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QUEST MEANS BUSINESS
Murdoch to Step Down as 21st Century Fox CEO; European Gains Tempered as Greece Talks Sour; MERS hits South Korean Economy; Chinese Stocks Surging; Twitter Names Jack Dorsey as Interim CEO; E.U. Tackles Tech Giants. Aired 4-5p ET
Aired June 11, 2015 - 16:00:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
RICHARD QUEST, CNN HOST (voice-over): Happening at the stock exchange, the Dow Jones is up some 38 points, over 18,000 as trading comes to a close.
The American Council on Germany ringing the closing bell, three solid if uninspired gavels to end trading on Thursday, the 11th of June.
Tonight the Murdoch empire lives on: Rupert gives 21st Century Fox to his sons.
They say goodbye, Greece. The IMF packs up and leaves Athens.
And it's a deadly threat to Korea's economy, the central bank takes action on the MERS outbreak.
I'm Richard Quest, live in New York, and I mean business.
QUEST: Good evening. Tonight the succession plan for one of the world's great media empires is revealed. Rupert Murdoch is to step down as the
chief executive of 21st Century Fox and in doing so will hand over the reins to his sons, James and Lachlan.
So what is 21st Century Fox and what is now the Murdoch empire? Join me at the superscreens and you'll see. You'll remember the organization, the
original News Corporation was broken in half. Fox is just one half of the former News Corp; Murdoch split the two off after a run of scandals which
rocked the company.
On this side, of course, it's the broadcasting, Fox, BTN (ph), FOX News, 20th Century Fox, Sky and the like. And this is the bit that he is leading
control or at least even chief executive.
On the other side, you have the News Corp, which is the publishing outlet of Collins, Dow Jones, New York, "The Sun," you get the idea. Together
they still create the Murdoch empire. But the important bit, the bit that we're talking about, is Fox.
QUEST: Can't beat a bit of rum-tum, rum-tum.
Well, 21st Century Fox is made up of the 20th Century Fox movie and television studios, FOX News in the U.S., Sky in the U.K. and in Australia.
And these are the men. Well, Rupert is now going to be handing over to James, who'll take over as chief executive. Lachlan, the other son, is to
be made the co-executive chairman with Rupert.
Now the elder Murdoch, Mr. Rupert Murdoch, he'll still be involved in the company's major decisions, the day-to-day operations will be left to James.
What they are saying, of course, is that the final decisions will still be with Daddy Rupert.
Now on the other side of the Murdoch empire, which of course is called News Corp, join me at the printing presses. And here you have the publications
that we are talking about. These are some of the U.S. titles that the "New York Post," "The Wall Street Journal," "The Sun" in the U.K., these are the
major publications of News Corp.
For now, this side of things, the printing presses appear to be left unchanged. Murdoch will continue to reign as executive chairman.
Onto the share price: how did all this perform, bearing in mind what happened with Fox and with News Corp? News Corp itself, that's the
publishing side, that was just down half of a percent on the day, whilst 21st Century Fox, they were trading higher until the news broke of the
power sharing arrangement. That's the way the market has given its view on what happened.
Pull the strands together, join me, Brian Stelter is our senior media correspondent.
BRIAN STELTER, CNN HOST: Good to see you.
QUEST: What do you make of it?
STELTER: Well, it's a day that perhaps has been expected for a long time, even for a decade, and then still a bit of a surprise because now we know
what the future of the 21st Century Fox enterprise is.
QUEST: So Murdoch remains executive chairman and co-chairman with his son, Lachlan. But James runs the company.
STELTER: That's -- well, James will be CEO, Lachlan will be co -- the executive chairman as you said. Imagine a trifecta, perhaps, a power
sharing arrangement. One source close to Murdoch said to me, he really wants his boys to run the companies together.
QUEST: Some would say, I mean, I always remember somebody telling me, if you're going to invest in Fox or News Corp, you are de facto recognizing
you're investing in a Murdoch enterprise.
STELTER: Yes, really investing in Rupert personally because the company is Rupert. Rupert is the company. Now, for the first time, we can start to
see what the future looks like if he's not the company, if his sons are the company instead.
QUEST: But they had this very strange shareholding -- it's a double shareholding dual listing, isn't it, where some shares are more valuable
than others in terms of --
QUEST: -- voting power.
What will the market -- what will the media people, what do people like you make of James running the company?
