Apple products are getting bigger and smaller. The company will unveil a wearable device on september 9 at an event as well as two larger iphones. They are also working on larger ipads with a 12. 9inch screen beginning production in the First Quarter of next year according to people with knowledge of the matter. With sales of current ipads falling for two straight quarters, will bigger screens mean bigger sales . Cory and i spoke with jean muenster. I started by asking jean, is bigger indeed better . It is. It is needed. Ipad sales have been down 5 for the past year. Bigger is better. Ultimately it is going to open up some newuse cases for ipads that we havent thought of, whether it is business or education. It is much needed. It has been a little bit slow on the innovation curve on the ipad. I think it will be positive for sales. What kind of use cases do you see . You could argue medical, design, manufacturing. This deal with apple which was inked about two months ago said they were going to come up with 100 applications working in combination. Right now the simple answer is we dont fully know but there are clearly benefits to bigger screens and they will be filling that gap. What does this mean for growth margins, a much bigger machine like this with much larger screen size . It is probably negative in ipads case. They tend to have lower growth margins at a starting point. About 25 versus an iphone about 50 . This will probably be slightly negative for overall gross margins. The exact amount, if i was going to just guess, it would be around 20 versus 25 for an existing ipad. We have seen apple start with only one screen size for the iphone. Only one screen size for the ipad. The ipad now has the ipad mini. Potentially well be seeing larger phones in a couple of weeks. Do you see a future at apple where you see a family of devices . A family of sizes rather than sticking with just a few . Absolutely. I think it is funny to look back because we were at a period when miniaturization was the big theme. With the ipods for so long. Then when iphone came out people were wanting bigger phones. What we have noticed in our survey work is that people are passionate about their screen size. The way i would liken it is to almost like a preference in music. When you say a screen size the wrong screen size, people get kind of upset about that. Everyone has a different opinion about what is the right screen size. Ultimately apple recognizes that and that is what they are doing. It is interesting, jean. Its sort of like the way that people attach themselves particularly to apple projects is different than almost anything else in computing. Your models are wonderful because you make some strong assumptions about use cases. How do you imagine people will pair a certain sized phone with a certain sized ipad . Do you imagine people will go for the biggest iphone and the smallest ipad or pair those devices with certain, i dont know paratifs. There has been a surprising dynamic with the fablet market. You would think you would have the opportunity to get a slightly bigger phone a five or a six inch phone you wouldnt have a tablet necessarily. So far the 5. 5 inch phone market that hasnt sold that well. It is going to be interesting to see how this plays out when apple, which has more say in the market, leans in with a product. I think the way this plays out over the next six to 12 months is youre going to see some success with that 5. 5 inch tablet. I think that is going to be negative for their existing ipad line and the higher 12. 9 inch size is still going to have some life because that is further enough away from that fablet that it is going to be differentiated anything surprising things that you have discovered as the drumbeat to this iphone unveiling continues on september 9 . The big wild card is payments. It is likely the next version the iphone has is a chip for payments. Trying to figure out exactly what is going to happen in payments is kind of the exciting substory here. So far we havent heard lot about that. Stay tuneed. Jean muenster. Up next, amazon is shelling out a billion dollars for twitch tv. Is a media platform where viewers watch other people play video games really worth it . Were breaking it down next on the best of bloomberg west. Welcome back to the best of bloomberg west. Im emily chang. Amazon is buying twitch tv for roughly 1 billion. Twitch is an emerging and powerful media platform with 55 Million Viewers every month watching other people play video games. It is already one of the top 15 most trafficked sites in the world. The average twitch viewer is spending 4 1 2 hours every month on the network. Those are numbers that most Cable Networks have only dream of. Cory johnson and i spoke with businessweeks brad stone. And a guest who led an early investment on twitch and is on the companys board. I started by asking could twitch really be the next cable giant . It absolutely could be. This is not some fringe activity that people do this their basements removed from society. Who are these people . Growing up, think of your teenage years sitting around the living room warming your friends play video games or watching people play together. Playing together is something that is universal. Twitch has brought that online. It is not so out of the mainstream. I got a lot of quizzical looks too when i first described the concept. As we know, they are making a dozen dramas and comedies. A lot of kids shows. They just green lit five now kids pilots. They are spending millions on content like hbo shows. Let me ask you about we have seen some numbers in that extrapolation of 4. 