Pressure to change the way yahoo does business. We look at what the options are for the company. Netflix has had a great run with original shows winning emmys in critical acclaims. Now netflix is taking on movies, launching the first original film next year, as he is to a sequel to crouching tiger hidden dragon. First to our lead. Just months after a full preparation just months after saying a full separation of ebay and how about that paypal was a bad idea, they are not changing their tune. Paypal to become a separate him funny sometime next year. Ebay had pressured based rusher from our icon who urged them to change from traditional marketplaces is nice. Now there will be executive changes as well. Ofon winick will become ceo the new ebay. American express executive dan shulman is ceo designate of the new paypal company. Donahoe will have no executive role in the new businesses. Is it the new a good idea . Ive been asking various members that very idea. These are the paypal founders to sell the company back in 2002. Here are some of their opinions there are still a lot of synergies between ebay and paypal, so no matter what happens, there has to be a very firm from agreement between ebay and paypal. That is true. Could paypal grow faster if it not within ebay . Maybe, maybe not. Would it be valued differently by the market . All of that stuff . I dont really care. I think about were spun off, you could motivate the Management Team to do more direct. On balance i was a spending on not a terrible idea. The relationship has to be extremely strong. I think there are very large synergies. Maybe it is something they should consider in the future. I think ebay was right to resist carl icon. We do not want them to be dictating what Silicon Valley does. It is critical to have someone with a product sense and not running as a operating business. Someone from the paypal mafia gekko i do not want to name names. Sales from onee point 5 billion. Looking back, was it the right decision . Ebay and paypal have had an interesting year. Some other members of the paypal mafia think they are better off apart. It was the right decision at the time. E made it collaboratively part of the reason was to get to the right level of the payment transaction system, it required a much closer transaction with ebay. There is a much closer synergy. The funding is a lot of profits that come from people who are ready have balances. You can say is a better inside or outside . What is thetion of Management Team and what can you build towards . I think fundamentally last is athe economics, there reason why paypal has missed every window. The streets and squares, every level of innovation over the past decade they have missed. They will continue to miss as long as it is is a pay subsidiary of the ebay in san jose. If you pull the poll the x leadership team, 90 believe it is spinning off the company. To me it is not a question of if but when. If the trend lines keep going the way they go, it will be at single percentage of paypal value. I think it is a 100 billion Dollar Financial services powerhouse. For more on this news and what the future now holds for paypal, i am joined by the paypal cofounder matt lecture in new york and an Investment Partner where he has led the Firm Investment in mobile payment strike and of former paypal Senior Executive in cory johnson. That it is official, what is your reaction on this incredible reversal from ebay and john donahoe . I am not sure. Most of us believe in one form feeling toa general get paypal its own wings in the Management Team direct correlated compensation to the performance. I am glad john is the one calling the shots. That preserves their relationship with ebay. And losing the incredible volume. I think on the incredible news it seems great that john is willing to pull the trigger. Remains to be seen whether the Management Team around the new paypal will be able to realize the full potential but very hopeful it well. What do you think of the American Express executive now in charge . Some of you wanted a former paypal mafia to be ceo and that is not the case now. I do not know him at all. I have seen as bio but have no working past with him selling the least likely person to comment. It is his opportunity to lose. He would be in romantic notion to see one of our own for one of her home. I think it was inevitable. Inevitableit was this was going to happen. We predictedknow when we sold a Company Paypal will be larger than ebay. There were only two executives of the time. A pulsar inly will trade at a higher market cap than ebay. Technologyterms the cap. What has paypal missed and what risk does a separate paypal have now been might not have been edited when people were looking at the whole package earlier . Paypal has missed the last decade in the United States. For growth is a lot of International Growth and have the very successful outside United States. The United States there has been an incredible innovation in payments over the past decade and paypal has not participated in any of it. Bitcoin and the derivative consequences. Paypal has been relevant. It hasly the past decade been a big black hole. The product is worse in the United States that was 10 years ago. How do you respond to that . I think in part it is sitting on top of an automatically growing revenue stream based. Order to quarter 15 growth. That is understandable if not forgivable. , it wasside of paypal founded over a decade ago and there are still a lot of the that is powering transactions underneath. They will still be under the quarterly magnifying glass of the public investor. I think it is inevitable that takeanagement team will relatively aggressive steps towards making it more flexible and offering new products and services. In this opportunity and Small Business lending. Seele or companies that cash flow and transactional volume of a Small Business inevitably get into the cash flow management. It is an