♪ emily: i'm emily chang in san francisco, and this is "bloomberg technology." coming up in the next hour, the u.s. justice department accuses chinese officials of coordinating a decade-long espionage campaign to steal ip and data from dozens of companies around the world. we will talk about the fallout of this expensive hack attack. plus, another legal win for qualcomm. the chipmaker claims another victory over apple in germany. will the iphone maker have to change its strategy?

and the billions that netflix is spending on content is paying off as massive subscriber gains and big rewards. but will the advantage be under threat in 2019? first, to our top story. accused tostates has chinese nationals of coordinating with national chinese officials against dozens of united states companies and abroad to steal intellectual property and other data. assistant u.s. attorney general rod rosenstein outlined his case before the press. >> our department has repeatedly cast a spotlight on china for its state sponsored criminal activity targeting american corporations. more than 90% of the department's cases of espionage over the past seven years involved china. more than two thirds of the cases involving theft of trade secrets and are connected to china.

emily: this in the mist of rising trade tensions between the u.s. and china. we are joined by tom schellenberg, who covers enforcement for bloomberg news. tom, what do we know about these charges? tom: we know they are computer intrusion conspiracy charges. and essentially what the government is saying is that for 12 years, a couple of hackers who were tied to the chinese government were infiltrating both u.s. companies and u.s. agencies using traditional hack ing tactics, phishing and installing malware, and in the process, stealing all sorts of intellectual property and other data from these companies for a long period of time. emily: samm, presumably these hack attacks are happening all the time so what stands out

about this one? sam: i think this is a big deal, and it's a big deal because we it comes at a time when we are negotiating with china over a trade war. what it says is china is in breach of a 2015 agreement made by president xi and obama not to conduct cyber enabled industrial espionage. in this situation, how are we supposed to believe anything that they bring to the table in the trade negotiations? it also comes at a time when you also have a traditional espionage case. you have a case involving violations of sanctions by hauwei. this sends a strong signal from the u.s. saying that china notts the rules, they do play fairly. emily: tom, who are the victims here? which companies are we talking about? tom: the u.s. does not name any of the companies who were breached here, besides the government agencies, which was nafta and their jet propulsion unit, as well as the u.s. navy.

in terms of the companies, the best way they would describe it as a whole list of areas, from automotive to telecommunications to banking and financial services. nearly every industry you could think of was a victim of this hack, according to the u.s. emily: samm, in the context of the tension that is already escalating, how do you expect this to be received by the chinese government? samm: this is another data point that says the u.s. is potentially in a cold war with china. technology and cyber is front and center. and even as we are talking about paris, the issues that the u.s. has run much deeper. some speculate that there is no deal to be had. this is a much broader campaign. emily: in speaking with many business people who travel between the u.s. and china,

there is a lot of concern. you use the word cold war. that this is going to go on for a long time, that the relationship between u.s. and permanently, or at least damaged for the long-term. would you agree? samm: i see the u.s.-china relationship at a fragile moment. i think in the tech space, it is potentially going over a cliff. these are long-standing issues. this case, the indictments, this is not a recent case, this has been going on since the obama administration. but now we are in an environment where the u.s. government is not holding back. because what worked in the past did not work, and it is a recalibration of the relationship. emily: tom, what are next steps in this case? tom: these two individuals are not in custody. presumably they are still in china, which we don't have an extradition treaty with china, so getting them in custody without some type of deal with china, it is unlikely we will

see them in the united states. what this really does, it's set a narrative that the government wants to set that, despite having this 2015 policy or agreement in place, it is being violated. really trying to publicize that for the world, and this is one in a string of cases that the justice department has brought, and i are planning to bring more as part of the china initiative -- and they are planning to bring more as part of the china initiative they announced last month. emily: we will continue to bring you developments as we have them. tom schonberg and samm, thank you both. first china and now qualcomm is seeing another legal victory in germany in its patent fight against apple. a court in munich says qualcomm can block sales of some iphone models, but the ban will not start immediately. qualcomm has accused apple of infringing on its patents. earlier this month, china said it would ban sales of certain iphones. for more, i want to bring in ian king. what makes this ruling in germany significant is that we

