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Quest Means Business
eBay to Spin Off PayPal; Icahn Gains from PayPal Spinoff; US Stocks Flat; EU Slams Apple's Irish Tax Deal; Hong Kong's "Umbrella Revolution"; Hong Kong Protest Played Down on Mainland; Yelp, TripAdvisor Unite Against Google; Luxury Resort Nikki Beach Plans Expansion
Aired September 30, 2014 - 16:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
(NEW YORK STOCK EXCHANGE CLOSING BELL)
MAGGIE LAKE, HOST: That's the sound of the third quarter coming to an end. It's Tuesday, September 30th.
Tonight, an online shopping spinoff, eBay and PayPal go their separate ways.
The Umbrella Revolution is drenched with rain, yet protesters remain camped out on the streets of Hong Kong.
And bringing Netflix movies to the biggest screen of all. I'll speak to the IMAX CEO about their latest deal.
I'm Maggie Lake, and this is QUEST MEANS BUSINESS.
Tonight, a major reversal for eBay. The e-commerce giant has announced plans to spin off PayPal into its own publicly-traded company.
eBay has spent much of this year insisting PayPal and eBay are better together, despite fierce criticism from activist shareholders like Carl
Icahn.
Now, eBay says turning PayPal into a separate company is the best way to deliver value to its shareholders. The companies are expected to split
in the second half of this year. There's a lot for PayPal investors to like. PayPal is growing much faster than its parent company. Last year,
PayPal contributed around 40 percent of eBay's total revenue.
Both companies will see changes at the top, eBay's chief exec and chief financial officer will both leave after the split. Dan Schulman will
take the top job at PayPal. He is an executive at American Express, where he's pushed the company to embrace new technologies. He's also held
positions at Sprint and Virgin Mobile.
Schulman's experience will be critical for PayPal. It is facing threats to its business from competitors like Google Wallet and Amazon
Payments, and let's not forget, Apple's recently-announced Apple Pay
CNN Money's Cristina Alesci has been following the story. She joins me now. Cristina, this is quite a reversal. They had been trying to
convince everyone they were better together. Why are they doing it? Why now?
CRISTINA ALESCI, CNN MONEY CORRESPONDENT: Well, it's really interesting, because what we have now is the fact that the separation
really doesn't address some of the fundamental challenges that both of these companies face.
On the marketplace side, you have Amazon as a very fierce competitor. Not only that, but brick and mortar are going directly to consumers. So
more and more, eBay is going to be the place where you go to buy used goods, which is really not the place you want to be.
On the payment side, as you alluded to, you have Google and Apple, which haven't even begun to rev up their efforts yet. So you really have
some fundamental challenges. Now, the changes that they made in management may address some of that, but we didn't hear any specifics.
So, as you alluded to, the major reversal is confusing to a lot of people on Wall Street, right? You had the company just six months ago say
that eBay helps PayPal and separating these would actually destroy shareholder value.
Now today, you have them saying the complete opposite, that there's no benefit to this partnership beyond 2015.
LAKE: Yes.
ALESCI: It's kind of crazy. It's not something -- and what's even crazier is that we saw the stock price increase today, basically erasing
the loss -- the losses that we saw since Icahn ended is formal push --
LAKE: Right.
ALESCI: -- to have this separation.
LAKE: Right. So, clearly, investors like it. And listen, a lot of people have been talking about this, despite the objections coming from
management. That management now leaving, so perhaps they're turning over a new chapter.
That chapter likely to continue to be about acquisitions, though, isn't it? Because now that they're separate, both are potentially targets.
I know a lot of people think Alibaba might actually look at eBay. But it does also potentially put PayPal in play, doesn't it?
ALESCI: Absolutely. In fact, Icahn, who's still a major investor, actually put out a statement today saying that he wants to see more
consolidation, more of these payment companies coming together exactly because Apple and Google are going to be major competitors, and the only
way to be competitive with them is to get together. So, he sees, definitely, some synergies there.
But the question is, these companies are massive, even separated, right? You're talking about a valuation in the case of PayPal of
potentially $43 billion. That is a huge deal. Who's going to do that deal?
Look, there is a potential. Maybe Google wants to move forward with its efforts so it goes in and it does a deal for PayPal. But keep in mind,
one thing that really stuck out with me on the release today is that PayPal and eBay didn't talk about PayPal on mobile.
And that's a lot -- what analysts are paying attention to is the fact that PayPal may be behind on mobile, and that's where a lot of the action
is going to be. So, if you're Google, you have this amazing mobile operating system, why would you go to PayPal and buy PayPal for $43
billion?
LAKE: Yes.
ALESCI: That's not really a logistic -- it just doesn't have a lot of logic to it.
LAKE: Right. And in fact, Google and Apple both have hardware connected to their digital wallets, and we've had analysts talking about
the fact that that hardware, especially when you're talking about security -- think about Apple's thumbprint -- is going to be increasingly important.
That's a really interesting point. It is -- it just underscores one of the challenges PayPal has.
When we're talking about competitiveness, we're talking about mobile - - they are -- they do have a head start, don't they? I know some people think they've really fallen behind and they haven't taken advantage, but
they do have first move and they do have a lot of active PayPal customers, don't they?
ALESCI: Without a doubt. And they actually talked about today in the release that they facilitate a lot of transactions between US and China, so
they are firmly entrenched in that market. And they are growing, right?
