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Quest Means Business
China Ends One-Child Policy; Drastic Cuts at Deutsche Bank; Boeing Passenger Jet Catches Fire on Florida Runway. Aired 5-6p ET
Aired October 29, 2015 - 17:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
RICHARD QUEST, HOST: The closing bell is ringing, (Abbot) ringing the bells. The Dow just off some 23 points. The market was down for all of the
sections except for a short blip, and as the bell comes to an end, yes, no coming on madam, the gavel. Not the sort of person you want to argue with
on Wednesday, October the 29th.
(BEGIN VIDEO CLIP)
QUEST: It's a Thursday even. Tonight, the birth of a new era. China ends its one-child policy. There are drastic cuts at Deutsche bank. 35,000 jobs
will soon be gone. And inferno on the Florida runway. A Boeing passenger jet catches fire moments before takeoff. I'm Richard Quest, and I mean
business.
(END VIDEO CLIP)
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QUEST: Good evening. The biggest population controlled experiment of our lifetime has come to an end. After more than three decades China has
announced it's to abandon its one child per couple policy. China faces a demographic problem. Its elderly population is growing rapidly as its
working age population shrinks. Now since the policy's implementation in 1980, just look at this number.
(BEGIN VIDEO CLIP)
QUEST: This is - well the Chinese say it's estimated, the one-child rule has prevented the birth of 400 million babies. Put that into perspective.
It's equal to the population of the United States and Germany combined. The emotional toll is far more difficult to measure than just a mere number.
(END VIDEO CLIP)
QUEST: The one-child-per-couple policy was brutally forced through forced sterilizations, forced abortions and large fines. There were of course also
many exceptions, certain ethnic groups were allowed to have more children. Rural families were allowed to have more children, especially if the first
child was a girl. But it did lead to a disproportion at number of men as women - or families knew they were going to have girls went for - went for
abortions.
Steven Jang joins me now from Beijing.
As they -- how did this come about? I mean it's part of the new five-year economic plan and we know it had been relaxed of fashion over the years,
But why now with this.
STEVEN JANG, CNN PRODUCER: Well, Richard, as you say, you mentioned some of the darkest aspect of this policy, especially in the enforcement -- brutal
enforcement in the countryside.
(BEGIN VIDEO CLIP)
JANG: You mentioned forced abortions, huge fines. These are things many activists and (inaudible) have been fighting years against and trying to
get this policy changed or abolished. But it is happening now as they say not because of these human rights abuses but because of a cold economic
reality.
You mentioned that. This is a population that is aging very fast. A workforce that's also shrinking very fast. It's a double whammy at a time
when the economy is slowing down, so that's a big problem for the government.
(END VIDEO CLIP)
JANG: So in the communist party leadership meeting that just ended on Thursday, they decided that it's time to scrap this policy and change it to
one-couple-two-children, in their words to promote a more balanced population growth and to address this issue of an aging population.
Richard.
QUEST: The fascinating part, Steven, of what you've just said is the rationale and not even a whiff of reference to what humans might want, what
people might want. They've justified it on the basis of economics and national social policy.
JANG: That's right. That's why when I talk to activists including some of those who have been jailed for their work in this area, they show no traces
of joy in their voices.
(BEGIN VIDEO CLIP)
JANG: They say this is just a same policy with a different quota. One child, two children. The government is still telling its people how many
children you're allowed to have. And in those activists' views this is simply unacceptable. Because they say it's a human right for people to
decide how many children they want.
[17:05:02]
But on the other side of this coin, the policy at least in the short term will probably not have a lot of impact when it comes to the population
growth. Because remember the government has been relaxing the rule over the years. Two years ago they tested the water by allowing some couples if one
of the two spouses is a single child, him or herself, you were allowed to have a second child.
Most people did not take up - did not take up the party's offer back then. So it's the same scenario now. People think it's too expensive to have a
second child especially in the cities, they simply cannot afford it.
(END VIDEO CLIP)
JANG: They've done the math, the cost of going through another pregnancy, the cost of raising a child in big cities, too prohibitively expensive. So
that's another reason probably they were feeling comfortable doing this now because they're not foreseeing a surge in population, at least not in the
short - short term, Richard.
QUEST: Steven Jang getting up early for us. It's 5:00 o'clock in the morning in Beijing. Thank you very much Steven for your reporting.
The number of people aged 60 and older in China is growing and is projected to spike sometime in 2050.
(BEGIN VIDEO CLIP)
QUEST: If you look and you will see this is the observe -- this is the median projective for China's population aged 60. Now, this will put major
pressure on the nation's social programs and health care systems for decades to come, especially if there's a working population that's reducing
at the same time.
