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First Move with Julia Chatterley
Indian Hospitals Struggle for Oxygen as More Lives are Lost, Warren Buffett, the Sage of Omaha Says the U.S. Economy is Red Hot and so are Prices; Epic Games Challenging Apple in an App Store Battle Royale. Aired 9-10a ET
Aired May 03, 2021 - 09:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[09:00:22]
JULIA CHATTERLEY, CNN BUSINESS ANCHOR, FIRST MOVE: Live from New York, I'm Julia Chatterley. This is FIRST MOVE and here is your need to know.
Supply shortages. Indian hospitals struggle for oxygen as more lives are lost.
Bullish Buffett. The Sage of Omaha says the U.S. economy is "red hot" and so are prices.
And courtroom clash. Epic Games challenging Apple in an App Store Battle Royale.
It's Monday, let's make a move.
A warm welcome once again to FIRST MOVE. Fantastic to be with you and have you with us to kick off a brand new month together. This week, actually,
it's all about the Ps: pandemic. The entire world, of course, watching developments in India and the arrival of aid to try and help ease the
nation's suffering. Prices: inflation talks are heating up with famed investor, Warren Buffett saying the U.S. economy, as I mentioned there, is
red-hot.
And speaking of red-hot, payrolls, U.S. jobs numbers this week expected to show a net one million jobs recovered in the past month, and one more,
premarket trade in the U.S. positive. The bulls hoping to see stocks break out after two weeks of sideways action.
Just to give you some perspective here, we are three-quarters of the way through earnings season, a whopping 85 percent of S&P 500 firms have topped
forecasts and that is due to a relatively low expectation, or is it due to firms truly outperforming?
Well, I think it's a mix of the two and that's the reason for short-term consolidation especially when the majors are still sitting at record highs,
and just to be clear on that heating up of prices, the mention of inflation in the first quarter tripled year-on-year. That's the biggest jump, in
fact, since 2004.
Now from red-hot to recovery rebounds across Europe and Asia, too. German consumer spending soaring in March. That was up 11 percent year-over-year.
Hong Kong's recovery also on target, too, with Q1 GDP growth hitting an 11- year high after six quarters of contraction.
No ordinary recession is going on here. There are clear reasons for recovery optimism, but of course, that recovery has to include addressing
India's COVID crisis, and that's where we begin today's drivers.
And while the official case count in India heads north of 20 million, many believe the real picture is far worse. As essential medical supplies
dwindle, international aid is coming, but for some, it's simply too late as Sam Kiley reports from New Delhi.
(BEGIN VIDEOTAPE)
SAM KILEY, CNN SENIOR INTERNATIONAL CORRESPONDENT (voice over): Tears for a much-loved colleague killed colleague, Dr. RK Himthani killed by COVID-19
in the same hospital where he had spent a year treating other victims of the coronavirus.
Grief and the inevitable silent question: who is next?
He died here in this intensive care unit because the Batra Hospital where he worked ran out of the most basic necessity -- oxygen.
He was not alone. The Medical Director of the Hospital, SCL Gupta gave the midafternoon casualty figures in this war against the virus.
DR. SCL GUPTA, MEDICAL DIRECTOR, BATRA HOSPITAL: Eight patients died today.
KILEY on camera: Eight?
GUPTA: Died just now, and five patients, they are under resuscitation, may or may not survive. Just because in the capital City of Delhi and because
of want of oxygen, which is the life line.
KILEY (voice over): He knew the chances of reviving the five were slim.
KILEY (on camera); When you heard this morning that you had just a few hours of oxygen and then eight patients die, what does that do to you, to
the soul of a doctor?
GUPTA: I cannot explain my feelings. We are dying inside. We are the saviors, not the murderers. And we cannot express our feelings. I cannot
express my feelings to you, sir, how I am feeling inside.
KILEY: Is it destroying you?
GUPTA: Yes.
KILEY: How long have you been a doctor?
GUPTA: What, sir?
KILEY: How long have you been a doctor?
GUPTA: Forty five years.
KILEY: It must be soul destroying. I can't imagine what it must be like for you. I'm sorry.
GUPTA: I'm sorry, sir.
[09:05:08]
KILEY (voice over): Over the next hour, four of the five resuscitation patients died.
KILEY (on camera): In a space of about two hours, when the oxygen ran out, 12 people died in this hospital which in every other respect is a first-
world facility. They simply asphyxiated.
KILEY (voice over): The hospital copes by advising patients to source their own supplies of oxygen to cover its erratic supplies.
