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Quest Means Business
Netflix Going Global; Investors Want Marissa Mayer Out at Yahoo; Business Buzzword. Aired 4-5p ET
Aired January 06, 2016 - 16:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[16:00:00]
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QUEST: -- but it's still a very down day on Wall Street. The market is off nearly 1.5%, a loss of around 250 points. Now, that's what you call
a robust gavel to end trading on Wednesday, it's the 6th of January.
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QUEST: Tonight wherever you look risk is back. From North Korea to the Middle East, fear is stalking the market and we will dissect that for
you.
Trouble on the starboard bow. Investors want Marissa Mayer out at Yahoo! And coming soon to a tablet near you, Netflix is going global
with 130 countries.
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QUEST: I'm Richard Quest and I mean business.
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QUEST: Good evening. Tonight markets across the globe are once again reeling as a host of threats that could have been predicted -- could not
have been predicted, even a week ago are rattling investors.
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QUEST: Look at the way the Dow Jones traded during the course of the session. Straight out of the gate, it's lower. It hits the low point of
the day around 3 o'clock, and although it manages a bit of a gain, a pullback, it still ends with the second triple digit loss of the year,
and we are only three days into the trading year. Is this a portend of what is to come? And why are we seeing this? The reason very simple.
Wherever you look, there's geopolitical risk.
So, for instance, the latest, North Korea claiming it had detonated a hydrogen bomb. Now, if true, this would mark a major advancement for
North Korea and completely destabilize this whole region.
But there's more. There are those tensions between Saudi Arabia and Iran. Now, put that into the context. Not only do you have two rivals
going at it and the whole area starting to fragment, you have oil prices hitting the lowest point in a decade.
There is more. On the strict economic front, let's take China which has weak data. The worries about what's happening in the Chinese economy,
not only the economy but also the stock markets? It's the slowdown, and it's fierce and it's pushing oil and commodity prices lower. The Yuan
fell sharply against the dollar and still the Chinese authorities tried to build it up. Even Washington isn't immune from this fear. The Fed
minutes released just moments ago where they had hiked rates. It was a close call for some members, and now the Fed Vice Chair, Stanley Fisher,
says the markets have underestimated the number of rate hikes. He believes there could be up to four. Let's put all this together to see
which of the fears is the most significant.
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QUEST: Jeremy Siegel is joining me. Jeremy is the Finance Professor at Wharton. He joins me from Philadelphia, Pennsylvania. I've outlined the
risks as we see them. Which to you, sir, is the most pressing, prescient, significant, dangerous?
JEREMY SIEGEL, PROFESSOR OF FINANCE, UNIVERSITY OF PENNSYLVANIA: Well I think there's two things that scared the market. I mean what's going on
in the Yuan, the Chinese currency, the sharp devaluation, it's very bad. It's very bad because it signals that the Chinese economy is probably
weaker than we think and weaker than the Chinese officials are admitting.
And secondly, this is putting another wave of deflation, a devaluation of China, if it's weaker, commodities will be down, exports for China
will be lower in price.
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SIEGEL: And I think this is what the market is fearing, another deflationary push on all of these commodities, on oil, you know the
energy sector has been devastated. I think that's important.
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SIEGEL: On the other hand, I think that Stan Fisher saying that we could have four rate hikes in the face of this deflation is also very bad
news. And I really don't think he means it that literally. The Fed really is data dependent, but it sounded like they're on track for four.
I think that's far too many, given these risks that we've enumerated. I think the Fed will tamp down on that number. But that's really on the
table right now.
[16:05:00]
QUEST: Professor, you haven't mentioned North Korea. It is the crisis du jour, but does that crisis -- I mean, obviously it could spike oil
prices which - I mean - and gold - no doubt gold will rally accordingly like the good boy that it always does. But does North Korea per se have
the probability to disrupt economically?
SIEGEL: North Korea is always a risk out there. I mean, even if you just have the atomic bomb without having the hydrogen bomb, that's a
dangerous situation.
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SIEGEL: And I think China is concerned as well as Japan as well as all the major countries. I don't think, honestly, that today even though it
certainly caused a little bit of a ripple, I think the main effect is what's going on in China and the fear of steady rate hikes basically
going against and crushing the market through 2016.
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SIEGEL: I think those are the two most important threats.
QUEST: You know, if we say we're at the beginning of the year and almost on a scale of 1 to 10 where you know, 1 is it's going to be horrible,
dreadful, let's turn off the lights and 10 it's going to be a great year and things couldn't look better. Where would you, even at the beginning
of the year, place yourself, professor?
SIEGEL: Well, I am still optimistic for this year. I think I'm one of the very few left that are. And in and of itself, the extreme
bearishness that's out there, you hear analyst after analyst you know holding their heads and shaking why this is a bad year. My experience,
your experience, when everyone's bearish, it is rarely as bad as what we fear.
I think the Fed is only going to hike once or twice this year, maybe not even that. I think we are going to get an earnings rebound this year,
although that certainly depends on oil stabilizing. I still think we can get an 8% to 10% gain in the market. But clearly these risks that have
piled on right after January 1st have certainly been a negative so far and certainly I can't deny that.