LAKE: Right.
ALESCI: They put out in the statement today 26 percent increase in total payments. So yes, it's a good business. The question is, at what
price in terms of a merger or a buyer that you're talking about. You have to pay a premium here.
LAKE: You have to pay a premium to get over that tax hit they'll take if they sell.
ALESCI: Exactly. That's why the opted for the tax-free spinoff.
LAKE: It's interesting to see if they go after the business they've been blocked from when they were part of eBay, including maybe doing deals
with Amazon, Alibaba.
ALESCI: That's right.
LAKE: Maybe not being a takeover target, but maybe doing some business as well. They have their work cut out for them, that's for sure.
ALESCI: Absolutely.
LAKE: Cristina, thank you so much. Cristina Alesci for us.
Well, activist investor Carl Icahn has already profited enormously from the proposed spinoff. He holds more than 30 million share in eBay.
Now, with the stock up 8 percent today, Icahn ends the day with more than $130 million more in his pocket. Richer by that much, at least on paper.
He's been a key agitator for the split. In February, he told QUEST MEANS BUSINESS that eBay was ripe for a change.
(BEGIN VIDEO CLIP)
CARL ICAHN, CHAIRMAN, ICAHN ENTERPRISES (via telephone): You want to give marks for corporate governance, some comers are A, some are B, some
are C, eBay's an F. If you separated PayPal and eBay, we think the company's very undervalued, all right? And as far as we're concerned, that
is what they should do.
(END VIDEO CLIP)
LAKE: Icahn is known for meddling in the companies he takes a stake in. He insists it's a strategy that pays off, but he doesn't always get
his way. Apple's Tim Cook successfully resisted Icahn's call for Apple to buy back more of its own stock. Icahn had also called on Apple to roll out
new products faster.
In 2012, Icahn argued that Netflix was ripe for a takeover by a larger firm. Netflix responded with a stockholder rights plan designed to prevent
activist shareholders from launching hostile takeovers.
Last year, Icahn's plan to take over Dell flopped. It came shortly after founder Michael Dell announced plans to take the company private on
his own.
Well, US stocks ended the day flat. Growth in home prices slowed more than expected in July, and consumer confidence fell sharply in September.
That was driven largely by weak job numbers in the US.
Europe's top regulator is accusing Ireland of giving Apple a sweetheart tax deal for more than two decades. The European Commission
says Ireland's tax deal is so soft, it may constitute illegal state aid. An EU spokesman laid out what that means.
(BEGIN VIDEO CLIP)
ANTOINE COLOMBANI, SPOKESMAN FOR EU COMPETITION COMMISSIONER: What we analyze is whether there is state aid involved in the meaning of EU rules.
In other words, hear whether there is selective treatment, selective advantage given to a company. And we analyze whether this state aid is
compatible or incompatible with EU rules.
(END VIDEO CLIP)
LAKE: The Irish government insists it didn't break the law on state aid. If the EU decides otherwise, Ireland will have to recover billions of
dollars in tax from Apple. Apple says it didn't get preferential treatment. The company will have a chance to challenge the allegation.
Starbucks is facing similar allegations over a tax deal with the Netherlands. Fiat also facing an investigation over Luxembourg.
It is 4:00 AM in Hong Kong, and pro-democracy protesters refuse to stand down no matter if it's pouring with rain or raining teargas. We'll
be live from the site of the demonstrations after the break.
(COMMERCIAL BREAK)
LAKE: The pro-democracy protests in Hong Kong are becoming known as the "Umbrella Revolution." Demonstrators certainly needed them during this
intense rainstorm. Umbrellas have also coming in handy as rudimentary shields against tear gas. Police used 87 canisters of the stuff against
the crowds on Monday.
The Hong Kong chief executive says he wants the streets cleared, calling it a safety concern. It is a public holiday on Wednesday in Hong
Kong, and with many people due to take the day off work, the crowd is expected to swell. You're looking at live pictures right now of the scene.
Our senior international correspondent Ivan Watson joins us now from Hong Kong, from his perch above it all. And Ivan, we are expecting these
crowds to get larger. The mood has been very optimistic, very upbeat, but certainly, given the statements coming from authorities, there does seem to
be some sort of confrontation looming.
IVAN WATSON, CNN SENIOR INTERNATIONAL CORRESPONDENT: Certainly. This whole protest movement, this whole sit-in is a part of this political
confrontation. This is the third night in a row, now, that the demonstrators are occupying this part of Hong Kong behind me, as well as
several other locations in downtown Hong Kong.
It is a soggy night, as you can see. But neither the weather and the rain nor statements coming from Hong Kong's top official declaring that
this sit-in is illegal and that it must disband immediately, none of these factors are convincing these protesters to give up and go home.
(BEGIN VIDEOTAPE)
(THUNDER)
(CROWD CHEERS)
WATSON (voice-over): Lightning crashes and Hong Kong's pro-democracy demonstrators erupt in cheers. The deluge soaks thousands of protesters,
who all seem to be armed with umbrellas. Used last weekend to shield demonstrators from police pepper spray, the humble umbrella has become the
symbol of this protest movement.
And yet, the government here announced on Tuesday it is not open to negotiations.
