Shows like Stranger Things. Elon musk claims his new technology can redirect mind, announcing his latest startup has successfully implanting wires into brains and enabling a monkey to control the computer. The next goal, human trials. We begin with the hearings on capitol hill. Facebook, amazon, apple, google all appearing in washington to answer lawmaker questions on antitrust, social media, and cryptocurrency. The first to be raked over the coals, facebook, as the Senate BankingCommittee Fired searing questions at the cocreator of the social networks cryptocurrency project. We will take the time to get this right. Wouldnt it be easier and safer if people could securely receive money transfers through their smartphones, just like they do for so many other things . Thats what libra was about. Emily virginia democratic senator mark warner grilled the libra chief on tuesday. We caught up with him after the hearing. I think Blockchain Technology, even the possibly of cryptocurrencies, has some positive upside, but i think we have to be careful, particularly when we are talking about the possibility that facebook might dominate this otherwise very disruptive technology. Facebook already has 2 billion users. It has all of these advantages. We have seen facebook over the last decade plus do what i call catch and kill, where any new entrant into the marketplace, facebook would either copy or go out and directly acquire, and here you have this Blockchain Technology that might be able to come in and disrupt, and, again, it appears facebook is using the same strategic effort to say, lets bring some other players in, create this libra network, and then use their market power to create the wallet, where a lot of the transactions would take place. They call it calibra, and my fear would be it would give their wallet solution a great deal of undue advantages and, frankly, mr. Marcus today, i know he wanted to clarify, but it seems like some of these questions should have been yes and no, and i came away with still a lot of questions that need to be answered. Emily right. So you were not satisfied with david marcuss answers, it seems. What would your message be now to Mark Zuckerberg, the ceo of facebook . My message would be blockchain offers an awful lot of possibilities, but you have a burden of proof, facebook, to make sure, one, that we get it right in creating this new network, two, that it is safe. I thought mr. Marcuss comment that for every crypto dollar there would be a real dollar or another currency on a 1 1 backing it up, thats basically absurd when there is no such requirements within our banking system. It seemed to me, as well, where you have had facebook not be a good steward of so much personal data already, the idea that they would create this new network and not build in implicit and explicit preferences for their own product, really strange credibility. I was glad to hear mr. Marcus say that when a third party while came around and people to use thet facebook product and want to use a third party, they would be willing to transfer the keys, transfer the data, do the technical transfers to that third party, that was a good sign. My hope would be, as somebody who has legislation i am about to drop, Bipartisan Legislation that would talk about data portability and interoperability within their existing networks, my hope would be that facebook would bring that same kind of supporting approach to the legislation that i would bring forward for their existing tools. Emily so, look. There were a lot of issues that came up, adjacent issues that facebook has been dealing with, misinformation, election hacking, fake news. Would you like to see Mark Zuckerberg testify before congress on libra, specifically, and again on some of these other issues . Here are the circumstances with facebook. And my office works with facebook on a regular basis, and we are trying to get them, and we have made some progress. They have made progress, for example, on some of the Disclosure Requirements around facebookbased political ads the same way we have disclosure around tv and radio ads, but there are technical issues, and my background is in telecommunications, longer than i have been in politics, so i hopefully bring some expertise here, where we can bring more transparency to this marketplace, whether it is about data valuation, whether it is about data portability and interoperability. They have yet to be willing to lean in and acknowledge what they would be willing to support. Mr. Zuckerberg has said he realizes there need to be some rules of the road for facebook in its current applications. What we have not seen yet is that level of specificity of which rules of the road they actually accept. So before we open up this whole new area that could have transformative efforts on the way we transact business in terms of blockchain and cryptocurrency, facebook has got some proving that they are willing to accept certain rules of the road or regulation around their existing products before we go into this whole new realm. Emily meantime, you had facebook appearing at a House Antitrust Committee hearing today, along with google, apple, amazon. Do you think facebook should be broken up . Senator warner listen, i am not at that point in time in terms of breaking up some of these companies, but i have not taken that off the table, because i think there may be ways to add more competition if we have more of this transparency and data portability, interoperability. I think we could step back from some of the breakup calls if we put in place appropriate privacy protections, the way europe has done already. I think we could have a little more forward leaning if facebook was willing to acknowledge, or twitter, for that matter, when youre being communicated with by a bot versus a human being. There are things in a legislative area that, if we move forward on, i think would take off the pressure, at least visavis facebook or google in terms