>> i am emily in san francisco, and this is bloomberg technology . coming, spotify versus apple. the music streamer calling for the eu to investigate the iphone maker over how it treats rival services, saying it has created an untenable situation with ever-changing rules and a massive tax. plus, google power struggle. new court documents. he coulde worrying

lose control of the company and delivering what one director called a veiled threat to quit. takingdes of the aisle up the issue of breaking up big tech. washington's new agenda. first, our top story. spotify taking on apple. they argue that apple should be allegedlyr how it squeezes rival services. key bank spotify is largely on the right side. any big change to payment terms could affect apple earnings and cash flow. i want to bring in the cofounder of elevation partners, and also mark who covers apple. so what is spotify arguing in this complaint? mark: spotify is arguing that apple as the platform owner but also developer of the competing

the developer of the competing streaming music service and apple music is giving a lead up up over spotify and spotify is complaining that at that is unfair. >> does spotify make a good point? mark: spotify does make a great point where is apple is playing both sides. but i find it obvious that apple as an organization of business is going to promote apple music. one of spotify's points is that apple takes 30% cuts for subscription apps that only compete with its own services, but that is not the case. apple takes that 30% for the first year and 15% for the second year for all subscription apps. and you are seeing companies working around that cut by making sure users can't subscribe via the iphone. they have to subscribe via a website or other platforms and log in.

what you are also seeing increasingly are app developers raising their prices exclusively for iphone users in order to take back the tax of 30%. would you saye the argument is? >> the argument is way less clear-cut then people would you have -- would have you believe. there is a case working through the courts on this exact issue. apple's situation from an antitrust perspective is going to be hard to defend. the issues we worry about with other monopolists come to bear. being a market maker and at the same time, the owner of one of the participants in the market. apple is going to have to work for a hard to justify this. what makes people so that ache towards apple is the app store has been one of the ways apple

has protected customers from the predatory surveillance of products like google and facebook. they have done a good job of that. the app store is one of the good guys. in this case, spotify is making a point about participating in the market. argument is way less sound than they want us to believe. i believe the antitrust argument has some weight. >> how is apple responding? >> they have not said anything. somethingink this is apple put much consideration into while developing apple music. apple has sold its own applications. this is a similar argument to apple not being allowed to sell its own products at the apple store because there are hundreds

of them around the world. are notknow why they allowed to sell their own applications. what i do somewhat agree with, they could level the playing field. only apple applications can be set as default in the default music player. the default email is not gmail. apple added a toggle where you can make any in equals the sin. that could push back against an antitrust issue. >> i am sensing you agree. >> in general, i do but i am sympathetic to their position. i cannot make a good intellectual argument for it. is people should not make markets and participate in them. i am not sympathetic to spotify because they have done harm to musicians and copyright owners in the music business.

this is a difficult thing for me to look at a emotional he. >> you are a musician yourself. and say fromthis an investor's point of view, in the european union, the antitrust case is going to be decided on the merits of the antitrust laws. >> the case is pretty solid here. if they wereis faced with the choice, with a be willing to shut down apple music or manage it a different way in order to continue to have the same basic business model? clearly notis important enough to apple to store inosing the app its current levels of control. touted thishas business as becoming a bigger part of the business.

>> i think that is looking at it too narrowly. the big business opportunity is to take the hardware business and make that a subscription. you pay something per month and you get a bundle of services with the base case and then you can pay more for more services. in that context, apple music looks different than it does today. and its relative weight in the bundle is going to be different. i look at this thing and if i am apple, you have to look apple music and ask, is this as core going forward as it might have been a couple of years ago, and i'm not sure what the answer to that question is. emily: meantime, apple's holding in of that and a couple of weeks where it is going to unveil its streaming and original content strategy. we hear there might be celebrities at the event. what are you expecting? mark: this is an interesting backdrop to the spotify situation because apple is going