LEUNG CHUN-YING, HONG KONG CHIEF EXECUTIVE (through translator): The central government won't be swayed by illegal activities. This illegal
protest will not force the central government to go back on its decision of August 31st.
WATSON: The mass protests that have occupied large parts of downtown Hong Kong for more than 48 hours sparked by the Chinese government's
announcement last August that future candidates for Hong Kong's top job would first be vetted and approved by Beijing before being elected in a
popular vote.
(CROWD CHANTING)
WATSON: Senior opposition leaders call this "sham democracy." But these mass protests were spearheaded by Hong Kong's youth.
WATSON (on camera): You guys just started university.
UNIDENTIFIED FEMALE: Yes.
WATSON: Just a few weeks ago.
UNIDENTIFIED FEMALE: Yes.
WATSON: And now you're already boycotting class?
UNIDENTIFIED FEMALE: Yes because we want to support the students from all over Hong Kong, and we want to express our opinions to the government.
WATSON: And what is the message that you would like to send to Beijing right now, to the central Chinese government?
UNIDENTIFIED FEMALE: Just to respect the democracy that Hong Kong deserves and really uphold the principle of one country, two systems.
(CROWD CHEERING)
WATSON (voice-over): On Tuesday, opposition leaders ramped up their demands, calling on Hong Kong's chief executive to resign and threatening
to expand the Occupy Movement to government buildings.
WATSON (on camera): Neither warnings from the Chinese government, from the Hong Kong government, or monsoon rains seemed to have dampened the
fervor and the enthusiasm of these demonstrators. Both sides appear to be digging in their heels in this political dispute.
WATSON (voice-over): The speed and youth of this protest movement seemed to have caught everyone off guard. And no one knows where this
burst of activism will take Hong Kong next.
(CROWD SHOUTING)
(END VIDEOTAPE)
WATSON: Maggie, Hong Kong's embattled chief executive, C.Y. Leung, the crowd here has been demanding that he step down. In his comments on
Tuesday, he did come out and say listen, these protests are blocking the way for things like emergency vehicles to come through. And they are
certainly making daily life more difficult in Hong Kong. Traffic has been snarled.
There are some people, some segments of society, that do not support this, that are complaining about this. And in fact, some of the young
people we've talked to have disagreements within their own families, their parents don't even want them to come here, and yet, they're defying not
only their government, but also their parents in coming out here and protesting in these streets. Maggie?
LAKE: Ivan, thank you so much. Ivan Watson in Hong Kong. While the Hong Kong protests are a big story internationally, on the Chinese
mainland, the coverage is quite different, not surprisingly. CNN's David McKenzie has more.
(BEGIN VIDEOTAPE)
(CROWD SHOUTING)
DAVID MCKENZIE, CNN INTERNATIONAL CORRESPONDENT (voice-over): They braved teargas and police batons in Hong Kong, demanding democracy from
China's Communist rulers. And the Occupy Central movement vows to dig in. But back in mainland China, CNN's coverage of protests blacked out. And
over on state TV, the Hong Kong protests are largely ignored.
MCKENZIE (on camera): Out on the street, state media has been warned to toe the party line. This headline saying "Occupy movement creates
instability in Hong Kong." It's very difficult for Chinese in the mainland to get the full picture of what's going on.
MCKENZIE (voice-over): "I don't know about the protests," says this man.
"No, what news? Haven't see it," she says.
"I think they are people with ulterior motives behind the protests," he says. "It's probably the US. The Americans are always doing evil
things."
China media expert Jeremy Goldkorn says the ultimate battle is on the internet. Facebook, Twitter, and Google were all already cut off in China.
After protests began, the party censored photo-sharing site Instagram.
JEREMY GOLDKORN, FOUNDER, DANWEI: There is the idea that images are just as powerful as text when it comes to spreading certain kinds of ideas
the Chinese government would prefer not to be spread in China.
MCKENZIE: Those ideas, the freedom to vote, freedom of expression, freedom of assembly, are all openly debated in Hong Kong, but far more
dangerous to the party here.
MCKENZIE (on camera): The situation in Beijing couldn't be any more different. If even a small group of protesters moved onto Tiananmen
Square, they'd be stopped immediately and detained. The Communist Party in mainland China doesn't allow for any open dissent.
MCKENZIE (voice-over): Because the threat of the Tiananmen Square student uprisings of 25 years ago still looms over current party
leadership. When it comes to Hong Kong, the propaganda and censorship machine in China is in lockstep. Their ultimate aim, making sure nothing
at all threatens the party's grip on power.
David McKenzie, CNN, Beijing.
(END VIDEOTAPE)
LAKE: "A platform for piracy, spreader of malicious networks, a parasite." Ahead of a European Commission probe, these are all words
companies are using to describe Google. We'll explain the latest complaint next.
(COMMERCIAL BREAK)
LAKE: Google is coming under fire from Yelp and TripAdvisor, who accuse it of rigging the results of its own searches. They join a growing
list of companies taking issue with how Google manages its search results. News Corp recently accused Google of being a "platform for piracy" in a
letter to the European Commission and called it "an unaccountable bureaucracy."
Now, TripAdvisor and Yelp are taking on Google. The two teamed up today to launch the Focus on the User campaign intended to highlight how
Google links to its own reviews and recommendations. We tested the theory out and did a quick Google search for a tailor in London. Of the seven
business results featured, all of them were linked to a Google-Plus page.