Compare that to the number of people under 14 years of age. Declines after 1980, one-child policy. And that is projected to keep falling. So in
classic economics, these people have to work to pay the taxes, to create the productivity to create the wealth if you like, the national wealth of
the previous ones who are now going into retirement.
The Managing Director of the IMV, Christine Lagarde tells CNN, China has good reason to shift its policy.
CHRISTINE LAGARDE, IMF MANAGING DIRECT: It's clear that, you know, with an aging population, with entitlement issues that are on the horizon, it is
certainly from a demographic point of view, a good move for China, to head in that direction of a second child being legitimate and actually
authorized.
(END VIDEO CLIP)
QUEST: Jeffrey Sachs who's the Director of the Earth Institute, joins me now. Jeffrey, good to see you. I'm not sure whether you were able to hear
Steven Jang. But he makes a valid point. This is not a change in philosophy and policy. It's a change in targets and quotas, isn't it, really.
JEFFERY SACHS, DIRECTOR, EARTH INSTITUTE: Well, let's remember that China had a runaway population. It's by far so crowded and densely populated that
it had a real issue.
(BEGIN VIDEO CLIP)
SACHS: And from the time that this policy was enacted, the policy has gone up 400 million people. So I think one has to understand the context of
this. Now China's population is stable, thank goodness, because the stresses on the environmental are enormous. The water stresses and other
challenges of climate change and so on.
China has succeeded in stabilizing the population. It could even gently decline in later decades. That's the backdrop to all of this and I think
it's important to keep in mind. China also, at least during this period, had the most remarkable advance in ending poverty in all of human history
with poverty coming down from about 60% or so down to around 7% today on the extreme poverty line. So we have to see the full picture of this in my
opinion.
I think China's right to end this policy right now, but it's not going to make a huge difference for reasons that were already said.
(END VIDEO CLIP)
QUEST: But it is economic. And as Christine Lagarde said and as you've just said, the strains of a dwindling number of employees or wealth producers
even in China, if you know what I mean, wealth with a small "w," wealth producers, vis-a-vis, a growing number of pensioners, it is almost the
opposite of what's happening elsewhere.
SACHS: Well, I think we have to see everywhere societies are aging. This is going to happen in Europe, in the U.S. though at a somewhat slower rate.
But compare that to the strains of a Ponzi scheme on the planet where the population just keeps growing, growing, growing against the finite
resources of the planet, that's also not possible.
(BEGIN VIDEO CLIP)
SACHS: So the way that retires have to take care of themselves is a high saving rate. And China has a high saving rate and then United States comes
along and says to China don't save so much. This is really a big mistake from the U.S. point of view. China needs to save for its rapid aging.
(END VIDEO CLIP)
[17:10:13]
QUEST: Jeffery Sachs, joining us this evening. Thank you sir, good to see you Professor Sachs.
Germany's biggest bank has announced a sweeping overhaul.
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QUEST: It follows a massive quarterly loss and we'll tell you how bad things become at Deutsche Bank after the break.
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(END VIDEO CLIP)
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QUEST: Germany's biggest bank has announced a brutal restructuring following a ginormous loss.
Deutsche bank says it's axing 35,000 jobs. Yes, you heard me right the first time. 35,000 jobs over the next two years. That's as the bank lost
$6.6 billion in the third quarter.
Now, what's it going to do? So those are the 35,000, but that's just a start.
(BEGIN VIDEO CLIP)
QUEST: It's closing operations in ten countries. This is where they're pulling out from, Mexico, Peru, Argentina, Chile, Uruguay. So you may want
to question those very new developing markets with possible profits in the future.
They're also pulling out of Norway and of Finland and of New Zealand. Deutsche's co-chief exec says the cuts are necessary to ensure the bank's
future.
JOHN CRYAN, CO-CEO DEUTSCHE BANK: It's kind of useless to suggest that our cost reductions are ambitious, but we think that they're realistic in the
context of where the bank is and our need to remain competitive.
(END VIDEO CLIP)
QUEST: It's the latest European lender to announce a sweeping overhaul under a new Chief Executive. Deutsche plans to slim down its bank --
investment bank and it's going to slim down the bank just as Barclays did.
And remember, the new Barclays (inaudible) he says it's going to slim down the investment bank. So they're along with Barclays. But it's going to
follow through, look at that, with cost cutting just as Credit Suisse announced it was doing, dramatically reducing its cost and making bank
smaller.
But Deutsche will also completely rethink its use of technology very much along the lines of RBS, which was forced to do the same thing this year.
Put it this way, I was reading that deutsche bank has a hundred different ways and systems of clearing trades in its London operation.
The German Bank will still have to deal with legal costs like almost every other major European bank as a result of a variety of scandals.