are talking about hardware, not software, which is the case in china. ian: that is absolutely correct, the idea being that if it is software, you put your program to work and everybody gets on with their life. contrary to that here, it is related to hardware, which implies if you are not successful on the case, you have to redesign your phone creating a lot more trouble for the phone manufacturer. emily: we are talking about older iphone models, correct? ian: correct. everything up until the recent announcement that we saw this year of the new models. but obviously, qualcomm has said in the china case it intends to seek an extension to the ban for the recent models. emily: could the same thing happen in germany? ian: you have to assume that is what they are going to do to have the maximum impact. emily: we have seen a war of words between the companies. apple's lawyer was on the show earlier this week. he said he does not believe apple has much to worry about

with this china band. take a listen. >> it's not a blow at all. it's part of qualcomm's distraction technique. they went in secret and got in order. my clients, the companies that build the iphones and ipads, were not even -- did not even know about it. it's an order that relates to software. it does not have to do with the cellular technology or the issue in the lawsuits we have against qualcomm for my clients, where we seek about $9 billion in damages. emily: in the meantime, qualcomm's general counsel thinks otherwise. take a listen. >> this is clearly something that was subsequently -- substantively ruled on, and the order is something that needs to be taken seriously. unlike apple seems to be. if it were my company, i would have immediately indicated that i would be abiding by this court order and following it to the letter.

emily: ian, there are so many open cases going on around the world, but these last two rulings appear to indicate the momentum is in qualcomm's favor. ian: there are two sides to it. the qualcomm angle is to use patents to hurt its former customers, apple shipment, to slow them down and bring them to the negotiating table. but we have another case, the ftc case. so far, the judge there has been restricted in the saying, you cannot argue this, qualcomm, you cannot argue this, qualcomm. their attempt to force bans appears to have some audience in the courts. emily: what is their response to the rolling? ian: they say we will take a

couple of phones off of the shelves and don't worry about it. the seven and the eight will still be for sale, so don't worry about it. we will appeal and see what we are going to do. emily: does it seem apple will need to change its strategy? ian: it's too early to say. they can afford to have carried this fight on much longer than qualcomm has. they have a lot more money and you are in a financially stronger position. why wouldn't they appeal? why wouldn't they push this further? why wouldn't they see if they can put more pressure on qualcomm? emily: fascinating. so many twists and turns. ian king, always appreciating you keeping us updated. thank you for stopping by. coming up, facebook is once again seeing negative headlines and pushback, but will it impact the growth of the social network in the long run? and if you like bloomberg news, check us out on the radio. you can listen on the bloomberg app, bloomberg.com, and, in the u.s., sirius xm. this is bloomberg. ♪

emily: facebook is facing government scrutiny amidst new regulations that it cut special data deal with 150 companies, including spotify and netflix. sharing more information about its users than it disclosed. the company is being sued by washington, d.c. and more lawsuits from the states could follow. this, on top of an inquiry from the doj and sec. dive onaking a deeper impactl of this will growth long-term. will this hurt long-term or not? >> you have to look at two things. if you zoom out of the regulations, it is giving an

opportunity for amazon, for google to gain market share. advertisingking very seriously. if they take that social media aspect they have been pushing for a while even more seriously, they have an opportunity to take market share. google on the other hand, their mobile search potential is still underestimated. if you look at how much the search has changed, when you use d to search on mobile before, there used to be 10,000 pages. now it is, load more. it has become more of an app experience. it's becoming more important for you to be there from an ad perspective on mobile search from what google is doing. emily: that is ads, what about users? i have this chart, which shows the number of people using facebook everyday continues to grow. 20%. 20% of the world's is using -- of the world's population is using facebook everything will