QUEST: Professor, wonderful to see you, sir. Thank you for joining us on the risks tonight.
SIEGEL: Thank you, Richard.
QUEST: Now, North Korea, we were talking there, and the country could possibly face more sanctions over the alleged h-bomb test.
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QUEST: The U.N. Security Council is holding a meeting and diplomats are telling CNN widening sanctions may be appropriate. U.S. Secretary-
General has condemned North Korea and the White House Press Secretary has cast doubt on the very claim that they've managed to detonate a
hydrogen bomb.
JOSH EARNEST, WHITE HOUSE PRESS SECRETARY: This is a serious subject. The initial analysis that's been conducted of the events that were
reported overnight is not consistent with North Korean claims with a successful hydrogen bomb test. There's nothing that's occurred in the
last 24 hours that has caused the United States government to change our assessment of North Korea's technical and military capabilities.
(END VIDEO CLIP)
QUEST: Our correspondent at the United Nations is Richard Roth. He joins me now. What is the U.N.going to do?
RICHARD ROTH, SENIOR U.N. CORRESPONDENT: The U.N. Security Council did what it's used to doing with North Korea, it held an emergency closed
door meeting. And afterwards there was a statement of condemnation. They are promising the diplomat significant measures because two, three years
ago during the last nuke type test they said there would be a significant follow-up if North Korea did something like this. So they
feel they have to do something.
Countries are saying they're planning possibly for sanctions, some sort of broader package against the north.
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ROTH: I don't think it's necessarily going to work, that's what they're hoping for. Japan's Ambassador told the U.N. media here, he implored
North Korea's leaders to think of the people and not focus on weapons but on their starvation.
MOTOHIDE YOSHIKAWA, JAPANESE AMBASSADOR TO UNITED NATIONS: Whatever the action that Security Council does will reach to the minds of the leaders
so that if you think of the people and how they are suffering, the money should be spent for food and the agriculture rather than nuclear
development.
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ROTH: Russia's ambassador said cool head should prevail. Condemnation by the U.N. Secretary-General, a former South Korean Foreign Minister, he
said what happened was profound destabilization potentially for the region.
So they're going to try to come up with a resolution Richard. It will probably take days and for now, they have China on board. But they're
limited really on how much they can really do, Richard.
QUEST: Now, you talk about they're being limited. The country you didn't mention there was China. Now, China, of course, which does provide a
certain amount of subsidy, support, economic backup for North Korea, and in many ways it's China that holds the key both for North Korea and here
at the security council surely.
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ROTH: Yes. China that has to deal with this crazy at times neighbor. China wasn't even notified of this test. China at times has pushed back
against international action.
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ROTH: Here in December, China was upset that the human rights record of North Korea was publicly examined inside the security council. China,
however, doesn't want to destabilize North Korea with millions in refugee crisis. China is always getting pushed on here but can't deliver
it seems over the years. No one wants to inflame the situation even worse and so for now it's always some sort of diplomatic track.
(END VIDEO CLIP)
ROTH: Maybe North Korea will come back to multi-country talks and then the same cycle starts all over again.
QUEST: Richard Roth, if that cycle starts you'll be at the United Nations to tell us what's happening. Thank you sir.
Into all that happened, you've seen the Dow fall and European markets fell on Wednesday.
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QUEST: You have that data all the same reasons that we've talked about, but look at those losses. The FTSE was off 1%, the CAC down 1.25.
Interesting the DAX just held under but clearly the selling pressure or at least the nerves were there right throughout.
(END VIDEO CLIP)
QUEST: As we continue, Mayer must go. That's the call from the activist investors in Yahoo!
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QUEST: Yahoo! Now has to respond. Will there be the sort of changes that many are calling for? In a moment.
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QUEST: Marissa Mayer must go. Yahoo has responded and it calls for its Chief Executive to be fired.
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QUEST: A large investor has urged the firm to sack Marissa Mayer. While Yahoo didn't address that directly, a spokesman says it will share
additional plans for more focused Yahoo on or before the next earnings call.
CNN's money guru, Paul La Monica, the guru on Quest Means Business is with us.
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QUEST: Paul, let me read you one letter, one bit from this letter from Starboard Value. If nothing else, they wrote in their letter, the
results of the past three years which follow other failed attempts demonstrate you that turning around this business is extremely
difficult. To be successful, dramatically different thinking is required together with significant changes across all aspects of the business
starting at the board and executive. They want her gone.
PAUL LA MONICA, CNN MONEY DIGITAL CORRESPONDENT: I think they do. Starboard Value has lost patience. They first took a stake in the
company in 2014 and Jeffrey Smith the top managing member at Starboard has written several letters to Yahoo, to Mayer, the board urging them to
really shake things up in order to get this stock price back on track. And they pretty much have mostly ignore them.
QUEST: But it's not just the stock price. I mean they point out the earnings, the EBITDA is on a trajectory down. They talk about the 2.3
billion acquisitions that have basically been money down the toilet. They talk also about you know, Mayer has been there three years and this
turnaround should have been showing. And the best plan she can come up with gets scuppered on tax grounds.
LA MONICA: Exactly. They wanted to try and spin off that Alibaba stake. The IRS wouldn't give it tax-free status.