of the breakup calls. But if we do not see these Platform Companies roll up their sleeves and give us some framework so americans or, for that matter, folks around the world have a little more transparency, a little more protection of their data, know what data is, in a sense, being sucked out of them already, and what that data is worth, then i think we have to look at more radical solutions. Emily meantime, investor peter thiel has called out google for what he calls seemingly treasonous work with china. We do not have specific evidence for his allegations, but the president is now saying that the administration is going to look into googles work with china. Does this concern you . Sen. Warner well, it concerned me when a group of folks at google did not want to work with our defense department, but were willing to partner with some of the Chinese Tech Companies who are, quite frankly, creating an almost orwellian social credit system, where they monitor the behavior of the chinese population, 1. 3 billion people, in ways that are, frankly, the antithesis of everything that we in the west would support. I think that is one of the reasons why you have seen 2 Million People a few weeks ago in hong kong go to the streets rather than have the Chinese Communist party system and that kind of orwellian network take over hong kong, as well. So i do think there is some explaining that google needs to make. I have met with the google ceo. He said they are backing out of some of those partnerships and they are willing to continue to work with the u. S. Government, so i think mr. Thiels and mr. Trumps statements are a little overthetop, but i think it is incumbent on these companies to frankly go the extra mile to earn peoples trust. The truth is these Companies Got so large, so quickly, i am not even sure they fully understood the full ramifications of what they were dealing with, and, quite honestly, the regulators and those of us in government have been slow to catch up, and instead we saw a foreign nation like russia, in and willynilly use youtube, facebook, twitter to massively intervene in our elections, and they continue to massively intervene in trying to pit one american against another. Candidly, these companies have been slow to acknowledge that and be a more active participant in bringing about these kinds of appropriate regulations and appropriate rules of the road. Emily virginia senator mark warner. Coming up, netflix and no chill. The Company Reports underwhelming secondquarter earnings, losing subscribers in the u. S. For the First Time Since 2011. What this means as the competition turns up the volume. And if you like bloomberg news, check us out on the radio, on the bloomberg app, and on sirius xm. This is bloomberg. Emily netflix reported a surprise loss of u. S. Customers for the Second Quarter. The earnings renewed concerns about Growth Prospects at a time of looming competition. Netflix lost 130,000 customers in the u. S. As a result of higher prices and a weak slate of shows. It signed up 2. 7 million subscribers globally, also missing projections. We break down the results wednesday. I hate to bore lucas, because he actually tweeted he is tired of talking about this. I think price increases probably drove subscriber loss domestically. I think they are probably bumping up against the ceiling on what they can charge and continue to grow. I personally believe they will keep 80 of the domestic subscribers, but the last 10 million subscribers are probably middleincome households, and they know what prices go up a couple bucks. And i think you are going to continue to see continued defections as content migrates away from the site and as competition starts to materialize. Fall, warner and comcast next year. I think middle income households will probably have to think about whether they subscribe to one, two, or three plans. Yes, they can cut the cord and maybe afford all of them, but the fact is netflix saw 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 they are worth the price target my competitors have a must stop, stockthink have on the , and i think todays correction makes a lot of sense. Emily to avoid being boring at all, you did tweet you would be talking about the big whiff and that you would be duking it out, so bring it. What is your take . Is this a blip or a longterm problem . The Second Quarter has been a problem for netflix in the past. In 2016, they missed their Second Quarter forecast by quite a bit, though not as much as they did today. And they had not warned everybody that this would be a light one. So is this a onetime phenomenon, or something where we cannot trust their forecast for q3 . Netflixs response to this is that we have forecast 7 million and are still on pace for the biggest year yet, but as weve seen, their forecasts cannot always be trusted. They miss on these a lot. So if they miss again next quarter, which is going to come around the time disney is introducing disney , that becomes a real problem for investors, especially if growth slows overseas. Emily lets talk about the Current Quarter where they say they will add 7 million subscribers, a huge jump. Of course, we know this quarter, Stranger Things is back. As for last quarter, they have highlighted dead to me and murder mystery, but does this mean it is dependent on an original hit like Stranger Things, and does that make it more challenging . Subscriber additions really depend on a huge hit. Go ahead. Emily michael, you first. I honestly think what lucas said is right. I think this is a blip. I think that subscriber growth will be like movie box office. When there is lots of great stuff, they will see an increase in subs. The numbers on Stranger Things are pretty impressive. It is a really good show. That a handful of really great content. I think they will probably hit the 7 million sub number. The problem is next year when there is competition, and we saw a preview of the quarter. Next year, you