Vince Sollitto is vice president for Yelp. He oversees corporate communications and government relations for the company, and he joins me
now from London. Thanks so much for being with us, Vince. What are you hoping to achieve with this campaign?
VINCE SOLLITTO, VICE PRESIDENT OF CORPORATE COMMUNICATIONS, YELP: Thanks for having me, Maggie, I really appreciate it. Well,
FocusOnTheUser.eu is an educational campaign designed to provide a solution, really, to the regulators in the European Commission that are
trying to figure out how to solve this Google search bias problem.
As you pointed out, when someone does a search for, say, a pediatrician in Munich, they're not getting, perhaps, the best results from
all over the web, but they're getting results that are being promoted by Google from their in-house property, Google-Plus, even when Google's own
algorithm admits that they're not the best results.
LAKE: Vince, Google would suggest, and others perhaps, that this is just sour grapes. If your brand was good enough that consumers would know
where to find you and this wouldn't be an issue.
SOLLITTO: Well, think about what your search just found. Someone was trying to find a tailor in London, and rather than find the best results,
the first seven results were those provided by Google from their own property
This is really about protecting consumers, which is exactly what the European Commission is trying to do, is make sure that consumers are able
to get the best results from around the web, not just the results that are best for Google.
LAKE: Vince, why is this fight happening in Europe as opposed to the US, which arguably is a larger market?
SOLLITTO: Well, because the European Commission has launched a years- long investigation into how to solve the problem of Google's search bias and dominance. There are a number of things that the company is doing that
the European Commission is very concerned about. And frankly, promoting their own services ahead of the welfare of consumers is one of them.
The FocusOnTheUser.eu website is simply an educational portal that can help consumers understand what happens when they do a local search that
they might not realize, as well as provide an easy solution to the problem. Let's go back to using a merit-based algorithm to find the best results
from all over the web, rather than letting Google preference their own in- house properties.
LAKE: Vince, is this entire discussion a little bit backward-looking. When we're talking about searching on the web, a lot of people who are
under a certain age don't even use a computer anymore, they're doing it through devices, they're doing it through apps. Is it worth the energy to
have this discussion?
SOLLITTO: Absolutely. Local searches, like the one you described, a tailor in London, a pediatrician in Germany, that's actually about half of
all the searches that take place on mobile devices or about a third of all searches in all platforms. And as more and more searches like this are
done, we need to make sure that consumers are getting results that are taken from all over the web.
For instance, when someone searches for a pediatrician in Germany, while they're going to get Google-Plus-dominated results, Google's own
algorithm concedes that Jameda, the local medial service provider there, actually has much better information. But the consumer has to jump through
hoops to get it, and that's why we're trying to make sure that consumers are protected.
LAKE: All right, Vince Sollitto from Yelp, thank you so much for bringing us your point of view, appreciate it.
SOLLITTO: Happy to be with you, thank you.
LAKE: Now, if you search for Nikki Beach on TripAdvisor, you may soon be able to turn up a few new results. The chain of luxury resorts is
planning to expand. It's already got a presence in 11 locations around the world: Ibiza, Mallorca, Cabo San Lucas, and Marrakech just to name a few.
It recently broke into the European market with a hotel in Greece. Today in a CNN exclusive, the company's owner is here to announce a turn
toward the Middle East as well. Jack Penrod is the founder and owner of Nikki Beach Worldwide, and he joins me now. Jack, thank you so much for
being with us. Pleasure to see you.
JACK PENROD, FOUNDER AND OWNER, NIKKI BEACH WORLDWIDE: Thank you, Maggie.
LAKE: So, before we talk about your new expansions, I do want you to weigh in, since you are in the travel industry as well. Do you worry about
your consumers being able to find you fairly on the web?
PENROD: Not really. Most of ours is word-of-mouth. We have a logo, "Tell only your best friends." So, our friends tell each other what to do
and where to go.
LAKE: So, you're looking for exclusivity.
PENROD: Exactly.
LAKE: So, talk to me about the location in Europe. Why now? Why Greece? And aren't you concerned about the economy?
PENROD: We are in Spain right now with the fastest-growing restaurant we own. It's 40 percent up this summer, with about a 20 percent
unemployment in the area. It doesn't seem to bother us. We have a very exclusive customer base that doesn't worry much about money.
LAKE: So, what is it that you're selling? For those who haven't been to one of your resorts, now, explain what you offer that other beach
resorts do not. It's more of a lifestyle brand, isn't it, than just a hotel?
PENROD: Yes. We have another motto: "Celebration of life." When you come to Nikki's, you can be someone that sits around and watches the
fun happening, or you can get involved. I'm the designer of Nikki's, and I designed them so that there's always a place to sit quietly and enjoy a
nice meal, or you can participate, spraying champagne or what not.
(LAUGHTER)
LAKE: Just to name one of the -- what are we doing sitting here, Jack, is this first question. But talk to us about where the inspiration
came from this idea bout "celebrate life" and how the company got started?
PENROD: Well, unfortunately, 15 years ago, I lost a daughter named Nicole. I've never really spoken about it, but after the pain, you decide
that you must do something, so that's where we came with "Celebration of life." My daughter was one of the most outgoing, fun, beautiful little
girls on the planet, and we're celebrating her life.