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LA MONICA: So instead Yahoo did an end around and said OK, we we'll keep the Alibaba stake and spin off the core business, which really is just a
cosmetic change. It doesn't do anything to improve the fundamentals.
QUEST: And it's a core business that they're really talking about, the search, the advertising, the absolute core part of Yahoo!
(END VIDEO CLIP)
[16:15:05]
QUEST: The letter says the board must accept that significant changes are desperately need. This would include changes in management, changes
in board composition. Are they going to get their way?
LA MONICA: I think that Jeff Smith has proven that if he doesn't get his way he will go hostile and there will be a proxy fight. Yahoo probably
wants to avoid that. But if you look at what Starboard has done in the past, there's a company Darden Restaurants, owns Olive Garden, he
successfully led a proxy fight they won control of that board, sacked the CEO. Smith is now chairman of Darden and that stock has done
extremely well under Starboard's stewardship. So it will be very interesting to see. If I were Yahoo I would not underestimate Smith or
Starboard value. They have to take him seriously.
QUEST: So when Yahoo says that it will share additional plans for a more focused Yahoo. I mean for goodness' sake you know, they've been focusing
Yahoo for as long as I can remember. What can they mean by that?
LA MONICA: It's very difficult to try and figure out what Yahoo can do to reverse the decline. It's been going on for pretty much a decade
now. They have lost ground to Facebook, to Google.
(BEGIN VIDEO CLIP)
LA MONICA: Microsoft and Twitter are still you know competitors there. Snap Chap has emerged as a big threat in digital advertising. Mayer to
her credit is not the only CEO that has failed to turn around Yahoo but she was the one who came in with the most hype, because she came from
Google. Everyone thought she would really be the savior of the company and it just hasn't happened.
(END VIDEO CLIP)
LA MONICA: I think Yahoos best bet is to probably do like AOL and sell itself. AOL was struggling, Verizon found some value in those assets and
scooped them up last year. That's probably what Yahoo should be doing, looking for a buyer, not pretending it can turn things around.
QUEST: And you're going to hear from the AOL Chief Executive a little later in this program. Good to see you guru.
LA MONICA: Thank you.
QUEST: Thank you sir.
Malaysia Airlines bans luggage on flights from Kuala Lumpur to Europe and then lifts the ban just as quickly.
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QUEST: The problem, of course, is the luggage got left behind.
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QUEST: Malaysia Airlines says it's once again allowing checked bags on all flights out of Kuala Lumpur. A temporary ban affected Malaysia
Airline routes, particularly routes - well specifically routes from Kale up to Europe particularly London, Paris and Amsterdam. The airline says
the reason why was unreasonably strong headwinds that limited its ability to safely carry the luggage.
Apparently with the headwinds the airline was given a much longer route to get to Europe and therefore wouldn't have had enough fuel for its
alternates safely as required. So the airline's solution was to leave the baggage behind. Yes, fly the passengers, but leave the baggage.
Somewhat unusual.
Spud Hilton is the travel editor of the "San Francisco Chronicle" and he joins me now. Weight restricted flights are not unique. Many airlines
have weight restrictions on flights. But I can't remember an airline leaving -- deliberately leaving the luggage behind.
SPUD HILTON, TRAVEL EDITOR, SAN FRANCISCO CHRONICLE: Well, I guess it's only slightly better than actually taking the luggage and leaving the
people behind. It probably wasn't the best solution, Richard, but it's actually not the worst solution either.
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I mean, when you look at it, there's only so many things you can control when you're dealing with fuel consumption, and weight is a big one.
(BEGIN VIDEO CLIP)
HILTON: It actually all started when they were making sure that they had a route that, despite having bigger headwinds had a lot fewer people on
the ground with shoulder launchable missiles. I mean, Air Malaysia has already had a situation with this, and they really don't need that type
of thing again.
(END VIDEO CLIP)
QUEST: All right. But one assumes -- and we don't know this - one assumes that they'd already decided to leave the cargo behind because
that would be somewhat unconscionable if you're flying the cargo but you're flying the passengers and not taking the bags.
HILTON: Yes, well if -- one thing I've found out about this job is that you really don't mess with people's luggage. We are so into making sure
we take everything we want with us and we're so protective of it.
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HILTON: The irony is that Air Malaysia actually allows more luggage on board, you know checked luggage, than almost - most other airlines. So
the point that they were leaving on a regular flight, they're actually already two tons, two metric tons, heavier than the same flight that's
British Airways. Well, you can only control so many things.
(END VIDEO CLIP)
HILTON: So a really last-minute short-term solution was, let's drop some of that luggage, make sure it gets to them eventually, because almost
every airline also has a freight business. I can't say for sure if Air Malaysia does, but almost every airline has a freight business and will
get the luggage to you eventually. But at least people got to the place that they were going.
QUEST: And interesting to hear your view on this because the net out there, the internet and the social media, has absolutely beaten up on
Malaysia Airlines in an enormous way for their decision to do what frankly, as anybody - and I mean, it may not be the most elegant way,
but if you're flying 777-200s which are 15 to 17 years old, haven't got the capacity range or power of the 300, you really don't have many
choices.
