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Quest Means Business
Oil Prices Hit Lowest Levels in 11 Years; Sepp Blatter Defiant in Face of FIFA Ban; The Dramatic Tale of Martin Shkreli; Coalition Talks in Spain After Weekend Election; People Missing as Landslide Hits China. Aired 4-5p ET
Aired December 21, 2015 - 16:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[16:00:00]
RICHARD QUEST, CNN HOST: All the gains in the morning disappeared at lunchtime, and then in the afternoon they roared back, we'll discuss that
during the course of the hour. As the closing bell rings on Wall Street, I think we can call it a firm gavel on Monday, December the 21st.
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QUEST: Tonight, it's the selling that will not stop. Oil prices hit their lowest levels for 11 years. Think of it as bruised but not bowed. Sepp
Blatter is defiant as he faces a FIFA ban. And scores of people are missing as a landslide hits China's Silicon Valley. What's happening in China with
so many infrastructure issues.
I'm Richard Quest. We start Christmas week together, and I mean business.
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QUEST: Good evening. Think of it as a slump that simply will not stop. Oil prices are at the lowest level in more than a decade. And the mismatch
between the supply and the demand confounds analysts and it raises a game of chicken between the United States and OPEC. Join me at the super
screens, and I'm going to show you.
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QUEST: Brent; keep in mind Brent is at $36 which is at the lowest level since July. Now this is how the year has gone. You're familiar with that
of course, that's where you had the big drop then and it comes up again and you get to roughly 120. And that's the - that's the recession, of course.
Then you get this enormous drop where prices just fall (inaudible). That's when OPEC says it won't be -- or Saudi says it will keep pumping come what
May.
And now of course you end up back down here again with this latest leg down, the lowest since 2004.
Now that fact it's 2004, well in 2004 Lance Armstrong was winning the Tour de France. "Mean Girls" was one of the summer's top biggest films. And
shows how times have changed, Senator Barack Obama announced John Kerry as the Democratic nominee for President. He is now the President and he's now
his Secretary of State.
There are two key factors that bring 2004 back to the future. First of all, Saudi Arabia has announced exports were up in October. That -- coming back
to that price, and you'll see as Saudi keeps pumping, so that's obviously crucially important. And in the United States, a development there, the
U.S. obviously with Alaska says that the rig count is coming back online. That's the number of rigs drilling for new deposits, particularly in shale.
That will replace depleting and dwindling stores from existing performing rigs. And the export ban has been scrapped after 40 years. That was part of
the trillion dollar budget deal that was done in Washington.
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QUEST: Antoine Halff served as the Chief Oil Economist at the IEA, now Senior Fellow at Columbia University. Good to see you, Sir.
ANTOINE HALFF, SENIOR FELLOW, COLUMBIA UNIVERSITY: Good to be here.
QUEST: So are you confounded at the way in which this price will not stop falling?
HALFF: Not completely, to be honest. I mean I don't want to brag, but I think it's kind of expected in a supply glut, to see producers respond by
making the glut even bigger and putting more pressure on stocks and more downward pressure on prices.
QUEST: This, is pardon the seasonal reference, this is Turkey's voting for Christmas. I mean in the sense that there's the glut there, Saudi's
producing more, Iran is about to come online, there's no end.
HALFF: Russia is producing at records, Brazil is producing at records, Iraq is surpassing itself. Everybody is producing as much as they can. What
they're doing is cutting expenses, so they're undermining their future production by restricting investments and by producing so much that they're
postponing maintenance. It's like driving your car without doing an oil change.
QUEST: But if this all began, because the U.S. became de facto the swing producer through shale oil non-traditional fracking, if that started it,
then what's continuing it? I mean you know demand has picked up for oil since the recession.
HALFF: Not so much. There's been a bit of a demand response but not as much as people expected. It's been partly offset by the fact that the dollar has
become stronger, so in most countries around there, the rise of the dollar has offset the price decline and consumers are not seeing so much relief.
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[16:05:10]
HALFF: You know in Russia, it's been kind of a flat price and so we've seen a very strong demand response in the U.S. Not so much elsewhere.
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QUEST: Do you expect to see - I mean I just mentioned there the rig count is coming back into the United States. Is that because they are finding
ways to produce non-traditional at lower costs, therefore fracking is viable?
HALFF: Well frackers are very good you know, they're cutting their cost, they're adapting constantly, they're trying to adjust. They have - you know
they're facing serious challenges the oil price is a very great threat to them. But nobody wants to stop fracking. The banks don't want to become
frackers, don't want to take over fracking assets. So their fracking, there's been cuts in budgets. The production of shale oil has fallen a bit
and is going to continue to fall next year, but not enough to offset production gains from other places. And as soon as they can, you know,
produce more and cut the cost to do so.