STELTER: You know we see the stock price mostly unaffected today, only slightly down. And the company's being very sensitive about this, trying
to make clear Rupert's not going anywhere; he's going to remain actively involved. Perhaps they're saying that partly to reassure investors or
reassure shareholders because perhaps the most disturbing or concerning news today is that Chase Carey, the only non-Murdoch at the top of the
company, will be leaving. He right now is the president of 21st Century Fox. He's viewed on Wall Street as the professional leader, the guy from
the outside who takes care of business.
Well, he'll be stepping down. He'll just be an adviser to the elder Murdoch.
QUEST: OK. So we have James and I'm not being unkind or uncharitable when I say he's tainted goods.
STELTER: You're referring to the hacking scandal, the phone hacking scandal in Britain. This was a terrible --
QUEST: -- he resigned as head of News Corp U.K. -- over it.
STELTER: He left his job there several years ago. But he has been rehabilitated, perhaps, or maybe he's rebounded, not hard to do when your
father owns the companies. He became the co-COO of 21st Century Fox right next to Chase Carey. So he's essentially been able to learn from Chase
Carey about the company. He's been able to be involved day-to-day. And this is a step up for him, that makes a lot of sense because of that.
QUEST: News Corp itself, the publishing arm -- this has no -- I mean, this has been the bit that Rupert loves, in many ways. He recognizes -- he
recognizes that the money may be with 20th Century Fox or the Fox side of it. But he loves the smell of the newsprint.
STELTER: Yes, he loves the print newspaper company. He'll remain the chairman of it. That part's not changing today. It already has a
different CEO that runs it day-to-day. But of course, 21st Century Fox is the one that matters. It's the one that matters most on Wall Street. It's
the much bigger of the two companies --
QUEST: And here we actually see.
Final question to you, is it a rum business, as they say, in this day and age, when dynastic -- and this is a public company. Let's be honest. This
is a public company. This is not a private family entertainment concern. It's a bit of an odd business when effectively shareholders are going to
rubber stamp, son takes over from daddy.
STELTER: There's no other media company quite like it, you're right about that. And it's unclear exactly how much control James Murdoch will have.
One of the most revealing details today is that FOX News on that board, FOX News, run by Roger Ailes, will continue to report to Rupert Murdoch.
So the power drama and the power dynamics inside FOX will continue to be interesting for a long time to come.
QUEST: And perhaps somewhat black eye, it was CNBC that got the --
STELTER: Funny you should mention that.
QUEST: It was CNBC, not FOX, both -- I had to make it quite clear. All of these companies, of course, are competitors to our own CNN, Turner
Broadcasting, parent company TimeWarner, so put the boot in while we can.
STELTER: But you're right. It was CNBC that broke the news this morning, FOX Business, FOX News was ready though. They followed up a couple minutes
later. And they were the ones who report that Roger Ailes will still report to Rupert Murdoch. Go figure. But you know, these dynamics are
going to be closely studied because some people wonder if the sons love FOX News and agree with its politics as much as the father.
QUEST: And we're glad that you're here --
STELTER: Good to see you.
QUEST: -- talking us through it. Thank you very much indeed. Excellent, thank you.
Now stocks in the United States pushed modestly higher, a look at the Dow Jones. If you join me over here, you'll see this is how the euro reports -
- we'll come to them in a second.
The market itself in New York, good, strong rally at the open; gained back just about all of the gains. So it's almost closing at the lowest point in
the session. It was solid retail U.S. sales that did it and more evidence that the economy is strengthening.
And to the European markets, as I was promising you, that's the way the FTSE -- always good just for a moment just to show you how the FTSE is the
-- that's what happened over the year. So it's still doing an extremely good performance. As hope for a deal, Team Brussels and Athens, ran high.
The stock market, the Athens Composite itself finished up 8 percent. But look at how that 8 percent went. It went straight up like a rocket and
stayed there for the whole session.
If you look at how the market has been overall, you get a much better idea of looking at and telling the whole true story. The hope ran out; European
stocks fell. That's the way the Athens market has gone since the beginning of the year or at least over the last year.
The IMF mission to Greece is ending its talks and the IMF says the two sides are just simply too far apart.
(BEGIN VIDEO CLIP)
GERRY RICE, INTERNATIONAL MONETARY FUND SPOKESMAN: There are major differences between us in most key areas. There has been no progress in
narrowing these differences recently. And thus we are well away from an agreement.