-- is using facebook everyday. yet, we had rich greenfield on the show earlier this week, and he does not think this will have an impact on growth. take a listen. >> consumer usage of facebook has been in decline, not in terms of users as much as time spent shifting. without a doubt, that time is shifting to instagram. you have seen explosive growth of instagram over the past couple of years. i think that is very much unchanged. consumers love using these applications. they continue to love using these applications. there is not a great alternative. emily: there is not a great alternative other than not using them at all. so, does that mean this is not really going to impact user growth? jitendra: near-term, no. instagram, like rich was mentioning, the engagement in -- the engagement keeps on improving. within instagram, it is mostly on stories. that is what is shaping up the outlook for facebook for next year. you have to convince advertisers they can produce the same number

in advertisement that they used to. out of all the problems facebook has today, one thing we are most confident about is they will be able to crack live stories, mostly in the second half of the year. first half, it is more about demonetizationw potential is there. also, dealing with risks with regulations, fines, and things like that. it's a story of two half's. emily: what about messaging? jitendra: messaging is an important point for the long-term growth story. messaging needs two things. you need a trusted network for things like customer support, e-commerce, instant messaging and things like that. secondly, you need partnerships. with all of these scandals, partnerships, regulatory approval, payment gateway, those things become more challenging. so they have to figure those things out. emily: is it apple that is the big competitor here?

jitendra: exactly, you are right there. apple's business chat, they are integrating businesses with apple pay. basically, you could chat with somebody from a business directly, use a network payment if you want to. there is a developed market to give facebook the competition. both are going to different strategies, but what will hold facebook back is this difficulty in striking payment network issues and difficulty -- or delays in striking. emily: will they figure out how to monetize whatsapp? jitendra: i'm more confident about live stories monetization than messenger and whatsapp, at least for 2019. it's going to take time. first, they have to address the misinformation issues. again, going back to the regulatory aspect of things, those things need to be addressed first. and then, the monetization aspect could be coming.

investors need to adjust the timeline. emily: jitendra waral, thank you so much for breaking that down. coming up, terry go is not backing down in the midst of a trade war between the u.s. and china. this is bloomberg. ♪

emily: poultry a has made it -- altria has made it official. the tobacco giant is spending $12.8 billion for a 35% stake in jull in an effort to offset declines in cigarette sales. the deal values juul at $38 billion. that makes it one of silicon valuable private companies. a few months ago, it was not unit $16 billion after tiger global management led a $1.2 billion investment in the company. meantime, foxconn is known for being the biggest assembler of iphones. terry gou, the chair and largest shareholder of foxconn, he is

also taiwan's richest man. this is the story of how gou turned a small operation in his shed into the biggest electronics operation on the planet. now, he's building a $14.5 billion factory in wisconsin. >> if you open an iphone, this is what you would see. all of these parts were put together by a company called foxconn. many of the parts themselves are manufactured by foxconn. almost any piece of electronics have some components from the is owned by the guy, billionaire terry gou. he found success by making deals with the biggest tech companies and following through. >> following through client delivery is number one. even if that means taking big risk because he is confident once he lands that order, there will be benefits. and it is usually the case. >> he even expanded into the

u.s., by building a $14.5 billion factory in wisconsin. this is how one man turned a small operation in his shed into the biggest electronics operation on the planet. foxconn is one of the largest employers in the world, with over one million workers during peak iphone season. that is a commodity politicians like to offer during election time. jobs. so, when it came time for president donald trump and various u.s. states to decide where they want the promised factory, gou has them playing against each other for the best offer. >> they took the bait and offered a lot. they offered massive, massive incentives. one of the biggest packages in u.s. history. >> critics say the factory will most likely not create as many jobs as promised. people are calling it a white elephant. but gou doesn't care. wisconsin is paying him $4.5

billion in taxpayers money or $1800 per taxpayer out. -- per taxpayer. >> we have agreement packers jersey with your name on it. >> at the end of the day, terry gou is a big winner. in the state of wisconsin will be a winner. >> other countries have sought similar deals including brazil, indonesia, and various chinese provinces. that is because gou has a reputation of pulling off massive operations. offering companies a one-stop shop to electronics. >> there's no other company in the world that can do what terry gou does. even two decades later. foxconn is still the master of assembly. and it is because terry gou is always looking to try to look ahead and keep customers happy. >> early on, gou saw opportunity by streamlining process by automation and cutting out the middlemen. in the 1970's, taiwan had a booming export economy.

