Bad. Videogame companies are trying to one up each other at the e3 Gaming Convention in california. We will hear from a Top Executive from microsoft and taketwo ceo. First, to the top story. President trump says he will not finalize a trade deal with china unless beijing returns to terms negotiated earlier in the year. Trump spoke to reporters as he left the white house for iowa, a day after he threatened to raise tariffs on china if chinese president xi jinping does not meet with President Trump at the g20 summit. Pres. Trump china is a major competitor and right now, china wants to make a deal very badly. It is me right now who is holding up the deal. Vonnie apple is geared up with a backup plan if the trade war gets out of hand. Its manufacturing partner says it is able to make all iphones bound for the u. S. Outside of china if necessary. Right now, the Company Makes all most of apples smartphones at chinese factories. How did the company decide it was able to do this, to make all of apples products outside of china so quickly . This was an executive who was talking to investors and other people in taiwan and our reporter was there to listen. This is more of a plan. The executive didnt say that apple has asked foxconn to do it yet but he was saying basically that they are very capable of doing it. It raises questions. We spoke to an analyst over here who looks at the smartphone industry. He was saying that if you are talking about actual final assembly, which is what a lot of what foxconn does, that might be relatively easy to move. If you are talking about the whole manufacturing process, that would be a lot harder. Vonnie we know that politically china and taiwan are at odds. The company is in taiwan. Is there any danger that china would retaliate against the company if apple would move all of its production to the Taiwanese Company . Alistair that is a good question. Apple has to be careful in general with this kind of thing. Some of the activities going on with huawei in the u. S. , where the u. S. Government is Encouraging Companies and consumers to steer clear of huawei. That has really raised concerns about what happens to the treatment of apple in china. There have been a lot of concerns that there has been an unofficial recommendation that chinese consumers not buy iphones. That market is really important for apple. It is a big risk. Vonnie hon hai, of course also known as foxconn, had a plan for a wisconsin plant. That would have employed 13,000 people. Do those plans change . Alistair the executive who was speaking yesterday seemed kind of bullish about wisconsin plant and he kind of placed it in the same strategic realm has moving the iphone assembly out of china. India is something to consider, too. Foxconn has plants in india already and was dealing with similar types of restrictions from the indian government. It certainly does have a lot of options around the world. Vonnie alistair barr, thank you. Alistair barr of Bloomberg Technology. When it comes to taking an antitrust lens to pick tech, it is not just a federal game. Today, nine states and the district of columbia filed suit to block the merger. It is between sprint and tmobile. Heres new York Attorney general Letitia James announcing the action. A Fabulous Group of attorneys, unsealed a multistate lawsuit in the United StatesDistrict Court of the Southern District of new york to halt the proposed merger of Telecom Giants tmobile and sprint. When it comes to corporate power, bigger isnt always better. Vonnie joining us, bloombergs senior antitrust analyst jennifer rie. The teacher james presenting the argument for the state attorneys general. Will this action have any impact on the doj . They have yet to make a decision. Jennifer it is possible. It may have been filed when it was filed to put pressure on the doj to join or file their own suit. It is possible. It could also be that this was filed because the state attorneys general seem to think that the doj was ready to clear it because they want to take charge. Vonnie do we know what the state attorneys general will accept . Have they presented any plans that are acceptable to them . Jennifer we dont know yet. Clearly what has been offered to the fcc, which we know about from the company, and some of these additional remedies it looks like the doj is seeking maybe some satellite sales, they provided promises about lower prices, about building out 5g into rural areas. We know what is on the table for that. Clearly because the suit was filed, the states dont see that as proper. They dont see that as something that could fix the heart of this deal. It could be there are additional concessions that could get them to settle. But thats unclear. The one thing that is clear is they have a little more flexibility than the department of justice in terms of what they might accept in a settlement. Vonnie if the department of justice comes out with a decision, do the state attorneys general then back off . Will they be happy with an agreement on the part of the ftc and the doj . Would that be enough . Jennifer it wouldnt because they filed this with doj looming. Any day now, the doj could come out and say we have agreed to the deal and heres this settlement and the Consent Order and we are ready to clear it. The state lawsuit will stay. They know they can that can happen. In this situation, they are ready to go it alone if they have to. It is interesting that you should bring that up because if there is this bolstered remedy, one of the things the states are going to have to do in the lawsuit is proved to the judge not only that there harm from this merger but that that harm cant be fixed by these two remedies, the fcc and doj remedy, that federal regulators have been ready to accept. That is an additional hurdle. Vonnie sprint and tmobile have promised that Consumer Prices wont go up. Is that not enough, if that was written in the constitution of the combined