to really announce itself as a services company on monday, march 25, by introducing their competitors to netflix, their magazine subscription service, and their new credit card strategy. i am expecting that and all sorts of services discussion. i agree with roger about apple shifting to a subscription model. one more thing on spotify, spotify put out this website and it has a list of five issues it takes with apple. i think the simplest fix is apple could basically work with spotify and mitigate those five things. they are asking for better access to the apple watch, apple could do that. they are asking to be able to write an app. they are asking for percentage splits. they are asking for upgrades. annualas their

developers conference. i would be surprised if apple was not planning some of these things that would mitigate the problems on spotify's perspective, as well as the other app developers. smaller ones that do not get as much attention because they do not have their user base. >> we are going to have full coverage of that as that on march 25 right on bloomberg mark gurman, thank you for joining us. you are sticking with me. more to discuss. meantime, users of facebook as well as facebook messenger experienced outages around the globe on wednesday. a facebook person released this statement. we are aware that some people are having trouble accessing the facebook family of apps. we are working to resolve the issue. as soon as possible. coming up, breaking up big tech. we are going to break down senator warren's ambitious plan as she campaigns for president, taking aim at the power of google, facebook, apple, and amazon.

i want to hear what roger mcnamee has to say about that. and once upon a time, sxsw, that is where it all went down. this was a huge tech festival but now it is a place where ambitious politicians come together. we will discuss. this is bloomberg. ♪

emily: longtime tech and music festival sxsw turned into a campaign stop for presidential 2020 candidates. elizabeth warren promised legislation that could break up facebook, google, and amazon. senator warren says big tech companies have too much power. at another event, she declares that she wants to make antitrust cool again. a clear swipe at the same

company. what would a big tech breakup look like? still with us, roger mcnamee. i have been dying here -- to hear what you think about the proposal. what do you think about the planned war and laid out? roger: i really like what elizabeth warren is doing. she first reached out to me and others back in 2017 with her early thoughts relative to what was going on in technology. i was incredibly impressed by the insights that she had and comparing what was wrong in tech to what she had seen go wrong in the banking business where essentially, you had markets in which one side had vastly superior information and was able to control the information available to the other side and where people who made markets were also participating in them. when this thing came out, i was -- i have studied it very closely, and i believe in two different ways.

first is the big tech companies, google, facebook, amazon, are blocking competition from startups in their immediate area. they are basically causing innovation to come to a stall in and around the core internet. they have been amazingly successful at this. and i think that is a terrible idea, i want to end that. and war and is very much on that issue. antitrust is a progrowth way of doing that. second at&t the breakup case, microsoft. you have seen massive new industries created by using antitrust to stop the incumbent from dominating new spaces. so, i like that. i also like the notion of preventing companies that operate markets and also are participating. google and facebook do this and advertising.

amazon does this in its marketplace. i think that should stop. cross sharing of data are also really, really bad. i think that warren's proposal is the first step. i recognize the history of tech was misinterpreted in some of the statements that came out, i really could not care less. and the reason, the issues in tech, the dominance of the public square, the manipulative technology that people are using, their surveillance that is now pervasive in our lives -- that is bad for society and we should not allow that. new tech companies are kind of like the earliest 20th century companies so jpmorgan and all. emily: i should point out that there is no real breakup threat under today's law. a lot of that could change in a lot of lawmakers would have to

get on side. do you see a better argument to break up facebook, google, or amazon, or apple. which of those companies serves elizabeth warren's argument? roger: let us be clear. this is a position. you want to start with a position that says we are going to do something really dramatic. we may be open to finishing somewhere else. i think both the really understand this issue. whether you break them up or not is less important to me then you prevent them in operating in ways that stalled the economy. i think you can achieve some of this without breaking them up, but the threat is how you get them to the table to have the conversation.