So deutsche -- is Deutsche leading or is it following? William Cohen joins me now. Former (inaudible) banker. When you were here yesterday talking
about Barclays, I didn't expect to see you back so quickly. But I'm glad that you're here.
WILLIAM COHEN, AUTHOR, "THE PRICE OF SILENCE": It's a pleasure to be here.
QUEST: So why is Deutsche doing this?
[17:15:03]
COHEN: Look, Richard, this is sweeping the European continent. You have new CEOs at almost every one of the major universal banks in Europe, and what
does a new CEO like to do? He likes to say find me a kitchen sink and I'm going to throw it out.
(BEGIN VIDEO CLIP)
COHEN: So number one is he is getting rid of everything he possibly can.
QUEST: Okay. So to viewers who are not as familiar with what we're talking about, we're talking about investment banking.
(END VIDEO CLIP)
QUEST: I'm writing it down here. What does that involve? Merges and acquisitions?
COHEN: Underwriting debt and inequity
QUEST: Bond issuance.
COHEN: Bond and equity issuance. Corporate and sales trading of bonds and equities and trading.
QUEST: A trading desk.
COHEN: A trading desk but they're not getting - you know, we're talking about slimming down. We're not talking about eliminating totally. Nobody is
eliminating totally. They are taking capital out of these businesses because they can't get a return on these capital as much anymore and the
big regulators want these firms to have more capital.
QUEST: So what's left? I mean all right, Deutsche Bank will still have tens of -- millions of customers in Germany. It will still have managed assets.
But what will be left in terms of the investment bank. Will it still be a player?
COHEN: Well that remains to be seen. In fact, all European investment banks remains to be seen how competitive they are going be with the U.S. banks.
(BEGIN VIDEO CLIP)
COHEN: Which are in a very strong position, vis-a-vis their European competitors now? But, look, Deutsche Bank has a big presence down on Wall
Street, in the old JP Morgan building at 60 Wall Street. So they're not going away. It's not going away, but they are taking capital way from that
business and they are cutting jobs all over the world. And as you said, closing offices. They are - they are apparently saying they're going to get
rid of half of their clients. I've never heard of such a thing.
(END VIDEO CLIP)
QUEST: OK. In your case then - so you're left with JP Morgan, Bank of America -
COHEN: Goldman Sachs, Morgan Stanley .
QUEST: . Morgan Stanley, the big - the big U.S. banks. What are the big U.S. banks doing that makes it more profitable, acceptable, capital - or
less capital intensive than the Europeans simply are not?
COHEN: Look. For a long time New York has been the center of the intellectual capital of investment banking. So it's no surprise that banks
like Goldman and Morgan Stanley, which were, of course, were let's face it, rescued in the financial crisis. Their big competitors, two of them have
gone down the tubes, Bear Stearns, Lehman Brothers gone. JP Morgan Chase was the one acquiring Bear Stearns and other firms. Bank of America
acquired Merrill Lynch. So you have a real consolidation in this country of powerful big firms with lots of capital and lots of expertise and they are
hovering up clients all over the world.
QUEST: Doesn't get much fairer than that in terms of the explanation, sir. Good to see you.
COHEN: My pleasure, thank you.
QUEST: Now after Deutsche Bank today and Volkswagen on Wednesday, corporate Germany could do with some good news. And indeed it came that way sort of
with Lufthansa which raised its outlook following strong summer bookings that help boost the third quarter. The airline is in the middle of a
massive transformation and cost cutting of its own. I asked the Chief Executive, Carsten Spohr what his main priority was now.
(BEGIN VIDEO CLIP)
CARSTEN SPOHR, CHIEF EXECUTIVE, LUFTHANSA: Well, I think the most important part of our strategy is to consequently build Lufthansa into a premium
airline, into the premium airline in Europe.
(BEGIN VIDEO CLIP)
SPOHR: And that's why from all the positive effects we have shown the markets today for me the most important one is that our investments into
quality are respected by our customers and premium customers are not just coming back but also helping us to regain market shares on key markets.
(END VIDEO CLIP)
QUEST: When I look at the actual number, you've still got a lot of pressure on the cost side. Yes, revenues are -- you're getting more passengers, but
you've still got a problem on the -- with the costs. What more can you do about that?
SPOHR: Historically the biggest challenge for Lufthansa has been our cost issue.
(BEGIN VIDEO CLIP)
SPOHR: Being based in Germany, Austria, and Switzerland, high cost countries investing into our staff which we think is the right investment
but which is resulting into higher labor cost, is our challenge and remains our biggest challenge.
QUEST: Industrial relations at Lufthansa remain poor and you could be facing strikes before too long. That would be very damaging for the airline
again, wouldn't it?