QUEST: Help us understand. I can hear viewers at home saying, I don't care. Oil is cheaper, gas is cheaper. My heating bill is going down. I don't care
that some of these countries are in deep economic doo-doo because of their own poor policies. So now explain to me, net-net, is this lower price
beneficial to the global economy or is it too destabilizing?
HALFF: It's both. I mean it's good to pay less, and that means more spending on other things, and that's good for the economy as long as we can
pocket the price difference.
The problem is, a lot of the consumers are also the consumers, they're pro- sumers, if you like. Now most of the demand growth has come from countries like Saudi Arabia, from Iran, from Venezuela, from Nigeria, producers.
They're getting less, they're spending less, as well. And the problem is, future production, the reasonable price rebound, the social impact, the
impact on social stability in producer countries, they need the high price to fund social spending. Less spending means less social stability. We've
seen the result in Venezuela, possibly social instability in those countries, possibly supply disruptions.
QUEST: Good to see you, sir. Thank you very much, indeed. Thank you.
Now the fall in oil prices put a strain on Saudi Arabia's finances, exactly what we were just talking about there. The issue of continuing high
expenditure with lower revenues.
On Monday, the government was expected to announce its budget and explain how it would weather the storm.
CNN's John Defterios is in Abu Dhabi for us.
JOHN DEFTERIOS, CNN EMERGING MARKETS EDITOR: It's nearly impossible to plan a budget without knowing whether the world has seen the bottom on oil
prices, but there's no doubt prosperity is on the way in Saudi Arabia.
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DEFTERIOS: It's the first budget on the King Salmon and his son, the Deputy the Crown Prince, Mohammed Bin Salman. He controls a wide ranging
portfolio, covering oil, economic development and defense. And they both have a very steep hill to climb. The budget deficit has expended nearly
seven fold in the past year from over 3% last year to a projected 21% in 2015. Amazing since the Kingdom had a 12% surplus just three years ago.
Analysts are looking for deep spending cuts and even privatizing state run assets from airports to power companies. After years of $100 a barrel
crude, it's hard to push reforms under pressure.
UNIDENTIFIED MALE: It's making it difficult to diversify. Unfortunately, Saudi Arabia hasn't managed to diversify during the last oil boom. So it's
going to be the challenge for them to do it over the next five to ten years when oil prices are going to be more depressed.
DEFTERIOS: So far there's no indication that Saudi Arabia will give up its year long fight for oil market share which led to the budgetary collapse
this year. The latest figures from Riyadh show it's produced over 10 million barrels a day for the last nine months and exports are sitting at a
four-month high. At the same time, the government has been generous with subsidies at the pump, with the third lowest petrol prices in the world at
just 16 cents a liter. That sort of generosity may be difficult to justify with Saudi Arabia burning through nearly $90 billion alone in the last
year.
John Defterios, CNN, Abu Dhabi.
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QUEST: To the markets. Now last week you'll remember was a stomach churning week, which ended with a very sharp fall on the Dow.
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QUEST: Now it's the opposite way. Another triple digit move, this time to the positive. And a weird sort of day; you had that selloff during
lunchtime which seems - which there's no obvious reason. Recovery in the mid-afternoon, then a selloff in the late afternoon, and a later -- you get
the idea. The Dow Jones closed up nearly three quarters of a point.
To Europe where it was a different story. There you see - now what they are seeing, of course, they're seeing the selloff in oil prices, and oil
shares, you see the Spanish stocks down sharply, the IBEX off three and a half after that inconclusive election where both the ruling PP Party and
the oppositions will now both be trying to form a government, Mariano Rajoy says he intends to at least try. So Spanish stocks down 3.6. And
Erickson's were up 3% after extending and signing a patent deal with Apple.
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[16:10:27]
QUEST: FIFA, the drama continues. Sepp Blatter this time is coming out swinging.
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QUEST: The FIFA President is vowing to fight his eight-year ban from football. And the sponsorship fallout continues. Its QUEST MEANS BUSINESS.
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QUEST: 17 years at the helm of world football, and now Sepp Blatter has been hit with an eight-year ban from the game. The ethics committee of FIFA
ruled that Blatter who is 79 years old along with the UEFA President, Michel Platini broke FIFA rules relating to conflicts of interest, breach
of loyalty in the gifts. It was all about a payment made to Platini by Blatter and FIFA for previous work done. Several million dollars' worth
involved.
The FIFA committee cleared the pair on bribery and corruption allegations. Now Sepp Blatter has vowed to appeal and insists he's still the boss.
