Good wednesday morning. Welcome to squawk alley for wednesday. Kayla is in San Francisco for us today with an exclusive tonight. Jack dorsey on closing bell as square reports its first ever earnings as a Public Company. Joining us from San Francisco today angel investor, a lot to get to with jason but well start with the news alert on apple. Loretta lynch testifying on capitol hill. Eamon is live with that. That testimony still going on. Reiterating now the governments position in this apple versus the fbi fight in encryption. Heres what she just had to say. I support strong encryption. We all have to. We need it to protect our data, personal data, financial data, medical data. The issue here is warrant proof encryption and just as we have security in so many other areas of our lives and still retain the ability to have very, very focused responses to Law Enforcement i believe that our technology companies, the greatest companies in the world have the ability to work with us and achieve that. Interestingly enough we heard from senator diane feinstein. She is at odds with them on this issue and is siding with the government. Saying no company here should be above the law and expressing skepticism of the private Data Companies in Silicon Valley that can use this data themselves but are refusing to turn it over to the government. She doesnt like that they would use it for profit but not to help out the government. Thanks for keeping us honest on that story today. Next up today disney ceo saying that selling espn direct to consumer is, in fact, on the table. Heres what he said at the Media Conference yesterday. By and large rights are not an issue. Legacy distribution deals in some cases are. Not that they limit us in terms of our ability to do it but they limit us in terms of how we take it out to the consumer and i dont want to get into any details but it can be done butissues that we have to face in doing it. Pricing is one of them, by the way. As of december espn lost about 7 million subs over the last two years. John, he has said before it can be done but his time frame was a little bit longer. This is getting a little bit more specific now. The calculus has shifted in this debate over the top. It seems clear that its not just a cheaper way to get content. In a lot of cases the skinny bundles or over the top content through apps is going to be more expensive. How do you do it in a way that the experience is good enough that they are happy about what theyre going to get. The quality of experience isnt quite there. In order to release espn that way. It seems very clear now because espn is the one, just in terms of monetary value that you would expect to be among the last move. Its going to be the last one to fall but its going to fall and its a matter of negotiating with the big directvs and the Cable Companies of the world but weve seen hbo do it and obviously theyre filling the sting of 7 million lost subscribers so its pretty cheerily going to happen and why not people spend 125 a month. Let them pick the 10 services at 10 a month they want. But he pointed out jason that the Sticking Point is pricing and as some of the skinny bundles come together there remains a question, what is espn worth especially as they are beginning to spend so much on rights. Theyre losing subscribers. How do you value a business like that that has always been number one and where the ground is shifting pretty dramatically underneath them. Who they have to convince to get money from is the big issue here. Now they have to actually go to the consumer and convince the consume tore give them money directly. This will be scary for them but look at hbo, look at netflix, look at amazon. These companies are getting people to pay direct. It will be huge for them when they have a data base of all the customers and they can slice and dice it. They dont have a data base of customers or all of these credit cards on file. Theyll get tens of millions of credit cards on file and that will be huge for espn. Especially for a company thats its been said leverages Consumer Products probably better than any other Entertainment Company out there. Yeah. Correct. I mean, theyre advertising is going to be huge. Their ability to invent products will get better. Its just going to be amazing. Theres no reason that sports fans wont pay 10, 15, 20 a month for espn and theyll be able to do things that no other network can do because of the content. A lot of the content that doesnt make money is going to have to go away and theyre going to have to fight for every program. Which is how Consumers Want to eat. Theyre disgusted by the buffet. They want to go have organic foote food and pick specific programming and once youre doing that and youre eating healthy the buffet looks disgusting. But think about back to february 9th when he said were not going to let the disrupters disrupt us. We will decide when the time is right. Good luck with that. Are they losing control here. Of course. Consumers have no interest in paying 125 a month to Cable Companies and directv. Once you cut the cable and you start picking what you want and theres all of these exceptional pieces of content its very liberating and freeing. They spend three or four dollars a day. Why not spend that money picking what you want and getting rid of all of this waste. How many channels do we all watch . Cnbc plus three others. Exactly. Who are these three others . No, you make an breasting point but i wonder about the loss of control, isnt part of the narrative here that User Generated Content has not become the juggernaut we expected. Youtube is facing celebrities. A few user generated folks that rose to the level of being marketable and book is going after the nfl. Youtube is trying to assign a bone identified celebrities now. The same, a lot of the same people still have control and its just the distribution methods have changed dramatically. Bob iger is doing a show here. Hes like were going