SPOHR: Intensive discussion with our unions, I think it's (really) to say we have a joint goal. It is to create growth again in the core brand, in
the Lufthansa brand. And I think more and more employees at Lufthansa also realize not only is any day of strike one too many for our passengers, it's
always one too many in bringing us further away from our growth in the core airline.
So I think it's this understanding which would carry us through the negotiations of the next months.
(END VIDEO CLIP)
QUEST: Are strikes inevitable do you think?
[17:20:06]
SPOHR: Yes any day of strike is one to many in the interest of our customers. I surely hope no and Lufthansa will do anything which is
economically feasible to avoid further strikes and that fuels optimism.
QUEST: And my final question to you, Carsten, Bjorn is managing now just to make money at Norwegian his long haul low cost? Are you going to make
money, long haul low cost with Euro Wings?
SPOHR: Well I think the way we purchased Euro Wings, it's a secondary brand enhancing our premium brands, of Swiss, Austrian and Lufthansa.
(BEGIN VIDEO CLIP)
SPOHR: And we surely believe there is a market underneath our premium products and that's why we believe in Euro Wings going long haul. The first
takeoff is just four days away and we are expanding the fleet to seven aircraft initially.
(END VIDEO CLIP)
SPOHR: And we're getting a very strong response from individual customers but also from large travel corporations and I think we will be seeing
another brand long haul in the Lufthansa group successfully with Euro Wings.
QUEST: Carsten Spohr, talking to me from Frankfurt.
Now despite that upbeat outlook, shares in Lufthansa fell 8% in Frankfurt.
(BEGIN VIDEO CLIP)
QUEST: It was the troublesome labor issues that continued to bedevil particularly with the unions and the negotiations about to take place.
The Zetra Dax closed the day lower as did London's FTSE. In fact the only one there that managed a modest gain, very modest by those numbers, is the
Zurich SMI.
(END VIDEO CLIP)
QUEST: As we continue Quest Means Business tonight; A plane catches fire as it prepares to take off in Florida. We're in ft. Lauderdale with the
latest.
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QUEST: The U.S. NTSB, the official investigator has started an enquiry after a plane caught fire on a runway in Florida. Officials say 15 people
have been injured, one person seriously.
(BEGIN VIDEO CLIP)
QUEST: It was a Boeing 767 that was preparing to leave Ft. Lauderdale for Venezuela. The pilot of another plane saw fuel leaking from the Dynamic
International Airways aircraft and then the fire broke out.
All the passengers were evacuated from the plane using emergency slides. CNN's Pam Brown with the latest.
[17:25:02]
PAM BROWN, CNN INTERNATIONAL CORRESPONDENT: Smoke pours from a Boeing 767 as frightened passengers scramble to the emergency evacuation slides.
The Dynamic Airways flight was about to take off from Fr. Lauderdale airport to Caracas, Venezuela at 12:45 this afternoon.
UNIDENTIFIED MALE: Emergency, fall the fire trucks.
UNIDENTIFIED MALE: Roger 9002.
UNIDENTIFIED MALE: Ground to 119, we are going to do a 180 here (inaudible) taxi instructions.
BROWN: The frightening scene happening moments after --
GREG MEYER, BROWARD COUNTY AVIATION DEPT: The left engine was on fire. The plane was loaded with passengers. They were taxiing -- the plane's behind
me now, they were taxiing to the north runway to depart for Caracas.
BROWN: Moments before the fire a pilot on another plane on the same runway noticed fuel was pouring from the engine.
UNIDENTIFIED MALE: Hey Dynamic, out of the left engine it looks like it's leaking a lot of its fuel. There is fluid leaking out of the left engine.
BROWN: After the frightening passengers scurried down the plane's chute, some were taken away in stretchers and wheelchairs while others were able
to walk away from the jet.
The Ft Lauderdale airport was quickly shut down. Stunned passengers on other planes filmed the scene unfolding. Emergency crews sprayed the left
wing with foam to extinguish the fire before investigators could move in to find out what happen and why.
LES ABEND, CHIEF AVIATION ANALYST: So something happened, in answer to your question from the time that you know the particular pilot did his walk
around inspection to when they got to that point that we're looking at footage-wise now. You know, a fuel leak is not something which you can
readily determine from the cockpit. It's just not - it's just not possible to see that until you have a fuel loss situation.
BROWN: Dynamic Airways started five years ago in Greensboro, North Carolina. And only goes to two international destinations from the U.S.
Venezuela and Guyana. Its fleet consists only of Boeing 767s. The plane that caught fire was 29 years old.
It was a similar scene in Las Vegas last month when a British Airways plane's left engine caught fire on the runway. 13 of 159 passengers were
taken to the hospital mainly from going down the plane slides.