LAKE: What a fantastic way to honor her. So, we talked about the location in Greece setting up. You're also moving into the Middle East.
Tell me about that, and have you found any resistance to the services you offer and that sort of "Celebration of Life"?
PENROD: No. Middle East, we've been looking at Dubai for about ten years.
LAKE: And that's where it is, in Dubai?
PENROD: In Dubai. So, for ten years, we've been looking, and we've been waiting for the exact location. We now are working with the Meraas
Holdings, and they have a site that's 400-meter-long beach that we're going to build a phenomenal hotel, live-in residence, and a beach club. We have
a budget of $100 million to spend.
LAKE: Wow.
PENROD: So, it ought to be pretty special.
LAKE: And when is that going to be open? When should our viewers think about booking that vacation, getting those requests in early?
(LAUGHTER)
PENROD: Should be in the September, October 15.
LAKE: Well, we look forward to it, and we hope you'll give us a special tour when you cut the ribbon.
PENROD: You bet.
LAKE: Jack Penrod, thank you for joining us.
PENROD: Thank you.
LAKE: After the break, this woman's son flew to Syria to fight for Islamic militants. Now she wants to know how he was allowed to board a
plane when he didn't even have a passport. That story is next.
(COMMERCIAL BREAK)
LAKE: Welcome back, I'm Maggie Lake. This is CNN. Time now for an update of the news headlines. Hong Kong's chief executive has told pro-
democracy protestors that China will not compromise. Demonstrators again took to the streets of the city's financial district in their thousands,
challenging Beijing's right to veto electoral candidates.
Fourteen hundred U.S. troops are being sent to fight Ebola in West Africa. The Pentagon confirmed that 700 soldiers are being sent to Liberia
with another 700 military engineers being sent to help build treatment units. The U.S. eventually plans to send 3,000 troops to fight the
disease.
Afghanistan's new government has signed a security agreement with the United States that will allow U.S. forces to remain in Afghanistan after
September 31st. Former president Hamid Karzai have refused to sign the agreement, forcing the U.S. to consider a complete withdrawal of troops
this year.
U.S. Secret Service Director Julia Pierson has been defending her department in Congress. She was testifying before the House Oversight
Committee. It follows the revelation that the recent Whitehouse intruder made it farther into the building than previously reported. Pierson called
the breach unacceptable.
Olympic swimming champion Michael Phelps has issued an apology via Twitter. It follows his arrest early Tuesday on charges of driving drunk,
for excessive speed and for crossing double-lane lines along a highway in the city of Baltimore. Phelps later posted a tweet saying he was quote,
"Deeply sorry."
British planes have carried out their first airstrikes on ISIS targets in Northern Iraq. Two fighter jets taking off from their base on the
island of Cyprus targeted a heavy weapon position an armed pickup truck which had been attacking Kurdish fighters. Initial assessments according
to the British government say they were successful. Despite all of this air support, ISIS continues to advance through Iraq and Syria. The
militant group says it has carried out attacks on Albu Aytha 80 kilometers from Baghdad. Iraqi security forces claim they are in control of the area.
They described the ISIS attack as just a hit and run operation.
The mother of a British militant killed in Syria last week is demanding answers from airlines and from the British government. She wants
to know how her son was allowed to board a plane to Syria when he didn't even have a passport. CNN's Karl Penhaul reports.
(BEGIN VIDEOCLIP)
KARL PENHAUL, REPORTER FOR CNN INTERNATIONAL: Seaside Britain, home of fish and chips and ice cream cones. Brighton was supposed to be a fresh
happy start for a mother fleeing war in Africa and a broken marriage. Now Khadija Kamara sits reading condolence notes.
KHADIJA KAMARA, MOTHER OF JIHADIST SON KILLED IN SYRIA: To the lovely lady in the shop, I am so sorry for your loss.
PENHAUL: Last week her 19-year-old Ibrahim was killed in the first wave of U.S. airstrikes on Syria. Family and friends say he left early
this year to join the al-Qaeda-affiliated al-Nusra Front.
(KAMARA): (CRYING).
PENHAUL: Ibrahim Kamara had been studying computer science at college. His mother says he regularly helped out at a charity store
raising funds to build a school in their native Sierra Leone. News reports of civilians suffering in Syria infuriated Kamara but his mother had no
idea he'd joined rebel ranks until he phoned in February to say he was in Syria. Khadija says she was so mad she hung up.
KAMARA: I don't think it's just because I was angry with him, it was because I couldn't understanding that my kid went to such a place.
(Inaudible).
PENHAUL: Kamara did not have a valid passport. His mother says he stole his 15-year-old brother Mohammed's. She's dumbfounded how her son
could ever have boarded a flight.
KAMARA: I didn't see my son. He's dead. I really have to bury him, at least let me get this answer - let me know how he traveled. I want to
know how he passed that airport with 15-years old passport. I want to know how he did it. I want to know.
PENHAUL: Britain's home office responsible for homeland security said airlines, not border police were in charge of checking departing
passengers' identities. Kamara traveled to Syria with two Brighton friends. They were heading to join their brother Amir (ph) Deghaye
pictured here on Brighton beach. He was already fighting with al-Nusra Front, his family says. He sent news of the teenager's death.