to lose control but hes going to love this. Hes going to love going to direct consumer and everything is is coming together. If you look at the advertising the pie the internet is roughly a third and advertising tv still half. The internet just went right past outdoor print and radio. We demolished the three categories. Those two things are merging into one and when two things merge together and you have the right like bob iger owns everything in the world he is going to crush it. Disney is a huge buy. Theyll have all the chips and it doesnt matter what pipe they distribute it through theyre going to get paid. Its going to be the transition thats going to be hard but he is inside laughing and thrilled with this. Lets move on here. Square tonight reporting after the bell. First Earnings Report since going public in november. Kayla has the exclusive tonight on closing bell and there is a lot to get to kayla. Where do you start . Well, i think carl, the place you start is really with squares own performance. Its the First Quarter as a Public Company. Its not expected to be a profitable one. The street is expecting a loss of 13 cents a share despite the fact that revenues are expected to grow more than 50 . Especially hardware revenues are going to be a big part of this because this transition to wireless chip readers is one thing that square is trying to position itself to win and because of that and other head winds the research and Development Costs are skyrocketing and thats why they wont be able to post a profit or the street expects they wont be able to post a profit today. Thats something that investors will be watching if theres not a profit this quarter. Where is that path to profitability . We asked jack dorsey that question when the company went public in november. As any entrepreneur would tell you have to invest in your business and you have to grow your business and we dont see this as a loss. We see this as investment in our business. It costs money. So we have an understanding of our business. We have a very clear sense of the controls of the business. We break even in q2 this year and that proves that we have a business that can see that but we want to invest in growth. The stock actually broke below its ipo price earlier this year. Its up about 40 from the bottom but investors are searching from some me trick and trend line to be able to value this company. Most Payments Companies are valued against net income because they are profitable in squares case that is obviously not the case. Other big picture items is Square Capital going to be the source of growth . We think it will be. How are they viewing the frenimies in visa and paypal and the big banks that are investors in square but increasingly on their heels. Theres a lot to talk about. Earnings hit at 4 00 p. M. And jason who is right here with me, the narrative today will hopefully be about square for this company and the longterm growth theyre hoping to talk about. You think it will be hard for them to control the message. Congratulations on getting the interview. Hes not talking to anybody by the way. The narratives can continue to be hes a halftime ceo and the results are not great and twitter is running out of bullets an people are very down on the business and square is a growing business. So it would be one thing if people felt he was 100 focused on either of these businesses that maybe they could come out of the tail spin and in square space get to break even or profitability. He has a lot to prove and the clock is running out. I dont think he has more than two quarters to run both companies. I will say one thing thats working in this companys favor is that where dorsey talked about having a team to help him run these companies he does have a very solid team in place at square. Theres been fewer questions about the strength of the team at square than at twitter so i would expect that to be a message the Company Hopes to drive home. Cramers question this morning guys was when you hire, john, who do you funnel to twitter and who do you funnel to square and how do you square what he called that conflict of interest . Thats a tough one. So often when i talk to executives they talk about i want to get the smartest people and figure out where to put them. In this case you got two place where is you need to put them. He needs a clear vision of the difference between the skill set needed in square versus on twitter. I think you can make an argument to that one but its not clear. Square could turn into a sales force. Com for Small Business in terms of the data and the understanding of the data that they need to have in order to make these bets on where they put capital. Small part of the business right now. Small part right now but the bigger part get cog mmmoditizedt he has to tell two very complicated stories at the same time to investors. Jason, you have pointed out that his challenge is running both companies again and again but how would you handle that hiring question . Theres no good answer. If you find a great cfo and both Companies Need it, where would you end one. This will dog him until either both stocks rebound or he picks a company to raund puts somebody in charge of square or twitter. So two things are going on beline the scenes. One is twitter is for sale and somebody is going to try to buy it. Thats still going on. Maybe theyll say its not for sale but i think its for sale at the right price and then with square is there a better person to run that company that has more experience doing payments and listen, jack can work both issues until one sorts itself out. Thats going on beline the scenes because no rational set of board of directors would allow somebody with no experience run a Public Company to run. 22 the satwo at the sam. This is crazy. Kayla we cannot wait for tonight. Kaylas exclusive interview is at 4 30 p. M. Eastern time on closing bell. Jason always good to talk to you. Thanks so much. The mans facial hair