industries, start cutting steel capacity so a deal with us actually gives them the cover to cut that and so i think a deal will happen i don't think it will be incredibly economically impactful, but i think it will happen. >> barry, great to have you with us for the hour. barry knapp of ironsides that does it for us on "squawk box. fun to be here, for all the gang we'll see you tomorrow "squawk on the street" is up next ♪ good morning and welcome to "squawk on the street. i'm david faber along with jim cramer we're live from the new york stock exchange carl on assignment this morning. let's give you a look at futures. half hour until we get started trading on a hump day. you can see there, i don't know, how do you characterize that maybe up a little. >> eh. >> it is eh. european markets, we can make a more definitive judgment on those. they have been open for quite some time. mixed picture there.

really down except for italy ten-year note yield down a bit, in the 26s now we had been last time i looked 2.68 you see crude oil below 54 bucks, has been down a bit over the course of the last three trading days or two this week. road map starts with u.s. china trade talks. steven mnuchin telling cnbc that negotiations have been, quote, very productive, and they will continue in beijing next week. stocks pointing, though, as you saw, to a slightly lower open. plus, we're keeping an eye on earnings shares of disney, they're up as the media giant transitions into the streaming era. snap, maybe not too late to buy after all. a big jump in revenue and it stems user losses, most importantly. spotify, well, it is betting on podcast, acquiring two podcasting companies it does report a quarterly profit the company's co-founder and ceo daniel ek is going to join us

moments from now in what is a rare and exclusive interview this hour. thanks to jim cramer's dogged pursuit. all right. stocks are set for a modest open after president trump's state of the union address. last night, the president delivered a wide ranging speech, which included his push for a border wall, more infrastructure spending, and a decrease in drug pricing. he also emphasized trade issues, especially when it comes to talks with china take a listen. >> i don't blame china for taking advantage of us i blame our leaders and representatives for allowing this travesty to happen. i have great respect for president xi and we are now working on a new trade deal with china. but it must include real structural change to end unfair trade practices, reduce our chronic trade deficit, and protect american jobs.

>> and you saw mnuchin sitting in the audience there as well. he was a guest on "squawk box" very short time ago, jim speaking positively about the upcoming talks in beijing. always hard to sort of get a full sense, but certainly i think was -- could be interpreted positively >> i think there could be a deal we always have to remember that secretary mnuchin is very pro-deal there are other people, like peter navarro, very powerful, i think very much has the ear of the president for saying, listen, we're not going to give in on key terms and the key terms are very difficult because president xi doesn't acknowledge they're terms. he's going to give in, say, listen, we have been stealing all along and huawei, you buy their equipment -- we're sorry about that and we're not going to do that anymore i had robert -- >> never been made clear, just -- not to defend huawei, never made clear and we never have seen evidence that it actually spies on you. the overall concern is that the

chinese government has access to it if they want it the same trying to, you know -- >> and where i was going with that, robert herzvik on last night, he actually has the largest private security company and he said to me, huawei is -- you can't use it he tells people -- he tells corporations, when he advises a lot of corporations, he said do not use huawei's equipment because there is a chance they are spying >> right. >> so use our -- >> to the point, beyond huawei, the question is, the key things about forced technology transfers the sanctity of intellectual property, cyber espionage, these are things that have been in the playbook for quite some time that are going to be hard to eradicate and even if you get an agreement in principle on them, how do you monitor to make sure that they actually are upholding that? >> xactly. i think that secretary mnuchin, not just soybean, that's good. no one talks about soybean that's ridiculous. they already had him

if you're on the ridiculous miserable horrible sorry to be so pejorative about dow dupont, that's fine, they're going to buy that stuff what matters is everything you just said. i never heard secretary mnuchin talk about it. when peter navarro comes on, he's talking about hegemony, belton road, 2025, they got to disavow themselves of the 2025 world domination slant. >> not going to disavow themselves of it they may stop using it in terms of -- >> as a road map that is the sticking point, so what you have to do is you can't just buy stuff, you can't commit to buying more boeing planes, you have to let american express come in, it has been on the desk for a long time, and have their own. visa and mastercard have to have their own. no more of these joint ventures. david, did you mean -- the brooklyn case about what they stole from t-mobile. they have like people, you know,

they have transcripts. >> back to huawei. >> transcripts of people saying we're going to steal this. david, that is not among the counsel of nations remember the wto. >> let's analyze it quickly. so many earnings too here is mnuchin. >> we'll do everything. >> on "squawk box" a few moments ago. >> a wide range of issues, we're working around the clock if we can't get to the deadline, that's not because we haven't worked around the clock. i think there is a big commitment on both sides to try to meet this deadline. and we're working under the direction of president trump and president xi so hopefully we'll continue to make progress. >> all right, so there it is, jim, hopefully they'll continue to make progress and we'll sit here trying to analyze how much progress is being made as the march deadline looms. >> absolutely. look, i think the chinese as we know when you listen to the emerson call, slowdown, slowdown, okay now, nike had no slowdown, okay. ralph lauren, i mean, let's say estee lauder. >> not a slowdown.

nvidia, slowdown apple, slowdown. >> yes a lot of industrial slowdown united technologies, not as bad slowdown but china is, the conference call, china is usually represented dollar as the reason why somebody didn't have a good quarter. now, think about that, david it used to be that europe was. now, i know italy is a mess. but europe is starting to get better no longer to be bad for us but what matters, really got to make this point, is that china is weaker. so the chinese do not want weaker the chinese want more consumption. t-mo is good >> it was. >> i would buy alibaba. >> disney seemed to have no trouble with shanghai disney and their parks. let's move on to some -- >> you want to go to disney now? >> yeah, let's go to disney now. early, 9:07. >> i didn't know that's what we were going to. >> we're going to it i'll read it and give people a sense of what we're talking about. >> okay. >> disney is rising in the premarket after reporting better

than expected quarterly results. helped by media networks and theme park businesses. the company's espn plus streaming service doubled subscriber, they have 2 million in the past five months. shares of snap also surging. look at that 21%. the company posted fourth quarter user numbers above street estimates revenue also ahead of forecast, losses now lower than expected average revenue peruser up and a huge short position, but let's start with disney. can we do that >> i want to clarify things. the iger did say results at shanghai disney resort were slow just in terms of -- >> he did say that. >> lower results >> did he say that he did >> lower results he talked about. now, look, david, i love the call >> you loved it? >> i'll tell you why. >> okay. >> because he said when you get to the april conference call, the april -- >> the april investor day, april 11th. >> you're going to like what we

hear on all of these different things now, right now the stock was up 2 bucks until he started talking about the second half. david, you said the other day that the second half would not be strong. now, these analysts had watched you rather than the spreadsheets, they would not have been so shocked about that. but the conference call had analysts talking about streaming and then at a certain point, bob seemed like, i'm done with the streaming questions already, boring the heck -- i think it was a fantastic question asked about is it going to be pro gambling that doesn't work with the disney theme he said, no, but i think it is going to be used by gamblers you go on to espn trade. there was a big trade by the sixers last night, espn regular didn't have the in depth analysis espn plus, it was killer one thing they're doing, i'm not saying they're making espn more superficial, but if you're a gambler and you want to gamble on the 76ers, not allowed to

gamble, but if you gamble, you need espn plus gambling is big. >> it is moving into state by state by state in terms of sports. >> iger is ahead of the posse on this ahead of the posse. >> the focus is and the future is, and he said this on the call, the bet of the future of the business is in terms of their move to direct to consumer we're calling streaming. and how they deploy their capital so long-term growth and i'm quoting here from iger, of this company is stronger than it would have been without these investments. >> do you agree? >> i don't necessarily agree i think that you have to do this because your old business is going away but the argument that your growth rate is actually going to be stronger than the old business' is unclear to me you have to do it, but it doesn't mean you're going to some promised land where growth is going to be -- >> how about the acquisition how about hulu mentioned multiple times >> what do you do with it? hulu spending a lot of money but having real success in signing people up for both their rott

platform and vsod. >> i came away thinking hulu is the trojan horse here, much more than i thought, it is better i think that bob is bankable i think that people are saying, talk about -- >> 150 million bucks goes away this year, most of it towards over the course of the year, from licensing fees that they no longer have. marvel has -- >> that was a surprise >> a movie they're not going to be giving to the streaming, to the svod services. >> i was more worried about the giveaway than netflix. >> the question still becomes, this is where we get more clarity, i think, in april, how much is it all going to cost yes, you have to buy, yes, you're forgoing royal tiz or rig rights and you got to increase potentially how many you're producing. my understanding is they're not going to have the volume of a netflix. they're going to go behind the brands, the key disney brands to be the key to why people don't want it.