HILTON: Yes, I mean, supposedly there's a very specific equation that tells you what a plane is consuming in fuel when it's got luggage and
when it doesn't have luggage. Now, I don't know what that equation is, but, quite frankly, I don't want to be on the wrong side of that.
Because, honestly, you think social media is bad when a few people got their luggage left behind, what happens when Air Malaysia has its third
major disaster in two years? What happens when somebody says, you know what? We misjudged how much gas it was going to take to get to
Amsterdam. You can only imagine the social media at that point. So, you know, we're not dealing with actually all that much.
QUEST: In the future, Spud, I will find out whether you're a carry-on or checked baggage sort of man. Good to see you sir.
HILTON: I'm not telling. Good to see you.
QUEST: All will be revealed.
Now of all the places that you can visit on the internet, tens of thousands of people have been watching quite literally a live stream of
a soggy street in Newcastle Upon Tyne in the North of England.
(BEGIN VIDEO CLIP)
QUEST: Up to 20,000 people watching pedestrians negotiate a big puddle via the periscope. #drummondpuddlewatch has been trending all day. The
video was streamed by the local social media group Drummond Central and the Managing Director of Drummond Central, Beth Hazon, is with me via
Skype from Newcastle.
(END VIDEO CLIP)
QUEST: Why did you decide to stream people -- I mean, I can see it's a publicity gig and I can see that it's had a lot of attention. But what
was your thinking about why this was worth streaming?
(BEGIN VIDEO CLIP)
BETH HAZON, MANAGING DIRECTOR, DRUMMOND CENTRAL: To be completely honest, this is something that we as an agency have watched internally
for quite a long time. We've had some awful weather here in the U.K. And we decided to stream it for our own amusement. It allowed us to watch
what was happening out the window whilst we were also doing our day-to- day work on our screens. That's the reason why we did it. Really, really innocently.
QUEST: And the reaction, I mean there were tens of thousands of people sometimes watching this thing. What do you think it tells us about
people? And I mean, what does it tell us about people wanting to watch this sort of stuff?
HAZON: I think it tells us that people crave to be involved in a shared experience. They want to be involved in a community. And something as
mundane as watching people struggle or see how they're going to you know get through this huge puddle, it's interesting, genuinely interesting.
There's something about, the collective experience say over in the U.S. when you watch the Super Bowl, there's something about people coming
together.
[16:25:10]
QUEST: Which of course is fascinating for social media company like yourself because the goal - the goal is -- I mean, social media is both
collective and individual.
(END VIDEO CLIP)
QUEST: It's not mass broadcasting in the same sense as you and I are go doing now with millions of people that we have perhaps no relationship
with. But social media is the unknown here.
(BEGIN VIDEO CLIP)
HAZON: Yes, I completely agree. But I also think there's something quintessentially British about watching people trying to tackle puddles.
I think it's simple and it's fun.
QUEST: And provided you had a nice cup of tea and a rich tea digestive biscuit with it, then I think we can all agree that's the way to move
forward. Thank you for joining me.
(END VIDEO CLIP)
HAZON: Thank you very much.
QUEST: As we continue our evening conversation on business and economics, Netflix announces a huge global expansion.
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QUEST: More countries will be able to use its video streaming service. There's one place it can't get to yet. In a moment.
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(COMMERCIAL BREAK)
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QUEST: Hello, I'm Richard Quest and there's more "Quest Means Business" in just a moment when the Chief Executive of AOL tells us why he's ready
to take on Netflix and what does that actually mean? And it's time to lather up and synergize your platforms. No, that's not something to see
your general practitioner about. We're going to tell you it's the latest business jargon. Before that, this is CNN and on this network, the news
always comes first.
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QUEST: The United States says it doubts North Korea's claims they've tested a hydrogen bomb. North Korea announced on Wednesday it had
detonated an h-bomb for the first time. Diplomats at the United Nations called an emergency meeting and say more sanctions on North Korea may be
appropriate. The U.N. Secretary-General Ban Ki-moon condemned Pyongyang's actions.
BAN KI-MOON, U.N. SECRETARY-GENERAL: This test once again violates numerous security council resolutions despite the united call by the
international community to cease such activities. It is also grave conservation of the international norm against nuclear testing.
QUEST: Qatar is recalling its Ambassador to Iran according to the Qatar state media. It becomes the latest nation to scale back political ties
with Iran after Saudi Arabia executed a Shiite cleric. (inaudible) official says the move follows a subsequent attack on the Saudi embassy
that ran last weekend.
[16:30:10] The Iranian foreign minister says the reaction from its Middle East neighbors has been 'disproportionate.'
(BEGIN VIDEOCLIP)
MOHAMMAD JAVAD ZARIF, IRANIAN FOREIGN MINISTER, VIA INTERPRETER: Unfortunately, our actions and the steps we have taken have not been met
by an acceptable response from our neighbors in Saudi Arabia. This trend to create tension and escalate tension needs to stop.
(END VIDEOCLIP)
QUEST: Fears over the situation in North Korea and the Middle East as well as the economic slowdown in China have all hurt stock markets.