company would that be enough to satisfy the states attorneys general . They are after all only worried about the consumer. Jennifer i think it wouldnt because that promise would only last so long. It will not be ad nauseam. Seven years or three years or 10 years. What happens after that when you only have three competitors rather than four, and the two that where the big price cutters cutters and competitive against each other have combined . That would be one thing. The second thing is its not just about lower price. They have also alleged there could be lower quality for certain consumers, particularly prepaid subscribers. When you have three Companies Instead of four, even with the prices, it doesnt create incentives to put money into r d or make sure quality is maintained. Vonnie thank you. Coming up, we head to los angeles for coverage of the e3 Gaming Convention. Our conversation with taketwo interactive Ceo Strauss Zelnick is next. If you like bloomberg news, check us out on the radio. You can listen on the bloomberg app, bloomberg. Com, and in the u. S. On sirius xm. This is bloomberg. Vonnie the esports market is booming with highly skilled players, arenasized audiences, and a revenue projected to reach 1. 8 billion by 2022. Bloombergs Shelley Hagan takes a look. Shelley it is a far leap from the penny arcade. Esports takes the gaming world with highly technical players, arenasized audiences, and big sales. The global esports market raked in 865 million in revenue over 2018. With nearly 26 Million Viewers in the u. S. The audience is larger in asia, boasting 50 of the worlds viewers, compared to 12 in north america. With the e3 conference underway this week in california, all eyes are on the booming business. Two californiabased gaming companies, Activision Blizzard and electronic arts, have a combined market cap of more than 60 billion. Private investment is growing as well. Venture Capital Investment in the u. S. Reached one point 8 billion in 2018, with a more than 5000 increase in a 10 year period. Cloud nine esports, a north american team, raised 58 million last year. Teams compete in games like fortnite and league of legends. Have totaleded to 100 million players. The winners take home more than the high score. The largest prize pool was more million at the international 2018 in vancouver. With the Global Market projected to reach 1. 8 billion by 2022, it is far from game over. Shelley hagan, bloomberg news, new york. Tonie now lets head over the videogame industrys largest annual gathering, e3, which kicks off today in los angeles. Developers, including microsoft Activision Blizzard, electronic and taketwo interactive, just a few industry players participating in the events to highlight upcoming releases. This years conference is different than years past. Instead of focusing on hardware and new titles, a lot of it has to do with streaming and how these games are played. Taketwo interactive Ceo Strauss Zelnick joins us now. What can we look forward to in terms of new releases from taketwo interactive . Here at 83, we are showing borderland three, the third in the iteration. It comes out september 13. We are super excited about it. We have 100 different stations where you complete the game here. Beple seem really happy to playing the game. Vonnie in terms of the pipeline, what do we expect from taketwo beyond that . A lot of people are talking about red dead online. May. Ited beta in should we anticipate more . Strauss you should be expecting more content online. There will be plenty coming. Coming fort also grand theft auto online, which continues to be a big title v and a half years after its original release. Of course, we have nba 2k coming and wwe 2k. Should be a very exciting year for us. Vonnie are you interested in bidding for any other sports licenses . You mentioned nba, you also have wwe. What else are you interested in . Strauss the sports business is pretty well spoken for. The nfl property is under exclusive license. One of our biggest competitors controls the fifa title. We have brought out other sports. We have golf, for example. We have boxing, hockey. Right now, our focus is on golf and of course basketball. Vonnie we are seeing more and more subscription models. What is your plan for subscription and streaming . Are you launching your own platform or anything like that . Strauss we want always to distinguish between a technology , streaming, and a business model, subscription. We are interested in both but they are different animals. You can have a subscription business without streaming and streaming without subscription. We are excited about the upcoming launch of googles technology. We are excited about many potential developments in the market. We are supporting google, microsoft x cloud, and i expect we will support others as well. Subscription vehicles, many are being developed, some already. We are openminded. In terms of a direct to consumer presence, we have our own small direct to consumer presence and we are obviously looking at that market as well. Generally speaking, when people look to acquire entertainment properties, they want to go where they can get a multiplicity of properties, not just an offering from one company. Vonnie interesting. You have had a partnership with tencent for china since 2012. How concerned are you about the current standoff between the u. S. And china for growth of taketwo interactive there . Strauss we are very optimistic about china. Our relationship with tencent is great. The nba 2k online title, which is a joint venture between ourselves and tencent, is the number one pc sports title in china with 45 million registered users. The Consumer Spending on that title is actually up about 74 yearoveryear. We also distribute in china in a myriad of other ways. Our nba 2k title was just approved ps4 in china. We think there is a great Market Opportunity in china and we are hopeful the trade talks will be