i want to be clear about something. i am really excited about the strides we have seen in the trump administration, particularly in the federal trade commission and the antitrust department. what i've found is these are people that understand that there is something really wrong with what is going on in tech right now, and antitrust is the most pro-growth way of dealing with that. they are the antitrust tools and the regulatory toolbox and both of them are doing things right now that are a big, big change from what we have seen an antitrust under the obama administration and before under the bush administration. i do not think this is partisan, i think this is a right versus wrong issue. emily: facebook, google, apple, amazon, these are four different companies. do you think any one of these is more of a culprit or target than another? roger: i think google is by far the most effective at this. they had this insight into 2002. when they were trying to improve

search, they discover that you could use it to predict behavior. then they go in and do gmail, and they set it up so they could machine read all of the emails, which would tell them what people's behavior was going to be. people would tell you in the mail. maps.reated google they started things like street view where they drive up and down the streets taking pictures of everybody's private spaces. they do the satellite version. now you have google home. so you are putting audio and o in everybody's houses. they are taking away all of our privacy, where privacy defines being able to make choices without fear. but they are also taking away our pricing power because they manage our access to information

just like they manage anybody that has something to sell. they manage their access to consumers. essentially, they are centralizing the whole economy in the hands of google number one, facebook, amazon, microsoft, and verizon. they are the five guys at the core of that strategy. let's face it, it is a brilliant strategy. i just think we need to have a conversation as a country. why is it legal for corporations to own and to trade our most private data? why are they allowed to buy and sell and trade our credit card transaction data, which they get from experian and equifax. why are cellular companies allowed to sell our location? why are health and wellness apps allowed to sell data that if it was a hospital they would not be able to? any internet companies allowed to sell our search history online. emily: does apple stand out to you from the rest?

roger: apple is not perfect. a lot of what they do in china, i object to. but what they are doing in this area is fantastic. the reason why i have mixed feelings, i am hoping there is a way for them to it avoid the antitrust problem. i think apple is trying to be a good guy, and they really succeeded. the iphone actually does protect your privacy and security in the ways that google's androids does not. i want to reward apple for doing that. i don't tar them with the same brush, even though there are clearly areas where they are vulnerable, and the spotify case would be one of them. emily: we could spend hours talking about this, always appreciate having you here. thank you for coming in. roger mcnamee. always appreciate you stopping by. coming up, president trump says the u.s. is grounding the 737 max.

we will cover the new and ment followingp the second crash in five months. this is bloomberg.

emily: president trump announced the faa will ground the 737 max 8 and 9 planes. here is what he had to say earlier from the white house. pres. trump: we are going to be issuing an emergency order of prohibition to ground all flights of the 737 max 8 and 737 max 9, and planes associated with that line. emily: brooks sutherland cover s the industrial sector and joins us from new york. the faa saying they gathered unspecified evidence at the site.

what exactly do we know if anything about this evidence? still don't know very much as far as what the new data is that would convince the faa to reconsider its position. we did hear from canada earlier today that shows that there was new surveillance data from the crash that was inconclusive that suggested there was a connection to the earlier crash in october. that is what gave canada or reason to say, we are going to put the brakes on this. president trump did say the u.s. is working closely with canada, so they may be talking to about the same surveillance data and different interpretations of it. american, southwest fly the max eight. why is the max 9 included here? brooke: i think it is a blanket ban on the entire family, but the max 9 has not had any crashes.

it is a slightly different model. it is interesting to see them include that in this. i think they are playing a little bit of catch-up. concerno demonstrate for the safety of the passengers. reluctant to demonstrate earlier. >> emily: what are we hearing from boeing? we heard about the software update that did not roll out until after this crash. it took several months. is there any explanation? when you are talking about a life and death issue? brooke: the software update is not in place yet. they are expected to have that by april. they are working on it. has not communication been great. i have a column saying it is ironic boeing is calling the faa

grounding proactive because it is anything but. they are late to the party. every other regulator has already grounded the plane. to gethas an opportunity out in front of this and take control of the narrative. still don't know exactly what happened in the ethiopian airlines crash. airplane crashes when that is relatively rare and 340 people that passed away. it calls for conservatism as we try to figure this out. >> we still don't know the actual cause of the second crash. whether it is connected to the first. brooks sutherland, thank you so much for that update. coming up, larry pages quest for power. how he does not lose control of google. and later in the show, elon musk versus the whistleblower.