Local and international efforts to get enough of the gas into India's capital are still failing. India's central and national government have
been unable to explain the oxygen shortages and as the number of people infected soars in India along with the daily death toll, the Batra
Hospital, like many others, will admit no more patients. There's no point.
UNIDENTIFIED FEMALE: We will not take more admissions because we don't want people to die in front of us, so they can go to other hospitals where
oxygens are available.
KILEY (voice over): Dr. Kishore Chawla runs a Hindu temple charity. He pulled through COVID before the oxygen started to run out.
KISHORE CHAWLA, CEO, CHHATARPUR MANDIR: From housekeeping and even the nursing staff, the supervisor all are working very hard.
KILEY (voice over): Fair enough. But the India government's failure to ensure basic supplies to hospitals in the face of a long-term pandemic is
simply not going to wash.
(END VIDEOTAPE)
CHATTERLEY: And Sam joins us now. Sam, a harrowing weekend for the people involved here, for their families, and for you, too, having these
conversations. Just explain where you are now, and what's the situation with oxygen there?
KILEY: Well, Julia, I'm in an NGO, it is basically a camp where a local NGO had been able to provide some oxygen, and they provide the oxygen by
driving many hundreds of miles. They're even expecting a delivery, they hope, from Mumbai, which is 1,200 miles by road away.
But these three cylinders here have all run out. There are only two now that are functioning. This patient here arrived about an hour and a half
ago. He is in a very, very bad state. His family have told me that they, Julia, have been to 10 or 20 -- rather 20 -- more than 20 hospitals in
search of treatment, and this is where they've ended up.
And frankly, this is, as my report rather indicated, this is often a better place to be since there are better chances of oxygen. Now, that is the
reality on the ground, but this is the point of view as expressed by the -- none other than the Minister of Health from India.
(BEGIN VIDEO CLIP)
HARSH VARDHAN, INDIAN HEALTH MINISTER (through translator): The Indian government has provided data for appropriate oxygen production according to
demand, and according to the production, states have been allocated their quotas. Delhi has been allotted more oxygen than what they probably asked
for.
(END VIDEO CLIP)
KILEY: Now, Julia, clearly that flies in the face of reality, but the national government is very much on the back foot over this. It has just,
in the last few hours said it's going to mobilize all medical students to try to help cope with the COVID crisis, but still giving out mixed
messaging saying it is desperately trying to produce oxygen and at the same time saying they are already producing enough.
I can tell you what is absolutely sure, there isn't enough here and people are dying -- Julia.
CHATTERLEY: And we can see that, Sam. What about supplies from elsewhere in the world? I mean, we've seen this response from the international
community saying, look, we're going to send supplies. We're going to help.
Sam, what are you being told there about when things will arrive?
KILEY: Well, we know that quite a lot has arrived. We've seen it on the television. There have been aircraft from the United States, United
Kingdom, France, Germany, the European Union in general, also Asian countries have been contributing.
But what we haven't yet seen is any effect on the ground here in Delhi nor have we heard reports of elsewhere for example, neighboring Uttar Pradesh
where my colleague, Clarissa Ward was over the weekend. She was telling me, and she has got a report coming up on this later, that the situation there
was just as catastrophic.
So where there is a heavy infection of COVID, there doesn't appear to be enough oxygen no matter the claims of the government and no matter the
level of effort that is being put in by the international community. At the moment, it is simply not getting through.
CHATTERLEY: Yes, arriving in the country is one thing, but actually getting it to the places where it is needed is another thing entirely.
Sam, thank you for being there and for bringing that report to us, and our hearts are with the families behind you and of course, he is a very young
man there as well. So, we keep our fingers crossed for his recovery. Thanks, Sam.
Okay, later in the show, we'll hear from the Lancet COVID-19 Commission's Task Force for India on what more needs to be done.
[09:10:06]
CHATTERLEY: Okay, let's move on. The stark divide between India's terrible suffering and America's ongoing recovery could not be greater.
Famed investor, Warren Buffett is warning of, quote, "very substantial inflation" as the United States heals and companies raise prices. Buffett's
second in command at Berkshire Hathaway also blasting Bitcoin and SPACs at this weekend's shareholder meeting. Christine Romans joins us now.
Christine, he said it and it is clear, this is a very unusual recession in terms of what they are seeing and the recovery, but it was his comments on
prices: "We're raising prices. Other people are raising prices, and everyone is accepting it."