the question still will be, how many do you add year one 3 million? 5 million? how quickly can you get near 100 million people and how many years is that going to take and will your shareholders be willing to sustain the margin decreases potentially as a result of that spending? >> the april meeting will be very -- they have to present some sort of delta, which says, listen, we're not other bets for google, i use google because it is like yesterday it came back big. we're core business. david and i don't know the brand equity of disney will be tested here >> yeah. there is any company that has deep brand equity, and can do it, it is -- >> that's why i'm encouraged i think the brand equity is going to tell the tale about what you'll pay in terms of price earnings multiple. and i think that we have to all wonder look, i know when my kids, it was, like, i had to, like, remember when, like, bamambi's m

and that was a major crisis in my house >> what ifyou do have disney with netflix and amazon and hulu to some extent and some others, what about all those other guys out there producing lots of content, relying on the old model, what happens? >> viacom had a good quarter. >> they had a decent quarter stock was up yesterday. >> how about cbs i don't know. >> we'll see we'll see. >> david, i think that -- you said if anybody can do it, it is disney and they can -- i felt that a lot of the resources are going to be devoted toward disney.com. and i told you i think the 5 million -- 2 million people for -- >> plus. >> over five months. how much was that ultimate fight club i don't know how sustainable ultimate fight club is i just don't there is a lot of talk it is not as sustainable as we think but a cohort is just swears by the thing. when you and i go to the next fight club after we do wwe, i got to tell you -- >> we don't talk about ultimate fight club

>> first rule. >> yes all right, we are going to talk about snap we didn't get to it in this block. don't worry. we will come back to snap, of course and ask that key question whether it is too early to buy first -- >> no, because the cfo quit. >> we're going to have this exclusive with the ceo of spotify, daniel ek, talking music streaming, earnings, new deals to buy some podcasting companies. stock is down a bit after the call a look at futures, we set up for trading 16 minutes from now. a lot more "squawk on the street" from post nine when we come back. obvious.

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revenues kind of in line. >> right. >> and their gross margin guidance was below in part i think because of the podcasting -- they're investing. >> they're investing for the future, which i like david, look, i got to tell you, the analysts i think are not thinking big enough. analysts are looking at what number, you know, they made and how it wasn't right. i look at premium. this is the graduation from ad supported premium. you talk about plus 36%. they guided -- >> 9 million added, 96 million overall. >> that's a great business. >> and that's going worldwide. so i think the analysts and the people who are selling the stock here, they'll be buying back. >> you do? you think so does it makesense to you this move to become an audio company as opposed to a music streaming company? >> audio is gigantic f y if you and i were to do a podcast, we would be -- we could

do it wherever we want, it would be -- i'm not just doing -- >> do we talk about whatever we want >> the commercial break, i will disavow any knowledge that we had this -- but, yes, that's what people are doing and people love podcasts because they're all over the map i like the brooklyn acquisition. they're fabulous they're fabulous at aggregate. and so i like it i like it very, very much. i think it is a very good -- >> premium ad revenue peruser down 6% year over year, ex-foreign exchange. and therefore it kind of led to revenues meeting expectations but not exceeding them. >> i like where the subscribers were from. north america 30%. latin america 20%. r rest of the world 10%. they remind me of netflix. and periodically netflix went down and you had to buy netflix. i think we're going to hear from this man and i think we're going

to like what we hear. >> i'm looking forward to meeting mr. ek wasn't here the day that he actually -- they listed the stock. so great to have him >> yes. >> with us. >> thank you for that. >> up next, get ready, a mad dash coming up i don't know what you're planning on doing there. let's give you one more look at futures before we take you to a quick break and we're back with more "squawk on the street" in a minute (baby crying) ♪ ♪hold on, i'm comin' ♪hold on, i'm comin' ♪hold on don't you worry,♪ ♪i'm comin' ♪here we come, hold on♪ ♪we're about to save you i'm comin', yeah♪

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seven minutes from now, we get started with trading on this wednesday. and then not long after that, spotify ceo founder daniel ek will join us for an exclusive interview.

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all right, four minutes before we get started with trading here from the new york stock exchange time for us to get to a mad dash we're going to stay seated as we roll into the opening bell sky works solutions on your radar. >> there were two wins for boston for new england we know about the one that was the most boring game in history. but there is a fellow by the name of liam griffin, monster supporter of the patriots and the ceo, i think i have it in the right order, of skyworks solutions. tour de force conference call. a lot of people are saying, you know what, this is not going to be a good quarter. we have a lot of guys who downgraded, why? because they are apple their largest customer is apple. the first rule of apple is -- that is fight club, you can't talk about it. they dazzle with 5g. they talked endlessly about --

they are the 5g play. >> they are? why are they the 5g play i thought qualcomm was the 5g play >> i don't want any controversy. they have all the accouterments of 5g and their balance sheet is clean. they're buying back a lot of stock. liam griffin is saying, you think i'm -- you don't think i can pull it off? well, we're still here that's what the call was about we're still here so i want a t-shirt that says skywork and the patriots, we're still here and by the way, i think i saw peyton manning here. it is really a football day. >> football is over. >> we're still here, david, that's the theme of skyworks' quarter. >> snap? you could say that's a similar theme in some ways, isn't it >> snap is not going anywhere. >> up over 20% this morning, this after the company did report better than expected numbers. it is not as though they're growing enormously, but what does seem tonight case is that they have rolled out the new version or they stabilized engagement.

>> they got -- >> they're getting to android in terms of a cultureating users. >> i think the key thing here, david, really, key thing was a lot of people felt that their balance sheet was in question. we saw research which said their balance sheet, they're spending so much, they had the giant hosting cost, we're taking that off the table. people are saying, we can't do that previous we had the second cfo leave and people said it has to be related to the balance sheet. now i'm thinking, wow, that guy walked away from rsus. what was he thinking maybe he was ill advised maybe it is not suboptimal >> it is a heavily shorted stock. >> massively because of the balance sheet. >> part of this move up, maybe people covering as well. i don't know where. >> skyworks was covered. >> those who believe instagram continues to take it to them this year. >> instagram, that was zuck's

way. they got zuck'd. >> they got zuck'd. >> the name of roger mcnamee's new book they did free cash flow, they actually got some. >> i was impressed, david. i have not had, i think, the best relationship with them. i didn't used to have the best relationship with twitter until the stock went to 14 i warmed up to it. >> the nice thing about these relationships is they can always get better >> i think they can. >> sometimes they get worse and then they get better. >> i think they can. >> people know that when we are critical, we aren't -- it is not personal. >> i'm a kind man. i'm a giving man it is not. >> i don't know if you're a kind or giving man. >> i didn't really like michael kors but now this capri holdings, the old michael kors, they guided better than expected, they have a lot, david. i have to tell you, versace is logged in asia that's the theme of capital. versace is the big brand. >> okay. >> i like --

>> you hear the -- you hear the applause building for the opening bell here which we're going to get three, two, one there it is. where futures were, down a bit here at the big board, anheuser-busch celebrating its partnership with water.org to help end the global water crisis. >> right. >> big advertiser on the super bowl, of course. over at the nasdaq, mba association doing the honors. >> you meet a lot of ceos and they talk about water because the millennials, it is a very -- should be a big issue with everybody. >> it is should be. >> i know when i contributed to the fabulous chris long who won the walter peyton award for the best humanitarian in the nfl, he said, listen, we're giving water in africa. >> there are water shortages in many places. climate change is causing enormous droughts.