Pamela Brown, CNN, Washington.
(END VIDEO CLIP)
QUEST: As we continue tonight, the U.S. economy is feeling the global slowdown. I'll tell you why it isn't all bad news. Quest Means Business,
after the break.
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(COMMERCIAL BREAK)
[17:31:31] QUEST: Hello, I'm Richard Quest. Of course there's more "Quest Means Business" in just a moment when Apple's SVP - senior vice president -
shows us how the new Apple TV works.
And three years on from Hurricane Sandy, New York's harbor, how it's been rebuilt with a flood defense.
But before all of that, this is CNN and on this network the news always comes first.
China is ending its controversial "one-child" policy. The state-run Xinhua news agency says Beijing will now allow every couple to have two children.
The rule was put in place in 1979 to control population growth. It led to forced abortions, heavy fines and forced sterilizations.
Officials say 15 people have been injured, one seriously, after a passenger jet caught fire in Florida. The Boeing 767 was carrying 101 people when it
started billowing smoke as it taxied for departure.
The pilot of another aircraft reported fuel leaking from the Dynamic International Airways plane just before it caught fire.
Talks aimed at ending the Syrian civil war have begun in Vienna. Iran is attending the crisis meetings for the first time.
The Iranian foreign minister joins those from the U.S., Russia, Saudi Arabia and other nations. The E.U.'s Foreign Policy Chief Federica
Mogherini said getting all sides to the negotiating table has been an achievement in itself.
(BEGIN VIDEOCLIP)
FEDERICA MOGHERINI, E.U. FOREIGN POLICY CHIEF: I believe it is already a relevant compromise, a relevant commitment for all the sides to be here
tonight and tomorrow to come together to accept to sit together, this is already a very relevant starting point.
(END VIDEOCLIP)
QUEST: The threat from ISIS to the United Kingdom has never been higher according to the head of the country's security agency.
MI5 boss Andrew Parker said plots against the U.K. are increasingly being directed by militants in Syria via the internet.
He said the U.K. faces the highest level of risk he's seen in his career.
In Washington the new speaker of the House of Representatives Paul Ryan has promised to bring rival politicians together.
The Republican congressman was officially elected as the 54th speaker, replacing John Boehner. In his first address to the House, Ryan warned
that Congress was failing to tackle America's problems.
(BEGIN VIDEOCLIP)
PAUL RYAN, SPEAKER, U.S. HOUSE OF REPRESENTATIVES: The House is broken. We're not solving problems, we're adding to them. And I am not interested
in laying blame.
We are not settling scores, we are wiping the slate clean.
(END VIDEOCLIP)
QUEST: There's been a dramatic slowdown in the United States economy which grew only 1 1/2 percent between July and September.
Now, it's expected by economists, but obviously as you look at the numbers, it's evidence of a global slowdown that's hitting American manufacturing,
trade and exports.
Compare it - Q3 in 2014 was up 4.3 percent and now it's 1.5 percent. In fact, the entire history of 2015 with maybe just this exception has been
sclerotic.
U.S. stocks ended slightly lower. They were down just 23 points. There was obviously some sort of blip just before the close which the market
turned positive but a technical factor.
Overall, there were concerns - I'm joined by Anthony Chan, chief economist at Chase. Good to see you, sir.
ANTHONY CHAN, CHIEF ECONOMIST, CHASE: Good to see you.
QUEST: Thank you.
CHAN: All right.
QUEST: 1.5 percent, why? (RINGS BELL)
CHAN: Very simple. We had inventories that really slowed down, you had to get rid of some inventories. You also know that in the third quarter you
also had a little bit of momentum to have to go out - 3.9 percent is an outsized number.
[17:35:05] But when you look at the actual components to see whether or not the economy was healthy, it was healthy. You had consumer spending in
excess of 3 percent. That's what really matters in terms of robustness for the economy.
QUEST: What in Q3?
CHAN: In Q3.
QUEST: So the consumer is OK, and if I understand you rightly, you're saying technical factors may have brought this number down more than it
should have done?
CHAN: Technical factors, as I mentioned, inventories. But another factor is the effects of the stronger dollar. In the first three calendar
quarters, in each one exports subtracted from overall economic growth.
That's the reason why manufacturing is doing so badly - 25 percent of our manufacturing products get exported.
QUEST: But what do you now, what's your forecast for full year 2015?
CHAN: For the full year, you'll probably get something around 2.2 percent, next year may be around 2.4 percent. So it is sluggish growth,
but it is positive.
QUEST: Does this number give the Fed a plus or a minus towards a yay or a nay for rates in December?