The Dow tumbled more than 250 points. It's now fallen by triple digits in two out of three trading sessions this year. The price of oil's
fallen to its lowest level in a decade. In Germany, police say more than 150 criminal complaints have now been filed in cities across the country after a spate of violent assaults of
women on New Year's Eve. There had been protests in the city of Cologne where most of the incidents took place.
A special edition of "Charlie Hebdo" has hit the newsstands in France as Thursday marks one year since the terror attacks killed 12 people at the
magazine's office in Paris and five others - people around the city. This week's cover shows a bearded figure of God carrying a rifle with the words "the killer is still out there."
Netflix has announced a giant international expansion. It will be quicker to tell you the countries where they're not operating in as a
result of what they're planning to do. But the video streaming device and service is now live in more than 130 countries. That means India, Russia, Nigeria, Turkey, Indonesia. And
the big holdout? (RINGS BELL) China. Joining me to talk about this, our senior media correspondent Brian
Stelter. Also Poppy Harlow has been speaking to the chief executive of AOL, Tim Armstrong, about his ambitions to take on Netflix.
But we start with you, Brian. A hundred and thirty countries.
BRIAN STELTER, CNN SENIOR MEDIA CORRESPONDENT: Yes.
QUEST: Is this - is this an achievement or -
STELTER: (LAUGHTER).
QUEST: -- once you've actually been in the - well don't look at me like that, Poppy Harlow!
POPPY HARLOW, CNN JOURNALIST: (LAUGHTER).
STELTER: Every country does get easier than the one before it. That is true.
(CROSS TALK)
QUEST: Once you've got the infrastructure -
HARLOW: Right. That's a good point.
STELTER: No, it's so hard for Netflix having to do all these deals, all these negotiations in Hollywood studios to get the worldwide rights for
shows. Well now they have that. So they turned on the lights in all these
countries today. But it was really impressive. You know, they said they'd do this by the end of the year, but they're doing it in the first
week of the year. There are four countries left - China, Crimea, Syria and North Korea. That's it.
QUEST: Right.
STELTER: That's it.
QUEST: Crimea - the country -
STELTER: Conflict, (ph) yes.
QUEST: It's complicated.
STELTER: Complicated. And by the way, the reason why Syria and North Korea are excluded is because Netflix is an American company - it's not
allowed to operate -
HARLOW: Sure.
STELTER: -- in those countries. China of course as you mentioned is the hard one that flap (ph).
QUEST: All right, so within - country just a moment - but in North - but in Netflix with these various countries, what are they offering
compared to, say, the U.S. or the European service?
HARLOW: Right.
QUEST: And is there the facilities, the bandwidth, the broadband to actually make it worthwhile.
STELTER: It varies widely in many countries. I saw a lot of positive reactions from people in other countries, say mostly in Asia and Africa.
Those are the two big continents where Netflix was not widely available, but it is as of today. Also parts of Eastern Europe today for the first
time. And lots of island countries, some of which I had never heard of which were you can now listen to Netflix/watch Netflix.
However, it's mostly English language programming, it's most of the same shows you have on Netflix today. What they say is they're going to
continue to expand probably in other languages now.
HARLOW: Is that the key lesson, Richard, from so many companies having expansion success or huge failures in other countries is knowing your
market? And you just wonder if everything that resonates here will resonate abroad.
STELTER: Right.
QUEST: Right, but let's talk about AOL.
HARLOW: Right. So, Tim Armstrong -
QUEST: I mean, one, you know - it's not quite your hope but one wonders what AOL is doing next.
HARLOW: It's a great point and Tim Armstrong was at the Consumer Electronics Show in Las Vegas right now. It's where I spoke with him
today and they said obviously they were purchased for $4.5 billion by Verizon last year.
And he said that has helped influence their reach globally, hugely. They're now operating in 50 countries in terms of their contravinage
(ph).
QUEST: Doing what?
HARLOW: Just compare that - their content, their original programming - compared to 130 for Netflix. He said their goal is to hit $2 billion
content consumers by 2020. That's way off from where they are now. They're bellow $700 million. So here's what Tim Armstrong said.
(BEGIN VIDEOCLIP)
TIM ARMSTRONG, CEO, AOL: Our main focus - and you saw the amount of change that we made as a company last year - is we want to build really
the most important and biggest mobile media technology company. It was the reason we did the deal with Verizon, it was the reason we did
the deal with Microsoft - to take over Microsoft's global advertising, and the reason that we acquired Millennial Media which is one of the top
three global mobile advertising platforms. [16:35:09] So we're really -- have one main vision for the future which is that mobile and the machine, that second brain. The machine you
carry around is really going to drive everything in your life over the next two decades and we will want to be the company that delivers media
on that platform.
HARLOW: I mean, no question you've made this huge content push. I'm interested, Tim, in where you see this going. I mean, should we expect
AOL to take on as a formidable challenger, the likes of Netflix for example?
ARMSTRONG: Well, we've - you know - we with Verizon have launched Go 90 which I would -
HARLOW: Right.
ARMSTRONG: -- argue has a Netflix type library, but a lot of it's around live content -- live sports like the NFL -
HARLOW: But it's not known as well -
ARMSTRONG: -- (inaudible) programming -
HARLOW: Right? It's not known as well.