5 hours per month per user. I have read that a lot of the users, over 58 spend as much as 20 hours a week. Are those kinds of numbers right what happened does that mean . There are a lot of users that spend a lot of time watching video game content. If you think about it, it is not so different than what we all do what we watch the world cup. We want to watch great people play games. And we can all be united through that concept. And game players learn tricks from other game players. There is an entertainment value that is addicting. From a media standpoint, is what is really curious. There is tons of entertainment and learning value and also marketing value. For the game publishers to show this is what these games do and this is how you play them. Who are the people posting the content, how did twitch recruit them . They have a very diverse amount of broadcasters that stream. Everybody from the best in the world to someone who has a funny, entertaining show around a particular type of content. You have a million different broadcasters broadcasting on twitch. A lot of the revenue comes through the dedicated players to belong to a certain stream. Brad, when you look at amazons other plans to monetize content because a lot of the work has really about selling stuff, using streaming to sell stuff. Using amazon prime to sell stuff. Where does this fit with a different model . We know amazon is building a huge ad business now. Emarketers say it will be a 1 billion business in 2014. The thing you notice when you have these devices it is not there because amazon does not use google services. There is no youtube, for example. I think twitch tv brings it kind of up to speed partially in the usergenerated space. On a kindle fire tablet. On a fire phone. It gives people another reason to hit up amazon. Amazons original shows havent done so well. It is hard to name even one of them, but the other shows that they are buying, if it is a show that i want to watch, i will find it. Who has the power . Is it the content creators, is it these upstarts . Twitch has only been around for three years. It shows you how fast things can change. You tap into a community. They create all of this content, you very quickly have the power. Something that jeff bezos said around why they were making this acquisition is that they want to learn how to do that. I think they want to understand, they are keeping twitch as an independent company. They want to understand how twitch was able to harness this collective energy so quickly. Broadcasting and watching gameplay is a global phenomenon and twitch is a content that brings together tens of millions of people who watch billions of minutes of games every month. They acquire a Company Really just to get the engineering talent. Has amazon done that . Not as much. They have a build it here philosophy. They made a lot of mistakes in the late 1990s. Google, were just seeing that. It is so hamstrung in trying to make acquisitions. They are under the microscope. Didnt they try to buy twitch and it didnt work out . What happened there . I cannot comment on any particular rumors. What about yahoo . Twitch built something very special, as you all said. I think a lot of people took notice of that. Do you think that google right now is more hamstrung because of antitrust concerns than they were even a year ago . That is hard to say. I think they have made a lot of acquisitions and i think corporate priorities are probably more hamstrung than any particular regulatory concern. Where they want to spend their energy. How are they reacting to this acquisition . A lot of people are passionate about this network and whether it remains the same. Its been very positive, and that is something that they took great care and how this was gone about. We saw in the town hall, he said, we are keeping twitch independent. The same office, the same team, the same policies with respect to broadcasters. I think that message has been received well. It was interesting to see complaints about google not being able to get the deal done. They have brought certain elements of that, i wonder if that will decline. I think they like it as an alternative to youtube and amazon is committed to keeping it that way. As you mentioned, Amazon Gaming studios. What is happening in the rest of Amazon Gaming studios . They are trying to build a gaming function. Theyre developing some of their own apps, they are hiring. I dont get the sense that it is a huge corporate priority in the same level as video. Obviously, this gives them another access to gaming. Up next, what happens when your airbnbs guest refuses to leave . One landlord shares her story next on the best of bloomberg west. Welcome back to the best of bloomberg west. Im emily chang. So what do you do when an airbnb rental goes horribly wrong . A rehabilitation therapist found out when she rented out her condo. The tenants refuse to leave after 30 days claiming California Law allowed them to stay. She turned to airbnb for help, but had to hire an attorney to victim the squatters. Airbnb told us our team has been working to do everything we can to provide support, we regret how long it initially took us to get in touch with the hosts. The guests in this situation have been permanently banned from our site. What exactly happened . I can laugh now because there is a happy ending. It started out as a nightmare. I have a small condo i use as a vacation ebb rental down in palm springs. When i am not using it, i let families or friends use it out on airbnb. For people who want to have a shortterm vacation down there. These individuals came through. They wanted a longer type of stay. They wanted a sixweek stay. They said they were going to be working on a work project. They are videogame developers. It was two brothers. I thought, ok, six weeks. We can do that. And then long story short, they ended up paying for the first 30 days and then we were not able to process payment any further. Basically after 30 days they claimed squatters rights they were legally allowed to be there as tenants and if you wanted to get rid of them, you had to evict them. That is right. Thats right. They reportedly came from austin, texas. I think they were taking advantage of a local jurisdiction which states that once a tenant is in a property, whether a shortterm Vacation Rental once they are there 30 days, they have tenants rights. Did you know about that in the first place . A lot of my critics, who are landlords or have properties say how did you not know this . This is how it is in the state of california. I talked to others and they do more of this temporary Vacation Rental, they were surprised. They said that could happen to me. I had no idea. They not only are predatory, they also apparently are accused of taking some money from kick starter and not starting the project that they were getting money for. I assume they are looking for the next scam. What do you do when you look at the people you might rent to and how might you do it . Are you going