>> my cousin, mark dubois, the head of doctors without borders, they had a good point to me, he said in no country is there actually a water problem there is just a leadership problem. every country has water. but the leaders can't get it to -- >> getting the water >> lived in khartoum for a long time, which, by the way you felt was safer than a lot of areas of new york city. >> that seems unfair because new york city is the safest big city in the world so what are you talking about? >> well -- >> we got a lot of problems here we got a lot of problems here. that's not one of them i can go through them. i got a -- i don't have enough time crime is not one of them, thankfully. >> he was talking -- listen, david. >> what? >> you won a nobel peace prize like they did with -- >> i'm just saying i'm just saying, i'm just -- >> have a little slack >> a little slack, but you could have used another city that's all >> he used that city i didn't -- >> don't get me started on amazon, though trying to, like, keep them out

unbelievable what our city is trying to do stop stop >> okay. >> queens. mind boggling. let's move on, though, to electronic arts. can we do that >> that's too painful. >> no, it is not it is down 14% if you own the stock, it is painful. perhaps you're short it because in some ways the weakness here has already been, well, showing up in the stock price for some time you can see that if you go back. it was not a good quarter. a confluence of lower than expected, some sales short fall in mobile, battlefield one, live services decline, ongoing head winds for fifa online, i'm reading from a credit suisse note all the notes look similar. >> the conference call was just, battlefield drops a bomb they released it wrong and ran up against a buzz saw. if it is really any good, it doesn't matter who it is up against, right the fact is that electronic arts, i think that they may have screwed this thing up more than anybody else

activision blizzard goes down. >> nintendo. we're going to speak to strauss zelnick later this morning. >> strauss is the best the ea conference call, they need -- they need a crisis manager. i'm telling them right now, get a crisis manager because you do not use the word disappointing over and over. give us something. give us a reason it is like earth, wind and fire. this thing, we move the ship date to november to accommodate the goals, moved the game launch deep near a competitive holiday window, they chose not to make it a battle royale they made it a single player experience, david. can you imagine, battle royale sweeping the globe, they chose to make it a single player is that unbelievable >> we haven't even discussed fortnite. >> fortnite is big >> it is huge. >> nobody makes any money. >> nintendo down, activision down, take-two reported earnings, we'll get to them.

a poor guidance number. >> video games now we're starting to worry is that a lot of people feel fortnite brought new players in people feel like, no, they're to stay no video game ceo will say that. maybe strauss will i don't think so >> we did have nvidia citing weakness in china for its chip sale >> nvidia is bottoming they did that big secondary that i have been worried about. nvidia is bottoming out. i have to see how the touring -- >> vision fund, vision fund. >> word is that no one -- you should ask strauss i know you're going to, is he writing -- are the guys from his outfit that make grand theft auto, are they writing for the touring chip because they know more than anybody, the touring chip is going to be the biggest chip ever, it is life-like. but we don't know if rock star is -- i'm talking here.

>> i'm reading my text. >> it is so rude the other day -- >> we'll go to rick santelli on the other side of that, we'll talk to daniel ek. let's get to rick so we can make more time for mr. ek what is going on in the bond world? >> david, it is like chocolate on a sunny day we're seeing rates melt a bit. not a lot. but just a little bit. look at a year to date of two-year note yields 260 seems to be the reversal area we're down a basis point now if you look at ten-year yields for one week, you can see that right under 2.75, right at 2.74 it started to back down open that up to last year, you'll see that we started to back down on left side, right around 2.80, the midpoint of the closing extremes for 2018. we couldn't pop through 2.80 we gave it a retest early in this year and now we can't get through 2.75 we're slowly melting back down

if you look at what is going on with respect to foreign exchange, maybe the most important aspect is to be cognizant of the fact that over 50% of the dollar index is the valuation relationship with the euro currency. so if the euro is in a range, you really need the leverage the other currency percentages to get the dollar index to budge. but it is budging a bit. matter of fact, it is now cleared the 96 zone again. let's look at a chart from the fall of 2016 this is true now and true at the end of last year from 103 to 88.5 on the bottom there, the midpoint is 96. and it seems like 96 continues to draw the dollar index like a magnet and it is basically the high frequency above area where we crown for the best part of the range of last year jim and david, back to you. >> all right spotify, i'm a big user.

big user >> we are as well. >> they just bought two podc ea. this is an exclusive interview for us spotify's co-founder and ceo daniel ek, right here, post nine daniel, i've got to ask you, right up front, podcasts i understand they're red hot and what we want is an aggregator. i didn't think that a music company would do it, but i do think that an audio company would do it. that's what this is about, isn't it >> yeah, it is really about expanding our mission from just being about music to being about all of audio and being the world's leading audio platform and what we see really is -- we have done podcasts for two years. it is -- our users are listening to podcasts are listening to the platform almost twice as much and, of course, the growth in podcasts for us is just phenomenal and that's part of the reason why we're now making this move.

>> podcasts are a gateway drug for the rest of your products. >> indeed, yeah. i mean, great example would be we had in the fourth quarter amy schumer and joe budden on the platform those are all very different types of audiences who are now trying spotify for the first time and noticing all the benefits that the platform has >> now, you got a netflix lineage. the cfo is -- let's say he's pertinent or jermaigermane on te conference call and says things that are a little unusual. you use algorithms, we use spotify at restaurants, we never worry, you always seem to know what we want how is that possible >> well, it is really all down to the team of both editors and the machine learning team that we have at spotify we're looking at more than 16,000 signals every single day as we look at your taste profile and try to rank you the things

you like the most. so i'm glad that that's working well in the product. >> there have been those who thought that podcast was a fad why would we go back to something like talk radio? you're finding it is not the listening patterns are consistent is there real growth in the potential audience, though, as well >> well, the growth has been really spectacular for us. and just shy of two years we have become the second biggest podcasting platform. the types of experiences that we're seeing podcaster doing is vastly different than just the normal talk show radio there is literally shows like cereal, which is drama, that is acted out, and there is kids shows that are now coming including news, the daily, great sxmz examples of podcasts doing very well. >> the investors may look at your stock down a bit and wonder about the long-term, which i know you're thinking about one question i got from a number

of people who owned the stock for a while, what about long-term guidance on your margins? you said it was between 30 and 35% at some point. does that hurt -- does this new effort hurt that long-term guidance on margins? and should they expect perhaps a different metric >> no, we're staying study with our long-term margin goal. we never said that it would be a linear path to get there but i think looking at it in our fourth quarter results you can see that the margin is going up. it is very strong. our core business is very strong what we're doing now in 2019, however, is we're investing in more original content on the platform that will broaden the appeal it will abroaden the ebroaden . >> i'm following you guys pretty closely and like your company ever since you became public one thing i thought you would do is not get trapped by the four calls of the spreadsheet i view you as netflix, more

great content that you add, the more i want to own the stock i don't really care, things happen as barry mccaffrey said in terms of the range today. why are you trapping yourself? why are you not going with something which just says, you know what, we got a netflix idea here, mr. mccarthy is from netflix, we understand the more content we add, give us a chance, don't look at this as a snapshot if you want to know the key metric, advertising, going to premium, is what we care about >> yeah. >> why did you -- why did you revert to traditional guidance when your company is bigger than that >> well, i mean, again, we have always strived to be a very transparent company and we do give a lot of detailed numbers on the guidance. and obviously this is a new business line for us but i think the way in looking at the potential of the business, it is very much more to be said we're investing in more original content, broaden the feel of the platform and as we're doing