(END VIDEO CLIP)
QUEST: And that's the reason why meanwhile anti-austerity protesters staged a sit-in at the Greek finance ministry in athletes. The occupiers
held up a banner, reading, "We have bled enough. We have paid enough." And that is why you are still seeing, if you look at the Athens market, an
extremely poor performance as those talks have continued to dwindle away.
In just a moment as QUEST MEANS BUSINESS continues, the MERS outbreak playing havoc with the South Korean economy. More cases are reported and
the central bank is now shoring up what needs to take place to protect the economy. It's QUEST MEANS BUSINESS in New York.
QUEST: The MERS virus outbreak is battering the economy of South Korea. So much so that the central bank has unexpectedly cut interest rates today.
They were slashed by a quarter of a point and there's an all-time low of some 1.5 percent.
More cases of MERS are now being reported in South Korea. It has killed its 10th victim. There are now 122 cases of the virus as confirmed since
the South Korean businessman brought the disease back with him from a Middle East trip last month.
Now trips to South Korea are dropping very, very sharply. You'll see so far, we believe, 25,000 people have canceled visits to South Korea this
week alone. It's difficult to actually work out the full implications of this because very much like avian flu, very much like other viruses of this
type, it some takes time for the incubation period and even afterwards the economic effect.
Jim Rogers is with me.
JIM ROGERS, CHAIRMAN, ROGERS HOLDINGS: Delighted to see you, Richard.
QUEST: Good to see you. We're very pleased. You're one of the world's most successful commodity investors. You moved to Singapore. You are a
man we always like to hear when we're talking about what's happening in Asia.
This MERS outbreak for South Korea, which was an economy relatively robust. But this could take a very nasty toll.
ROGERS: It has already for me. I own one share in South Korea. That's Korean Air Lines. I noticed the other day it was about 51. A few days
later I looked, it was 39. I said, what happened to my stock? I hadn't been watching CNN.
MERS, you know, nobody's going to South Korea. So the price of South Korean, of Korean Air Lines has collapsed.
QUEST: The government has responded by cutting interest rates. I'm not sure what that does other than prevent an internal crisis of people
ROGERS: Well, it's a foolish panic. I mean it's -- you cannot stop MERS by cutting interest rates and you're not going to get people to revive the
economy. The only way that's going to happen is to let the economy work its course. It's not the end of the world. We've seen this before.
You remember SARS in Southeast Asia. Everybody stopped for a while. Two years later, nobody remembered SARS. It was all over and everybody had
ROGERS: If you want a real opportunity in Korea, you should look at North Korea. North Korea is perhaps the most exciting opportunity in the world -
- if I could put all of my money --
QUEST: But you can't.
ROGERS: I know. I'm an American. I'm a citizen of the land of the free.
ROGERS: I'm not very free.
QUEST: There's not the vehicles also. The risk profile is very high for - -
ROGERS: -- direct investor, which I'm not, there are fabulous opportunities.
QUEST: All right. We'll come back to Korea and all these things in a moment. I want to talk about China. Bear with me one moment.
Over in China, nothing can slow down the surging stock market and I'm sure Jim's got some views on that which -- hold yourself, sir -- because Chinese
stocks are the world's top performers this year. And there are fears over whether the bubble is about to burst.
We'll hear from Jim in just a moment after CNN's David McKenzie in Beijing.
DAVID MCKENZIE, CNN CORRESPONDENT (voice-over): These days, the hottest hangout for Beijing retirees isn't the public park, it's the local
securities company, tracking their A list stocks, places trades on their terminals.
Retired driver Mr. Shuh (ph) has been at it for 20 years. But lately, he says, it's become a lot more crowded.
"Now that the market is on a streak," he says, "more and more people are coming in. If it wasn't like this, no one would show up."
As Chinese stocks have gone on their epic bull run, tens of millions of Chinese have opened new stock accounts just this year. You could call
trading the new national pastime.
And while veterans are still in the game.
CHA ER SI (PH), FIRST-TIME INVESTOR: You have to, you know, appreciate the technology which allows you to check on your accounts everywhere
MCKENZIE (voice-over): It's the younger, often first-time investors, like Cha Suh (ph) who are powering the market.
MCKENZIE: Young Chinese think there's easy money to be made.
CHA ER SI (PH): I think so, yes. They're jumping into the market and they're making huge transactions every day.
MCKENZIE (voice-over): He says many of his friends are taking out loans to trade just to catch the wave. It's starting to sound a lot like a bubble
and it's a huge shift.