how tesla's ceo hits back. the factorye leaked was not running efficiently. this is bloomberg. ♪

emily: this is "bloomberg technology." nearly 21 years ago larry page and sergey brin started what is now the behemoth google. it has become one of the largest public tech companies with him a market value of $830 billion . with any company becoming public is the threat of founders losing control, something a board member described as a concern to cofounder page. according to confidential emails and other documents recently unsealed in a court case, we know how he wanted to keep his grip on his creation. why should i sacrifice and work so hard if i might not be in control?

that is what he allegedly told a former google director. we have a professor from george washington law school who specializes in corporate governance and our mark ber gon who covers apple. -- covers alphabet. what is interesting is is not the first time we have seen any end of division between the google founders. why page wanted this was because he was concerned what sergei brin would do with his shares. explain what happened. >> that is what he expressed to the board. we don't have larry speaking at all here. there is a deposition from sergei. you can see from the beginning, the board brought on eric schmidt, he comes back, visits steve jobs, ask what it takes to be a good ceo -- asks what it takes to be a good ceo. he is trying to pivot the company in a big direction.

sergei brin is going into the beginning of self driving cars. we talk to people involved that had said there was always tension between the there was two. always a healthy tension their documents show at times maybe it wasn't. larry was concerned one of them would sell their shares and an outside group would have a controlling stake. emily: the founders wanted the creation of a new class of shares. they already had the class b shares. and votes of regular shareholders, shares for regular shareholders had one vote. mark: initially they said december around christmas we will give this three weeks. the board pushed back and there

was back and forth, and the lawsuit demonstrated there was a bigger push back. emily: illini expressed concern about pages and threads and the board created a committee to look into whether a shares should be granted. what do you make of how google's board handled it? >> i am impressed, looking back on stockholders with a controlling the stake is not easy. they pushed and insisted on larry explained what it was up to. if he was concerned about ordinary dilution, they could avoid issuing stock. they could use cash for acquisitions and purchase stock back. they pushed hard and his men -- main concern seemed to be if sergey brin would sell his stock, larry would lose the jet oint majority control. issuing the no vote stock would solve that problem.

he could sell to sergei brin for the b and retain control. the board did a good job. emily: the board still decided to start this new class of no voting shares. mark: we saw john doerr's a good example. he has been a board member for a long time, originally against the proposal. one deposition said he changed his mind, convinced it was the best way to recruit talent. a huge concern of google has been about recruiting the best talented engineers. emily: keeping sergei brin and page engaged would help recruit talent. mark: and they made the biggest $12.5 billion acquisition of motorola, they had plans coming to fruition with alphabet and self driving cars, biotech and health care, all the stuff that didn't exist in google in 2011. now much grander and areas moving in different fields that arguably could not have happened

if the founders didn't take control. emily: when you give founders control there is there is the risk of them not making great decisions. larry page personally approved a $150 million payout package for andy rubin, accused of sexual harassment, and permitted this guy to leave quietly and invested in his company. also played another google executive $45 million, also accused of sexual misconduct. where was the board? larry: both of these examples show the downside to dual class. the proponents of argued the founders envisioned in their out long-term outlook warrant control. but the downside is you sacrificed accountability to shareholders. if it is true, and i think it is disputed by the company and by

the executive who was leaving that the ceo or founding shareholder is able to unilaterally make that decision. that is a downside. i can't say the board has a lot of power in this situation, but it points out some of the negatives and problems of managerial accountability with a dual class stock. to the extent that sergei brin was thinking about selling anyway. larry has sort of faded a little bit in the background. running the company it is not obvious what their vision and sense of the long-term vision is that warrants disproportionate control. emily: andy rubin did ultimately leave with $90 million, but other tech companies have emulated this dual class model, facebook's mark zuckerberg, you have upcoming ipo's, founders of

companies doing the very same thing. is the dual class structure a good thing for shareholders and the company? larry: it is good when they have that vision and secret sauce and outlook, and sometimes it can be very helpful. it has been used successfully in these tech companies, by nike, with phil knight. if the guy has a secret sauce it is helpful. the downside is you have to trust the fellow that he will be able to remain accountable. this episode suggested downside. and areho support it proponents need to be careful. when we get some obnoxious behavior, you will get public class andgainst dual people may crackdown. that would not be in anyone's interest because sometimes a device is useful and effective.