K. KAMARA: He said to my son, congratulations your brother Ibrahim died this morning as a martyr. I say what a nice way to break the news to
your family member.
PENHAUL: Khadija's mind drifts back to her last phone call with her son four months ago.
K. KAMARA: I just talked to him. I told him that I have found it in my heart to forgive you and that I'm here no matter what, that I love you.
PENHAUL: The last words of a mother to her son. From Brighton Beach to the battlefield. Karl Penhaul, CNN Brighton, England.
LAKE: And we will be back with more "Quest Means Business" in just a moment.
(COMMERCIAL BREAK)
LAKE: One of next summer's biggest movie releases won't be at your hometown theater. I will be on your TV or computer thanks to Netflix. The
video streaming service is premiering the sequel to the hit 2000 movie "Crouching Tiger, Hidden Dragon," and it's titled "The Green Destiny," due
out next August. Now the film will be out on demand around the world at the same time it is released in IMAX Theaters. Netflix has been working
directly with the Weinstein Company which is producing the film. The deal turned to the traditional Hollywood model - it turned to those traditional
Hollywood model - theater models - theaters first, then DVD streaming on its head. Netflix will also be partnering with IMAX to bring the movie to
select super-sized screens around the globe. Joining me to discuss the details is Rich Gelfond, the I-M-AX - IMAX, rather, CEO. Rich, great to
see you. Thank you so much for being here.
RICH GELFOND, CEO, IMAX: My pleasure, great to be here.
LAKE: A lot of people would say that you're crazy to do this.
GELFOND: Yes, as a matter of fact -
LAKE: (LAUGHTER) - have you heard that yet today?
GELFOND: -- we have heard that from too many people.
LAKE: What is behind this decision?
GELFOND: What's behind the decision, first of all on a bigger scale, is innovation. I think if industries don't innovate, they tend to
stagnate, and I think one would have to have their eyes closed not to realize that there's a lot of change going on in the movie industry - the
influence of digital, the influx of, you know, television changing, online streaming changing. So what we see is the opportunity to provide more
content to audiences and exhibitors.
So traditionally the movie business is at the slowest the end of August, the beginning of September because studios don't make big
blockbusters then. Kids are going back to school around the world, so we saw the opportunity here to take a relative high-budget movie that Netflix
and Weinstein are making, and to take that movie and make it available in theaters when there's almost nothing else available. And you would say,
well, why won't people pay to go to the theater?
LAKE: Wouldn't it cannibalize your sales? Wouldn't I just sit home in my pajamas and watch it?
GELFOND: Well, the answers we'll find out I think. It's an experiment, but I think not. And the reason I think not is seeing a movie
in an IMAX theater is such a special immersive experience. You feel like you're inside the movie, you're not compromising. Second, because a big
audience to see it on iPads or to see it on phones or see it on televisions, but movie-going is a social experience and you just get a
vastly-different experience on an IMAX screen. So I think there's room for both, particularly at a period of time where there wouldn't be other good
content.
LAKE: And that's the key, isn't it? Because we know when things get buzz, more people see them. Sometimes nobody sees a movie, it wins an
Oscar and then everybody wants to see it. Are you counting on the fact that you may have a halo for a film that's getting released at a shelf time
where people might not go to the movies, that you'll actually draw people in if it gets enough - gets enough water cooler chat, I guess you could
say?
GELFOND: Yes, there's no question about that. And while there hasn't been exactly a precedence for this, HBO introduced "Game of Thrones" at the
Barclays Center, and it sold out and people waited online to go see it there. So I think that is proof of concept that for the right kind of
product at the right time, even though people could get it for free in another way, they will pay for it. Another example would be think of a
sporting event.
LAKE: Right.
GELFOND: You can go watch your TV and get a baseball game for free. But you can go to the World Series and you pay lots of money. Because the
experience is vastly different. So this test is, is the cinema experience different enough from the at-home experience that people will pay a premium
for? And we'll all find out together, but I think the answer's yes.
LAKE: It's - I applaud you for taking the risk. It's not easy to do this in an industry that is resistant to change. Do you think if this type
of experiment is successful, that we are going to see this translate to the big blockbusters? To the peak season time? Or is this something that's
only going to happen at the margin in these sort of shelf periods as you call them.
GELFOND: Well, I think certainly for the future over the next sort of, I'll call five years/ten years, I think it will apply only to the shelf
periods. And the reason is that the studios invest so much money in the big blockbusters that they really need the windowing. So they the - you
know - the initial window where they create the buzz and they get the release from the box office and then they'll sell off the rights to
airplanes or television or wherever else it is, and then to streaming or DVD or whatever else it is. I think the economics for a long time are
going to ensure that the windowing takes place, and if it's not broken, don't fix it. And I think that works but, on the other hand, if you can
supplement it, why not? And that's what we're trying to do here.
LAKE: Absolutely, and it works until it doesn't and it's nice to be the first one out in front of those changes rather than having to be
reactive. Rich Gelfond from IMAX, it's always great to see you. Thank you so much for coming by. Good luck with the experiment.
GELFOND: Thank you, thank you very much. Appreciate it.
LAKE: Well, October is just around the corner and there has been some heavy flooding in Europe. Jenny Harrison is at the CNN International
Weather Center. Hi there, Jenny.