(BEGIN VIDEO CLIP)
SEPP BLATTER, SUSPENDED FIFA PRESIDENT: Even suspended I am the President. The President must be relieved of his duties otherwise, you cannot elect
another President. I am not ashamed, I regret, but I am not ashamed. I am ashamed if you go in depth what has been presented and how all this has
been done, with the support of you.
(END VIDEO CLIP)
QUEST: Taking a swipe at the reporters in Switzerland, and it's not just the media who helped bring about Sepp Blatter's downfall. Sponsors have
been putting pressure on the governing body of football.
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QUEST: So if you take a look you'll see earlier this month major FIFA sponsors opened a letter to the association's committee. It was Coca Cola,
VISA, Adidas, InBev and McDonald's. They all demanded an overall of the entire FIFA culture.
(END VIDEO CLIP)
World Sports, Don Riddell is at the CNN Center. We've talked about this so many times, Don. So let's just dissect first of all. I see that they
cleared him of corruption or -- and bribery. So what they've really got them both on is this very relatively narrow point on this payment of a
contract from FIFA to Platini.
[16:15:16]
DON RIDDELL, CNN WORLD SPORTS: Yes that's right. This was the payment, around $2 million that was made in 2011 for work that Platini stopped doing
nine years before that. And what was very fishy for a lot of people about this Richard was that 2011 was also the year that Michel Platini decided
not to stand against Sepp Blatter in the FIFA Presidential election, instead throwing his support behind him. I think reading between the lines,
that was very, very suspicious, and those - or that is the situation which these two find themselves on the outside looking in, but they're vowing to
appeal and as you've already heard, they're not going quietly.
(BEGIN VIDEO CLIP)
QUEST: OK. One's left with -- I mean, the sponsors continue to watch. You're in touch with these people, you - you're close to it all. What are
they saying, the sponsors, when they do speak? Are they just -
(END VIDEO CLIP)
QUEST: They know they've got to be involved in world football, because it's the biggest game in the world, and they need to be associated with it,
but they're holding their nose at the stench from FIFA?
RIDDELL: Yes,. I mean, it's all very interesting seeing them write these open letters and apply pressure.
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RIDDELL: But none of them are threatening to walk away, or none of the - none of the major sponsors have actually done that. And even the sponsors
that have walked away they've kind of left the door open for themselves to come back one day, because they haven't been as critical of FIFA as you
might hope or expect.
So I mean sure, they can take some of the credit for where we are now. FIFA's executive committee recently has come up with a series of wide
ranging reforms which will be voted on in February, and I guess it are be good news if those are passed.
(END VIDEO CLIP)
RIDDELL: But the real pressure has come from these criminal investigations, from the U.S. Department of Justice which not that long ago knew very, very
little about FIFA but its they who are leading the charge, and it is they who are making things very, very uncomfortable for those leaders now.
QUEST: And they are the ones who still call it soccer in the indictments and the various documents. John, isn't the real fundamental -- when I think
about this, I often think of the former communist countries, when the wall fell down, who suddenly embraced democracy. But of course, those countries
still had to be run by the former communist civil servants, because they were the only ones that knew how to run a country.
It's the same thing at FIFA. The top men may have gone, but everybody else who's there, all the exec co, the whole lot of them, they're the same lot
that got them into this mess in the first place.
RIDDELL: Well to be fair, a lot of the individuals who voted for Russia and Qatar in 2018 and 2022 are now no longer a part of the setup there.
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RIDDELL: But certainly, if you were expecting or hoping that FIFA could be reformed or could reform itself, you would expect perhaps some kind of
outside help. And that's still very, very difficult. They changed the rules a few years ago and said that anybody who stands for the FIFA presidency
has to basically be a football man. You have to have served two out of the last five years working in the game.
And so the five candidates who are going to stand on February 22nd next year are all very much FIFA football insiders.
(END VIDEO CLIP)
RIDDELL: And so, whilst perhaps the two biggest figures in world football are now being moved to the sidelines, it's still people within FIFA or
within UEFA that will be taking over and running head.
QUEST: Don, thank you sir, have a good week, thank you.
I talked earlier about the Dow Jones industrials and what happened. Take a look.
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QUEST: This weirdness around lunchtime, which, even where the market went negative seemingly inexplicable. The man who might have an explanation, ha
ha, Paul La Monica, good to see you sir.
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QUEST: What did happen?
PAUL LA MONICA, CNN MONEY CORRESPONDENT: I wish I knew. That was a very odd sequence there where it looked as if we were going to give up the gains and
then head south just like we did on Thursday and Friday and then all of a sudden -
QUEST: -- And then it recovered and it went again -
LA MONICA: -- it bounced back and we have yet another triple digit point move (inaudible).