JEREMY STEVENS, CHINA ECONOMIST: There's really a flip-flop from previously, where you had a real economy that was doing very, very well and
a financial market that was in the doldrums. Now suddenly you've got financial assets that are really outperforming and dislocating to some
extent from the real economy.
MCKENZIE (voice-over): The markets have been cheered on by the ruling Communist Party. They've loosened trading restrictions and eased barriers
for foreign investors. Chinese investors are gambling that the red bull market hasn't hit the ceiling because they're taking their cue from the
But Mr. Shuh (ph) has been around. And he knows it never lasts forever.
"After all, they wouldn't be called stocks," he says, "if there weren't bubbles." -- David McKenzie, CNN, Beijing.
QUEST: When I see pictures of people sitting there, watching I'm remembered of the 1990s in the United States, dotcom boom-bust, where you
had all these little places on Times Square, where people watched what was happening in the market. It went badly wrong.
ROGERS: It certainly did. Bubbles are all the same all over the world. There was a bubble in China in 2007. This is not a bubble yet. It's an
incipient bubble. It's going -- it looks like it's going to be a bubble. I hope something -- it's my largest stock position. I have -- in China. I
haven't sold any. In fact, I've bought more last week.
If it turns into a bubble, I'll have to sell. But so far it's not a bubble.
QUEST: Right. But you're confident in this. Oh, I mean, look, I'm not denying the growth of the Chinese economy. But are you confident that the
underlying statistics that we really know what's happening, that the bad loans, the bad debt, the banking crisis, the shadow pools, you really know
what's going on there?
ROGERS: It sounds like America, doesn't it? Nobody ever knows anything unless they watch CNN, unless they watch your show.
No, of course not. I'm scared to death whenever I invest in any market, Richard, including China. But I don't see a bust. I see a high-priced
market. I see a market, it could turn into a bubble. I'm not selling yet.
QUEST: We're glad you're here to talk about this. Thank you, sir.
ROGERS: Thank you.
QUEST: Good to see you on this side of the Pacific.
News to bring you at the moment. It's a brutal world. I'm reading it straight from -- yes I'm old-fashioned and I still have a BlackBerry.
Twitter has announced that on Twitter, that the chief exec, Dick Costolo, is to step down as chief executive. He'll remain on the board and Jack
Dorsey has been appointed -- he's the co-founder, you remember Dorsey.
Now Twitter's had all sorts of issues over where the company is going, what its strategy, what its commercial regime's going to be.
Dorsey's back as the interim chief executive effective July the 1st. I'm not sure if you're going to fire your CEO while you're going to wait until
the end of the month. We'll talk more about it after the break.
QUEST: Breaking business news or business breaking news, effective July the 1st, Twitter says the chief executive, Dick Costolo, is stepping down.
The company's chairman and co-founder, Jack Dorsey, has now been named the interim chief executive. It's bad enough to be fired or to leave. But
when the market gives you a rousing applause for going -- the stock is up 8 percent.
Brian Stelter is with us. Stelter means business tonight.
Did he fall? Was he pushed? Does it -- what does it say?
STELTER: When you read a statement, well, it becomes very crystal clear is that this was not something he wanted. This is something he is doing
because the board has asked him to. A couple other telling details, Richard, in the press release, one is that Jack Dorsey will be taking over
effective July 1st, in just a couple of weeks.
But the board has already created a committee to search for a permanent CEO. In other words, Dick was not going to stick around waiting for them
to find a new CEO. Maybe that's why Jack is coming in in the interim. Dorsey will also stay the CEO of his current company, Square, you know, the
company he co-founded in 2009. He'll remain the CEO of that while also helping run Twitter in the meantime.
QUEST: What's -- why is Dorsey being pushed out? I mean, in all the matrices that you look at -- number of page turns, number of people, which
is the one that is going so badly wrong for Twitter at the moment?
STELTER: Fundamentally, the concern about Dick Costolo's reign over Twitter has been that growth is not happening as fast as investors want it
to happen and not as fast as competing social networks. You look at Facebook; it is giant compared to anything else in the market but
especially Twitter. Twitter has not been able to gain new subscribers as quickly as Wall Street wants. It's able to hold onto its existing members,
lots of people love it. But it's not able to gain enough new users.
QUEST: But Twitter has effectively become almost like a de facto news agency. Those of us in the business -- news business -- love it because
we're getting announcements direct from the horse's mouth in a timely fashion.