that, we believe obviously subscriber, engagement will go up which increases our long-term opportunity. >> we know what netflix spends a year to acquire content. nothing like you are, 12, $15 billion a year can you give us a sense of what your expectations are in terms of how much you will spend to acquire this original content? >> yeah, i mean, again, it is really right now from a very low base, but i don't think it is unlikely that it is netflix type of story than if the magnitude of the numbers won't be the same, doubling that investment year over year to get more and more content. >> you see yourself doubling potentially how much you're putting towards original content, which would typically come in the form of podcasts, i guess, or of audio as opposed to -- >> yeah. >> exactly we're definitely investing a lot more in getting more original content on to the service and you should expect that going forward and as long as we're seeing cost of engagement

numbers, the content, we're investing in, you should expect this to make those investments. >> i like the apple service revenue stream and when i saw it, i know this company, the big one, brooklyn companies, i followed brooklyn companies, i lived there, i was hoping that apple would make this acquisition. the reason i say that is because people don't -- unless you listen to the podcasts, they are very millennial, and they are very much the way people multitask now. do you see yourself buying all that is left, so if you become synonymous in podcast. >> i don't think we have to buy all of the companies that are in this space there is a tremendous lot of these companies. what we feel very strongly about is we want to be in the game, we want to be the platform that these creators come to and go to and, again, as you mentioned, i would say we're very much focused on being audio video is a huge space. it has the attention of everyone right now. but we think audio being almost

two hours of consumption per day is a massive opportunity that no one is really paying attention to. >> you said you have line of sight, sorry, jim, on 4 to 500 and you said that may double it could be as much as a billion in 2020? >> not really in terms of just acquisitions i was talking about our content investments that we're making. part of what you should look at is both acquisitions, but then also our own efforts in investing in creating the shows. we had 14 exclusive shows in the fourth quarter of 2018 we're doubling down on that. and we want to grow the number of shows that we have. >> all right i am so impressed with the subscribers by region. something you originally told me, your company told me could happen does podcast, do they fly in every region >> yes you would be surprised

it has grown very, very fast germany is a great example we're already there. the number one player of kids shows right now, so you see young consumers are there going to listening to stories in a big, big way even the perception in germany wouldn't be that spotify is just about music, it is about audio already. >> this is important because when i watch netflix, i never watch it in -- you have to watch the titles, it is a different show than if you listen. will you translate everybody's great stuff for united states? >> i think there is definitely that opportunity of taking the shows that is working really well in these different geographies and translating them across the world. >> what about the car? do you have a sense as to how many people are listening to you in an automobile >> yeah. i mean, we're doing very, very well in the car. i think last number we gave out is that there is more than 50 million of our users who are

using spotify in the car it is definitely a big part of our business. >> and do you -- do you have any sense the growth of that there is competition in the form of sirius, which many people know, but even beyond that, some of the others. is it growing substantially? >> it is growing really, really substantially. i think the number one metric is dual platforms how many of our users are using it on more than one platform that number is increasing dra matically as more speakers come into play, as cars are getting more and more connected. it is a big part of our story. the other thing that we see is those people are more than twice as engaged as the average user as well. it is an important part of our overall story. >> when you look at the competitive landscape, daniel, you were early, you sort of -- in the days of piracy, you transformed and really streaming, you've been the leader but apple is out there with a product. we don't talk very often about

it amazon, they're both incredibly deep pocketed companies. do you believe if they wanted to that they could spend enough money to push you out of your leading market position? >> i mean, these are formidable companies. no doubt but what i look at is obviously how our business is doing and we had a phenomenal q4. the other part that i look at is we're really just focused on audio. that's how you should look at this there is a ton of things that are -- these other companies are doing, self-driving cars, whatever other businesses they're into and i believe in this day and age that you need to be very, very clear with your brand, what you are for consumers, in order for them to take it up the best experience wins and now we're adding the best content to that as well that's now spotify. >> i don't know whether you're familiar with team zeus' work, but the subscription economy, great book, he always said watch

churn. churn shows you loyalty. you got some of the stickiest churn i've ever seen. >> yeah. and it is trending as you can see, the churn is decelerating >> that's good >> yeah, yeah. churn is definitely detell ratee decelerating you should look at the announcements. it broadens the appeal of spotify. we think it has the opportunity of lowering churn even further. >> and how about google? >> yes, google is obviously the same category as -- i guess all of the other f.a.n.g. companies. >> wasn't that long ago that you guys went public i remember it. i don't think you were actually even here at the time. you chose to list as opposed to raise capital. are you happy with that decision >> i am. indeed it was obvious that a big

decision for us to make, but it felt like the spotify way of doing it it wasn't just about doing it for the sake of everyone else doing it and we always said that we're a long-term thinking company, and i think we proved that with that move >> tell me more, what is the spotify way means, means doing it differently -- >> about being transparent and it is about in this case trying to align the incentives of everyone. and in our case, we didn't need to raise additional capital. and we wanted a way to -- our existing shareholders with liquidity, but also our employees. that was an important part for me of avoiding that traditional lockup process for our employees. >> for the sake of transparency, we're very happy to have you, but sort of curious as to why you're suddenly communicating in this way can we expect to see more of you in a sort of public setting, articulating some of the things you've just done here is this a one-time only and we'll never see you again? >> no, i certainly hope to be

available and transparent. that's certainly what we want to be as a company. and i would encourage both of you or everyone else, by the way, to reach out to me on social platforms that i'm happy to respond to questions there as well but i think this is obviously m a shift in terms of people's perception what have this company is and that it's very important for us to state very clearly why it is and that we're excited about the future. >> let me go back to something that we wanted to drill down on sharing stuff. this google. i didn't want google to be a throwaway. google home promotion marked the first hardware bundle offer ever in history this worked big for you. are we going to see amazon who else do you do this with because to me this is premium, and premium is the way that i want to judge you. >> yeah. i mean, we have as a core part of our strategy we call ubiquity which is being on all platforms. >> good. >> we've got 500 of these partnerships going, and

obviously what we saw was our members were asking for these voice speakers we saw a clear opportunity to provide that with an amazing experience we saw that people who were also fans of the google assistance wanted the spotify experience, so we'd be happy to extend that so samsung, of course. >> right. >> and happy to work -- >> samsung's car, because can you do with infotainment and do it with haarman. >> yes. >> what do you think of facebook >> facebook, again, is an exciting company we have a long relationship with facebook if there are opportunities, we would love to work with them. >> so you don't mind what happened with facebook in terms of the world -- you are a company driven by morality you have no problem with facebook >> no, look. i mean, at the end of the day we want to be where our users are. >> fair enough >> just getting back to many so of the financials and things that some of your investors care about. what are your expectations in terms of negotiations with the labels and what's going to actually occur there

>> well, our focus, and i believe that's their focus as well, is really about how do we grow the entire music industry i've said before on our earnings call that the focus for us in these round of negotiations is really about enabling the marketplace, and that's a crucial point because it isn't a point about them losing and us winning or taking the points of the margin here or there at their expense. it's really about getting rid of the inefficiencies that exist in the music industry by creating tools that makes it easier for artists and fans to connect and making it easier for labels to market their, you know -- >> you have access to enormous amounts of data that conceivably would be helpful in terms of where people are listening, how they are listening and who they are listening to. >> exactly, including the 16,000 data points we're gathering every single day through the taste profiles that's a huge part that we're able to connect these two in a

way that's positive for users and positive for artists as well. >> i don't want to be too bob can i kennedy-like, but we now know and if we dream things, i'll go back to the churn, a lot of people looked at netflix at 695. they said it's never going to be anything i mean, when i see the low churn, i think that one day you could raise prices, that you're a little bit more stickier, and, therefore, we should be modeling higher prices down the road. >> 1499 is enough, i think. >> what do you think >> i mean, look, all i can say right now is we're in this growing the market phase we're not in capture all the profits side. >> david, take the commercial side if you have a problem with 14. >> i think we need to get into the podcasting business. >> daniels, great that you came on daniel ek. >> thanks for having me. >> an unbelievable company that people need to start understanding if they want to only stock as they do rather than the ridiculous four walls that the analysts come with the

neutral. i'm not neutral. >> daniel ek coming up, shares of take two interactive are down sharply this morning you can see there. this is in reaction to quarterly results both from it and from competitor electronic arts we'll have an exclusive interview with strauss zelnick, ceo of the company back with more "squawk on the street" right after this imagine traveling hassle-free with your golf clubs. now you can, with shipsticks.com! no more lugging your clubs through the airport or risk having your clubs lost or damaged by the airlines. sending your own clubs ahead with shipsticks.com makes it fast & easy to