QUEST: Now let's talk about Martin Shkreli and what happened with him today. Because if he thought that this week was going to be marginally
better.
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QUEST: He's arrested on Thursday on allegations of misappropriating cash. He resigns on Friday from Turing, that's the company of course where he
raised the -
LA MONICA: -- price dramatically on (inaudible), yes.
QUEST: Absolutely. He's hacked on Sunday in his twitter account. And then today, he's ousted as Kalobios CEO which is the company that he was the
pharmaceutical or the drug company that he was involved with where they supposedly were dealing with the policy scheme.
(END VIDEO CLIP)
LA MONICA: No, now that's not the -
QUEST: Forgive me.
LA MONICA: You see here's the - it's such a complicated mess this story is. He was originally the CEO of Retro Fit, a company
QUEST: Retro Fit, give me, forgive me.
[16:20:00]
LA MONICA: Yes, no problem. What's really intriguing is Kalobios after the whole Turing insanity when he became famous, he took over this small
company called Kalobios that was on the verge of going under.
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LA MONICA: They were going to liquidate, their stock was at 44 cents a share. He took control, the stock went as high as $46, it's now about 23
and change before it was halted. So they fired him -- the interesting thing is they actually fired him on Thursday but they took until today to
disclose it.
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LA MONICA: The stock is still halted on the NASDAQ because they haven't given any more information other than the fact that they fired him. It
really is a mess.
QUEST: Shkreli is in a lot of trouble.
LA MONICA: He is in a lot of trouble. He's alleging that the Feds are coming after him just because of the political pressure that -
(BEGIN VIDEO CLIP)
QUEST: -- well over Turing.
LA MONICA: Over Turing.
QUEST: But this investigation - this investigation has been going clearer longer than Turing.
LA MONICA: Right, Retro Fit and the company that he founded and was fired from because they allege that he was raiding their corporate coffers they
sued him, it seems like it's more about that - definitely more about that than anything with (inaudible) and the fact that he became the most hated
man in America.
QUEST: You'll continue to watch this in the New Year?
(END VIDEO CLIP)
LA MONICA: We will to watch to see what happens in this for Shkreli.
QUEST: To help me navigate this thicket of -
LA MONICA: -- I'm sure he will tweet before his ultimate fate is decided.
QUEST: (inaudible)
LA MONICA: Thank you.
QUEST: When it comes to elections Spain's Prime Ministers says a time let's talk.
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QUEST: His governing party wings sort of the election, it's the largest single party, it loses its majority in parliament, and now the horse
trading begins between the existing government to see who may conform a coalition.
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QUEST: Spain faces weeks of tough coalition talks after there was no clear winner from the country's general election over the weekend.
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QUEST: In Spain the Spanish stocks were down. Borrowing costs also touched their lowest levels in more than a month. You saw the IMAX was down 3 --
more than 3.5%. Now despite winning the most parliamentary seats, 28% of the vote, the governing People's Party, the PP, had its worst result ever
on the election.
Two newer parties took seats for the first time. There was Podemos which is the anti-austerity party and the pro-business Citizens Party.
(END VIDEO CLIP)
QUEST: Now the question is between the PP or between the socialists, between Podemos and the Citizens Party, who can form a coalition that will
actually gain a majority?
CNN's Diana Magnay now looks at Spain's apparent rejection of austerity.
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[16:25:05]
DIANA MAGNAY, CNN CORRESPONDENT: A messy result to Sunday's poll. But one thing's clear -- a resounding no to the status quo. The two main parties
have held power in succession for the last three decades and must now scramble for the backing of the two new kids on the block. The anti-
austerity Podemos Party, and the pro-business liberal party, Ciudadanos. And the newcomers are adamant they won't make it easy for them.
PABLO IGLESIAS, LEADER PODEMOS PARTY: (As translated): So that there's no doubt about it, neither actively or passively will Podemos allow the
Peoples Party to govern.
MAGNAY: It's up to Mariano Rajoy, Spain's Prime Minister to try to form a coalition government. His conservative People's Party won more seats than
the rest. But with just under 29% of the vote, it's still their worst ever results.
Even with the backing of their closest political allies, Ciudadanos , they won't have the seats they need to form a majority. It's possible the
socialists could ally with Podemos, not two years old and already with 20% of the vote. But they don't see eye to eye either, and negotiations will be
tough.
And then you have the Catalonia factor, a region which has long campaigned for independence, home of Ciudadanos and where Podemos has made the
strongest gains.