resolved amicably, positively, and in a way that is beneficial for the overall entertainment systems. Vonnie i have to ask you, your interim chairman of the board, reportedly there is a meeting friday to discuss a viacom merger. What would you make of that . What can you tell us about this . Strauss out here, im talking about the videogame business, so not much. My primary focus right now is the excitement around taketwo and the upcoming release. Vonnie if there were a board meeting, presumably you would have all of your e3 meetings done by friday. Strauss [laughter] as i said, im pretty focused right now in the videogame business. Vonnie all right, we will look forward to hearing from you friday or post friday. Thank you very much and the best of luck at e3. That is taketwo interactive Ceo Strauss Zelnick. Coming up, more e3 coverage out of los angeles. How microsoft is gearing up to take on googles nearest streaming platform. Bloomberg technology is livestreaming on twitter. Check us out technology. This is bloomberg. Vonnie back to our coverage of e3 in l. A. More than 70,000 fans are expected at the videogame industrys biggest event. This year, the biggest shift focused on game consoles to streaming platforms. Google has upped the ante, announcing a 10 Monthly Price tag last week. Microsoft is not far behind. Ed ludlow caught up with the head of xbox game studios. He revealed a bit more about the service. For us, everything starts with great games. The way i approach it, if you start out to design a game with a certain strategy, you can paint yourself into a corner. If you set out to make a great game, you can support whatever you want to do later. We have designed some games that turned out to be fantastic. Nobody in our studio sat down and said i want to make a good game path. With streaming, we want to make great games. I think it unlocks some Amazing Things in terms of how we will approach multiplayer and how we approach the types of gameplay. You will be playing on the go or may be doing things that you will be related to a game. Do you see most users playing on the xbox . How is that balance going to work . We see them playing across all those devices. Pc, console, mobile. We have a great selection. 60 games, 14 from our first party studios. It is about putting the player at the center of what we do and providing choice. We announced game pass. It is all about choice, whether you want to be a console gamer or pc gamer. For us, project x cloud and streaming is about expanding the choice to give people more places to play. Google has priced there is at 10 a month. Surprising,found it making it accessible to a lot of people. Expect the cloud to be competitive pricingwise . We havent shared pricing yet. We will talk more about that in the fall. So you do think it will be competitive . Google today coming out with 15. I do think you can expect that. One of the areas people have been talking about is the involvement of celebrities and games. A big unveiled keanu reeves sunday. Comes out on sunday, revealed as a big character. What did you make of that . It was a big secret to a lot of us, too. To be honest, i think he was pleasantly surprised when he saw the enthusiasm from our fans and how excited people get when someone like him shows up. It is an authentic character. I think people saw that it was authentic and genuine. I have not seen as much consoles as in previous years. What do you make about that . It is about choice, putting players at the center. We know people will still want to play games in their living room. It is the social hub of our families, our homes. The best place to play games is still at the center of your living room on the tv. That is why we made it such a focus. Reporter china is a big videogames market. How do you view china . We have had success in china, particularly around minecraft. We have other games with tencent. The key is finding multiple partners in markets that really understand the chinese player, understand how to the negative eight regulations. Our approach has been to partner with other folks and bring our team authentically to the chinese market. Reporter one of the concerns is about game approvals. How do you see that playing out . Again, thats why i think it is so important to have partners that understand the nuance. It is hard to keep track of from seattle. We are very grateful for the Productive Partnership we have with people like tencent. Reporter given that china is the biggest market with the revenue and players, are you concerned that the trade war, that may limit the u. S. Developers access to that market . I will just say that again, we have strong partnerships with people local in china like tencent, and we will look to them to help navigate that. Vonnie that was matt booty from microsoft at e3 in los angeles. Ecigarette start of juul reported firstquarter sales of 528 million, a 23 increase from the previous period. In november, they opted to stop selling certain flavors of the nicotine pods in stores to mitigate the breakaway popularity with underage that. Led to a drop in sales underage users. That led to a drop in sales at the end of coming up, dropbox is 2018. Coming after microsoft and google. How the Productivity Software company is evolving from a file storage system to collaborative workspace. That is next. This is bloomberg. Vonnie this is Bloomberg Technology. Im vonnie quinn in new york. Dropbox unveiled new integrated workspace tuesday. The biggest overhaul of its software to date. The company has a new desktop workspace with updates that are to its website and mobile app, that allows customers to combine different files and collaborate across teams. Romaine bostick and Caroline Hyde spoke with the dropbox ceo drew houston about the new changes. Drew we are really excited about it. It has been a big morning. We launched the biggest change we ever made to our product and all new desktop app. It evolves the