CHRISTINE ROMANS, CNN BUSINESS CHIEF BUSINESS CORRESPONDENT: Yes, and he says, look, it is substantial inflation, not transitory, the word you're
hearing from the Fed, but from Warren Buffett, he used the word "substantial." And he said, 85 percent of the economy right now is in
super-high gear. That super-high gear means people have more money in their pockets. They are paying higher prices, and companies are raising prices.
Pointing out that furniture business and housing business, those are important businesses for Buffett's company, they are seeing higher steel
prices and lumber prices filter through there.
When you look at some of these consumer products companies, they have already said, a handful of them already said they will be raising prices in
everything from diapers to Kleenex and all kinds of different consumer products.
So, we know the prices are coming right now and gasoline prices are also higher. So just all the way down the line, Buffett is saying, you're seeing
these substantial increases and it is because of the rapid deployment of funds from Congress, right, they got money out there to people. People have
the money. They're spending the money. Prices are rising and consumers are chasing those higher prices.
CHATTERLEY: Yes, and that's the problem. This is the conundrum of pumping the system with money. You fuel asset prices of all shapes and sizes, and
it is those with the least disposable income that spend on these essential products as well that feel the heat.
But other asset prices like SPACs also raised some interesting comments and some interesting comments about how these actually work in practice and, of
course, the performance after a company goes public.
ROMANS: It is so interesting the way he and his longtime lieutenant, Charlie Munger poo-pooed the SPACs. In fact, poo-poo is too nice of a word
to say what they were saying about that.
Charlie Munger called them shameful, immoral, stupid -- I mean, these are the words they were using to talk about them and Warren Buffett said they
are a killer for sort of his acquisition attempts, right, because you have all this money out there that is -- sole purpose is to go buy stuff and has
to buy stuff in a couple of years, so that makes it hard for the $145 billion he has to deploy to go find -- to go find hunting targets.
So that's an interesting sort of -- and he said that they won't go on forever like this. This is -- he didn't say the word "fad," but he hit it
almost sounding like a fad. This is the way Wall Street works. Wall Street goes where the money is and this is where the money is now and that is
where it will be chasing.
He talked about Bitcoin, cryptocurrencies, but also Robinhood and he used the word "casino" to talk about retail investors and the ease with which
retail investors can, without any kind of real information and with borrowed money, can enter into the stock market right now. So just a
feeling of bubbles all around here from the Buffett team this weekend.
CHATTERLEY: Yes, the quote on the SPACs, of course, the more you get at that, the sillier your civilization is getting. It was a punchy comment.
And of course, it is tough if you're a distressed asset buyer finding some form of distress and cheap valuations and this market is really tough. What
do you do? You buy Apple and that is what he resorted to.
ROMANS: And he sold Apple last year and said that was one of those mistakes.
CHATTERLEY: You're right.
ROMANS: He said he made that mistake last year and acknowledged, so Warren Buffett does acknowledge when the Oracle of Omaha gets it wrong, so said
they should not have sold Apple last year.
CHATTERLEY: Yes, I am cheeky this morning. Christine Romans, thank you for that.
And as Christine mentioned, cryptocurrency also being mentioned. Cryptocurrency, Ethereum soaring to an all-time high this morning,
quadrupling its value this year. The rise of the world's second biggest cryptocurrency threatens to overshadow better known rival, Bitcoin.
Paul La Monica joins me. And there are huge differences in the underlying blockchain technology and this is critical, I think, to why we are seeing
this catch-up in Ethereum. Paul, talk us through it.
PAUL LA MONICA, CNN BUSINESS REPORTER: Yes, either way, you are not as cheeky, Julia as Charlie Munger with his comments about cryptocurrency,
which for a minute, with Ethereum, what is very interesting, as you point out, it is overshadowing the rise in Bitcoin which is also dramatic.
Bitcoin is double this year, but Ethereum has really caught on because the Ether blockchain is the crypto payment of choice for all of these NFT sales
that have really taken the art and collectible world by storm.
You've already spoken to Beeple before about his record-setting auction at Christie's, selling a piece of NFT artwork for nearly $70 million. The
baseball company Topps is going public through a SPAC, so it is combining two fashionable things in one partly because Topps has caught on and is
also launching its own NFTs for baseball cards and other collectibles.
So, Ether is riding that train and I think that is the big reason why Ethereum prices are now, you know, up as much as they are and it is $370
billion market value for Ether, which is still significantly lower than Bitcoin's $1.1 billion, but when you take -- I'm sorry, $1.1 trillion --
when you combine the two, they make up about two-thirds of all the market value of every cryptocurrency in the world.