ARMSTRONG: All right, well you know, that's - yes, the opportunity is you have one major company known in that space which is Netflix and
they've done a tremendous job operating and executing globally. And there's a bunch of categories around OTT services which, by the way, they - those - services grew 500 percent in terms of viewership in the
last four years. They're likely to outpace that in the next four years, and Verizon has
done some of the smartest investments in content along with brands like oh there's (ph) the Huffington Post, Conchin, (ph) Engadget and AOL On
and AOL Build. So we're - I think we're going to be a competitor in the space of global OTT time for consumers and something that's a very big developing
market.
(END VIDEOCLIP)
QUEST: I don't doubt that he's right in terms of the future. But, you know, I can't even do a little bit of streaming, a little bit of news or
whatever on this thing when I'm roaming. So where's this discontent?
HARLOW: So he made it very clear to me - this is what stood out to me most from the interview is when he said to me - and I'm paraphrasing -
mobile will be even more critical or revolutionary for this - for our - generation than the internet was.
QUEST: Our generation?
HARLOW: We're all one here - our generation. But he said that - they're putting - it seems like almost all their eggs in the mobile
basket and betting on mobile ads. I mean, is that a smart play?
STELTER: Every company like AOL is doing the same thing right now, but not every company's going to win.
QUEST: All right, but here's the problem. So, -- and the reason I come back to Yahoo because we had them on them on the program, we talked
about it earlier.
STELTER: Yes.
QUEST: There you've got it, how you can get it - dramatically wrong. Now then you had AOL which nearly got it dramatically wrong and they
still get it dramatically wrong. Netflix hasn't realty faulted yet.
STELTER: And it's only doing one thing. It's streaming great TV videos.
QUEST: Exactly -
STELTER: They're not trying to be everything.
QUEST: -- exactly. It's not trying to book my holidays,
STELTER: (LAUGHTER).
QUEST: -- it's not trying to do my laundry or tell me what's happening in the world.
STELTER: But what AOL does have is Verizon. Verizon has so much power because -
HARLOW: Yes.
STELTER: -- so many people are subscribing. So I do believe they'll increasingly be in competition - Amazon, Netflix, Verizon and AOL.
HARLOW: And we asked - I asked - Tim Armstrong about Yahoo. Because this talk of Yahoo and AOL merging will never end --
STELTER: Right.
HARLOW: -- even though he's said it's dead in the water.
STELTER: (LAUGHTER).
HARLOW: He didn't totally deny it to me because the CFO of Verizon came out last year and said they'd look at Yahoo if the price tag were right.
I don't know if that tie up makes any sense (inaudible).
QUEST: So, last question. People go to Netflix --
STELTER: Yes.
QUEST: -- for their streaming and media content - for programs - for programs.
What are people going to AOL for?
HARLOW: What people are getting from AOL through these deals which he would argue through the Microsoft deal, etcetera, they're running,
they're powering all the advertising. That's what it is. It's not necessarily about me and you right now going for their original programming. He would like that and he's betting on that.
But it's all of the advertising that they're powering here.
STELTER: And that's why this is so powerful, right? Because it's always with you in a way even a television set is not.
So for advertisers, this is the holy grail.
QUEST: I think you're all deluding yourselves.
(LAUGHTER)
QUEST: I think you're absolutely deluding. I think you've never actually try to roam and stream at the same time.
STELTER: It gets a little better every year, doesn't it, Richard?
(CROSS TALK)
QUEST: Oh great, it only takes you 20 minutes to watch a two-minute piece. Good to see you both.
HARLOW: Good to see you, my friend.
QUEST: Keep well.
STELTER: Good to see you.
(LAUGHTER)
QUEST: A website crash is causing problems for Oculus. Its virtual reality headset, the Rift, was available for preorders starting today.
Even at least $600 bucks a piece, demand literally overwhelmed the site. Samuel Burke is at the Consumer Electronics Shows joins me now from Las
Vegas. Thank God you're not wearing one of those things then look even more ridiculous. Samuel, but the way it managed to break the web - what
happened?
SAMUEL BURKE, CNN BUSINESS CORRESPONDENT: Richard, you know as business journalist much like Brian and Poppy and as a tech journalist, we look,
every year we see incremental changes. But there are these times as a journalist when you're using something,
you're trying some out and you realize you've got a slice of the future for our generation.
And that's how I felt the past two years when I've used virtual reality here at the Consumer Electronics Show. It just wows me.
[16:40:01] I see the future when I'm using it. Finally Oculus Rift has said that their headset will cost $599, but
don't fix - don't get fixated on that price. The full kit - which you'll need - will be $1,499. So I asked the CEO of Oculus Rift how he can compete with companies like Google - have a $8
cardboard virtual reality.
(BEGIN VIDEOCLIP)
BRENDAN IRIBE, CEO, OCULUS VR: We really look at this as a entirely different category. This is high quality VR.
This is VR for people that want a super immersive experience - that really want to feel that sense of presence where you put on a headset,
you wear it for an extended period of time, you're fully immersed, you feel great inside.
That's something that's unique to the Rift.