CHAN: I think this number was neutral. The numbers that really will determine what the Federal Reserves does is - are - the next two employment
reports. The labor market is still very robust, we still have initial unemployment claims at lowest levels that we've seen since the early 1970s.
So labor market is getting tighter.
QUEST: China. China reversed its one-child per couple policy and it did so on the basis of economics basically - that it needs a growing population
- or at least a stronger population for the future.
CHAN: Absolutely. They are shifting from a manufacturing-based economy towards a more service-oriented economy.
And everyone knows that a service sector requires 20 to 30 percent more workers than if you were focusing on manufacturing.
And by the way, if you have more workers producing more things, the economy grows a little bit faster. With a 6.9 percent growth rate that we just saw
from China, and they want to do something to accelerate it, they're going to do everything they can.
By the way, this two-child policy now it will add between 3 to 8 million more births every single year. Eventually those workers will start to
become productive.
QUEST: Right, but the other side of that coin is the loss of production. I mean, and this has nothing to do, you know, let's not talk about the
human misery of the one-child policy, let's just stick with the economics for the second.
Do you think that China - that China - suffered economically even though 30 years ago it was seen there as being the right policy?
CHAN: Back then they didn't suffer so much because they had a huge young population. They're starting to suffer now because last year, as you
probably know, it was the first year in over 20 years that the working age population shrank for the very first time.
They are starting to suffer. It would have been better if they would have shifted perhaps a couple of years ago, but at least it is a policy that is
actually needed in China badly and it is going to work as they start to increase the population.
QUEST: Good to see you, sir.
CHAN: My pleasure.
QUEST: Thank you very much. Interesting times in economics at (inaudible) (CROSS TALK). Absolutely right.
Now, two companies known for gaming with two very different fortunes. I'm going to tell you about the latest showdown between Nintendo and Sony.
After the break, "Quest Means Business."
(BEGIN VIDEOCLIP)
[17:40:49] QUEST: Two of the biggest rivals in the world of video games are now heading in seemingly opposite directions.
Now Sony finally swung back into profit. PlayStation 4 sales were strong that closed up almost 1 percent in Tokyo.
On the other hand, Nintendo is delaying plans to release its first-ever smartphone game. That won't now come until next year. Shares closed down
9 percent.
You have this view, this difference, but what's going on underneath it? Some suitable noises for Samuel Burke who joins me now at the desk.
So what's going on?
SAMUEL BURKE, CNN BUSINESS CORRESPONDENT: Basically if you want to be successful in gaming now, you have to have mobile apps. And everybody
thought that Nintendo was going to do that and they didn't. And so Mar -
QUEST: Well didn't for now.
BURKE: For now. So Mario and Luigi are saying "Mama mia" because this is what everybody was expecting. Yes, it's going to be in a few months. But
let me put up just one number on the screen for everybody to remember.
It's predicted that by 2017, the mobile gaming business - so that's games on your smartphones, tablets, apps. It's going to be worth $41 billion and
Nintendo has delayed that for three months.
QUEST: All right, three more months. But if in three months - I mean - is there a fundamental difference in the way Sony and Nintendo - besides the
three-month gap - is viewing and operating and executing?
BURKE: Totally different what they are doing. Sony, we're finally seeing them have success with the PlayStation 4. What they did is really just
focus on having good games - forget having being able to stream this and adding that, you can finally stream.
The other thing that has people excited and what has the stock up is what you're seeing on your screen right now. Virtual reality headsets - they're
releasing more information that's looking like it could be a real growth sector for them.
Richard, no matter what company I go to now, whether it's Facebook with Oculus Rift or it's Microsoft with the Hologram which you saw in the new
Microsoft store earlier this week on "Quest Means Business."
All these companies are focusing on virtual reality apps (ph) that has investors excited.
QUEST: Right. And the ability of VR in - you see I've got the lingo, yes -
BURKE: Ah, there you go. VR.
QUEST: I may be over 50, but I cans still get a bit of VR. So where was I? (LAUGHTER) now if I can remember the question.
BURKE: (LAUGHTER).
QUEST: So they've all got VR and would imagine that Nintendo and Sony are working on the same ideas because that is the future.
But is Nintendo hold beneath the water line?
Facebook with Oculus BURKE: It will do well when it does the mobile, when it gets to the mobile games. And all in all, the Wii has done pretty well.
This last one didn't do great - the Wii U. That was a disaster.
But it's doing all right. It'll come through for now. The other thing you have to watch out Sony - it's the cameras. That's what's driving their
profits. Sony has cameras, image sensors and all types of devices that's another thing.
QUEST: What's the downside for Sony? You've just spent a long time telling me how brilliant they are. What's the downside?