we need to protect it, and those who benefit ought to indicate the trust that is being shown. emily: george washington university's lawrence cunningham thank you so much. a whistleblower, lawsuit and reports of a fake shooter. what do they all have in common ? tesla's gige factory. find out how to. this is bloomberg. ♪

emily: it was back in june 2018 a business insider article detailed how inefficiency at the tesla factory in nevada cost $100 million. that came from a whistleblower believed to be martin trip, a former employee. but the story has been one wild

ride after another after investigations into corporate espionage, a lawsuit, a security guard charged, and a fake mass shooter report. to untangle it all for us, matt robinson who wrote about this in the upcoming edition of bloomberg businessweek. it is tangled up. there are new developments that other tesla employees have spoken to the fcc and that tesla's response to the leaker was out of proportion. what exactly happened? >> that is right. marty trip came out, business insider story out in the beginning of june saying it was determined trip was the one who gave information to the reporter there. our story was reporting the individual in charge or involved in figuring out who trip was said they went overboard trying

to figure out who he was, saying, disputing some of the information from tesla itself saying trip didn't sabotage or hack company systems. but basically making accusations they didn't have the evidence for. emily: the security employee told the sec they hacked into tesla, trip's phone, had him followed. trip and elon musk were involved in a heated email exchange, trip saying you have what is coming to you for the lies you told the public. elon musk said threatening me makes it worse for you. you should be ashamed of yourself for framing other people. you are a horrible human being. trip responding, i never framed anyone else or insinuated anyone else is involved, putting roads -- cars on the road with safety issues is being a horrible human being.

the pr department itself perhaps spread the rumors, we don't know for sure. >> trip was fired on news of the june 19. lawsuit, tesla sued trip saying he had basically taken valuable ip, and that exchange was that morning after that lawsuit came out. a few hours later there was a tip placed to a las vegas call center at tesla saying marty trip or a friend of marty trip's was saying he was distraught, planning a shooting of some sort. yed to theelate sheriff's office, chased him down, saying is this a credible threat. they did make contact with trip, and we described body camera footage. they found him very distraught,

he is crying. he sits down and explains what transpired. the sheriff say we don't deem this a credible threat. he does not seem dangerous. that is what they told tesla. thereafter, the next day, tesla put out a statement about a threat the service department -- sheriff's department had deemed not to be credible. emily: in the meantime business insider is reporting elon musk took issue with an responded to one of the reporters, lopez, responding to one of her stories saying it sounds sketchy if true. if it possible you are serving as it inside trading story -- and exit employees said he was bright and was given valuable ip in exchange, is this true? this.sider has denied is there any evidence of some sort of broader conspiracy at work? >> the individual tasked with

trying to find trip at this time was involved in investigations, he is going on the record in our story saying they never found evidence to suggest he took a bribe. trip never admitted to it. there is no credible evidence to substantiate accusations. emily: what is next now with what these folks have told the sec? could they take action? >> as we reported, trip did talk to the sec, last summer, talking about how he accessed some of the internal numbers. the issues here involving the police reports and potential sort of phantom shooter threat, the sec will be concerned with the numbers. what did tesla say to investors and what did their numbers reflect? that is something the government takes a long time to

investigate. emily: they never determined who called in that. correct? >> they never did, and tesla didn't make the person involved who took the call available. emily: matt robinson, thank you for your reporting in this upcoming issue. still ahead, a chinese e-commerce company out with its fourth-quarter results. how it is competing with alibaba is next. this is bloomberg. ♪

emily: uber is ramping up for what could be one of the five biggest ipo's in the united states. they have added several banks to the list of underwriters