styles change faster than we can get the pictures up. Lets get a check on the markets. Dow up about 20 points. The bull market turns 7. The third longest bull market in history. We cant forget on march 10 the late mark hanes sat at this building and said that the worst was over. Take a listen. However im going to step out on a limb here. This is the big hold on everyone. I think were at a bottom. And this is because, this isnt just your opinion. According to my research, the key to me is the 200 Day Moving Average of the do you and we are now at 67 of the 200 Day Moving Average. Now its gotten lower than that. Its been in the 30s. It got down to 50 . Half of the 200 Day Moving Average. But 67 is a real nice place to get a bounce. I think were going to have a rally. There we go. Man unafraid to make a call. In other words i think today this is for real. Look at this 187. As far as im concerned even if it dies tomorrow marks call was right because he did get a rally for one day. Thats the kind of loyal sidekick i am. I think its going to carry. Man was he right. People forget just what a limb that was on that day. It was such depression around what the market had been doing and he wasnt just right for one day. He was right for seven years arguably and he wasnt just taking a stab in the dark there. He had a reason and you just you cant remace that kind of experience, that kind of personality. Of course we all miss him here at cnbc. Very much. When we come back a Major Political upset overnight. Bernie sanders beating Hillary Clinton in michigan. Whats next on both sides of the aisle. Internet advertising could leave tv networks in the cold and samsungs new galaxy s7 phones are beautiful but theres a catch. Walt is going to join us live to explain. The strad argument is big for Bernie Sanders and thats the argument that donald trump is making too. At the end of the day this is a race about delegates. Lets take a look at the counts. First of all, you can see that donald trump has an edge over ted cruz. About 10e 0 delegates. Thats a significant lead. Not an overwhelming one. He has about a third of the votes needed now. He is going to have to expand some to get to that delegate majority if he wants to this summer. Hillary clinton on the democratic side she has got a substantial lead. About 600 delegates over sanders. Now thats counting the 400 super delegates. They has about half of the nomination delegates she needs but Bernie Sanders will have to have more victories like michigan by bigger margins to overcome that lead. Lets look at the bigger prices coming up on march 15th. You have ohio, illinois, florida, missouri. These are are important on the republican side because ohio and florida switch to winner take all. That means that donald trump can get a big hall of delegates if he wins those states alternatively. If john kasich in ohio or marco rubio in florida can stop them they can grab a big chunk that makes it harder to get to a majority. Another key factor is that missouri, ohio, illinois, those are open primaries where independents can vote. Those scenarios have been kind both to Bernie Sanders and to donald trump guys. Thank you, john. It continues to be riveting to watch. Coming up, Online Advertising continues to grow. It could leave some tv companies and networks out in the cold. Mark brings us winners and losers when we come back. Trade trader offices. Steve, other than making me move stuff, what are you working on . Let me show you. Okay. Our thinkorswim Trading Platform aggregates all the options data you need in one place and lets you visualize that information for any options series. Okay, cool. Hang on a second. You can even see the anticipated range of a stock expecting earnings. Impressive. Whats up, tim. Td ameritrade. The internet is continuing to bask in the glow of the advertising spotlight. Lets look at the winners and losers. Joining me is mark haney. It has seemed for years that it is google and facebook as the 800 pound gorillas and everybody else. Is that still true . Its largely true. We asked about 2,000 advertisers for 3. 5 years every six months how they would rank order all the advertising platforms. Google is king. Number two is facebook. Facebook is the number two roi leading platform and then you have to go down aways before you see the others. Most of the add dollars are going to those platforms. Money that marketers spend on those two platforms can be directly tracked through to a purchase of some kind, correct . Exactly. What about youtube and twitter . Some of the other players selling largely against video. Are they actually seeing the fruits of their labor . So the survey is incrementally positive and has been for a couple of sessions. Every six months we run this. For twitter it was incrementally negative. We started to see a cresting in advertiser interest on twitter at the beginning of last year. We saw for the first time a jump up in the number of advertisers that plan to decrease their spending on twitter. Just like their momentum stock buyers theyre momentum ad buyers and momentum is move agoway from twitter. In favor of whom . Facebook and google. The biggest positive and were seeing advertisers 59 of them in the survey the return on investment on the ad spin on facebook was rising. Talk more about who is losing whether its traditional tv players, whether its print advertising, where is some of this money flowing away from going to google and facebook and others. Yes, so every time we run the survey we ask marketers about 2,000 of them whats the source of funds for internet advertising . And the single largest source of funds is print. Its about 50 . We have also found what is some what surprising is an increasing percentage of that source of funds is tv budgets. A year and a half ago 25 of respond nts would have singled that out. When we just ran it last month it jumped up to 40 . Thats the issue for tv advertising going forward. Mark i like this line. A reco