ANGEL TALAVERA, ECONOMIST, OXFORD ECONOMICS: My take is that given the confrontation that we have now in Catalonia between Catalan and the rest of
Spain, I'm guess that the Catalan parties are probably going to say no to any government. But Ciudadanos I think a potential scenario where they
maybe allow the socialists to rule, because they think that maybe the alternative of the popular party is worse.
MAGNAY: Market's fell on Monday, an uncertain few weeks ahead, with the possibility of new elections if coalition talks fail. Spaniards happy to
see an end to the two party rule of the past, but worried though what this political fragmentation means for the future.
UNIDENTIFIED FEMALE: (As translated) It's bad. On the one hand, it's good, there are more options. But on the other hand, it's bad because it's going
to be harder to govern. And we'll probably end up with more elections. We'll have to vote again.
UNIDENTIFIED MALE: (As translated) Well I see there's a change and we've been governed for many years by two majority parties and now new parties
have joined in and in politics, you have to reach deals. So yes, I think it's beneficial. Now let's see what happens.
MAGNAY: Thanks to Mr. Rajoy's tough austerity measures, the Spanish economy is looking at 3% growth this year, but unemployment is still high, 21%
overall, youth unemployment around 46%. That's a difficult mandate for even the most stable of parties. And it's hard to imagine any possible
coalition as anything other than fragile.
Diana Magnay, CNN, London.
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QUEST: Think of it as China's man-made tragedy.
(BEGIN VIDEO CLIP)
QUEST: Absolutely horrific. Beijing's response to industrial accidents as China deals with its second major disaster in a year.
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[16:31:26] QUEST: Hello, I'm Richard Quest. There's more "Quest Means Business" in just a moment when the Miss Universe fiasco threatens to break
the internet. You think you had a bad day.
And the chief exec of Taj Hotels explains what "Taj-ness" actually means. Is it brand? Is it a concept? Or is it just marketing gobbledygook.
Before all of that (RINGS BELL), this is CNN and on this network the news always comes first.
The police in Las Vegas say they have identified the woman who drove into pedestrians on the Las Vegas Strip killing one person and injuring dozens.
Twenty-four-year-old Lakeisha Holloway is now in custody facing murder charges. Authorities say while they believe Holloway was acting with
intent, it was not an act of terrorism.
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SHERIFF JOE LOMBARDO, LAS VEGAS METROPOLITAN POLICE DEPARTMENT: Some disassociation with the father of her child, and then events prior to the
event - her being what we believe to be in Las Vegas approximately a week and homeless and residing within her vehicle.
We don't know the exact precipient (ph) event that caused her to snap and/or whether it was planned previously.
(END VIDEOCLIP)
QUEST: The Taliban is claiming responsibility for an attack in Afghanistan that killed six American soldiers.
It happened near a U.S. base in Northern Parwan Province.
One official tells CNN a suicide bomber on a motorcycle carried out the attack on a joint patrol of Afghan and coalition forces.
Sepp Blatter said he will appeal against a ruling that bans him from football for eight years. FIFA's ethics committee says the organization's
president abused his position and he paid $2 million to Michel Platini, UEFA president.
At a news conference, Blatter said he was sorry - not for his actions but for the state of world football.
(BEGIN VIDEOCLIP)
SEPP BLATTER, OUTGOING FIFA PRESIDENT: I'm sorry for the Federation Internationale de Football Association, I am serving now more than 40
years.
I'm sorry for it. I'm sorry for the 400-plus FIFA team members that are working in FIFA. I'm sorry about it. I'm sorry.
But I'm most sorry about me - how I am treated in this world of humanity and humanitarian qualities.
(END VIDEOCLIP)
QUEST: The Russian military says the black box on the Russian warplane shot down by a Turkish jet is too damaged to be readable.
The Russian officials say they are exploring the possibility of reading direct from the black box microchip. Russia hopes the data inside will
prove its claim that the plane did not violate Turkish air space.
Authorities in Paris say a former French policeman has been taken into custody after Sunday's bomb scare on an Air France flight.
The plane made an emergency landing in Kenya after a passenger found a suspicious device in the toilet.
The airline says the parcel did not contain explosives.
The pictures are truly horrifying and you'll understand why even now rescuers are trying to find at least 85 people who are missing after a
landslide in the southern Chinese city of Shenzhen.
The officials say this incident and the accident which happened on Sunday - you can just see the way this building just crumbles under the weight of
the landslide - a huge pile of earth collapsed.
[16:35:07] It was construction waste from Shenzhen's building boom. Our Asia-Pacific editor Andrew Stephens describes how this may have happened.