BURKE: And you've heard of a facelift, but last year when I put this on, it felt a little bit like a face droop. But now I feel it's so much
lighter than before. Is that the biggest change here?
IRIBE: Yes, we've really focused on the ergonomics and the weight of the headset - how comfortable it is when you put it on physically and
the experience inside. And so there has been a ton of improvements overall to the headset. And we really feel like this is consumer quality. This is the quality that
we've been working towards for several years now.
(END VIDEOCLIP)
BURKE: And the biggest change in virtual reality from last year to this year is now it's a social experience. It was very lonely just one
person using his virtual headset, Richard. Today I used it with two different people. The guy was just on the other side of the wall with me, but he could have been on the other side
of the world, and we were interacting and throwing things at each other virtually.
And that's the big difference I see when I put these headsets on this year.
QUEST: OK, so with this in mind, you just heard - I don't know if you heard much of our discussion previously with Brian and Poppy.
It's all about content. Now when I was looking at the Oculus Rift the other day, what's the content? How big does this content have to go
before people say 'I must have it.'
BURKE: And I think that's the big lack right now is the content. First you're going to see gaming. It has some basic games right now which are
very fun, but they're only fun because it's my first times using virtual reality.
They're going to need stronger games to do it. But I see as the future is exactly the type of content that you were talking about with Brian
and Poppy. Whether it's watching "Quest Means Business" in virtual reality.
Imagine when the viewer's going to be able to walk around you as you walk around that big set in New York, Richard. That's not there yet.
The other thing that I really see for it will be sports. If you can see the tennis ball zooming by your eyes if you have virtual reality goggles
on. For now though it's just gaming. It's interesting - we saw some of the top gaming people in the world at the Oculus booth behind us here this year. They've acquired a lot of
talent so that it's clear it is all about the gaming for now. And once they have those great games -
QUEST: Right.
BURKE: That's when I think people will start shelling out that huge price for the Oculus Rift and others like it.
QUEST: Finally, Samuel, am I alone in when I wear the Oculus thingamajig, I feel nauseous as all this movement goes on.
BURKE: In fact, you're not alone. The CEO told me he gets nauseas, and he says he wears that with kind of a badge of pride because he said he
makes the perfect test consumer as well as his mom. It's improved a lot from last year, I felt the difference. But he says
that's one of their biggest hurdles so he's always testing to see if needs a bag much like you might need it in an airplane.
But they've made big improvements on that.
QUEST: Well on that cheerful note, -- and that's an aside - a thought to keep us happy with - Samuel Burke who is at the CES for us this
evening. Samuel, thank you. As "Quest Means Business" continues -- and what a wide variety - what a diet we have brought to you this evening. After the break, the airlines
- the Philippine Airlines chief executive and president is going to be talking about the competition from the Gulf carriers.
Of all the airlines that perhaps stand to lose, well something like Philippines (ph) Airlines could be in trouble. He says not - in a
moment.
(COMMERCIAL BREAK)
QUEST: Emirates Airlines says it will launch new daily flights to cities in the Philippines beginning at the end of March.
The airline has cited strong demand from the Filipino expats who are living and working in Dubai. It's a move that will no doubt have an
impact on Filipino airlines. Before the announcement on a recent trip to the country, I asked the president and COO what his carrier's niche is and how he competes with
the Gulf 3.
(BEGIN VIDEOCLIP)
JAIME BAUTISTA, PRESIDENT AND CHIEF OPERATING OFFICER, PHILIPPINE AIRLINES: You know, the Filipinos are loyal customers of Philippine
Airlines. Ninety percent of our passengers are Filipinos, and we will count on them to be our major customers.
There are almost 3.5 million Filipinos in the U.S., almost 3 million in Europe and the Middle East and this will be the source of market that
Filipino Airlines will up (ph) and will continue to be the provider of seats to this market.
QUEST: How do you survive when on the one hand you have the low cost carriers of Asia - Tony Fernandez and the like - and on the other hand
you've got the Gulf 3 - Etihad, Emirates and Qatar. You're classically in that position of legacy carrier caught in the middle.
BAUTISTA: We have a good share of the Filipino market. For the Middle East we can say that we are the number one carrier of
what you call the third and fourth freedom profit to Dubai and Abu Dhabi.
Admittedly, the Middle Eastern carriers are mounting more flights from Manila to the Middle East, but they carry more passengers beyond the
Middle East. But if you thought of what you call the third and fourth freedom traffic, we are the number one carrier of these passengers.
(END VIDEOCLIP)
QUEST: That's the head of Philippine Airlines talking to me on my recent visit to Manila.
And incidentally, Manila is going to be the next "CNN Business Traveller." You'll enjoy that as well.
As "Quest Means Business" continues tonight, it's Jargon January. The New Year means new buzzwords in the board room after you have had a
moment because it's a New Year, you need to Make, Create, -- oh and don't forget Innovate.
(COMMERCIAL BREAK)
QUEST: Right now I want to amplify the CNN ecosystem with a whole new batch of business buzzwords for 2016. You're getting the idea.
You may be hearing plenty of business jargon this week. It's the New Year and it's got new buzzwords.
[16:50:06] So here's a sample from the language consultancy The Writer which spots and predicts trends in office-speak.