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all right. time enough to ask you what's coming up tonight. >> glaxosmithkline, the new ceo, i'm got michael neidorff, david, state of the union, you want healthcare, michael nyron. >> when we come back an interview with david kovtin. keep it here

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good morning around welcome back to "squawk on the street. i'm sara eisen here with david faber live from post nine as always as the new york stock market carl is on assignment. taking a look at the markets, the rally takes a pause after five straight up days for the

s&p 500. declines only a percentage tonight at this point. we'll continue to digest earnings with the lunar new year holiday. some markets in asia are closes. the dollar up, by the way, for the fifth day in a row the road map for the hour begins with president trump beginning with his second state of the union address. what it always mean to the markets. >> spotify is betting big on the podcast. what the ceo just told us about the company's acquisitions and quarterly results. plus, shares of take-two interactive after plunging fourth quarter results. >> and we'll begin with the president delivering his second state of the union address to the nation last evening. eamon javers joins us from the white house with more. eamon? >> reporter: yeah, good morning, it was a wide-ranging and lengthy state of the union address by the president in the house chamber last night there was a little bit of something for everyone in this speech last night, including a number of agenda items that the white house calculated they might have some outreach to democrats on

some items that they thought democrats might embrace and be willing to work with this white house on despite the intense paul martin isship that we've seen in washington, d.c. over the past couple of weeks we also saw a spontaneous moment from the president he was talking about women in the workforce. democratic women in the chambers stood up to cheer that line. the president recognized the moment and reacted spontaneously. here's how that went down. don't sit yet. you're going to like this. and exactly one century after congress passed the constitutional amendment giving women the right to vote we also have more women serving in congress than at any time before usa! usa!

>> it was a well received and warm bipartisan moment in a speech that had a number of them including a salute to buzz aldrin, the astronaut, a number of world war ii setrance were in the chamber to be honored as well as american heroes, but there were also some partisan notes, and the president struck a defensive note when it came to the idea of investigations by democrats and perhaps including robert mueller, the special counsel's investigation in his criticism. here's what he said. >> an economic miracle is taking place in the united states, and the only thing that can stop it are foolish wars, politics or ridiculous partisan

investigations [ applause ] if there is going to be peace and legislation, there cannot be war and investigation. it just doesn't work that way. >> despite the president's appeal there, it's clear that democrats on capitol hill are not going to back down on their intent to investigate this president. we can expect the subpoenas to start flying here any time now, so this white house will be in a bit of a defensive crouch on the investigations are front going into the rest of 2019. the question now is whether they can build on the legislative momentum from the speech last night and actually put pen to paper on bills that the president can sign this year as we get closer and closer to the 2020 presidential election that gets more and more unlikely, and the political seasons seem to be starting earlier and earlier these days a number of democrats have their hats in the ring, and we can expect up or two more to announce over the next week or so so watch for the politics to begin to take place here in

washington, d.c. guys >> eamon, the president doubled, tripled down on calls for his border wall. is there any reason to think we're not going to see another government shutdown? >> reporter: you know, the president called for the border wall, talked immigration, stuck with his rhetoric on immigration, but he's also talking about compromise, and so the question is whether or not there's a deal here somewhere that the president can get to with democrats that would allow him to back down from another government shutdown. republicans generally feel like the government shutdown was a political loser for them, and the president will be looking for an off-ramp here somewhere what that deal looks like though and whether the president would sign it still unclear at this point. we've got to muddle through this for a few more days. >> eamon javers from the white house this morning, thank you. >> you bet. for more on how investors are react, we're joined by goldman sachs chief u.s. equities strategist david kostin welcome back to nice to see you. >> are this any big takeaways from the state of the union?

>> probably not. politics, see how that plays out. the major issue that fund managers are focused on is the fed which has clearly been supportive in terms of its indications to keep interest rates low, questions about china and trade and earnings the topics that have been subject of our conversation. i just traveled through europe and ashat last two weeks where we saw portfolio managers in the leading cities, and we had an event yesterday at goldman sachs. we've been talking a lot with portfolio managers and the concern about recession was on the topic -- top of mind for a lot of people and that's really recede as a result of the fed's indication that there's probably going to be on hold for the foreseeable future and that is remove some of that risk and the market has had a pretty strong rally as we well know since the start of the year and that's more consistent with the forecast. >> so we rallied 13% off the christmas lows that removed some of the

recession risk and why haven't we seen the move confirmed in the bond market? the ten-year has barely moved. if that's really removing recession risk shouldn't we see it confirmed there >> we have rates basically that the economy is growing at a modest pace, still strong, still growing roughly 2.5% real gdp growth this year, and the fact is rates are remaining low that's a perfect sort cocktail for the equity investors you have policy rates that are going to be low and long rates staying relatively well anchored and that's basically supportive of an equity market that generally stays lower. >> how with you viewing the lackluster growth in china in terms of your overall expectations >> if we think of the impact in china, basically 70% of u.s. revenues are domestic so the china component is a certain part of that it is an issue focus fact that the current activity indicator for china is now at just under 6%, the lost it's been in ten

year, so that's certainly an issue that we focus on, but from an end of man point of view most of the u.s. drivers of revenue are something that's a big focus for us. >> chinese companies are more multi-national in scope. >> you'll see that many so of the industrial companies and a lot of technology companies where there's more of a sensitivity to business activity in china, but the rest of the market is more domestically oriented the questions about trade and china growth broadly speaking are one of those questions on the mind of many fund maine, and the most proximate issues focused on is the u.s. and what is the fed likely to do. the fed has indicated and seems to indicate that it's likely to be on hold and that's a supportive concern that people had and now that's been sort of removed from the table. >> that's helped, but do you think at this point the market is pricing in a trade deal between the u.s. and china. >> the expectation of many fund manageers is that some type of a deal now how do you define that is a big question, and is that likely

to happen or not probably 50/50 whether that gets extended or not. i can't our -- >> i guess what i'm wondering is if there were a deal to be struck is it buy the rumor, sell the fact, or would that be a catalyst for the market to real further? >> in my opinion that's reason for the markets to move higher if there was some resolution depending on the specifics of that >> are we pricing in an expectation that tariffs will go up on march 1st, or has that sort of been pushed to aside and would that be a surprise if it were to occur? >> people's expectations are that some modest extension of the negotiating window people aren't really anticipating a solution to this. i think this is an issue that has lots of ramifications, lots of dimensions, and it's probably going to be the subject for many more months to go. the near term issue, of course, is the federal government is going, to you know, reset in ten days time or not, so that was the politics if you focus on what happen, you know, the fed when it stopped hike, when it seemed to indicate

that it is not likely to be raising rates for the near term, historically that has been a catalyst for the mark. you have a 7% rise over the next three months, and like a is a% rise in the next year, so that -- the playbook that we're seeing in the month of january is more consistent with what we've seen in the past that's positive. >> we're looking at an initial number of benefits from the tax reform talked about buyback versus cap "x." i know that's part of your models what do you see there, and what are you seeing now with the benefit of some time was the real impact of tax reform? >> well, the tax reform itself obviously lowered the statutory rates and some of the effective rates also came down as well so that was benefiting -- >> it was supposed to fuel significant growth in part because of increased -- increased significant investment. >> we've now had about 55% of the company's report, fourth-quarter results in the market, so we have some evidence