BURKE: The phones. They invested so much money in making phones, they're never going to win that battle. That's their downside.
QUEST: Samuel Burke. (BLOCKING BURKE FROM RINGING BELL). No.
BURKE: Ah.
QUEST: The Apple - the new Apple TV - he's not old enough. The new Apple TV comes out in stores here in the United States on Friday.
Apple's senior vice president Eddy Cue says it will change the way we watch TV in the future. He gave our senior media correspondent Brian Stelter a
preview.
(BEGIN VIDEOCLIP)
EDDY CUE, SENIOR VICE PRESIDENT, INTERNET SOFTWARE AND SERVICES, APPLE: We wanted to change what TV is, and to us TV is about apps. And in order to
do that, we had to bring a touch interface.
Same thing that you have with your phone and how it revolutionized things which was apps and a touch interface.
And so we came up with a remote that actually lets you touch and slide across and move very quickly, and also takes advantage of things like Siri
so that you can talk to it to find things and then bring the app ecosystem which the greatest things about apps is you don't know what people are
going to do with that.
They've created incredible apps that we'd never thought of on IOS and we think the same thing's going to happen on television.
BRIAN STELTER, CNN SENIOR MEDIA CORRESPONDENT: Let's try it out if we can. You've got the remote so show us how it works.
[17:45:01] Female: With Siri I can find anything. Find that "Friends" episode with Brad Pitt. And what Siri will do is it'll take me immediately
into that product page with the episode highlighted.
If you know the title of the movie, you can find that as well. Find "Charlie and the Chocolate Factory."
STELTER: And I can watch on Netflix or on iTunes?
Female: Yes. So you'll look here, it says available, on and you can see there's an iTunes selection in Netflix. So with one single search I was
able to look across multiple services and it surfaces for you where the show is available on.
Would you like to try?
STELTER: Sure. So we're inside the CNN app here. It's so - it's so intuitive I guess to use this remote, but that's because it feels like a
phone.
All right so that's why it feels so natural.
TV covering TV, I love that. Has Apple TV graduated from the hobby that Steve Jobs famously said it was many years ago?
CUE: Yes, absolutely. Look, we have over 20 million Apple TVs in households today and we think this is really going to revolutionize
television.
So this is a big deal for us.
STELTER: Essentially what you're trying to do is fix TV.
CUE: Well I think we want to bring TV to what the world is today which is being able to do things that are interactive, being able to search for
things really easily. These are all things we're all used to on our phones, on our iPads, but we really haven't been able to do on our - on TV.
(END VIDEOCLIP)
QUEST: Apple TV. And there was a further reminder today of the changes taking place between telecoms and media with the old BT - British Telecom.
Now BT's quarterly sales topped expectations but the reason was because of demand for BT television and the Champion's League football through its TV
service.
BT is no longer just a telephone service with its new mobile division and now TV. I put to BT's chief executive Gavin Patterson where he sees the
growth next.
(BEGIN VIDEOCLIP)
GAVIN PATTERSON, CEO, BT: You're right, we are changing the nature of the business, the investments behind things like fiber are going very well for
us.
So we now have fiber network that extends across 24 million homes and premises across the U.K. And take up has been very good at that. We now
passed 5 million customers. In terms of take up, that's about 21 percent.
So that's going well. More to come from that. But we're making other investments at the same time and our investments in sports behind our
broadcasting business are really beginning to pay off consistently as well.
So it is a business in transition. You might well have seen that we've passed an important hurdle in terms of our acquisition of EE.
The competition and markets society have given a provisional -
QUEST: Right.
PATTERSON: -- approval to that. So it is - it is - a business with a lot going on but certainly a sense of purpose.
QUEST: And with that sense of purpose, between say the broadband business which I suspect is always going the bulk of BT - the broadband, the
telecom's part - and the mobile part and the television part.
Where do you expect the major part of growth?
PATTERSON: Well I think that the business can grow on many fronts. You can see in this quarter's results that the consumer business is growing at
a nice - a nice - pace at the moment.
So it's up 7 percent - the revenues in terms of year-on-year performance. That's pretty good and it compares very well with any of our peers.
But other parts of BT are really prime to grow as well. So in the business market revenues are flat quarter on quarter, but you can see an improving
trend coming through.
I expect that part of the business to grow going forwards.
QUEST: The TV side and the sports side was originally some would say designed to enhance to or bring people to your broadband services.
But it seems to have the potential for creating a service in its own right which puts you firmly as a TV distributor/provider.
PATTERSON: I think there's some truth in that. We've begun to charge more for our sports channels this quarter and over 75 percent of customers are
now paying for the channel in some form.
Maybe it was about 40 percent last quarter. So you can see that the business model is beginning to change there.
