Higher welcome to squawk alley. Im carl quintanilla. Jon fortt and Kayla Tausche at post 9. Mike santoli is here along with confides president and cofounder john broad. Good morning to all of you. Our top story is apple moving higher again today, the top gainer on the dow. Stocks the number one winner on the dow this week, up 6 . Its been a big few days for tim cook and company, rolling out the latest ios yesterday. Sprint and tmobile reporting historic preorders for the iphone which hits store shelves on friday. Cook was on Good Morning America this morning talking about his vision for the future. Wireless is the future. And so, when you decide on what the future is, you want to get there as soon as you can. You know, why put it for the consumer . Well, that plug, that jack takes up a lot of space in the phone, and theres a lot of more important things we can provide for the consumer than that jack. We can provide a larger battery. The stereo speakers i mentioned, those were also enabled because the jack is not there anymore. Mike, someone said this morning, its been a while since its led the dow two straight days. Its true. Well, flight to safety, maybe, i dont know, in a tough market. Whats interesting, one week from today is the fourth anniversary of apple stock first getting to 100 on a splitadjusted basis. So, that kind of shows you, it doesnt take a lot of incremental good news just to get the stock moving, because its essentially been working in kind of a choppy way sideways for a long time. Also obviously shows you low expectations for this iphone version. The bold case has been, the installed base of old phones is getting pretty big, maybe upside surprise. So i think that makes sense. The backlash to theback lash on the headphone jack, didnt it come quickly . People saying, hey, look, theyre nudging us toward the future here. Well, i mean, apple is pushing back pretty hard on that. Well see if people really embrace it. I mean, i think weve also got to be careful, keep in mind, the markets not going to get preorder numbers and first weekend sales numbers, as usual, so theyve got to react more strongly to stuff like this, these carrier numbers. Remember, this is u. S. Only. North america made up just over 40 of apples overall sales in last years september quarter, a little less than that in the holiday quarter. A lot is going to ride on how asia, particularly greater china, embraces this new phone. And thus far through the year, it hasnt been a good market for premium phones. So apples going to have to push through that over there. Of course, they go on sale. The first weekend begins this friday, the 16th. Jon, im wondering how big a deal you think ios10 will be. You get snazzier messages with new stickers, you get to delete the original apple apps, but some people are already having problems with that today. Yeah, i think ios10 is actually quite a big release. If you pull back, ios has not been a very permissive or opening operating system. They started to lay the groundwork for that in ios8. Ios10 makes massive leaps. You have the maps product open to thirdparty developers, and siri. Not as big as google and android, but i think its moving in an open direction and it has a lot of benefits for the consumer as well. Implications for confide, for example . Yeah, well, we Just Launched confide for imessage, right, so now you can send and receive confide messages all within imessa imessage. Encrypted, privacy protected, disappearing without leaving imessage. You dont have to set up an account, completely frictionless. And for a quedeveloper, to expo our product to thousands of new customers who are already engaged in a messaging application is incredibly powerful. Easier than getting them to download the app. Exactly. Moving to the broader markets, major averages extending gains. Dow is up 39, although it was higher a half hour ago. One of the theme at top of the minds of investors at delivering alpha was of course the return of volatility. Listen to this. I think volatility as an asset class is unbelievably underinvested in. How many people sitting here really own volatility rather than worry about volatility . And usually you dont own it because its expensive. It is inexpensive right now. I think there are tremendous risks. But i think anyone thats going to tell you its going to go down tomorrow or next week, even next month or next year, its sort of a guessing game. But you could look at the environment, and i think its very dangerous. In other words, youre walking on a ledge, and you might make it to the end, but hey, you fall off that ledge, youre going to really see trouble. And i think that could well be. This morning on the squawk on the street with cramer, he said the script was to use the word dangerous, which he argued isnt necessarily what ordinary investors have in mind when you think about how specific the situation is to an icahn or a miller or dalio. Youre talking about people who have a lot to lose, people who have been invested in stock and bond markets that are up a lot, depending on how you measure them. I do think its the prudentsounding thing, the idea of removal of central bank accommodation, whatever thats going to mean. It makes sense to point to that but its hard for me to kind of look at that type of conversation and say were going to get blindsided by these things that everyones been watching for so long. And the idea of owning volatility as an asset class, by the way, the publics kind of on to that. If you look at these exchangetraded products that basically let you do that, theyve been some of the most popular recently. Of course, its not a core holding of everybody, but its out there. Jon, your thoughts . I actually word for word, i agree with michael on that one. One of the other themes at delivering alpha was this end of central bank effectiveness and what happens if the efficacy of these Central Banks is already here, or its already over. But mike, there are some Central Banks, bank of england, for instance, hasnt even begun its corporate bondbuying program. So