including bank of america, barclays and allen and company. morgan stanley is leading the ipo along with goldman sachs. the company could be valued at $120 billion. the chinese e-commerce company reported fourth-quarter results. they beat expectations but losses surged. heavily onspent advertising and technology to take on rivals alibaba and jd.com. as an investor in the company. you worked with the founder at google china many years ago. talk to us about how this fits into the broader e-commerce landscape in china. are they a real threat to alibaba? >> i think it really addressed the market segments, has a really served very well by alibaba or jd, which is how to effectively find merchants at a

good price. the model they had, the social network, referred by friends and aggregated demand from consumers very quickly so the supply, we can provide merchant products at a very attractive price to users. this is a company that really addressed that market. you see the biggest user demographics with third or fourth tier cities which is really the driver for internet growth. this is a company that really has a lot of potential. emily: is there a good comparison in the u.s.? james: it is original innovation. my partners and i always try to figure out how we can make it work in the u.s. emily: is it was like a new budding amazon but in the -- but popular in the middle of the country? >> yes, and now it is a public

nasdaq company. emily: why doesn't it work in the u.s.? james: there is a potential. most of the sellers are in china. if you go here with the amount of products made in china, the merchants, available, it is easier to do that in china. emily: what do you think the biggest opportunities in the china tech scene are? james: increasingly we are seeing enterprise and deep tech picking up. wary: how is the trade affected your job? james: we just raised our fourth million u.s. i was surprised. the biggest demand is from the top investment people of the u.s.

emily: why? james: people recognize china is becoming one of the largest venture investment markets in return, in terms of growth, early-stage particularly is attractive. you want to get into the pop funds, you need to deploy that. it is long-term investment that people see. emily: do you see the difficulty for u.s. investors to navigate china and the bureaucracy and regulatory issues to change anytime soon? it certainly doesn't seem like the chinese government is backing down. james: that is why they look for the top vc managers. in terms of investing top internet companies, actually we see the regulation is getting more relaxed. to some degree there is pressure from the u.s. side, china to open up the market even more.

we have seen it is more favorable for the u.s. investors. emily: you worked with a man at google who said it is basically impossible for google or facebook or many u.s. tech companies, like amazon, to succeed in china, airbnb even. do you agree? james: i tend to agree. i started at google in 2003, the first representative for the google china office. if you look at all of the companies, they have a mentality of working in the u.s. that should work in china, but the market is different. pinduoduo, they are not structure to compete with local competitors. emily: thank you. james: thank you. emily: broadcom reports earnings after the bell, forecasting first quarter revenues at $5.8 billion, up 9%. despite high hopes for the broader outlook, they face

slowdowns in key markets. ed ludlow explains. ♪ ed: there is a good chance wi-fi or bluetooth in your smartphone is made by broadcom. the $105 billion company sells them to apple and samsung and apple accounts for 25% of the company's total revenue. that is why they are seen as a barometer for the health of the smartphone industry. last month their wireless business was better than expected. on the earnings call, the ceo talked about a north american customer who bought more chips than expected to put in its older smartphone models. he didn't name the customer. sales still fell from 5% year earlier. the blue line from july through

september last year, but since november, broadcom has outperformed the stoxx index as the company weathered the slowdown in the global smartphone market. now, there is a new concern facing the industry. chipmakers from nvidia to intel are talking about slowing demand in data centers. >> the chipmakers have ordered too much. they got ahead of bill plans. they have too much inventory. ed: in the past broadcom relied on sales to offset weaker demand in smartphones. while the company expects demands from its cloud customers and concerns that broadcom could get distracted from its focus on chips. in december, they purchased software maker for 18 million dollars. the deal left analysts scratching their heads why they stress that shifted from hardware to software.

bloomberg intelligence still sees the deal being the main driver of sales growth and margins in 2019. emily: that does it for us. we are of course livestreaming on twitter as always. check us out at @technology. follow our global breaking news network. this is bloomberg. ♪ ♪

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