STELTER: In some ways it's too insidery, perhaps. It's not necessarily appealing enough to new people, to outsiders. As recently as a couple of
weeks ago --
QUEST: Let me show you this. Here we've got a tweet that comes, "Welcome back @Jack from Dick Costolo.."
STELTER: Trying to play nice, I suppose.
But just a couple of weeks ago, Costolo was all over television, saying he wasn't going anywhere; he had no plans to leave. He was very confident in
the company's strategy. Obviously the board has reached the conclusion they disagree and they want a new vision for Twitter going forward to
figure out how to make it a much bigger enterprise and to diversify its revenue streams.
They've done some work with advertising but they need to diversify the revenue streams.
QUEST: But if you take Google, with all that it does and its growing empires, and then you look at Facebook, you take Vine, you take Periscope,
which is part of Twitter, if you take all of these things, what does -- where does Twitter fit into all of this?
STELTER: Where does it go? What does it become? Right now it is still the news feed for the most recent stuff. There are some people out there
saying it needs to become more like Facebook, give you the best, the highlights, not just be about reverse chronological order of the most
There's also that point about Periscope you made. Periscope may end up being the most important investment that Twitter ever made, that idea of
live video. But right now it is still in an embryonic stage. Now a new CEO will figure out what to do with it.
QUEST: Sir, thank you very much.
STELTER: Good to see you again.
QUEST: You'll be sitting in this chair before.
STELTER: A phrase no one has ever said.
QUEST: The online retail giant, Amazon, is finding itself the target of another investigation in Europe. This time it's over business practices
that could limit competition with other companies in the ebook industry, the second time the European commissioner Margrethe Vestager has targeted
Amazon after just eight months in the job.
Joining me now is the commissioner, the competition commissioner.
Why are you going after Amazon again?
What have they done so wrong for you this time?
MARGRETHE VESTAGER, EUROPEAN COMMISSIONER FOR COMPETITION: I would never dream to go after a company. What we're aiming at is to investigate our
litigation for a certain conduct, a conduct where behavior, which may limit competition and therefore also innovation.
QUEST: The perception will be, bearing in mind the other -- the other actions that you've taken, whether it's Google or other actions against
U.S. companies, that once again -- and you know this, Commissioner. You've heard this -- you've been on this program defending your position.
But they'll say you're anti-American. You're anti-e-commerce.
VESTAGER: Oh, by no means. I'm just very much in favor of fair competition. And that is the reason why, when we get complaints, for
instance, from U.S. companies, well, if we think there is something about it, then we'll look into the matter because fair competition is thousands
and thousands of businesses just competing by the book.
And then, of course, we want to, you know, take a closer look if there's something that concerns us.
QUEST: Now it's an investigation at the moment. Assuming your investigation drums up something -- and I'll concede, I'm jumping the gun
here -- you'll be looking either for remedies or cease and desist activities, won't you?
VESTAGER: Oh, but there's no reason to jump the gun because we do our investigation in a neutral way. We have no decision yet. We have no, you
know, secret stores or made up our mind in secrecy. We do this in an open and transparent way with the company. And we have a truly open mind. And
therefore, it's way, way too early to try to guess the outcome.
QUEST: The ebook industry, as long as I have -- as ebooks have been around, since the first ones came out, they have bedeviled the competition
industry, haven't they because the ability to shut out bricks and mortar, to corner markets, are really -- is really quite considerable.
Perhaps more so than most other industries, would you agree?
VESTAGER: Well, I think it depends very much on the -- on the markets because in some national markets, you also see that there is a boom in the
old school book, on paper. And you see people being, you know, using those, being very preoccupied with the ebook when they go on vacation,
enabling them to take a lot of books.
And at the same time, falling in love with just the book on paper, on the beach, where that is --
QUEST: Ah, sounds like you're a person who like the crinkle of the page, Commissioner.
VESTAGER: Basically I'm an either/all. A book may come as an ebook or a book on paper. I love both.
QUEST: We'll talk to you more about this as your investigation continues. Thank you, Commissioner, for joining us this evening from Europe.
QUEST MEANS BUSINESS, a very busy -- I promised you it was a busy hour when we began. And we've still got so much more to go.
Activists in Israel are trying to stop money from flowing into the country and major international companies are being caught in the middle.
Businesses are fighting back -- QUEST MEANS BUSINESS.