Congresswoman Maxine Waters called for the social network to stop development immediately. Says narrow link has successfully in place wires into its brain and enabled a control a computer. First, netflix tumbling after the streaming giant reported a loss of u. S. Customers for the second quarter. Netflix that it lost 130,000 customers in the United States as a result of higher prices and a weaker slate of shows. It is signed up 2. 7 million subscribers globally, also missing projections. Joining us now to discuss the underwhelming results, michael luca, who ofs course covers the company. Michael, this is the first time the company has lost subscribers since they split the dvd and streaming business. What is the type line here . Michael you know, i hate for poor luca, because he actually tweeted that he is tired of talking about this, but i think poor growth probably leads to subscriber loss domestically, and i think they are probably bumping up against a ceiling of what they can charging continue to grow. I personally believe they will keep 80 of their domestic subscribers, as high as a 20 t 10hly charge, ut their las million subscribers are probably middle income house holds, and they notice when prices go up a couple of bucks, which they did in january, and i think you will see continued migrations as composition starts competition starts to materialize. More content leaving at the end of this year and the end of next year. I think middle income households are probably going to have to think about whether they subscribe to one or two or three plans. The cord and cut maybe afford all of them, but the fact is that netflix did see a decline in domestic subs. That is what Fuels International expansion. They are about to lower prices in india, so i do not see how pricere worth the 4. 50 target most of my competitors have on the stock. Tweet aboutid talk netflix and how you would be duking it out with michael pachter, so bring it. Luca the biggest question for analysts is is this a blip, or is this a longterm problem . Forecastshey missed by quite a bit, but not as much as they did today, and they warned everybody at the end of the First Quarter that this would be a light one. Is this again a onetime phenomenon in which you have this corrected today, or is it something where we cannot trust their forecast for q3, because netflixs response is going to say we are still in pays for the biggest year yet, but as we see in this quarter, their forecast cannot always be trusted. They miss on these a lot, so if they miss again next quarter, which will come around the same time that disney is introducing disney plus, that becomes a real problem for investors, especially if growth is slowing not only in the u. S. But also overseas, which has been the engine over the last few years. Emily lets say they will add 7 million subscribers, a huge jump from 2. 6 million. We know that Stranger Things is back, they have highlighted dead to me, they have highlighted murder mysteries. Hit likedependent on a a Stranger Things, and does that make it challenging, because subscribers really . Epend on a huge hit luca you know, it must. Sorry, you go ahead. Is right. Think lucas i think they need a hit. I think they will see an increase in cells. The numbers on Stranger Things are really impressive. It is a really good show. They have a handful of really great conflict, content. I think they will hit their 7 million subs. We saw a preview of next year with this quarter, synnex. Mode you will have a couple of quarters where they start with this quarter, netflix will have a couple of quarters where they start losing subs. Lucas i know they did not have a Stranger Things or orange is the new black, but i was looking at the reports, it is seems like they had something new coming on every day, a standup special, and m a series, series, a movie. If it is only a handful of shows that swing it, that is a little concerning, just in terms of the volume and how much they are spending. That being said, they have a pretty good track record of coming up with a new big hit every few quarters, it is a keep that going, they will be fine, at they stildo do seem to have volume issue. Emily that is a good point. We talked about the hit shows. We have not talked about the shows that are truly not great. I have seen some of those. Michael, how good of the Business Model is the to be throwing everything at the w model of very hbo few, more highquality content, is that better . T, netflixy my coun produces about 10 times as many shows as hbo, and they get about the same number of any nominations, so throwing stuff at the wall, throwing 10x at the wall, they will have their hits. I actually think subscriber growth will be based on one of two things, watercooler shows like breaking bad, ozark, and Stranger Things, or good enough content was his high quantity of ok content, and that is the real acid test. Do they have enough stuff that is good enough to keep us coming back . I think all the metrics they are iting us on the crap shows, tells you people are willing to watch whatever they are throwing at them, so you get 40 Million People watching adam sandler, which shocks me, but it can happen. [laughter] emily i thought it was pretty good. Lets talk about international, because that is where the vast majority of new subscribers are going to come from. 6. 