QUEST: Will you be opening the checkbook to buy more rights?
PATTERSON: Well, we look at - we look at - all sports rights when they become available. So for example, in the last quarter we secured the
Australian cricket rights for their home games which includes the next Ashes series which obviously is a big deal here.
And that's from 2016 to 2021. That opens up another sport to us and I think that's going to help broaden the appeal of the channel beyond
football and rugby.
(END VIDEOCLIP)
[17:50:07] QUEST: The chief executive of BT.
New York under threat. It's three years on from super storm Sandy. We're going to take a look at the efforts to protect the city after you've
enjoyed a moment where you can "Make, Create, Innovate."
(COMMERCIAL BREAK)
QUEST: It's been three years since Hurricane Sandy destroyed thousands of homes here in New York, and in doing so landing a major blow on the city's
economy.
Michael Bloomberg was the mayor at the time and he responded with an ambitious plan to defend the city from future storms.
An expert said if average global temperatures rise by just two degrees Celsius, then New York may become one of the first victims of a global
catastrophe.
CNN's Claire Sebastian with more on the efforts to protect the Big Apple.
(BEGIN VIDEOCLIP)
CLAIRE SEBASTIAN, CNN PRODUCER: Traveling by dinghy in New York's choppy harbor, you get a firsthand view of the shifting tides.
My guide is Alexandros Washburn, New York's urban design chief under Mayor Bloomberg, now a professor in coastal resiliency.
ALEXANDROS WASHBURN, URBAN DESIGN CHIEF, NEW YORK CITY UNDER MAYOR BLOOMBERG: So all this area in the Battery was breached during Sandy and
we had just finished the new subway stop that was completely ruined.
SEBASTIAN: Three years ago superstorm Sandy brought a record 13-foot storm surge at Battery Park on Manhattan's southern tip, knocking out power and
flooding much of the financial district.
Throughout the city, over 300,000 homes were damaged and 44 people died. Then-Mayor Michael Bloomberg launched an ambitious $20 billion program to
bolster the fragile shoreline.
DANIEL ZARRILLI, DIRECTOR, MAYOR'S OFFICE OF RECOVERY AND RESILIENCY, NEW YORK: We've already put in place an additional 4.2 million cubic yards of
sand on our beaches, nearly ten miles of dunes have been constructed across the city.
We are definitely safer now than we were when Sandy hit.
SEBASTIAN: The city tightened up building codes too and this summer committed another $100 million for Lower Manhattan.
ZARRILLI: The idea is that we are going to integrate flood protection into the neighborhoods.
So we're finding a mix of both permanent and deployable or temporary measures that can be brought to bear and provide that flood protection when
needed.
SEBASTIAN: With 520 miles of coastline, New York has always been vulnerable to storms. Now scientists say climate change has created a
double threat.
Not only are storms like Sandy expected to become much more frequent, but sea levels will also rise. One forecast puts it at six feet by the end of
the century.
You don't have to be a scientist to see New York doesn't have six feet to spare. Planning ahead will help.
WASHBURN: This is the first of a new generation of super high resolution sensors, and they are going to be the first line of defense in protecting
the city.
We're asking government to be more nimble than it's ever been. I think that's really the challenge - is our government able to make decisions fast
enough that we are actually going to succeed.
[17:55:05] SEBASTIAN: Alex Washburn (ph) lived through Sandy at the first floor of his house on the on the southern tip of Brooklyn, still boarded
up.
A painted blue line shows where the government recommends raising the living space to survive a similar flood.
WASHBURN: I don't think we can fully defend against the water, so we have to manage a relationship with it.
SEBASTIAN: The challenge now is to manage it quicker than the rising tide. Claire Sebastian, CNN New York.
(END VIDEOCLIP)
QUEST: We'll have a "Profitable Moment" after the break.
(COMMERCIAL BREAK)
QUEST: Tonight's "Profitable Moment." It may be distasteful to talk about having children in terms of the economy, but that's exactly what China has
done.
Although with its new two-children per couple rules and policy as you heard on this program, one person pointed out that actually the policy hasn't
changed.
All that's changed is the target or the quota allowed.
When you put it like that, you really do start to see that once again, what are driving China's decision-making is pure and simple economics.
The decision of course for a 6.9 percent growth target or a 7 percent - doing what you can over the long term so that the older population still
has a younger population to provide the wealth in the future.
That's what this is all about in China. Maybe it's distasteful to put it in that sort of brutal fashion, but that's what happens with a five-year
plan.
And that's "Quest Means Business" for tonight. I'm Richard Quest in New York. Whatever you're up to in the hours ahead, (RINGS BELL) hope it's
profitable.
Let's get together tomorrow.
END