[09:15:45]
CHATTERLEY: Yes, the big deals in the space. The other one that caught my attention as well, rumored European investment bank could launch a digital
bond sale on the Ethereum blockchain network as well, so then you're really talking.
Okay, let's talk about Munger's comments about Bitcoin. "I hate the bitcoin success. I don't welcome the currency that is so useful to kidnappers and
extortionists and so forth, so I think I should say modestly that I think the whole development is disgusting and contrary to the interest of
civilization." Wowsers.
LA MONICA: Tell us how you really feel, Charlie. He is not one to mince words, and not hold back at all. And it was telling as Buffett just set him
up. It was like a big, fat softball over home plate for Munger to hit out of the park.
Buffett said he has learned his lesson. He knows a lot of people watching the stream on Saturday were probably Bitcoin bulls. He has been wrong about
Bitcoin, so he is not going to double down on bearish comments. He let Munger do that for him.
And I think Munger is right in that cryptocurrency, the epic rise is insane and probably a bit of a bubble, but I think what's getting tiresome is
hearing some of the criticisms from people Like Munger about it being the crypto of choice for organized crime and extortionists and kidnapping. This
is a legitimate part of the financial world right now, and I think Munger might be naive to not look at the fact that PayPal and Square, which last I
checked are not the mob, are going big on Bitcoin.
Big Wall Street firms are making investments in cryptocurrencies. The Federal Reserve is starting to talk more about whether or not a digital
dollar might make sense. Crypto is here to stay. Buffett and Munger may not like it, but the new generation of investors, I don't think they honestly
care.
CHATTERLEY: No, and I was about to say, what about the mighty U.S. dollar and suitcases of cash used for elicit purposes, quite frankly? Very
quickly, I just looked at the data on this as well. According to Chainalysis, the illicit share of crypto activity for all sorts of reason,
they don't capture it all, I don't think, 0.3 percent of transactions, another coin firm saying $10.5 billion. Even if it is two percent of
transactions, that's $60 billion, and compare that to the size of the market that you were just talking about. I don't know. Paul, work needed
before you shout about this.
LA MONICA: Yes.
CHATTERLEY: Yes, we concur, my friend.
Paul La Monica, thank you for that.
All right, still to come on FIRST MOVE, court room drama, Epic's lawsuit over Apple's App Store goes to trial in a landmark case that could change
the future of technology. And second home startup, Pacaso gallops to unicorn status in a record five months, but can it keep up the pace?
Stay with us. That's all next.
(COMMERCIAL BREAK)
[09:21:29]
CHATTERLEY: Welcome back to FIRST MOVE, and back to our top stories. The COVID crisis spirals in India.
Overwhelmed hospitals are sounding the alarm. As we heard earlier, 12 people died in a New Delhi hospital on Saturday after oxygen supplies ran
out. The government has been ordered by the Supreme Court to find more.
Vaccines are also hard to find, despite a new drive to offer shots to 18 to 45-year-olds, multiple states say they don't have enough supplies. The
world is trying to help respond.
This aid arriving from the UAE and Thailand. Corporations also acting. Pfizer is sending millions of dollars' worth of medical supplies, too.
Chandrika Bahadur is the Chair of Lancet Commission on COVID-19 India Task Force joins us now. Chandrika, thank you so much for your time this
morning.
Just -- can you give us your assessment of what we've seen even in the last 48 hours?
CHANDRIKA BAHADUR, CHAIR, LANCET COMMISSION ON COVID-19 INDIA TASK FORCE: Thank you, Julia, for having me. I think what we're seeing continuing now
into its third week is a really virulent, really massive wave of COVID infections.
There are some glimmers of hope emerging, very, very slight ones. We've seen the number of new infection in the State of Maharashtra which has been
the highest contributor of cases decline gradually, but fairly consistently over the last week.
We've seen a couple of other states where the numbers seem to be going down as well, but we are still very much in the throes of it and where it has
really hit is in terms of medical supplies and medical infrastructure, and that's what I think has been dominating the headlines for the last few
days.
CHATTERLEY: You mentioned that we are into the third week now. I know, it is difficult based on modeling and the cases that you're seeing, but have
you, in your own mind, a sense of how many more weeks based on what we're seeing India is still going to be battling and the healthcare system in
particular is going to be pushed to the limit, if not beyond.
BAHADUR: I think a lot of that does depend on the policy measures that get taken from now on.