JENNY HARRISON, WEATHER ANCHOR FOR CNN INTERNATIONAL: Hey, Maggie. Yes, you know this is the (inaudible) course and you get warm weather, some
nice sunshine - particularly this time of year. There is a downside, and the downside is some tremendous thunderstorms and copious amounts of rain.
This is really kind of the culprit - this whole system really which has been moving through the Western Med into Southern France in the last few
hours. Have a look at these pictures because the amount of rain that came down, particularly into Montpelier is just staggering.
Hopefully we can bring it up video. But, I mean, just look at this. It just literally looks like this massive river running through the
streets. Now, it was a huge amount of rain, but it was really of course the timeframe. It came down in such a short period of time that it just
obviously flooded everything. You can imagine any way that the water might normally to drain away. It just wasn't able to do that because it really
came down in about three hours.
Look at this - between 3 and 6 o'clock in the evening. It set a record for the entire day - not alone - let alone - just those three hours.
And the amount of rain - it's phenomenal - four times the monthly average. And in fact, nearly half the total annual amount of rain came down. So, it
was just a staggering amount - nearly ten inches by the way at 253 millimeters.
And not surprising, then guess what? People were caught out because remember it came down that short - that short burst of time and people
literally had to go and take shelter. Not sure which level they're on here in this particular mall, but probably not the ground - because look at
this. This is outside. So, again, you can just see how deep the water is. And of course thankfully nobody in sight. No reports of any injuries, but
that is good news.
Now, the heavy rain - it hasn't really gone away. What it is doing is moving further to the east. So, it is going to the turn of the Central Med
that we'll see this heavy amount of rain. It could be - again -- we could have some pretty serious downpours at times. There's some warnings in
place, although not particularly for that area just yet. Tuesday into Wednesday it's still around these portions of Southern France, Eastern
Spain and also in northern areas of North Africa, and also the Bely (ph) areas. I notice here probable there for very heavy rains, severe winds and
maybe even some large and damaging hail. But as I say, a lot of it's been due to the very warm weather.
We've got this big towering thunderstorms that build up and of course eventually down comes the rain. And it is still very warm across Western
Europe. Temperatures still quite a bit above the average. In fact, four or five degrees above. Amsterdam at 21 by the end of the week. We've got
24 Wednesday and Friday in Paris against an average of just 18. Same average in London - not quite as warm but even so, you're there by Friday
again 22 degrees Celsius. So very nice and warm and of course Oktoberfest is continuing. Not quite as warm there, a little bit more overcast. And
some rain in the forecast too on Wednesday. But of course this weekend is the last of the three weeks. So, still some pretty good weather and no
doubt beer-drinking to be done before then.
There's the rain - you can see it across central regions. It is pretty good - fine, dry edge across much of the west, the northwest, one or
two scattered showers moving through, but really nothing more than that. Variable temperatures for Wednesday - 17 in Vienna, 15 in Copenhagen - so
you can see where the cooler air is. Fourteen in Kiev. Meanwhile, 26 in Rome and a very warm 27 Celsius in Madrid. Maggie.
LAKE: All right. Very unsettled. Thank you so much, Jenny Harrison. Well, when eBay and PayPal eventually break up, they might want to stay on
friendly terms. A little cooperation could give good for both of them and for their customers. It's called a vested business model, and we're taking
a closer look at it in this week's installment of "Future Finance."
(BEGIN VIDEOCLIP)
KATE VITASEK, AUTHOR OF "THE VESTED BUSINESS MODEL": Every business strives for innovation. But in today's interdependent marketplace,
innovation requires a highly-collaborative win-win business model and mindset. Traditional buyer/supplier relationships are like a game of tug-
of-war. While organizations say `strategic partnership,' most still sit across the table with competing goals. The result, a win for your supplier
is a lot for your organization and vice-versa.
Let's look at what a highly-collaborative vested business model looks like. It starts by adopting a `what's in it for we?' mindset. Now,
success is defined when your supplier helps you win and it's a direct win for them too. We call this a vested business model because business
partners become vested in each other's success. It's essential to convert this mindset into a tangible business agreement or contract following five
simple rules.
Rule One - anchor your business model and outcomes versus transactions or activities.
Two - focus on the what, not the how. If you dictate the how, you limit your ability to innovate. It's like putting your supplier in a box
while telling them to think outside of the box.
Three - clearly defined and measurable outcomes. It's imperative you measure business outcomes and not just the task.
And four - use a fully transparent pricing model with incentives based on overall total cost, not just price.
And lastly, five - insight versus oversight governance. Manage the business with your partner rather than just managing your partner.
The vested five rules may sound simple, but our research proves they work. Harness them as you reinvent your business relationships and you
will create a hyper-collaborative environment that delivers on innovation rather than just talking about it.
(END VIDEOCLIP)
LAKE: When we come back, there were `oohs and awes' during Paris Fashion Week, all for a new model who didn't even make it to the catwalk
because it's a watch.
(COMMERCIAL BREAK)
LAKE: One of the biggest stars of the Paris Fashion Week was Apple's new watch. Apple's latest fashion statement drew crowds of appreciating
fans and potential buyers at a Paris boutique. For one Apple accolade, the move was another stroke of marketing genius.