now we've now finished the bulk of the full year 2018 results, and we're seeing earnings up 20% so what were the drivers of the 20%? well, probably half that have is coming from the benefit of lower tax rates. part of it is the economy is growing rapidly, north of 4% it's obviously decelerated now, but that's driving the revenue growth, and we saw, like, for example, this quarter, we're seeing the fourth quarter results come in at 14% eps growth, from the fourth quarter of '17 to the fourth growther of '18. that's strong and certainly well above trend long term. that's the kind of growth we've seen is that partly economy is it partly that oil prices, you know, there's a lot of volatility there, but the communications services companies have had earnings growth of 20%. >> right. >> that was your area of focus the two have spent a lot of time in that area and revenue growth very, very strong. most companies are growing revenues at 4% to 6% and some companies are growing obviously much more rapidly. the fundamentals suggest that 2019 this year will be still

some modest growth if you think about it analytically, you're looking at real gdp growth of around 2.5%, inflation of 2%. that means your nominal gdp growth is roughly 4.5% that's basically how most companies grow their revenues and with some buybacks we're seeing a forecast of something like $950 billion repurchases that we're anticipating forthcoming year. >> so you're not in the earnings recession camp. >> not in the earnings recession camp. >> sounding very optimistic today, david thanks for joining us >> expectations of 2017 middle of the year. 3,000 at the end year we're pretty much where we are now more than six years into the career. >> david costin, good to hear from you the chief strategist, chief u.s. equities strategist at goldman sachs. >> let's check on some individual movers. snapchat surge after posting a narrower than expected loss. snap reporting flat user growth

putting a halt to the downward trend that has plagued the stock over the last year gaming stocks also getting hit hard this morning electronic arts reporting results mission on the bottom line by one cent cutting its revenue forecast and take-two interactive is also tumbling revenue beat, but guidance was disappointing. we'll talk about that with the ceo strauss zelnick later in the hour and ask him about the outlook in the tougher environment, david, that seems to be getting priced in for gaming regarding snarngs i mean, this is a combo of one of the most hated stocks, a shorted stock. >> heavily shorted >> a big squeeze, location pectations, and what stood out to me actually on the call is evan spiegel mentioned a p & g executive because obviously they are big into digital advertising and said they continue to connect with again-z and millenials and snapchat touts that as one of its biggest

competitive advantages it is a goes up against the big guys, facebook and google, which is a tough challenge for them. >> yeah, instagram is one of the reasons why user growth stopped entirely, but the fact that it has actually stopped getting smaller is being encouraged today, and to your point, very heavily shorted stock. we haven't seen that up in quite some time. >> when we come back, is mary bara's turnaround plan paying off at gm. it did report a big beat on earnings we'll dig through those results and hear what the cfo had to say as well. as we head to break. here's a look at the top performing stocks on the s&p

the president use state of the union last night setting up a big theme for 2019 and beyond. the appropriate level of taxation for the level and corporate america and how we pay for large programs like medicare president trump framing it as the threat of socialism. listen >> here in the united states we are alarmed by the new calls to adopt socialism in our country america was founded on liberty and independence and not government coercion, domination and control. we are born free, and we will stay free.

[ applause ] >> those words drawing booze from the other side of the aisle. joining us now to discuss the economics of all of this is james pethokoukis, american enterprise institute scholar and cnbc contributor and along with jared bernstein, former economic policy adviser president obama. >> mao's china, how much your party is really flirting with the idea of socialism right now? >> you know, maybe half of 1%. i think this is really just kind of a silly exaggeration. we always have an economy -- we've always had an economy and always will have an economy that's part capitalism and part government providing lots of services where markets fail. in fact, you can't find an advanced economy that isn't some mixture of capitalist and socialist programs, what i would think of as the government

playing a role to offset market failures it's definitely true, if you want to talk about the reality of the democratic agenda, that they want to raise more revenues by going after those at the very stop of the scale, going after wealth concentration and they want to spend many so of those revenues on progressive programs that's actually characteristic of many decades of american history. it's not socialism. >> jimmy >> jared. >> should we be distinguishing between redistribution and socialism? >> listen, i just want to make a clear point, that the leading thinkfluenial in the democratic party is a socialist that's just a reality. >> you're talk bernie sanders? >> no, i'm talking alexandria ocasio-cortez. >> elizabeth warren? >> she's the leading -- aoc is the leading think -- fluenial? >> what is a think-fluentia

israel, she's a 209 nearly elected congresswoman. >> she's on every show, i'm not saying she should be and at the moment that's the reality. the democrats have a lot of big spending ideas and you won't pay near all of it by wealth taxes and high marginal tax rates. they want to spend like scandinavia and they need a tax like stand nevaeh, they don't mean high corporate or wealth taxes, it means a big value-added tax. jared, when are you going to come out for that? >> that's a good question. there's a lot of analysts on both sides of the aisle that would like to go to a v.a.t. i don't see that in in the future. >> i would like to take issue socialism equals redistribution. >> should we squish? >> i agree with that. >> there's never been an economy

in the world that doesn't deal with redistribution. consider the tax cut trump, that looked like massive redistribution upwards there's lots of policies that redistribute downwards i take your question now i misunderstood, i absolutely think that there's a distinction between what government is always do redistributing income, power, wealth and socialism, two very different things. >> when you define redistribution. >> unfortunately, we're short on time today, guys, but as we move into this presidential season, it would seem that we're going to be discussing this a lot in the broader context of how are you going to attack income inequality in this country whether it's a way to do it, 70% marginal tax rate over 0 million or some strange tax on your estate or whatever it might be, i mean, am i wrong, or is this gaining currency proudly in terms of an issue in. >> you are correct. >> jimmy, what do you think?

>> i think it's gaining currency on the left, but we don't have, you know, a wealth inequality crisis in this country what very is a crisis of the economy that over the long term doesn't look like it can grow much over 1.5% there's been zero thought to the trade-offs of the higher taxes on economic growth >> very quickly to both of you president trump linked the investigations into himself and the administration as a threat to the economy jim, is that right >> only if we don't have law and order in this country. we have to have rule of law, and we're going to investigate things, but i think the uncertainty -- it is an uncertainty of what's going to happen i think with china and with this mueller version but we'll let it play out. that's what we do in this country. we have laws and rules and that's the way it goes. >> stipulating jimmy's point i think the president is wrong about that and i think history shows that you can have investigations and robust growth nobody ever decided -- >> 1990s. >> 1990s, big growth. >> nobody ever decide, you know,

not to buy a house or a car because somebody is being investigate so putting aside jimmy's very good points about uncertainty the president is wrong about that. >> i don't know, watergate hit consumer confidence and the market. >> watergate -- >> we had the world's biggest boom during the clinton investigation. >> exactly. >> you can't cherry pick -- you've got to be careful not to cherry pick your data points. >> i'm out of time, but we'll have you both on many, many more times. >> just getting started. >> great. >> jared bernstein and jim pethokoukis. >> phil lebeau joins us now with more on the gm company results. >> conference call is still going on let's take a look at the fourth quarter numbers from general motors, the stock moving higher after posting better than expected earnings bogut the street by a little over 20 cents. revenue coming in $2 billion better than expected it's really two stories for general motors

let's start first off with the positive story which is north america because of demand for trucks, suvs you saw that yesterday we were at the launch for the new heavy-duty silverado they earned $3 billion in north america. the other side of the story concerns china, and when you look at gm's equity income from china dropped 33% in the fourth quarter. here is the cfo talking about the chinese market as gm sees it right now. >> we are cautiously optimistic about the mesh thursday are being talked about and what we can control is our execution you're outlook in the china industry is for a flood industry year over year. >> when you look at the china market, this is what you're looking at there is a slight downtick there where you see the line for 2019. that's the expectation for auto sales overall, not just general motors but auto sales overall that, will will be a slight downtick in 2019 in china. shares of general motors, again, the conference call going on right now. they have pulled back just a little bit from pre-market in

part because the company is going over what they expected in the first quarter, it's going to be the slowest quarter for the rest of the year but they have not changed their guidance at all and we'll hop back on to the call, guys, and if we have any news we'll spring it to you. >> phil, please do. >> phil lebeau on gm rising a little over a percent right now. up next, spotify reporting a rise in monthly active users revenues below the street estimates though you'll hear what the ceo had to say about the quarter and why o ey are embracing podcasts with twbig new acquisitions "squawk on the street" will be right back with the dow down 67 points you should be mad at forced camaraderie. and you should be mad at tech that makes things worse. but you're not mad, because you have e*trade, who's tech makes life easier by automatically adding technical patterns on charts and helping you understand what they mean. don't get mad. get e*trade's simplified technical analysis.