2 million of which will be outside of the United States. They talk a lot about india, introducing a cheaper, mobileonly plant in india. They said they can get another 100 million subscribers in india. Where is the growth going to come from, if not the United States . Lucas i think in the shortterm, you are still looking mostly at europe and latin america. Brazil, united kingdom, france, germany, these are the biggest markets according to analyst reports. Netflix of course is not break any of this out, which would be useful, both for analysts like michael and reporters like me. They are looking at asia. They have invested a lot of money and programming, and india in particular. This mobile programming is important, because they have been testing lowerpriced plans in asia for a couple of months. This is the first time they have committed to rolling one out, which suggests either they think it is going to grow, or it is doing it time they are at the region, because they are raising prices almost everywhere else. Emily michael, lets talk about the other parts of the story. You have disney, apple, warner media, all of these other companies trying to take netflix on. Disney is offering cheaper and has a huge library of original disney classics that, you know, people keep coming back to come over 50 years how big a threat is the competition . Michael you know, i think barry diller said it well couple of weeks ago. Netflix has won. They are not going to go out of business. They are not going to lose a material number of subscribers. The question is can they grow into their valuation . And i dont think so. International is true. If they had 100,000 subscribers in each of the 200 countries they do business, that is 20 million a year. They can do that for another 10 years. Can they continue to grow domestically . No. Can they turn cash flow positive . No. Not with the current model. Prices, and igher honestly think if these guys and of being a nogrowth company, they will trade at my 183 price target. I do not think anyone is taking subs away from netflix. I just think they will compete for wallet share, and new subs are going to choose the new programs if they have smoke is a not very much money. They will choose netflix that they had a lot of money, and they will choose is the amount that they have even more money. I think it is divided conquer. I think netflix wins overall the subscriber war, but i do not think they win the cash flow war. Emily all right. Shares trading at 362 of these, 13 . Hey are down Michael Packer of wedbush, lucas shaw, thank you. Hours orsing after revenue dropped for the fourth consecutive quarter, cloud revenue was up more than 3 . Remember, iv and is billiondollar acquisition of it hat last week and hopes will compete with cloud leaders like amazon and microsoft. ,oming up, all eyes on facebook and david marcus once again as he faces regulators once again on capitol hill. And if you like bloomberg news, check us out on the radio, check us out on the app, on bloomberg. Com, and listen to us on sirius xm. This is bloomberg. Oomberg. I dont think you should launch libre at all, because the creation of a new currency is a core government function and should be left to democraticallyaccountable institutions that are accountable to the american people. Emily that is new york congresswoman carol maloney, continuing a second day of facebook lashings on capitol hill, only today was the houses turn to take on the news of the libra. Therency bizarre moment is when congressmencongressman brad sherman of california decided not to have a single weston and instead claimed that question and instead claimed that libra could be more dangerous than on 11. Rep. Sherman the most innovative thing that happened this century was when Osama Bin Laden came up with the innovative idea of flying to airplanes in the towers. That is the most consequential innovation, although this may do more to endanger america of an event that. Emily sherman also kept referring to libra as zucks bucks. David, i have to get your response to his comments. Was laughing irreversible, i do think you could say that 9 11 was the greatest innovation ever in the last century, ever, it is ridiculous. Pose a libra could threat comparable to 9 11 makes no sense. The problem is that facebook is in a position right now where it has done so many things wrong, but when it is not proposing something that come in my opinion, is not particularly right or wrong, it is just an interesting that they are going to try and may or may not work, but because it involves money and people are worried about control of that, and there are a lot of businesses that are deeply engaged and sort of concerned, they are getting tremendous pushback. It isnt it fair, but it does not sound, from , like it is rational. Even well, to be fair, the chair of the fed has raised concerns about money laundering, illicit activities, the use that this currency could hide illicit activities. Kurt, you were at hearings today and yesterday. Talk about the difference between what house leaders and Senate Leaders had to ask. Mean, despite that one example that was pretty eyeopening, i actually thought the questions they were a lot more thoughtful than yesterday. I feel like yesterday in the senate, it was really just two hours of an excuse for people to shme in and the ba facebook for a lot of past misdeeds. There were a lot more members of the house who generally wanted to know what libra was all about. There were questions about facebook and whether it would be offering banking services, a lot of questions about the libre groupation, which is the that will oversee the new cryptocurrency, and i do feel like there was more genuine interest from this group of politicians to going to figure out what is this thing and only what is it, but if it possible that this could be launched and actually work . Emily david, health fairs you think all the skepticism is against the backdrop that facebook is dealing with a lot of issues and has been for the last two plus years, and its record on trust is not great . David i think it is totally legitimate and expected that there should be a lot of skepticism, and i do not think the questions being asked are inappropriate all, but all the congressman asking will you commit to putting this project on hold, letting us do it for you, only to a small test . Many requests of that type, i think they are a little premature. Look, they made a decision to announce this really early in its development. I think many of the questions really literally cannot be answered yet, because we do not even really know if the libra association, which they have proposed to govern it, is really going to hang together and do anything meaningful. If it does, i think that will be a Promising Development terms of suggesting that this could be a manageable operation. It is legitimate that people should ask questions. Facebook has invited skepticism because of their repeated malfeasance in many areas over the last few years, so i am not surprised. I am a little surprised that they announced it now, to be honest. Emily right. Did they make a major miscalculation and availing this now when they are