(BEGIN VIDEOCLIP)
ALEXANDRE BEAUSSIER, APPLE FAN, VIA INTERPRETER: Well it's quite clear. Apple is positioning itself as a luxury accessory to brand in the
world of fashion. They are doing this during the fashion week. It's been organized so that everyone arrives here, takes pictures of the watch and
puts it on Instagram, blogs and the rest. So, on a marketing and communications point of view, it's brilliant because it probably isn't
costing them much money. The ability in this sphere of fashion is huge. The direction they're heading is becoming clear every day.
(END VIDEOCLIP)
LAKE: Want to bring you some breaking news just coming in to CNN. The CDC says the first U.S. case of Ebola has been diagnosed. Around 3,000
people have died in the latest outbreak. The vast majority of those cases were in Sierra Leone, Liberia and Guinea. We will of course continue to
track this story for you and bring you the very latest. Let's right now though continue and return to our coverage of Paris Fashion Week. One of
the other stars of the fashion scene is a blogger. And as Myleene Klass tells us, this digital diva turned a hobby into a $7 and 1/2 million
business.
(BEGIN VIDEOCLIP)
MYLEENE KLASS, HOST OF "FASHION SEASON: PARIS": Early morning in Paris, and Chiara Ferragni is already changing into her second outfit of
the day - an elegant dress from Preem (ph), but with her own little twist. A pair of Converse shoes and a fluffy yellow bag. It's unique combinations
like this that have made this 27-year-old Italian blogger a global sensation.
CHIARA FERRAGNI, FASHION BLOGGER: I think fashion for me is really feel like you're selling the best version of yourself and always looking
for best teeving (ph) every day.
KLASS: For the past five years, her search has been documented daily on the blondesalad.com. Here she uploads images of her latest looks along
with links to buy. Each month her website gets over 5 million hits, and on Instagram, 2.8 million follow along.
FERRAGNI: I'm very natural to my followers. I never think twice about what to post, so if I take a photo and like it, you know, I just post
it. And even if nobody likes it, for once like I say - I like it, I don't care. They share like mixed positive message, but you can make hard (ph)
of nowhere really make the impact on fashion system.
KLASS: This nobody certainly made an impact. Her blog has gone from a hobby to a full-time business. She generates 6 million euros a year,
most from her own line of shoes, the rest from adverts, sales, commissions and brand consultancy.
FERRAGNI: Me and my team have always been very smart. We don't get paid to wear clothes - that'd never work for us and we don't want to do
anything like that.
KLASS: That independence is her key strength. Fans trust her judgment because they know here style choices are not for sale. They
remain transfixed by her globe-trotting life, her eye for the unusual and her ever-evolving sense of style.
FERRAGNI: My biggest inspiration comes from traveling. It comes like from, like people I see on the streets, and maybe as like see somebody like
wearing an overall with like this beautiful boots - I say, `All right, I have to try that.' I have like a very I focused eye on fashion and I like
the playful side of it.
Now we're going to see Amon Manungurl (ph) and possibly use his any- time designers, so I'm really happy to see what he has up next. Today's a very busy day, so -- lot of running and changing.
KLASS: Paris Fashion Week is her busiest time. Designers want her in their front row because they know her Instagrams create an instant online
buzz. She changes outfits between shows around five times a day and is like a honeypot with swarms of streetcar photographers. Companies such as
Lily Briton (ph), Knight (ph) and Yves St. Laurent are eager to employ her talents to tell the stories of their brands on her website. They know she
understands their product, but also knows the language of the new digital age.
FERRAGNI: Social media is so important right now. It's so powerful you can really just like reach so many people and at the same time you can
be more playful and you can like even brands can really take themselves less seriously. When I have to select photos, I know what kind of photos
they would like better. Yesterday I was wearing this lip dresser. We found some vests (when our shutter photo needs any gully) (ph). People
like this kind of composition - as long as it's natural.
KLASS: Her advice to aspiring bloggers?
FERRAGNI: Be unique. Getting inspiration from people but always trying to do something that has never been done before and really be true
to yourself. Follow your instincts. Just like you think something's going to work and you like doing it, keep doing it because it can work.
KLASS: Myleene Klass, CNN Paris.
(END VIDEOCLIP)
LAKE: Just want to remind you the breaking news coming in to us this hour. The first case of Ebola has been diagnosed in the United States. We
will have more on this story after the break. Stay with us.
(COMMERCIAL BREAK)
LAKE: We have more details on that breaking news this hour. A patient being treated at a Dallas, Texas hospital is the first case of
Ebola virus diagnosed in the United States. That is according to the U.S. Centers for Disease Control - the CDC, as it is referred to. Several other
Americans were diagnosed in West Africa and then brought to the United States for treatment. The CDC is due to host a press conference in the
next hour. More than 3,000 people have died in the latest outbreak. The vast majority of those cases were in Sierra Leone, Liberia and Guinea.
Meanwhile, 1,400 U.S. troops are being sent to fight Ebola in West Africa. The Pentagon confirmed that 700 soldiers are being sent to Liberia with
another 700 military engineers being sent to help build treatment units. U.S. eventually plans to send 3,000 troops to fight the disease.
Of course, as we were just saying, breaking news coming in this hour. The first U.S. Ebola case has been diagnosed - Dallas, Texas. The CDC is
going to be holding a press conference in the next hour. We will bring that to you of course. And that is "Quest Means Business." I'm Maggie
Lake. Stay with CNN for "Amanpour."
END