but most electronics from that time were made in japan, where the factories were. and then they were treated in taiwan, who had the connections to the rest of the world. a 23-year-old gou got a first-hand view of the potential to make money. >> he realized there is money in this. maybe i should go out on my own and do some of this. why be the person in the middle when i could be the one doing the actual, original production? >> he decided to go into business for himself. using a $7,500 loan from his mother, he rented a shed in a suburb, and started making channel changing knobs for black-and-white televisions. after that, he had a series of big breaks, starting with making components for atari, and later dell. dell and other companies would buy parts from their suppliers and assemble them in their own factories, but gou created a production line integrating most of these parts and processes

from the raw steel of casing and connectors to the final assembly. gou was also among the first wave of taiwanese factories in mainland china. >> he saw the writing on the wall in the 1970's. this is a place to do business, to build friends, to manufacture things, not only at the low labor rate, but it was going to be plentiful staff. 40 years later, it's one of the most perfect government corporate partnerships in the industry. >> eventually, gou landed a deal with apple, and the rest is history. 50% of their estimated $165 billion in revenue now coming from revenue. -- from apple. but it was not always going smoothly. foxconn hit international headlines in 2010 after a series of workers' suicides at their main factory in shenzhen. >> to put it in context, the suicide rate in china is around 20 per 100,000. terry gou had about 20

million people working for him at the end of the cycle, which would imply 200 suicides per year, but they had well below average but higher than anyone expected. because this was a company supplying to apple, it became famous as an apple supplier and suicide problem. >> after the 2010 scandals, he raised wages, set up health care clinics and hotlines to give advice to help workers. foxconn weathered the crisis, but it was already facing a big long-term issue. for the past decades, revenues for electronic hardware manufacturing has decreased, and software is on the up. almost all the world's biggest tech companies are non-hardware. gou has not been able to diversify products. >> foxconn has been trying and trying and trying for years to get into things i cloud services, software, but they are not good

at it. terry gou does not have that creative thinking. he does not look at the product to say how can i charge more for it? that's the biggest challenge facing foxconn in the future. ♪

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emily: this is "bloomberg technology." i'm emily chang in san francisco. streaming has become the next gold rush. for media companies. and netflix has competitors racing to catch up. it has been a banner year for the streaming giant, with nearly 29 million total subscriber additions expected this year. over 676 hours of original content, and its first box office debut. it even took the emmys by storm with 112 nominations. >> nbc has the most nominations of any broadcast network. great. [applause] >> yeah. >> which is kind of like being the sexiest person on life support.

it's not great. [laughter] >> still not looking great. >> not great for you guys, no. >> netflix, of course, has the most nominations tonight. >> [cheering] >> that's right. if you are a network executive, that is the scariest thing you can possibly hear, except maybe, sir, ronan farrow is on line one. [laughter] emily: but it is not just smooth sailing ahead for netflix. competition is on the horizon with disney, at&t, and nbc planning their own rival over-the-top networks. joining us now from new york to discuss is our guests. netflix nominated for a lot of golden globes. more than any other streaming services, more than hbo. is 2019 going to be as smooth? andre: no, it won't be. [laughter] emily: why not?