spotify announcing the acquisition of gimlet media and anchor for undisclosed amounts spotify also reporting its first ever quarterly profit though revenue was slightly below what wall street estimates had been the stock is lower this morning, down about 5%. we spoke exclusively with ceo daniel ek last hour. here's what he had to say about the company's move into original content. >> we are investing more original content that will broaden the appeal of the platform, and as we're doing that we believe obviously subscriber acquisition costs will go down, engagement will go

up which increases our long-term opportunity. it's part what have you should look at in terms of our forecasts going forward in terms of acquisitions but it's also our own efforts in investing in creating these shows we had 14 exclusive shows in the fourth quarter of 2018 we're doubling down on that, and we want to grow the number of shows the that we have >> positioning themselves, sara, in many ways as an audio company, not simple police a mike streaming service following a similar model to netflix, the idea, and he sort of articulated this, the more you give the more you'll get back in terms of subscription additions from people. apparently their algorithms on all the data they have shows people really do enjoy listening to podcasts and those who listen listen more in terms of being on the platform for longer periods of time. >> reading analyst notes, it looks like they are excited about the acquisitions. >> we don't note numbers they are supposed to be fairly small so there's spending of 400

million to 500 million in terms of acquisition thfz type. >> more to come. >> and then he indicated they will spend more, not necessarily double that, but how much they will spend on programming overall will continue to increase nothing like 12 billion or whatever the number is from netflix these days. >> they do have a significant cash position and it appears to be painting an optimistic portrait here of offering a broad array of services for artists. >> just nice to hear from mr. ek who was here today very nice. >> sort of promised you he would be back. >> he'll be back he was not even here when the company listed to become a public company. >> why now >> you know, he does seem to want to articulate this vision that he has for sort of a bit of a change in terms of their strategy change may be too strong a word but expansion of their strategy. >> the netflix of audio. >> yeah. >> i guess any company would like to be called that. >> time for our etf spotlight, taking a look at the semiconductor index. smh on pace for its fourth

straight positive session. chip stocks rising on optimism of a u.s.-china trade deal as representative mnuchin and trade representative lighthizer are set to talk in beijing skywork solutions a top performer on the s&p soaring despite a slight analyst miss. the stock is on pace for its best day since january 2017. they also announced a new $2 billion stock buyback which may be helping that stock up 11.5%. >> now let's send it over to sue herera with a cnbc news update. >> good morning, everyone. here's what's happening. european council president donald tusk blasting officials britain for wanting to leave the european union without coming up with a plan beforehand.

>> i've been wondering what a special place in hell looks like for those who promoted brexit without even a sketch of a plan how to carry it out safely >> a patient in philadelphia is being monitored for possible ebola. it is happening at the university of pennsylvania hospital right now doctors say they don't believe the patient has the illness but testing is being done out of an abundance of caution. >> and tesla is cutting $1,100 from the base price of its car designed for the mass mark that's the model three it now starts at $42,900 and tesla cut 30% of its workforce to trim costs and reduce the price of that car. >> you're up to date that's the news update this hour david and sara, i'll send it back downtown to you. >> thank you. >> when we come back, shares of take-two are in the red this morning after interesting results that were better than

expectations however, guidance, perhaps is o raerning some people cestuss zelnick is going to join us on set right here on set on the other side of this break. i know what it means to have reliable support.

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my name is tanya, i work at the network operations center for comcast. we're working to make things simple, easy and awesome. take-two interactive shares as you can see down sharply this morning the company beat on the top line, but apparently the outlook has investors concerned. video game stocks selling off broadly this morning electronic arts which did not report a good number or guidance activism blizzard reporting large on that and we don't see nintendo in there as well. >> joining us for a cnbc exclusive to join the company results. the interim chairman now of ceo as well, strauss zelnick you think we beat the number you but didn't give particularly bad guidance i'm seeing wall street analysts that said they didn't like the guidance.

>> so we crushed the quarter we had great results across the board, and we issued an outlook for the full year that says we'll have a record year in terms of net bookings and cash flow provided by operations. we sold 23 million units of red dead redemption, a massive hit we're having another record year for nba td '19 and nba online in china has 43 million registered users current spending on the title is up nearly double that's great news. having crushed the third quarter we adjusted our sales for the fourth quarter to reflect a record year and the guidance there is less than consensus. >> the quarter's total bookings beat was minor compared to the speak and they go on to say there's headwinds.

>> enormous tailwinds? >> so they got it wrong. >> in that instance they have gotten it wrong. the outlook it great. >> if you look at ea, they cut their revenue guidance, but the market appears to be telling a story of a challenging gaming environment right now and taking down all the multiples why is in a? >> at the end of the day entertainment businesses are driven by our release schedule and all of you're releases are working really well. i don't like to argue with the market market conditions are market conditions at the end of the day we deliver, we do well. if we fail to deliver, we don't. we're not seeing any competitive headwinds at all as long as we deliver great quality. all of our products are performing nba 2k19 is set to achieve another record this year. >> we got a warning this morning from nvidia that perhaps

concerned people because they talked about selling fewer chips into china, particularly for gaming you're not seeing weakness in china? >> not at all. approvals have opened up and asia is a really important growth area for us, and we're gratified that approvals are starting up again. as i said, nba 2k '19 online which is the number two sports title which is a title in our partnership with ten cent saw its revenue double in the quarter. >> a narrative seems to be that everybody is playing fortnite and is not playing anything else >> that's not remotely sarioglu is that frustrating for you, and what is your response when you hear that? >> fortnite was a huge hit, admire that. we would like to have all the hits at the same time they were doing well grand theft auto had another record year and red dead redemption two has sold millions of units at the same time that other titles in the marketplace are doing well in the entertainment business we're not picking and choose

among competitors. it's not like going to the grocery store. in the entertainment business you select only what you really want if there's nothing that you want you buying in on if there's a lot that you want you'll buy all of it. as long as we deliver quality we'll show up. that's what we've seen in the quarter and what we're projecting in the year. >> the fortnite effect isn't just a competition for eyeballs but that it's free to play and that could be a headwind to some of the models if consumers get used to that idea. >> fortnite is a robust title for a free play environment. that speaks to the success of its hit. i'm not sure can you extend that to the rest of the market. when we put out a high quality title like nba or red dead redemption 2 or grand theft auto 5, or other titles, many that we bring to market, as long as we deliver something great,

consumers will show up and pay for the title and then we seek to engage with them after the release and we can monetize that engagement as well our current consumer spending was up 31% in the quarter, not our expectations that beat our expectations. >> a lot centered around subscription models. you were asked about that on the call what the is your idea of the models when it comes to playing video games? >> i know subscription is the holy grail for many entertainment executives it. i would observe that the average american household wants somewhere between two and three subscriptions and no more, so i think a subscription model works when your subscription offers and benefits consumers and creates a great product as well. you need to find the crossover that may be somewhat challenging in the video game business given the cost to create the programming and the fact that the avid video game player plays 45 hours a month versus 150