(BEGIN VIDEOCLIP)
ANDREW STEVENS, CNN ASIA-PACIFIC EDITOR: This was the moment a wall of mud slammed into three industrial parks in Southern China on Sunday.
The sheer force of the landslide toppled multi-story buildings, burying some of them and smashing others to rubble. Hundreds of rescue workers are
still combing through the debris and mud as the number of missing climbs higher.
More than a dozen people are being treated at a local hospital. Among the injured, an eight-year-old boy.
EIGHT-YEAR-OLD BOY, TRANSLATED BY STEVENS: "It was so scary we just jumped off the building," he says.
STEVENS: About 1,000 residents have been forced to leave their homes. They spent Sunday night sleeping in temporary shelters.
Officials now say the cause of this landslide was man-made - a pile of earth and construction waste that grew as high as a three-story building.
Locals tell state news agency Xinhua that hundreds of trucks dumped construction waste here every day for at least two years. Premier Li
Keqiang has ordered an investigation.
Shenzhen on the border with Hong Kong is one of China's fastest-growing cities. It was chosen in 1980 by the then-leader Deng Xiaoping to be one
of the first cities to lead China's economic revolution.
From a quiet fishing village, it's now home to 10.8 million people and it's the center of China's tech industry. Andrew Stevens, CNN Hong Kong.
(END VIDEOCLIP)
QUEST: Andrew talks about Shenzhen which has seen massive growth over the past few years. Well if you take a look at Shenzhen, the report from last
January actually warned of potential landslides.
Local trucks said dumps were being - local reports said waste was being dumped every day and Shenzhen's been granted as China's answer to Silicon
Valley.
But it wasn't just them. The second high profile (COUGHS) - excuse me - industrial accident this year, happened in Tianjin.
Now in Tianjin you will be well aware this extraordinary explosion, saw government demand improvements, and on that occasion, the Chinese President
Xi Jinping said once again safe growth was needed, that people's interests must come first.
Explaining all of this now, let's talk about it with the chief economist and strategist for Silvercrest Asset Management, Patrick Chovanec.
PATRICK CHOVANEC, CHIEF STRATEGIST, SILVERCREST ASSET MANAGEMENT: Hi.
QUEST: Good to see you. The sort of things we're talking about - industrial accidents happen, but these are indicative of industrial
accidents because of unconstrained growth.
CHOVANEC: Yes, and I think it also shows how much China has changed in the last 20 years. You know, 20 years ago, people were poor, they wanted to be
rich. These sort of things were just sort of the cost of getting rich.
Now people's attitudes have really changed. It's not just these industrial accidents, it's also the air pollution that has gone off the scale, it's
also food safety scandals. And people are beginning to think about quality of life.
QUEST: Right. But the ability to handle this sort of growth, it's the sort of thing we saw in Russia towards the end of the Communist era with
Chernobyl, with industrial accidents, with agricultural mishaps.
CHOVANEC: Yes, and it's also it's an indication of priorities, and those priorities have now shifted towards recognizing that the pace of growth may
not be as important as the quality of life that's created.
QUEST: You think so? You really think that's the case and all that's not happening here is they've been caught with their fingers in the till?
CHOVANEC: Well I think, you know, one thing that's changed also has been that 20 years ago these sorts of things would happen but the news would be
suppressed.
And now because China's much more open, you have people on social media, whenever some of these things happen, they get reported, the media has to
cover them. And so people know about them and they become issues people become conscious about.
QUEST: Unless you have an entire infrastructure - a panoply if you like - of regulation, bureaucracy, health and safety inspected, the sort of things
that many of us think has gone too far in a litigious society like the United States.
But do you see China putting in place policies or are they just beating their chest?
CHOVANEC: They're talking about it and they're coming under a lot of pressure to do that. They also have to weigh it on the other hand against
the economy that's slowing.
So, they're trying -
QUEST: Ah, but it's not an either or -
CHOVANEC: Well -
QUEST: -- in most countries it wouldn't be considered to be an either or, it would be considered to be a sine qua non that you can't have the growth
unless you actually have the safe way of (ph) proceeding -
(CROSS TALK)
[16:40:03] CHOVANEC: In the long run that's absolutely right. In the short run though, you're talking about do you build something or do you go
through a process of evaluating whether it really is safe to build it.
And in the past it was always just build it and worry about it later.
QUEST: Have a good holiday week, sir, whenever you're celebrating have a good week.
The chief executive of Taj Hotels says his company is the rightful custodian of Indian hospitality. He's going to talk about "Taj-ness" and
how he plans to deploy it in his properties.
The question of course is, is "Taj-ness" actually meaningful and what does it mean? "Quest Means Business," good to have you (RINGS BELL).