they might not be effective anymore, but they still want to throw more easing at the problem. If its the beginning of the end, then the end process could last a long time. I do think this is latest bit of anxiety in the markets in general and this lift in yields globally is this sort of dawning sense that maybe the Central Banks themselves dont have the appetite for further kind of experimenting or basically kind of doubling and tripling down on what theyre already doing. That doesnt necessarily mean its over, its off to the races and the markets are on their own. I do think that, you know, you see the markets of today, the stock market of today, well, why . Because yields calmed down. For now, i think were going to trade in that way. Were going to trade on the bond yield story just like we traded for oil tick for tick in the early part of the year. All this discussion about lowvolatility etfs and the risk that brings overall, too much discussion . I dont think its too no, i think in terms of the mechanics of it, i dont think too much discussion, but its a very easy thing to grab on to. Its kind of to look for the malfunction in the machine as suppo opposed to saying this is the way the market metabolizes right now, but i dont think its anything you can handicap or say its a tremendous kind of springloaded problem that we have to be focused on all the time. A lot of things are going to be hard to handicap in the next eight weeks, thats for sure. Mike santoli, jon brod, thanks. As always, good to see both of of you. Check on the markets in terms of oil today. Crude was down in the early trading and then went positive after the eia inventory about half an hour ago. Now those gains are lost. Its gone down about 2 on quite a roller coaster on crude. That sudden reversal coincided with stocks coming off of their highs, although the averages are still the green. Among sarah palin sectors, energys gone from worst to first and back to worst again. Talk about 99 problems, streaming Service Title posting big losses as pandora inks a major music deal. Well talk with tim western again in an exclusive. Then, from the city of bridges to driverless cars, uber launching a driverless program in pittsburgh. Well speak with the mayor. And then apple with the rollout of the latest mobile operating system. Well get details on that coming up. The launch window. We have to be very precise. If were not ready when the planets are perfectly aligned, thats it. We need really tight temperature controls. Engineering, aerodynamics a split second too long could mean scrapping it all and starting over. Propulsion, Structural AnalysisMaple Bourbon caramel. Thats what were working on right now. From design through production, Siemens Technology helps manufacturers meet critical deadlines. I think thisll be our biggest flavor yet. When you only have one shot, you need a whole lot of ingenuity. [ala m beeping] the highly advanced audi a4. Pandora announcing new music Licensing Agreements with sony and universal, still working on one with warner. The companys expected to unveil an ondemand streaming service to compete with the likes of spotify and apple music. Joining us now on a cnbc exclusive is founder and ceo of pandora, tim westergren. Tim, good morning. Good morning. So, tim, break down for us exactly what the difference is between then and now, as far as how these new Licensing Agreements position you, especially when it comes to profitabili profitability and your projections for the next three to five years. So, its a world of difference for us. Pandora has historically been a leanback radio experience. Weve been tremendously successful there, 80 Million People using the service, very engaged, 24 hours and more per month per listener. And what the deals weve struck essentially allow us to do is substantially expand that product to address every consumer need. If you want leanback, you have that, if you want to lean forward, be more engaged, have more interactivity, up to a completely Ondemand Service to give you all of the feature sets any consumer wants. So, well be able to address the entire demand curve for listeners and bring to bear on that, you know, a great product and an enormous existing audience, about which we know so much. You are literally up against the biggest and most powerful names in technology in apple, amazon and google, also trying to push in this music space. Describe what gives you the confidence that youre going to be able to create this virtuous cycle, this funnel where perhaps people come into your free product and then are willing by percentages over time to expand their payment up into that 4 or 5 tier and then eventually that 10 tier, where apple music and some others reside . Yeah, so, were no stranger to competition. Weve been here before, and were very confident about our ability to execute. And if you think about what we bring to bear on this so, we have this core product right now at pandora. Listeners are very engaged. Theyve been thumbing on pandora, giving us an enormous amount of precise information about their preferences. So, we have this Huge Foundation of listeners that are very engaged about which we know so much. And not just about their preferences, but also about their usage of the service. So, owhat are the pain ponts on pandora . And well solve those with the higher paying products, subscription services, and then we can provide options for them when theyre hitting the pain points to upsell them. So, were perfectly positioned and we also bring to bear the enormous personalization engine. When we talk of interactive, Ondemand Services, were not talking about 30 million songs in a search box. Were talking about a completely personalized experience thats going to understand you, that will curate for you and be effortless and sort of as intuitive as the core radio product. And i think to win in this space, simplicity, ease of use, personalization are the keys, and i dont think anybodys got that right yet, and pandora will. The product were seeing inhouse right now is very