not even going to launch it in a year, if they plan to still do that . Way, and asems that i understand it, there was substantial disagreement in the company about whether now is the time to do it. Mark zuckerberg and david marcus, i am sure, both wanted to do it, and they prevailed. Mark zuckerberg is always going to prevail at facebook. But it may be that the naysayers were right. Emily meantime, kurt, alexandria ocasiocortez, aoc, as she knows, called facebook a surveillance company, and while the hearing in which facebook was present yesterday had perhaps less fireworks, the broader implications for facebook are huge, a potential breakup call, calling attention to the idea that facebook could be a monopoly. Paint the Bigger Picture for us here about everything that facebook is up against. Kurt well, it is pretty simple, right . We were already had a conversation about whether facebook had too much power, and now they say not only do they want to enter a new market, but they want to enter one essence of it as finance, as sensitive as having access to peoples money. There is a lot of concern that or do we let a company that we already think might be too morend too powerful has say over how people kind of do their personal life and how they spend their money . So aoc did mention that. She kind of slipped it in there, actually, it was a subtle thing, but it did not go unnoticed. I think your idea is one that is shared by many not only here in washington but other places around the country and the world that just think facebook is too big, and letting them do a cryptocurrency is a step too far. Emily certainly a provocative description, david your when you think of facebook, google, apple, all the companies that were questions for the hearings, which do you believe presents the most compelling case for a breakup or presents the most problematic situation in general . Visit facebook, or is it one of the other . David i do believe facebook presents the most problematic challenges. I am not a particular advocate of breakups myself, although i absolutely believe it is fair and inevitable and right that some form of restraint, governmental oversight, needs to be created. Unfortunately, it would be better if it were global, but we do not have global mechanisms that are capable of doing that, so it has of late we will see it in nations like our own, singapore, india, and elsewhere, the eu, of course. I think facebook has invited this by really failing to govern what became a rampantly growing system with all kinds of misbehavior that they, for some reason, when not able to anticipate and did not build any mechanisms to manage, and now they are paying the price. I think there are huge, legitimate questions about google and amazon also. Companies these have a global scale and reach that is unprecedented. Emily we will have more on this this hour. Omys david kirkpatrick, bloomberg technologys or wagner, thank you both. Kurt wagner, thank you both. Does consistency make the happiest city on earth . This is bloomberg. Bloomberg. Emily cities around the world are trying to transform themselves into socalled smart cities, and dubai is promising it will be the happiest one on earth. It is making the city become a more efficient city through the use of tech, ai, and blockchain. The tech will create free time for residents and visitors, the city claims. We sit down with the smart dubai director to talk about progress. I believe a city where the residents and visitors of a vast city are happier citizens. Today when we talk about technology, for us, it is the secret to happiness. If this technology will not by me time, will not give me a peace in my mind, for sure it is not the right technology for us. So i am going to win back time, essentially . Dr. Bin bishr absolutely. Almost 40 hours will be saved when we finish this project. So we like to deal with efficiency in numbers. Now anda sense between 2021 about what you are saying, because part of technology is about efficiency. How much . 10 billion. R but from the previous share of services that smart dubai needs to present for the government entities, for every one, we take five. I am trusting you with my data. What is the biggest risk for to buy with this data . We have seen lots of major scandals with regard to hacking. What are you doing to prepare for the risks . Dr. Bin bishr when it comes to hacking, for us in dubai, we measure we have all the criterias, policies, standards, the tools that would allow us to stop this kind of hacking, but the biggest for us is that individuals and corporate do not understand the value of the data, whether it be sharing or data, tothis stop our economy from growing and benefiting from this new talk of economy. Emily smart dubais general binctor their doctore, dr. Aisa bishr. Coming up, tesla has changed prices again. How it is renewing concerns over model 3 demand, next. And one step closer to connecting your brain to computers. First, they will have to move beyond mice. We will talk about the start ofs plan to achieve symbiosis with ai. This is bloomberg. This is bloomberg. Hey im bill slowsky jr. , i live on my own now ive got xfinity, because i like to live life in the fast lane. Unlike my parents. You rambling about xfinity again . Youre so cute when you get excited. Anyways. Ive got their app right here, i can troubleshoot. I can schedule a time for them to call me back, its great you have our number programmed in . Ya i dont even know your phone anymore. Excuse me . what . I dont know your phone number. Aw well. He doesnt know our phone number you have our fax number, obviously. Todays xfinity service. Simple. Easy. Awesome. Ill pass. Emily this is bloomberg technology. Tesla on the defense following more frustration the company is cutting prices on the model three. The latest issues captured in a story from bloomberg. You would think most would be happy about a price cut, but you profiled a guy who literally bought his model three literally beforefore, maybe a day the price was cut thousands of dollars. Tell us what happened. He bought a model three fully loaded, the performance edition, 68,000 at the very end of last month because his dealer told him the tax credit was going down in july. Then comes this month and elon cuts the pri