hours of television viewers and within those 45 hours you're playing one, two or three titles so i'm not sure you need a robust subscription offering if that's what consumers want, we'll show up. >> specifically the players that are thought to be entering the space, google, for instance, in terms of offering a streaming platform to coincide with 5g and apple is working on a subscription service who are the winners and losers going to be, and how do you deal with giants like that which have so much capital entering your space? >> well, streaming is obviously distribution technology. subscription is a business mold, so they might go together, but they need not go together. streaming is going to be a great thing for our business because broad distribution is always a good thing and if streaming does open the market to more consumers, they will come for our parts. >> you see them as a partner >> absolutely. >> there's only a limited number that can offer strategies. it's not ready for primetime

yet. >> i think that's a great opportunity. >> microsoft with xbox and amazon with twitch is that going to be a battle of the titans >> in order to be a streaming player, you need to have terrific technology. you also need to have hyper scale data centers all around the world. only several companies have that can google and amazon and facebook and microsoft do it yeah can anyone else do it? pretty hard. from our point of view it's sort same thing of saying how do we feel about comcast, you know, and kashlgs acable, and the ans feel just fine do we work with them yeah. >> are we happy to >> does it make sense? of course it does >> come back to yesterday's performance overall and you seem somewhat of mystified. what are we missing here then, and what are you missing in terms of investors seemed to be running away from your sector right now, mainly largely because of ea. there does seem to be an idea that stocks are overpriced given

the growth prospects or they are not coming in in terms of the expectations >> we know the big market moves are related to a disappointment or change next pectations or both i think it's possible that some people thought that if you were in this business, that is say the interactive entertainment business, if you were front and center, things would just be fantastic all the time, and i actually resisted that notion, even when it was benefiting us i said, look, we rise or fall based on the quality of our products as that happens that's been a good thing for take-two. all of our products are working and they have been for year. we're focused on quality, efficiency and creating the best people in the business to purr their passions that yields a great result that does not turn into a business that we show up every day and it keeps clicking along by itself. that's not the nature of the business and some investors thought that was the case maybe about the sector that's not the case about the sector you've got to show up every day

and deliver hard and. >> speaking broadly about media. you have a lot of responsibilities that include being the interim chairman of cbs which is in the midst, it appears, of looking for a new ceo. is that search under way are you getting anywhere in terms of finding somebody? >> that's under way. that's been previously reported. >> that's all you've got to share for me. >> pretty much the big news. >> is the interim designation one you're look forward to eliminating in the sense of no longer having that title at all because i would imagine you've got a lot of work that faces you every single day, not just here but given that responsibilities of being chairman of cbs. >> it's interim for a reason and in the meantime i'm trying to be as helpful as i can be >> how are you helpful >> oh, i don't know. you'd have to ask other people, but i think -- i think for -- for a non-executive chairman your goal is to convene and be a sounding board and, you know, help things move along, but what

don't you do you don't operate company. >> finally, of course, i know you're no stranger to the speculation that conditions that at some point cbs and viacom will get back together in some fashion or at least talk are there any talks under way at this point about a potential merger >> remember that part i'm not an operating executive. probably not something i would want to chat about. >> as a non-executive chairman i know you'd be aware of that since you do run the board we're thrilled of how -- at how the company is doing company is performing just great and i'm happy to be on the board and hope to be of service. >> and do you expect to have a show in place fairly soon? >> i think that's right. >> yeah. >> relatively soon. >> which would be what, a couple of months? >> hard to say. >> we're working ton and it's in progress. >> strauss, thank you. >> appreciate your time. >> strauss zelnick, ceo of take-two interactive and the interim non-executive chairman of cbs. >> sara. >> strauss, thanks.

checking shares of disney. the company reporting a beat on both the tom and bottom line it's actually the stock relatively flat. "squawk on the street" back after a break. dow has recovered some of its losses, now down only 17 points.

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welcome back toes on the street like to welcome my guest for today david wessel thank you for joining me. >> pleasure. >> you know, this morning we had limited productivity data out. didn't have service data we did have manufacturing productivity it's up 1.3% for that q4 preliminary read that's almost double the pace if you look at the end off17 to the

end of '18 can you make a comment on productivity and why it seems to be spongy, although it has improved of late. >> well, it is good news that the manufacturing productivity which is the only part of the productivity measurement we got today because delaying data, it's up i think looking at one quarter on productivity is pretty misleading pinpoint bounces around a lot i think what's happening is -- and you can look at the economy writ large, it seems to be going the other direction. there seems to be a lot of hiring and what gdp growth doesn't seem to be picking up steam. well, more hours worked without a commensurate increase in productivity, without commensurate increase in output suggests that productivity across the economy is a little weak so that's concerning so today's number is good news, but i don't think it's dispositive. >> excellent now, if you had to make a guess, is there anything going on with respect to, for example, the

house now democratic, tax reform potentially something to try to reverse out. are any of those dynamics affecting productivity or is it too soon to tell is there any correlation between macro political direction and productivity >> well, over time, we have better productivity growth if we have more investment, whether it's public investment in education and health of kids or more business investment in efficiency or expansion and innovation so, you know, the people who are in favor of the tax cut said it would increase investment. i don't think there's evidence yet of that. i think this is a long-term thing. i do worry, though, that there -- and i think, probably, the deregulation, for all its pros and cons, does tend to help on productivity. so if that gets reversed, if we have re-regulation, that's probably a negative for productivity it may have other benefits i am worried a lot about,

though, that we're falling behind on any kind of public investment, even the stuff that used to be bipartisan, infrastructure, for instance but i think the most important thing to remember is that even if the case for the trump presidency and the tax cuts and deregulation is going to increase productivity, that's a long-term bet, and really, it's too soon to come to any kind of conclusion about whether it's had an effect. >> i couldn't agree more, david. and thank you because i really think whether it's capital expenditures, which is really at the heart of some of these issues, it is a long runway. thank you for your thoughts, today, from david wessel to david faber, back to you >> okay. i will take it thank you, mr. santelli. now time to send it over to jon fortt and get a look at what's coming up on "squawk alley". >> well, david, calm is an app for wellness, should calm you down, make you feel better they actually just raised another round of funding valued now at ove$1r billion the cofounder is coming on with us and we'll talk about that and more, coming up on "squawk alley"

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welcome back to "squawk on the street." i'm dominic chu. as you can see here, markets are turning around we are almost positive for the s&p. the dow has actually seen now positive territory the s&p is coming off of its fifth positive day in a row from

yesterday. one of the key sectors moving higher is information technologies, you're seeing right there. you've got skyworks solutions, microchip technology among the best performers following their quarterly reports after yesterday's close. communications services, the worst-performing sectors so far today. video game stocks a big part of that story ea and take 2 both down a lot on those worries about competition. so keep an eye on those sector laggards now back downtown to you guys at the new york stock exchange. >> and i will take it, thank you, dom dom chu back at our headquarters time now to ask sarah on what is coming up on that all-important last trading hour, and then there's an hour after that, too. >> and that's important, too later today, we'll get some reaction to steve liesman's sit-down with former federal reserve chair janet yellen with fred mishkin and sarah bloom raskin we'll also talk about those new strenuous requirements behind the fed's stress tests

and the brothers behind ken griffin's new $238 million new york city pad. he's on a bit of a buying binge lately >> high-priced real estate >> and it's another crowded, very exciting earnings day chipotle will be reporting after the bell, bringing the numbers, instant analysis, and much more. coming up later. i think we have fire eye and a few hours. >> i can't wait for that closing bell but right now, "squawk alley" coming up next don't go away. duncan just protected his family

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good morning it is 8:00 a.m. at disney headquarters in burbank, california 11:00 a.m. here on wall street and "squawk alley" is live ♪ ♪ oh, that's the way, uh-huh ♪ uh-huh, i like it ♪ oh, that's the way, uh-huh ♪ uh-huh, i like it >> good wednesday morning. welcome to "squawk alley." i'm jon fortt here