have a couple quarters where they lose subs. Emily can the hits keep coming . The other issue i see is, look at the volume of shows they released in the Second Quarter. I know they did not have a Stranger Things, but i was ahead of the Earnings Report and they would have something new every day. Sometimes, they would have five new projects. If none of those are moving the needle and it really is only a handful of shows, that is a little bit concerning, just because of the volume and how much they are spending. That being said, they do have a pretty good track record of coming up with a new big hit every few quarters. If they can keep that going, they will be fine. But they do seem to have a volume issue. Emily and that is a good point. We have talked about the hit shows. We have not talked about the shows that are not great. I have seen some of those. How good of model is it to be throwing everything at the ball and produce a lot of stuff that really isnt that great . Or is the hbo model of very few, more highquality content, is that better . By my count, netflix produces about 10 times as many shows as hbo and get about the same number of emmy nominations. Throwing stuff at the wall, they are going to have their hits. I actually think that subscriber is going to be based on one of either water cooler chatter shows like breaking things, oranger good enough content, which is high quantity of ok content. That is the real acid test. Do they have enough stuff that is good enough to keep us coming back . I think these metrics they are giving us on the crap shows tells us that people are willing to watch whatever is thrown at them. So you get 40 Million People watching adam sandler, which shocks me. Emily i thought it was good. Lucas, lets talk about international. That is where they say the majority of new subscribers will come from. They are saying in q3, 7 million new subscribers. They talked a lot about india, introducing a cheaper, mobile only plan. Reed hastings has said they could get another 100 million subscribers in india. Where is the growth going to come from . In the shortterm, you are still looking mostly at europe and latin america. Brazil, the united kingdom, france, germany, these are the biggest markets. Netflix does not break any of this out, which would be useful for analysts like michael and reporters like me. But longterm, they are definitely looking to asia. They have invested a lot of money in longterm programming in the region, particularly asia. And this mobileonly plan is a big deal because they have been testing lowerpriced plans the past few months. This is the first time they are committing to rolling one out, which suggests that either they think it will work or that they need to do something to boost growth. It is the first price reduction we have seen netflix take, because they are raising prices almost everywhere else. Emily lets talk about the other parts of the story. You have disney, apple, warner media trying to take netflix on. Disney is offering cheaper and has a huge library of original disney classics that people keep coming back to over 50 years. How big of a threat is this competition . I think barry diller said it. Well a couple weeks ago. Said it very well a couple weeks ago. Netflix has won. They are not going to go out of business or lose a material number of subscribers. The question is, can they grow into the valuation . And i dont think so. International, sure. If they had hundreds of thousands of subscribers in the countries they do business, that is 20 million a year. They could do that for another 10 years. Can they continue to grow domestically . No. Can they turn cash positive . Not with the current model. Emily coming up, microsoft has beaten earningspershare last eights for the quarters. Did it deliver this time around . And elon musk seeks to merge human brains with artificial intelligence. More with how his neural implants are already working in rats and monkeys. This is bloomberg. Emily microsoft earnings out thursday. Investors have driven market value up to 1 trillion largely due to the success of cloud computing. That is at the center of analysis of secondquarter results. We did not find any mistake or anything negative. But the big deal is going to be guidance and seeing how they can come up with firstquarter numbers and some color about the next fiscal year. Emily the big question is, can microsoft keep it up . Now that expectations are so high, can the company continue to deliver in a new tech economy . We have expanded it to amazon in the last few quarters because there is such enormous demand from customers for the services they are providing. I think this is only the beginning of an incredible boom azure andcontinue in other cloud relating technologies microsoft is providing. Emily are youse adjusting the cloud will continue to grow and it is not a zerosum game . Absolutely. Every study tells us we are in the early weeks of a long game. Microsoft is on the verge of becoming the corporate cloud. Fresh off the last few days of summit in vegas, the big theme is trust. Not just trust with partners, but in the enterprise relationships they have to expand those, which frankly is a differentiator from google and amazon. Emily that said, when you are the most valuable company in the world, and microsoft does have more than a trillion dollar market cap, you have a target on your back. What are the challenges, the potential obstacles lying in microsofts way . The macro concerns are the only thing that could provide nearterm headwinds, but other than that i agree with aaron. The market with Cloud Services is so large, and we are seeing the tip of the iceberg. The market potential just in the enterprise space is enormous. Betterft, we think, is position than any company out there. Emily pc sales are still a big part of the business. What is happening between the United States and china is a huge issue given the u. S. China supply chain. Aaron, given you w