enormous opportunity. Donahoe has told me he personally came to you and other members of the paypal map the or advice for what he should do. What can you tell us about what kind of conversations happened he had the scenes between you and other members of the paypal mafia and ebay . Partthink he probably in thinks it is private. I am trying to remember exactly what i told him. To some extent the current Management Team within paypal, all of us are in agreement that it has a tremendous amount of potential skill, there are massive payments lending and consumer services. I am not too worried about paypal being in the same state. Just such a big market. We have always been an agreement. Under not think it has been a secret with ebay. I think we are all pretty happy this is finally happening. Thank you for nodding vigorously you have been nodding vigorously. I think that its not clear yet whether it is sufficient. The big challenge and opportunity. On a Conference Call today they talk to about the way ebay helps paypal. Specifically the working capital in the Balance Sheet of ebay giving a lot of capital to ebay to help it grow. How much money does paypal need to have on the side that make the investments you talking about and just to run the business and can they do that at a separate Company Unless they have a very big obligor offering . Up publiculd be capital. Financial Services Innovation is expensive. That is to why you see Companies Raise a reasonable amount of money. Atething you can do 100,000. Ebayis something that helps with the expanded international. Just to run the business to make the payment happen from quarter to quarter. Need honey when you move country to country. That said, you do not have to use equity or the Balance Sheet. David sacks said he thought it could be 100 billion Public Company. How big the you think a file can be . And ultimately how does this reflect on the record . John will leave a pretty similar legacy. Announcing they will leave. Achievement ofg letting paypal flight free is not going to stop it easier either. , thee valuation front speculation about public markets. Think from the public numbers they have to be 30,000,000,00040,000,000,000 dollars stock. There will be a lot more price and for future innovation. I do not think it is too far off. All they have to do is show robust growth. I think the biggest set of answers will be answered very quickly after the first one or two quarters of being treated. Things like the cost of running the business. It will be very easy to tell. Cofounder of paypal, thank you for joining us. Throughsticking with us the next block. More on ebay and paypal after this quick break. What is the future of both companies when we returned . G. This isily chang s bloomberg west. joining us at piper jaffray. Former april investor in cory johnson editor at large. Ebays future without paypal . Good question. I think people over the age of 30 do not really use ebay. I suspect there will be a lot of offer to acquire ebay. I think paypal has an independent future. You think ebay is a takeover target. Justave echoed what keith said. Absolutely. The most logical way is that alibaba ends up purchasing the marketplace and lines up directly with how alibaba runs their business. Be a standalone business. Google could use it to help google wallet. Agree paypal or ebay marketplace as it stands really belongs as a part of something bigger. Are1 of the transactions off ebay. What was the percentage when the business was sold to ebay in 2002 and how much has changed the strategy . 75 were on ebay at the time. A complete reversal. To me, that was always the reason. It was because they did not want anyone else to get a hold of the secret sauce of what was going on inside ebay and paypal have that. They were worried about amazon. I wonder, is amazon a potential acquirer of ebay now . Potentially ebay. Paypal, i do not know. I do not know that they have significant payments talent. Is david marcus kicking himself right now . What happened. Lex i do not exactly know. Looking for a Public Company ceo. And was not going to be him . I suspect so. What do you think of amazon fighting paypal or ebay . Ebayy being paypal or buying paypal or ebay . Obviously paypal, that is something that could work. Amazon has a payments business it has not had much traction. I think that plays the whole idea. Marketplace is not as bright. We have spoken to the market president of ebay over the past year. Theceo of the new ebay once spinoff happens, we do have a quote from him. A listen to what he had to say. For us, the priorities have been russia, matt and latin america. All of the emergent markets are growing rapidly. It continues to be. Domestic china will certainly be in the focus over the next few years. Oute ali baba does move from china around the world, we will hopefully move from around the United States into western china. It will be very interesting. Ebay or paypal . A pretty challenging job. I suggest it be flat over acquisition. That might be easier than it might look. , an early member of the paypal mafia. We do not have david yet. Inegust heard from devon when the future ceo of ebay. What should be the first thing on his plate . I think it is trying to differentiate ebay . They have done a great job of improving the growth rate from negative to positive over the years. Why do you go to ebay marketplace . I think it is perceived as a secondary market. Things that are slightly offseason. I think they kind of need to revitalize that and also energized the brand. Like we were talking about earlier, anybody about 30 does not go to ebay. I think there is a marketing problem they have that they tried to address to remind do a lot ofan things to combine ebay. Of ebay. Ceo i know you have been listening in. What do you think now that it is official that ebay will spin off r . Ypal next year taco let could not sit back and keith have all the fun there. I was was at least