to do it any more . That is a good question. I feel like this is a cautionary tale. I have learned a lot. I feel like a lot of other people are learning from it as well. I have learned that if someone is going to be a longterm rental, definitely 30 days, to do more vetting, the same way you would when you are renting to somebody for 12 months. So this got ugly. You gave us some text messages. You told them their powers going to be shut off. I hope you will check out peacefully today without the need for authorities to get involved. They write back saying they have spoken with their attorney and theyre going to press charges for blackmail and damages caused by your negligence and malicious misconduct. What did airbnb do about this . How long did it take for them to respond to you . They responded pretty quickly. The timeline was out of my hands once the tenants were there 30 days. It sounds like everything is taking a long time. Really it is having to go through this Legal Process of unlawful detainer, which is the eviction process. Youre not mad at airbnb . Not at all. A lot of people think that i am. I love the service. I would still use it as a guest. I travel all over the place. Do you think they should have given you more information about this 30 day issue . More warning . I think it is an emerging company. They are figuring it out. I know they have tightened up their customer service, their policies and procedures. I think going forward, maybe the next host that does a 30 day rental will get a popup warning. What did they do to help you . I read somewhere they hired a private Investigation Service to camp outside the condo and somehow catch these guys as they were trying to go in and out. In the beginning, when we had realized they were not going to leave, their intention was to pay for 30 days and have free rent during the three to sixmonth eviction process. Airbnb was trying to contact them through cell phone, email, and they made whatever offer they could to draw them out. To get them out of there. Like i said, once the 30 days were up they were not staking out the house . Or you youre unsure . Yeah, yeah. Im unsure. It is a combination of things. My dad is my property manager. He lives locally. The neighbors were all like staking out. It was a posse basically. Trying to monitor are they still there . Are they gone . May be airbnb did not hire professional investigators to monitor the property. Im not sure. I wonder what this means for this Business Model. They have attracted a huge valuation. They have added over 550,000 rooms available, rivaling some of the Biggest Hotel chains. There is a presumption they can do this without trouble. What we see in new york city where there are buildings that the government might get involved, there are renters laws in california, these are big issues. What do you think it means for the future of airbnb . Is their growth limitless or is this going to happen more . It is an emerging industry. It will continue to grow. While airbnb might see this media explosion as a bad thing, i see it as probably good. For example, i have relatives who live in smaller markets or our baby boomer generation. What is airbnb . Really, you can stay in apartment in paris . That is cool. They just had no idea. We take for granted we live in a big metro city. Everybody knows about airbnb. Ultimately these guys left. They did not pay after 30 days. Have you been compensated at all by airbnb . They did. How did that compensate you . They really stepped up to take care of my outofpocket expenses. Did they pay you for missed rent . Im not comfortable speaking about the details. The specifics. I did have to hire an attorney to take care of unlawful detainer. That is the way the law works. You are much nicer than most of what are you going to do with this condo . How do you feel about renting it out again . Or even keeping it after this creepy experience . That is a great question. I was there a few days ago to do the reclaiming of the condo. When i had friends or family around, i felt fine. As soon as they left, i did feel that creepy sensation come over me, like emotionally unsettled. I wanted to get out as soon as possible. So what are you going to do . But my advice, i have been given, wait one month. Let everything settle and calm down. You are feeling better about things now than you were four weeks ago and then make a decision. Do you want to keep renting it . Do you want to put it on the market. One thing i will say in palm springs, like you mentioned, airbnb in new york or here, in palm springs, they are pretty organized and make it easy for people to pay taxes. You apply for a permit. It is totally legit to have a vacation condo. Every month you write them a check. It is all good. Maybe other markets will kind of adapt. Airbnb landlord cory tschogl. Up next, can you predict an earthquake after the strongest earthquake to hit Northern California in 25 years. We take you inside the technology that is made to do just that. Welcome back to the best of bloomberg west where we focus on innovation, technology and the future of business. Im emily chang. For years scientists have been trying to better figure out when an earthquake is imminent helping people brace for the big one. Quake technology is back on the forefront after Northern California was hit with the strongest quake in a quarter century. It injured more than 170 people, damaging dozens of homes and buildings in napa county. Damage could hit 4 billion when you factor in all the business from closed business and wine country tourism. Cory johnson spoke with the director of the laboratory and brad at the geological survey. He asked brad what stood out about this particular quake. It was a magnitude 6. 2 earthquake on the fault system west of napa. We believe it is west of the napa fault. Further evidence will give us information on whether it was on that fault. It was more of a surprise that it took so long for us to have an earthquake of this size. The shaking and the area affected is very typical for a magnitude six earthquake. The most vulnerable structures affected by the shaking a lot of gas and water lines broken, consistent with the level of shaking that was reported. We are showing footage of an earthquake 25 years ago, really not that far away. A lot of the damage done in the ea