(COMMERCIAL BREAK)
QUEST: In the past month we've seen two giant hotel merger deals. Marriott is buying Starwood and Accor bought Raffles and the Fairmont
brands.
Well its rivals are joining forces trying to get ever bigger. The Indian chain the Taj Hotels has decided it's going it alone, announcing plans to
open a new property in Bangalore.
It's a startup-friendly zone with an anti-jet lag menu. The Taj in Bangalore is to directly target business travelers.
I was joined by the chief executive of Taj Hotels which has many properties, interestingly not huge numbers in the United States or in
Europe, and that's something I talked about with the chief exec.
The master plan not only to make his hotels stand out, but where the development and growth will be. At the core of it all, he explained he has
this philosophy. He calls it, appropriately enough, Taj-ness.
(BEGIN VIDEOCLIP)
RAKESH SARNA, CEO, TAJ HOTELS RESORTS AND PALACES: We believe that given our presence in India, given our legacy in India, we will be able to create
a difference in our hotels that will compel people coming to India to try us.
They will try us because we will have offered experience that is not like the rest.
Not saying we're better, not saying they're worse, it's different.
QUEST: What is that difference?
SARNA: That difference is "Taj-ness." That difference is "Taj-ness," Richard, for we believe Jamsetji gave us the right to be rightful
custodians of Indian hospitality.
QUEST: What's "Taj-ness"?
SARNA: "Taj-ness," the way it's been defined - and it's not me, I just arrived 16 months ago.
[16:45:05] "Taj-ness," the way it's been defined by my predecessors, by thousands of people that have worked so hard, is the sum of all experiences
that seek their inspiration from the nobility of Indian traditions and rituals. That's what "Taj-ness" is.
And that is what we're going to deploy in our hotels.
QUEST: Does that translate outside into other markets? When you're competing with the Shangri-Las, the Peninsulas where - not vast groups with
thousands of properties - but respected luxury brands.
SARNA: The answer is yes because first and foremost rule of "Taj-ness" says to have a sense of place. We don't intend to replicate and have Indian-
looking hotels all over the world. The hotels would pay homage to their neighborhood first and foremost.
Richard, we have tremendous respect for the Peninsulas and the Shangrilas and the Marriotts and the Hyatts, but we know who we are and we know what
we need to become in order to just not survive but to prevail.
QUEST: Survive but to prevail.
SARNA: Indeed.
QUEST: So your number of properties at the moment is?
SARNA: 131.
QUEST: And you'd like to get to -- ?
SARNA: I don't have a number.
QUEST: Oh you do.
SARNA: We don't - we need -
QUEST: You do. You have an idea of what you want.
SARNA: I know where we need to get to. Our priority markets right now are Bombay - we don't have enough, Delhi, Dubai, Abu Dhabi, Muscat, Singapore,
Bangkok, Hong Kong, Shanghai, Beijing. Those are the priority markets where we must get to.
(END VIDEOCLIP)
QUEST: You've got to admire a chief executive who is quite so determined, forthright and blunt.
Whichever way you look at this, to describe it as a horrible mistake is perhaps an understatement. It was seen around the world or literally in
the universe. The Miss Universe Pageant it was excruciatingly toe- curlingly appallingly (GROAN SOUND), after you've watched "Make, Create, Innovate."
(COMMERCIAL BREAK)
QUEST: Donald Trump says Steve Harvey's horrible mistake would never have happened on his watch when he owned the Miss Universe Pageant.
[16:50:00] For a moment, this was Miss Universe, and then it all went horribly wrong. If you can stand the gut-wrenching, toe-curlingly cringe
worthiness, this is what happened.
(BEGIN VIDEOCLIP)
STEVE HARVEY, MISS UNIVERSE PAGEANT HOST: OK, folks -
(AUDIENCE CHEERS)
HARVEY: There's - I have to apologize.
(AUDIENCE CRIES AND CHEERS)
HARVEY: The first runner up is Colombia.
(LONG DELAY)
HARVEY: Miss Universe 2015 is Philippines.
(END VIDEOCLIP)
QUEST: Videos of the mistake are not surprisingly the top trending clips on YouTube and have already racked up more than 10 million views for
YouTube and other online publishers (ph).
It's the smaller screens () the biggest potential. Mobile viewing is growing twice as fast as desktop viewing and as views move to mobile,
publishers must update their business plans to keep up.
Our senior media correspondent is Brian Stelter.
(BEGIN VIDEOCLIP)
UNIDENTIFIED MALE: The direction that we see things going is entirely on mobile.
RICHARD PLEPLER, CEO, HBO: My 12-year-old watches probably the vast preponderance of quote "television" on her mobile phone.