surprised at the definitiveness of the announcement. Howlked on your show about the spinoff was a mathematical inevitability that as the percentage of payments on paypal the ebay volume went down spinoff would make more and more sense. I thought the process could take years to become a parent. Of creditebay a ton for getting ahead of the curve in making the decision now. What do you think happened the hind the scenes . This is a big reversal. In our office about why he decided not to do this not too long ago. It is hard for me to speculate. As they began to look at this, i was athey felt again it matter of when not if. It makes sense to act decisively. It is hard for me to know what was happening inside the room. I think it is a very selfless move by john donahoe. I give him a lot of credit for that. Talking about how we were talking about the technological prowess. From your perspective, how strong is the technology at paypal . There is a lot of technological waves that have happened. 1999 and 2000. The social weight, mobile waves. There is an opportunity to update the product. Make it more social and mobile. As acquisition of the product by paypal. It is the way in terms of the social paradigms as a social service. Is the shift towards the importance of the developer. I think paypal made a very good acquisition. I think there is opportunities there to update. Createdduct we really in the late 90s and early 2000. What do you think now . To be clear, i was not prognosticating on what i thought it would be spun out. I guess what i was saying is there was a path right. Pathway. I still think that is true. I think that obviously payments and paypal is the leader. If they make the right move, it could be a very significant company. I will give you the last word here. Ithink first of all think obviously the world is moving very fast. Pretty transparent. Likelyve learned very the patient innovation has been very quickly. They can catch up. Cultural issues. Based in san jose where no one talent in an engineering and design wants to work. A lot of transformations that would have to be structural to allow paypal to reach the division. Gene munster. Thank you all. You are watching bloomberg west. Im emily chang. With ebay getting into investor pressure and spinning off paypal, will yahoo be the next tech company to break up . Pressure ebay see dave meyer Marissa Mayer and merge with rival aol. For more i am joined by the Senior Research analyst gene munster. Make of this pressure . Our yahoo and aol better off together . I do not think they are better off together. I would get the analogy they are to fading giants. I do not know that putting them together makes sense. I would sit with a score another win for shareholder activists. They look to get the shareholder in capital with dividends. They can be seen getting a better momentum. Weeku had asked me last the probability it happens, i would say lower than it is today. That said, i do not think it is the right thing for yahoo . That makes a lot of sense. I think there are important Tax Implications if they go that route. Tranche was almost a 40 tax rate. That could almost dramatically lobar that. I think a combination around that does make sense. I think former aol and yahoo , does not solve the fundamental questions with . , which is where does it fit into the internet over the past decade . Not seem toure has have stopped at all. We have seen up ebay caving to the same kind of pressure. Can yahoo stand up to this . I dont know. I think they probably have. Marissa probably has another couple of quarters to show some sort of life in the business. The core focus has been around alibaba. So i think if something does not happen in terms of improvement in underlying growth, shareholder activists will get louder and could cause some sort of change six or 12 months down the road. They just made a lot of money, what can they do with that . They definitely could. They said they will get more than half of it back to investors. If you look at acquisitions in the low single billion dollars, which may seem like a lot of term the todays acquisition does not give a lot. We think they take something along the range of content. They have a good highend salesforce. Whether it is around gaming or on demand. Something along that they can leverage existing salesforce, we think that may be of benefit. What about tumbler . Tumblr . Has it come a part of the business . It is a little bit early to tell. They think there is a big opportunity there. I would say success on a scale of one to 10 has probably been a six. Whereould be an example they would say give us time or six more months to make something happen. That is a good example of having unique content in different ways to monetize it. We just have not seen the monetization yet. Munster,jaffray gene thank you. Paypal. Us on yahoo and house of cards has been a huge hit for netflix. Last night we caught up with kevin spacey himself. Hear what Frank Underwood told about other netflix projects coming up. Kevin spacey have paved the way for hollywood stars to take on projects from streaming Services Like netflix. The start of house up heart was at a gala event in washington last night for the Kevin Spacey Foundation which supports Young Artists of film and other performing arts. He also took time to talk to us about the importance of the art. I am delighted to be able to do something. The government always has this argument every year. And teachers, across the country to make an argument for why arts and cultures are an important thing and why the government should and support arts and culture and now we are ding this wonderful area were seeing these wonderful things around the country where colleges are looking at stem education. It becomes steam and the a is for arts. Extraordinarily important thing to continue to try to encourage. Also in attendance last night, the chief content officer , the man who helped bring house of