Let's start with "amplify." Now it's a hot one and it's used instead of "improved" or "increased." The Writer says it's a favorite amongst cool
kids, including the governor of the Bank of England Mark Carney who amplifies himself.
In fact, the governor of the bank helped amplify the world's profile during a speech on the financial stability when he said, and I quote, "-
- foreign capital can flood in and amplify domestic trends." I think he was using it in economic terms, not buzzwords. Then there is
"ecosystem." What a wonderful word "ecosystem." It's an "ecosystem." It first gained popularity in the world of tech.
It is now used to describe how different systems work together as Oracle showed us in this quote from October. "Oracle today announced that it
continues to rapidly expand its partner ecosystem for software." And if you want to climb the corporate ladder, you'll need to know
"ladder up". The Environmental Defense Fund used it at last month's Climate Summit in Paris saying, "With this announcement, Secretary Kerry
builds support for a strong agreement that's designed to ladder up ambition over time."
Neil Taylor is the creative partner at The Writer that is trying to rescue corporate boardrooms from the tyranny of linguistic mediocrity.
The sort of man who you wouldn't see splitting an infinitive in the third paragraph. Sir, you join me from London. Which is your least
favorite of all of them this year?
NEIL TAYLOR, CREATIVE PARTNER, THE WRITER: Oh, I think "ladder up" is probably my least favorite one this year just because I think it really
just means connect. But it's the one that is really spreading like wildfire with -
QUEST: Give me an example.
TAYLOR: -- people saying - yes, I think that's -
QUEST: Give me an example of how you might use it to me.
TAYLOR: Well basically people say, well you know, this is how this small thing we're doing ladders up to our overall strategy.
And I guess, you know, it gives you a nice visual image but it's the one that is really catching on and we will be completely tuning out in a
year's time I think.
QUEST: So tuning out of course was jargon at one particular point. Then you had "amplify," then you have "ecosystem." Isn't it amazing
nobody has an idea anymore, it's always an "ecosystem." 'We need to link it all together.' It's absolutely infuriating, would you agree?
TAYLOR: Well I guess to start with I'm not sure it is infuriating. I think the instinct to start with is quite good. It's to paint pictures
in the minds of your audience and get them interested and get them to remember something.
Where it goes wrong is when other people hear that and go, 'oh, that sounds quite cool, I'm going to use it too' and then pretty soon it
turns into corporate white noise that you're probably hearing a million times a week on your show and we just stop listening to the meaning of
it.
QUEST: Ah, but how does it get it - that - because you've studied this. How does it come? Does it sort of - good Lord - how does it "amplify"
itself? No, I'm not going to apologize for that - that is the true definition of
the word "amplify." How does it "amplify" itself so that it goes from corporate-speak to
business jargon to de reiger (ph) for everyone?
TAYLOR: Well I guess some of these words are useful because they fulfill a gap, right? So last year we talked about words like "brand
jacking" and "news jacking" which is kind of a copy of hijacking, and actually we didn't really have a word for those things. Whereas the
ones like "amplify" and "ladder up" this year, we do have normal words for those things.
But what I think is happening is that people in kind of ordinary industries are trying to take on the language of particularly Silicon
Valley and social media because that's the stuff at the moment that feels innovative and feels like it's got cachet.
So if you want to add that bit of spice to your - they all talk about "supply chain logistics" or something, you can borrow some of that cool.
QUEST: All right. And finally, my least favorite which my colleagues here insist again and again is to say "reach out." 'Will you "reach
out?"' when really all they mean is 'will you get in touch with them?' Infuriating.
TAYLOR: Yes, well that's because -
QUEST: Go on.
TAYLOR: Well that's because you're saying it in New York, Richard. It's a very American one, that one.
QUEST: Good to see you, sir. Thank you very much in London. Now, @richardquest you may have your own least favorite or your favorite buzzword that you absolutely want to tell me about. @richardquest is
where you can tell that. [16:55:03] Unfortunately for the market, it was a case of "ladder down"
rather than "ladder up" - a triple digit loss - the second this week. We will have more with a "Profitable Moment" after the break.
(COMMERCIAL BREAK)
QUEST: Tonight's "Profitable Moment." On this evening's program we gave you a really good taste of just how difficult the entire multimedia
world is at the moment. From Yahoo's problems that Marissa Mayer simply can't solve to the point where her investors are threatening outright revolution to AOL saying
it's going to take on Netflix. AOL, remember, used to own this place - CNN and Time Warner - parent company of this network and then Netflix now in 130 countries while
Samuel Burke tells us about Oculus whatever it's called. And we've got jargon all over the place.
It shows us that we are not in an evolution at the moment, we're in a revolution. And so far it is moving so fast that most of us have got no
idea what it means. Which is why there will be those companies like Yahoo that may disappear without trace. But everybody said AOL was going to disappear and never
been seen again, and that came back from the dead. As for Netflix, Brian Stelter made the very good point - it does one thing and it does one thing well which is something we can think about
on "Quest Means Business" with our nightly conversation. I'm Richard Quest in New York. Whatever you're up to in the hours ahead, (RINGS BELL) I hope it's profitable. I'll see you tomorrow.
END