DAO NGUYEN, PUBLISHER, BUZZFEED: When people say oh, mobile, you can't monetize it because it has no one is spending time on it, I strongly
disagree.
BRIAN STELTER, CNN SENIOR MEDIA CORRESPONDENT: Anywhere, everywhere and always. That's the promise of Mobile Vision. Quite simply, it's anything
you watch on a Smartphone or on a tablet.
The implications are enormous. More eyeballs and more videos means more opportunity for media companies to sell ads. But your smartphone's smaller
screens mean less room for those ads.
It also means the videos themselves are changing. This video's horizontal, but Snapchat's promoting vertical. Storytellers are thinking about how to
make things pocket-sized and short enough to be viewed on the fly.
The new medium is mobile, and this little screen is going to be big.
When it comes to online video, nothing competes with YouTube. There's 300 hours of video uploaded to the site every minute.
But being big makes it harder to change, and right now the biggest name in online video has its sights set on the smallest screen.
ELISE STRACHAN, YOUTUBE CREATOR, MY CUPCAKE ADDICTION: I can only make so many cakes in a day. But I can make that cake and I can put it out on
YouTube and its reach is endless.
STELTER: Elise Strachan is a YouTube creator. Over the past four years her baking videos have earned her over two million subscribers.
And like the rest of YouTube, half of her views come from mobile screens.
STRACHAN: You're in these people's bedrooms, you know, you're on the train with them, you're at school when they're (inaudible) looking at their
phones.
STELTER: (LAUGHTER).
STRACHAN: You are going everywhere with them.
STELTER: That kind of intimacy with viewers is something new for media makers. And it could pay off big time. Mobile revenue for YouTube is up
100 percent year over year, and global business at Robert Kyncl doesn't see it slowing down.
ROBERT KYNCL, CHIEF BUSINESS OFFICER, YOUTUBE: The mobile will drive most business especially in advertising.
Mobile consumption has been incredible and it's growing twice the rate of anything else.
STELTER: You mean desktop is growing at one pace and mobile's growing just as fast?
KYNCL: Yes, twice as fast.
STELTER: Twice as fast.
STELTER: It's not just that mobile is outpacing desktop, Kyncl says mobile will replace it.
KYNCL: Mobile will matter. It will be the discovery device, it will be the transmission device, will be -
STELTER: The first screen.
KYNCL: It will be the first screen. That's exactly right.
STELTER: But right now companies make a lot more money through other screens. That (boz) of industry buzzword - monetization. It's still a
struggle on mobile.
That's one of the reasons why YouTube just launched a subscription option for $10 a month. But for now with $4 billion in total revenue last year,
YouTube is just breaking even.
KYNCL: Think about the infrastructure that it takes to ingest the videos, store the videos and then on the other hand broadcast them out and have
huge amounts of people all around the world see them. It's a tremendous amount of machine and infrastructure.
STELTER: So why the investment in international growth? It's because more and more people in the developing world are getting their first
smartphones.
KYNCL: The next few billion people that will come online will like to be able to (apport) a phone connection and the phone. It's like your window
to the world.
You know, I grew up in Czechoslovakia and if I can - I imagine what it would be like growing up over there having YouTube. It would be amazing.
STELTER: Who wins in this mobile digital world?
[16:55:04] KYNCL: I think people who innovate the fastest. Somehow online video now has become part of every person's life every single day.
And we need to make sure that we keep up with the growth.
(END VIDEOCLIP)
QUEST: Brian Stelter on the little screen and the mobile revolution.
We'll have a "Profitable Moment" after the break.
(COMMERCIAL BREAK)
QUEST: Tonight's "Profitable Moment." I've spent hours thinking about the awful moment at the Miss Universe when Harvey announced the wrong winner.
And you think to yourself, `What would I have done? What should they have done?' It was excruciating to watch.
Of course part of me thought, well, why didn't they just pretend and forget about it? I mean, after all how many people really knew who'd really won?
Couldn't they have just pretended Miss Colombia had won and just moved on? And then you realize, no, that's dishonest, that's not the right thing to
do.
So then I thought, well maybe you wait until the next day when the dust has settled and nobody notices and you can just switch things `round.
And then I thought, no, that's just moving the goal post and not very nice either.
When you finally come to the conclusion that they did the right thing. They took their bumps and their knots and they admitted they'd got it
wrong, it was a terrible mistake.
And those sort of things happen in the natural vicissitudes of life.
What it does show of course is that even on the biggest and best programs perhaps things go wrong. And when they do, you just have to live with it.
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) I hope it's
profitable.
Join me in London tomorrow.
END
