decade like you have been, do you think that is fair? is that legit? brian: as we have talked about before, there is a vast difference between a private valuation and a deal which may contain structure that we are unaware of, preferred stock, guaranteed returns, things of that nature, and a public valuation. unless they are trading at a public company, it is hard to make that comparison. i do think in general, while the internet lately has created some very hot service companies, some of the hottest companies with the highest valuations have

never made money. we are from texas, in texas we believe you make money the old-fashioned way which is you actually make money. until these companies show us all some profitability, it is hard to argue that these valuations might be a bit ahead of themselves. emily: how do you think about that? airbnb has a valuation higher than expedia's market cap? dara: we don't spend too much time trying to kill brain cells comparing valuations. like brian said, investors get to choose how much they pay for a company. airbnb is a great company that built a terrific brand, good for them. in the public market, you have to prove your value everyday. if we do our jobs, our valuation as a combined coming will be

higher next year than it is now. that is what we can worry about. that is what we control. hopefully that is what we will accomplish. emily: will we see more deals? dara: we are constantly looking for more opportunity. we have done a lot of deals. my guess going forward, there are deals that will happen for this company. although i think we will take a little bit of a breather. emily: expedia's ceo and home away's ceo on their big deal. i want to update a story we have been following, the continuing drama with elizabeth holmes and not deleting herself against potential shareholder revolt. according to forbes, homes posed a stock split that would give

her voting control over the company. the report went on to say that in march 2014 it said they approved the splitanos. they have been under pressure following published reports that question the company's technology leadership. coming up, more of george zachary. i want you to hear more from him. ♪

emily: tomorrow on bloomberg television, blackberry ceo, john chen joins bloomberg go.

later that hour, a full breakdown of the latest jobs report. on friday night, a special report, our exclusive conversation with bank of england governor, mark carney. still with me, our guest host, george thackeray, general partner at charles river ventures. i want to revisit our conversation earlier about valuations and where the market is going. you said that there will be some pain. i wonder how does that look compared to 2000? george: on the private market side? it usually trails the public market side by about a year. the summer, august, september, everyone was like, the world is falling. everything has to adjust. now it has been about 1.5 months, but i hear from fellow venture people and founders, they say, that was just a correction. it is back to how it was.

it is not really, because public market risk is still there. i think we will see this in the private market. what is going to happen when valuations continue to decrease in the public market over the next 6-9 months, which i believe it will. in the private market, venture capital will basically afford smaller valuations and founders will push back and say, i should be worth this. emily: there will be right downs? george: some in the company's not doing well. a lot of companies will not be able to raise capital. they will have to raise money at down rounds. that is a huge ego hit for the founder. emily: are they happening already? george: not yet. most companies have enough capital to get through it. emily: what about layoffs? one of the things you are saying

is that companies -- there is essentially a hiring freeze. george: a lot of them are silent. people are not announcing them across companies. the execs are telling people, hey, we are not going to hire more people. slowdown. we need to decrease the burn rate, even though there is a lot of capital. let's hang in there for a while until we figure out the financing environment. emily: how does this play out? george: i do not think it is a mass explosion like 2000. i think we will see the balloon slowly deflating. so we will see more employees that are available in san francisco to work in tech. there will be a slow deflation in the amount of companies. it means lower salaries. it means lower rent in that area, which is good. emily: it is really the employs who suffer, right?

george: sure. the landlords suffer. i am not too sad about that. emily: thank you. you always give it to us straight. coming up, we will talk about drones. they describe themselves as the data-driven alternative to eyeballing in. meet the ceo who is mapping the skies for drone pilots. ♪

emily: it comes to navigation, drone pilots are still very much flying blind. a startup is trying to solve that and become the google maps maps or wave of the skies. today the company unveiled a 3-d map to the public. they have close to three land

-- $3 million in seed funding. george is still with us, and ariel seidman is with us. we tested the mapping out, as we show the video, walk us through it. ariel seidman: today when you fly, you have no information about what is around you. you have no understanding if it is 100 feet away, or 50 feet. you have lost all perspective. emily: that is scary. ariel seidman: i have crashed a couple of drones myself. i have lost thousands of dollars with this exact problem. we affix icons so that when you are flying it will tell you, you are 30 feet away from this, or 40 feet away from the building. if you get too close, you break this geo-fence and we alert you. it is almost like if you are

flying in a plane, pull up, pull up, pull up, we are not that dramatic, but this is a clear alert. emily: how much of the world? ariel seidman: we started in the u.s. we have over 21 buildings. this works across most of the major grounds. george: i think it is incredible he cool. when i heard about it today, i said i want to get this. ariel seidman: we hope you do. emily: what kind of data are users submitting? ariel seidman: we have discovered people like to mark their territory in the air. this is a virgin airspace. emily: everyone wants to mark their territory. ariel seidman: they create these

points. it gives you a unique perspective on a building. other people in the community can visit the same places. it almost gives you this recon of, what does this place look like from different angles? emily: google backs you. isn't this google maps? ariel seidman: google maps is mainly for cars. this is a three-dimensional airspace problem. that is a fundamentally different problem. maybe google gets into it one day. george -- emily: george, how optimistic are you about drones? george: in which space? consumer? emily: you do plan to do these commercially at some point, right?

ariel seidman: it is very recreational right now. whether it be hobbyist or photographers looking to enjoy a different experience. george: i think for recreational, it is perfect. i think majority of the market is recreational. where the military. -- or the military. i think there would be some applications for agriculture. i think what amazon is attempting to do for delivery, i think that is much further off than people think. i think regulators in states and counties will be nervous about drones going on heads. emily: how do you respond? ariel seidman: it is easier on the recreational side. over the next few years i do think you will see more commercial applications. there is a company and the city doing good stuff on the commercial side. i think you are starting to see

commercial application, i think those markets can coexist. it is a question of which one grows faster. emily: we will be watching. i hope you met the area around here. always great to have you. thank you so much for stopping by. kris jenner and her agent are getting sued over the hit kim kardashian videogame. the lawsuit alleges that the kardashians asked a video game developer to prepare an original program for the game four years ago. they released the game in 2014, in a statement to bloomberg west, they said, it was completely frivolous. we were never contacted or had heard of the plaintiff before they filed this. the game grossed over 30% of blue mobile's revenue in 2014. that does it for this edition of "bloomberg west." tomorrow on the show, a

conversation about new media. that is all for today. ♪ . .

>> on today's paid program, you'll discover the secrets to not only aging gracefully, but beautifully. while looking your best every step of the way. cindy: my philosophy on aging is the same as my philosophy on living, which is do it well and take care of yourself.