You know, going back to the case of Maharashtra, they have been in lockdown since the first week of April and you'll see the effect of that and that is
pretty much the strategy moving forward for a lot of other states, which is to try whatever can be done to reduce the number of transmission rates
because that eventually will bring the numbers down.
There are some epidemiological estimates that say we are closing in on a peak, but these are all projections. So it's hard to tell whether the peak
will come in the middle of May as several have projected, whether it will take a little bit longer. But we know that that lag, the case rises by a
couple of weeks, so we're going to continue to see high mortality for the month of May.
CHATTERLEY: I mean, I have been very pointed about making suggested recommendations, and it comes down to the question of how do you break the
chain of transmission of the virus that we're seeing?
And in a country like India, when we're talking about lockdowns, it surely has to be targeted because the economic impact of telling people to stay at
home and not allowing them to go out, particularly for the poorest people in the nation is equally bad if not worse than what they're facing in terms
of the virus.
How is that best tackled, Chandrika, and are we finding the right balance?
BAHADUR: You're absolutely right. Lockdowns are a double-edged sword particularly in a country like ours.
[09:25:10]
BAHADUR: The recommendations that we have made have been essentially to not think about lockdowns in a binary sense of lockdown versus no lockdown,
but really think of a range of options in terms of even the kind of closures we are talking about, and one of the things that we recommended in
our most recent report is to think about how we can classify different parts of the country based on the spread of the pandemic.
And so there are still a large number of districts in the country that are not seeing the wave that we are seeing in Delhi and in Uttar Pradesh and in
other high-risk spots of the country. And over there, you can probably have a strategy that is less about lockdowns and much more about wearing masks
and distancing and banning gatherings, things that in place should not allow numbers to rise to the levels they have risen.
In other places, however, unfortunately, there is no way out where the numbers are what they are other than shutting down for a few weeks. We've
also seen evidence from around the world that one week lockdowns or weekend lockdowns are not effective.
So when you do shut down, you do need to shut down for about six weeks at a minimum before you really start seeing a significant decline. That's what
we're seeing in Maharashtra for example.
And so, I think the balance there is to make sure that provisions are made for the poor because this could be devastating, and it's a terrible choice.
And you know, I have a lot of sympathy for the government because this is a difficult choice to make under all circumstances.
When we, when the Commission Taskforce set up work about a couple of months ago, our focus was on recommendation that would not bring us to this point,
but we are at this point, and so these are the choices in front of us. None of them are good.
CHATTERLEY: You said you had sympathy for the government. Do you also understand some of the criticism out there that India shouldn't have been
so caught off guard by this latest wave? And I guess tied to that, are you confident this is the last wave once we get through this that India sees
and actually, that the government will be better prepared if there is another?
BAHADUR: Yes. So, of course, I'm familiar with the criticism and I think there are two aspects to the criticism.
One is the prediction of the wave itself. And I think there were a lot of epidemiologists and a lot of experts who did think that there could be a
second wave and that there was the possibility of a second wave sometime around now.
I do believe that the virulence of the wave has caught everyone by surprise because this is a wave that has been driven by several of the variants that
have emerged over the last few months and we did not have the intelligence and the information to really predict that at the time.
So, yes, there could have been better preparation, absolutely.
Once the wave began in one part of the country, that was the time actually for the rest of the country and for other states in the country to
preemptively try and impose restrictions, try and ban gatherings, try and do a lot of things that could have probably stemmed the increase in
transmission rates that followed from the first few places in the country where the wave began.
To your question as to whether this is the last wave, I doubt that very much. We've seen all over the world that epidemics like this go through
several waves before they finally become endemic. But if we are able to learn our lessons well from this wave, if we are able to plan effectively
and proactively and ramp up our medical system and practice all of the interventions we need to keep people safe, COVID-safe behaviors, if those
are communicated and practiced, then I don't think we need to have another wave that's quite like this one.
CHATTERLEY: Fingers crossed and work together as a world to ensure that we're maximizing vaccine supplies as well and manufacturing.
Chandrika, great to have you with us. Thank you so much and stay safe, please.
Chandrika Bahadur there, the Chair of Lancet Commission on COVID-19 India Task Force, thank you.
All right, coming up in less than two hours, a special edition of "Connect the World" India's COVID catastrophe is an in-depth look at how bad it is,
how it happened and how help can be achieved. Stay with us. We are back after this.
(COMMERCIAL BREAK)
[09:32:31]
CHATTERLEY: Welcome back to FIRST MOVE. U.S. markets are up and running on the first trading of the month.