andre: i think netflix has never really had to face direct competition for audience attention. they were the first mover in terms of the over the top streaming service and had a head start not only in terms of licensing content, but producing content specifically for streaming. you mentioned disney, at&t, potentially nbc universal. there is also a lot of free streaming solutions that are gaining rapid market share. there's no barrier to entry in terms of technology. and so, i think 2019 is going to be a year where it is very challenging for netflix to maintain that market dominance. emily: this is a company that continues to spend billions of dollars on original content. we don't get a lot of information on viewership from netflix, but this year, they did release a list of their top 10 most binge watched shows. paul, some of the usual suspects weren't actually on this list. so, how successful does this

indicate netflix's original content strategy has been? paul: i think it is important to distinguish between the most binge-watched shows and the most watched. it doesn't mean that if a show is being binge-watched, it is necessarily the most popular show. all of that is academic when you look at the bigger picture, which is that netflix is driving a lot of new subscribers to the service and retaining a lot of subscribers, mostly with originals, also with the content they license. and i would push back a little on andre's point that they never had direct competition, because i think hulu and amazon are certainly direct competitors. obviously, the competition is going to intensify in 2019, with disney, at&t, and others, but i think netflix has not only the early mover advantage but also just a great wealth of content in its portfolio. emily: yet, there is a criticism

that it is quantity over quality. they do have this new movie "roma" out now. some of the reviews have been mixed. the launch did not come off as smoothly as perhaps netflix would have liked. andre, do you think netflix is doing too much? because is funny, have in the past thought that netflix might be overstretching itself in terms of the amount of money it was spending on developing new content and licensing content, particularly not just domestically but also trying to fight on multiple front lines overseas as well, where they are competing against media companies in brazil, say global tv or i-flix in southeast asia that have a lot of the local content right. s. but i would say, you know, netflix is doing what they have to do, because they knew at some point the economy of scale would switch and the content they are most reliant on for growth would

be pulled from the likes of disney and others. for three years, if not more, they have been planning to, how they can fend off the coming battles. i would say amazon and hulu have not really been legitimate competitors, because the amount of money that were spending was not in the stratosphere of what netflix was. that is now catching up as well. they are going to be more legitimate competitors than they were previously. emily: netflix has really high profile content deals with talent like shonda rhimes, the obamas. are we going to see the fruits of that? paul: that's a long term strategy. it does take a while for the kinds of shows that the people you mentioned plus some others -- those things take a while to develop. i think we are going to start see the fruits of that. even with some of the things

they have been doing lately, like with bruce springsteen. they're working with ellen degeneres. that celebrity driven strategy is going to pay off for them eventually. emily: what about international? this is the first year that netflix overseas revenue surpassed u.s. revenue. where should we be looking for netflix to make some huge gains and perhaps also run into some challenges abroad? andre: so, i mean, i think everybody has known that international is going to be where the real opportunity for growth is. domestically, in the united states, you have about 80 million over-the-top connected tv homes. it is several times more than that internationally. and markets like latin america and asia are growing faster than north america. so, there's definitely going to be tons of opportunity. i think the challenge for netflix again is going to be pricing in some of those markets is going to be difficult to increase pricing.

also, the amount of money that they are going to have to spend on original content is going to be very high, because the popular content in many of those markets, they just will not have rights to for the next two years -- the next few years because it has been locked up already. the other challenge that i will mention, i think that is going to be very interesting as we look into 2019-2020, disney is more than just a content company. they are a whole entertainment experience, a lifestyle with the merchandising and the theme parks. i think one of the things that may be interesting as netflix has invested a lot of money in content, what are the other things they could do to diversify their revenue stream outside of just subscription revenue? emily: paul, how does netflix do that? the disney situation is a double whammy. not only are they launching their own human service, they are pulling their content off of netflix. paul: absolutely. yes, i think if not 2019, then