exciting. We cant wait to get it into the hands of consumers. One of the products your competitors are trying to get right is nonmusical content, podcasts, original content and the list goes on and on. What is pandora doing and what licensing deals do you have in the works for that . Weve done some experimenting there, had some really good results, actually, from podcasts. We recently launched quest love supreme, hosted by questlove, had over a million station downloads already. This American Life serial, weve had Great Success there. I wouldnt say that sort of content is hop priority for us. The First Priority is, of course, pushing out these incremental subscription products, but were well positioned if we want to add incremental content, talk, weather, sports news and the like. I think theyll see that on the service over time, but well focus on one thing at a time. Tim, are you saying in effect that the reason we havent seen more growth in pandora subscribers is because people want these services that are going to be offered now as paid, more specific control over what song theyre going to listen to when . Is that your contention . Yeah, weve heard that loud and clear from our listeners. And if you look at our numbers, it kind of speaks volumes. We have a little shy of 80 million a month, about 100 million every three months on pandora. And really, what youre seeing there is for some portion of time, pandora listeners want to have more interactivity. You discover a new song on pandora, you want to rewind. You cant on pandora, so you go someplace else. Thats the problem were solving on this. Weve seen this for a while so we began building a product and working on these deals. By the way, i will say these agreements with labels are true winwins. We sat across the table to find a solution that works for both parties and i think pandoras uniquely positioned to do that because our incumbent business is very profitable, adsupported business that gives us a great market, and our ability to kind of introduce what we think will be attractive, midtier products for the mass consumer that i think no one else can really do. I think its a watershed moment. For listeners it will be, and for the industry as well. Tim, maybe the most important question of all, are you pro headphone jack or anti headphone jack . Like my headphone jack. I havent tried it yet. Im curious to try it. But look, you know, apple has led innovation. You know, i never underestimate them. They seem to make one right decision after another, and weve been the beneficiaries of a fantastic platform. The Iphone Smartphones have been a catalyst for us in many ways, so im rooting for them, for sure. We had keith meister, an investor in your company, on the air. Weve asked you about the prospect of a sale. Obviously, hes in favor of it and thinks the fact that youve hired centerview is a positive sign. What process is centerview running and what is the end of the year deadline youve previously given yourself . Where is the progress there and how likely is the sale . We dont set any deadlines. As the ceo, my job is to look after longterm shareholder value. Mine and the board. Were very focused on that. I think this milestone weve come across that weve just passed, signing direct deals with the labels, not only on terms that work for us and in a timely fashion, but that give us the flexibility to deliver all of the features that we had hoped for. I think sort of a real validation of the strategic choice that we made to expand the business, and we think thats really the key to opening up the biggest longterm opportunity for our shareholders. So we feel good about that. We talk to all investors, listen to everybody, and then we make what we think is the best decision in the long run, so i think were on a good path. All right. Well, tim westergren, founder, ceo of pandora. Looking forward to seeing that new product and service out later this year. Thanks for joining us. You bet. My pleasure. Still to come on squawk alley, uber launching its first selfdriving Pilot Program in pittsburgh. How are users taking the news . The citys mayor, bill peduto, joins us next. And 4quarter cofounder Dennis Crowley on apples latest operating system. All that coming up in a couple minutes. [chains dragging] [eerie music playing] [crickets chirping] [owl hoots] announcer if you dont fix them, sparks from dragging tow chains can cause a wildfire. And that could be scary. Bye, smokey only you can prevent wildfires. Upgrade your phone system and learn how you could save at vonage. Com business if you hail an uber in pittsburgh today, it could arrive with no driver. Uber is testing out its Autonomous Vehicle program, and joining us now is the mayor of pittsburgh, bill peduto. Mayor, its great to have you on cnbc. And its an exciting technology. Im wondering why you think that this technology is consumerready for pittsburgh right now . Well, i think pittsburgh is the most logical place for it to be launched. It was back in the 1970s when Carnegie Mellon created the First Robotics Program in the world. And in the 1990s, back in i think 94, they actually had a minivan travel from pittsburgh to washington, d. C. , and then back without the driver ever putting their hands on the wheel. And in 2007, they won the darpa challenge, the first time an Autonomous Vehicle traveled from los angeles to new york. So, weve been running Autonomous Vehicles in pittsburgh through Carnegie Mellon for years. Over the course of the past year and a half, weve been partnering with uber, and now its time to take it to the public. An uber engineer in a quote called pittsburgh the double Black Diamond of driving. Is that a good thing or a bad thing . Well, i guess its if you like a little challenge, its probably true. Yeah, its not just the topography. Pittsburghs a very hilly terrain. It has all four seasons. But you know, its a city that was built in the 19th century, and it wasnt really designed for automobiles. So, as one of their engineers said to me, if we can prove we can do this in pittsburg