maybe 2020 will be a year when netflix is really forced to either reinvent itself or pivot, do something different from what it is doing now, which is a very simple, straightforward business based on subsequent. there is a ceiling to that, and i think they are getting close to that in the u.s. they are not as close to it in overseas markets, particularly some of the ones that andre mentioned. but yes, i think there is going to come a time when that business model run its course and netflix will have to do something different. i wish i could tell you what that might be, but i think if i knew what it was, i would be sipping a tropical drink on my veranda in a caribbean village. emily: in the meantime, the rest of us will be holiday binge watching. thank you so much for stopping by. meantime, twitter shares fell dramatically on thursday after a new report from citroen research. the firm cites reports by

amnesty international that says twitter is a toxic place for women who use the platform. according to the report, 7% of tweets that prominent women in government and journalism receive were abusive or problematic. citroen went on to declare that twitter has become "the harvey weinstein of social media." looking back in 2018, the stock gained 20% while its peers saw a decline. here to discuss is bloomberg's sarah frier. you and i have both been on the receiving end of some of these tweets. so, this is nothing new. what's significant about this? sarah: the significance is the attention it is receiving, particularly from citron, which has the reputation of going after companies and successfully having an activist position on them. and so, that is one reason the stock is reacting so much, because we've seen a lot of talk about abuse on twitter for years. i mean, it has always been a problem there. but now, the idea that that kind

of abuse can affect the bottom line for the company and its prospects is something that really hasn't been addressed at this level by wall street before. emily: something that we all suspected, however. so, what does this mean? twitter says they are working on it. they have new measures. they have taken more dramatic steps than, say, facebook. but what's next? sarah: well, twitter needs to figure out where the line is going to be drawn. a lot of their decisions seem subjective and inconsistent. they will make a decision and then there will be a blowup. it is similar to what we see with facebook. there will be a blow up in the public. how did you decide that, why did you do that? then twitter will reverse a decision and say we made a mistake. it is just this constant process of little things that don't makes sense to every day users. meanwhile, you have broader concerns about what the company has decided to take off its

platform. is it having bias against any certain kinds of people with opinions? and so, i think, abuse of women is certainly an area that, it's hard. are these opinions, is this harassment, is it credible? are these threats credible against these women? so, these companies have a very tough time coming to a consistent policy application. emily: is this going to impact advertising finally? sarah: it always has a little bit. advertisers when i talked to them say there is a brand safety issue on social media. you do not want your ads to show up next to one of these abusive comments. twitters algorithmic ordering in the last couple years has helped fix some of that. a lot of the worst of the worst doesn't get bubbled up to the top anymore the way it used to. but still a long way to go. and i think it helps that advertising is separate from the

user posts on twitter, but with video and other categories, new categories of advertising that are more difficult. emily: we will keep our eye on the impact of this report. sarah frier, as always, thanks for stopping by. coming up, the future of money. we take a look at different aspects of how technology is disrupting the financial sector. this week, a u.k. start up says it aims to become the amazon of banking. plus, uber's self driving cars are returning to pittsburgh. but have the safety measures improved? this is bloomberg. ♪

emily: amazon is struggling in the grocery business more than a year after it bought whole foods. according to a new study, the number of amazon prime members who shop for groceries on amazon at least once a month fell this year. the average amazon online grocery order is smaller than those that use grocery delivery and pickup from brick-and-mortar retailers. time now for our feature on the future of money, where we take a look at how the digital world will impact money. london has been a hotbed for start-ups but britain's decision to exit the european union has complicated life for a lot of businesses. now, u.k. firms are looking to other european jurisdictions for licenses. companyt london-based to receive one is revolut, a company awarded a license to lamia'-- washe awalithuania's central bank.

joining us to explain what it means for business is the ceo of revolut. thanks so much for joining us. lithuania is not a jurisdiction known for financial transparency. why there? >> it became a fintech hub for a lot of financial companies. in lithuania, because of, i think, digitalization, right? so, i mean, the central-bank there is very tech friendly. that is why we decided to apply lithok the lamia -- to uania for the central bank. emily: this need to have more opportunity, but it also means you have more risk. and you will potentially need to hold a lot more capital. couldn't that limit your growth? customers comeur for other banking products. we decided that we need to get -- so we applied.

for the customers, it means 100,000 euro protections on their accounts, debits, and other products. trading, and so on. emily: to what extent do you think your growth has been due to a decision to appeal to the crypto community? nik: well, so we launched a cryptocurrency in december. there was a huge jump in the number of users. but at the moment cryptocurrency was 5% of our business. so, i don't think it's actually as significant to user growth numbers. emily: you have got plans to launch in the united states. 100,000 people on the waiting list. how do you plan to compete with companies here like robinhood? nik: just offering products. -- just offering much better products. trading app. while we plan to come to the u.s. and offer the whole range of banking services, including

trading as well. emily: saying that you aim to become the amazon of banking, that is quite bold. what is the big vision here? what makes you think you can become the amazon of banking? nik: well we have developed new products. we have great platforms, we have a great team, we have resources to launch as many products as possible. we already have a great track record doing it. right now, we are licensed in 28 countries. we have more than six products on our platform. we'll continue innovating and launching products people need. emily: well, we'll continue to keep our eye on you, revolut. still ahead, uber's self driving car program getting a reboot after a fatal car accident. -- a fatal pedestrian accident. what changed? what a seven cents -- what has happened since? we will discuss. we are live streaming on twitter. follow our global news network

tictoc on twitter. this is bloomberg. ♪ emily: in the u.k., london's

gatwick airport was closed for six hours after reports of two drones flying over the field. that led to more than two dozen incoming flights being diverted. unmanned aerial vehicles are becoming a safety threat to airplanes. they are generally banned from operating near airfields. uber's self driving cars are hitting the road again, nine months after a death of a pedestrian in arizona. received thehas all clear from the department of transportation to resume testing in pittsburgh. the company says it will return one or two cars to public roads in pittsburgh where testing

resume with more limitations and new safety measures, including improvements to braking and driver monitoring. autonomous cars will be deployed in san francisco and toronto to be driven in manual, human driven mode. joining us to discuss is eric newcomer. what has uber been doing since that accident up until now? eric: three reassessing on every level. -- reassessing on every level. looking at the safety of drivers, looking at what braking technology they use, what is on and what is off. what they maintain from the cars -- they get this technology from automakers and they couple it with their self driving technology to interact. i also think changing processes, saying, ok, we are going to drive at a slower speed. we're going to do it on a much smaller circuit here. where they are going to be driving in pittsburgh will be a much smaller course than before. emily: one or two self driving cars. that is not very many. where else are they testing it? is there sense i got

is not a lot of room on this course. you can fill it with a ton of self driving cars, because it is so small. in toronto and san francisco, they are in manual mode, which literally means a human being is driving the car. but the cars, these autonomous vehicles take in data that uber can use. you imagine that getting them back in manual mode is one step on the path to try to get them back in true autonomous mode. emily: what is going to be the importance of self driving with the ipo coming up? eric: it is sort of a risk for uber, certainly a major cost center. i think, hundreds of millions. i think that's going to be a risk for them. we talked to the ceo a while ago, and he said they are going to look at all sorts of ways to spin it out or different financial vehicles for the program. i think that is still an open question, sort of what they do with the autonomous program. what they want is an upside. it is still good to be able to say, whenever these vehicles are ready, we are in the business of

autonomous vehicles, but it is a major cost center. emily: and how is where uber is in self driving compared to lyft? eric: lyft, more partnerships, started later. i think uber has more of its own self driving vehicles out and about. but lyft is aggressively trying to catch up with the idea that they can partner and also just, as time passes, it becomes easier to catch everybody else. what was once novel is easier for a new company to play catch up. emily: all right. eric newcomer, thank you. that does it for this edition of "bloomberg technology." on friday, we will look back at the biggest successes and blunders for apple over the last year. of course, we are live streaming on twitter. you can check us out @techn ology. follow our global breaking news network tic toc on twitter. this is bloomberg. ♪

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