The majors close to record highs once again with the NASDAQ coming off its sixth straight winning month. Lots of talk, too, of how the unexpectedly
strong U.S. recovery will affect the stimulus picture. Washington watchers suggesting that President Biden will need to trim his massive spending
proposals to get them through Congress as the rebound surprises to the upside.
Plus, will April showers lead to May pricing powers? Fed Chair, Jay Powell calls the latest inflationary trends transitory. The fear is that rising
prices may be more systemic amid tighter labor markets, supply bottlenecks and soaring prices for commodities as we heard from Warren Buffett and team
over the weekend.
Now, there are brands that almost as old as the internet itself, AOL and Yahoo are being sold off by Verizon in a media deal worth $5 billion. Paul
La Monica is back with us.
Paul, we are keeping you busy this morning. The message when this deal for me from Verizon is that they simply can't compete with Facebook and with
Google with ad spending revenue. So they are saying, okay, we'll give it to someone else to have a go.
LA MONICA: Yes, exactly, Julia. I think there are two things there. That point that you made is spot on. Clearly, there are two major tech media
firms dominating digital advertising and Verizon is not one of them.
But, also, I think it is a sign that Verizon CEO, Hans Vestberg really never probably liked this business all that much to begin with. It was more
from his predecessor, Lowell McAdam that these deals were done. Vestberg making no secret that Verizon's future is in 5G and AOL and Yahoo don't
really fit into that.
So I think that what I'm very interested in seeing is what Apollo, the new owners, are going to do now that they are renaming what used to be Oath and
then became Verizon Media, it is going back to Yahoo.
And I think, in some respects that makes a lot of sense. Yahoo is a brand that, yes, it's an old internet brand, but it still has some cache. I mean,
we talked about Warren Buffett before and Charlie Munger. The only way to watch that was on Yahoo Finance. Yahoo Sports is a very significant force
in the world of fantasy sports, which is a growing business.
So I think it's going to be interesting to see if Apollo doubles down on sports, on finance and news more broadly.
[09:35:00]
CHATTERLEY: Cache and cash -- I was looking the revenues of this, $1.9 billion worth of sales in Q1. I mean, this is not to be underestimated if
they can extract greater value out of this Apollo and focus on it.
LA MONICA: Yes. It definitely is a brand. Well, Yahoo, probably more than AOL, obviously, that still is something that resonates with digital
consumers and there is something to be said for the fact that you might have more revenue opportunities beyond advertising as well.
Does it make sense for Yahoo Finance and Yahoo News to have more subscription products? Perhaps, you're likely to see more in the world of
fantasy sports where you can charge people you know, to pay for playing a season. That's something that I think the new owners of Yahoo will probably
explore a little more closely.
So I think advertising and other revenue opportunities could help make what is now going to be just known as Yahoo, again, not the next Google or
Facebook, but maybe a strong third contender.
CHATTERLEY: Watch this space. That's a bold call, my friend, a bold call. Paul La Monica, thank you for that.
Okay, a fierce battle now between Apple and Epic Games begins in Federal Court today. The maker of Fortnight claiming Apple's App Store is anti-
competitive and monopolistic. But Apple says it's just one of many ways for developers to distribute their apps.
Clare Sebastian joins me with more. Okay, in English, what the battle here is whether or not Apple is entitled to take a 30 percent cut of revenues
that come from in-app purchases. This is the bottom line, Clare, on what they're battling over.
CLARE SEBASTIAN, CNN BUSINESS CORRESPONDENT: Yes, exactly, Julia. This is going to be a pretty sort of interesting case as it unfolds. We expect to
see fireworks. The two CEOs, Tim Sweeney of Epic Games and Tim Cook of Apple are expected to testify. They have already been sparring in front of
the judge.
The key argument for Epic is not just that Apple has a monopoly because that in itself is not illegal, but that Apple uses that sort of
monopolistic power to force developers to pay this 30 percent commission, not only on app downloads, but on in-app purchases, and thereby stifles
competition and hurts the consumer.
Now, Apple says not only that Epic Games acted in bad faith in provoking this lawsuit in the first place, you'll remember they did this last summer
by, you know, unilaterally acting against the terms of their contract with Apple and launching their own in-app payment system. Apple, then kicked
them off the App Store, Fortnight that is, and they launched this whole sort of campaign to paint themselves as the victim in this. Apple says that
was in bad faith.
They also say, A, that they're not a monopoly. There are many, many ways, particularly with games for consumers to download them. They also say that
many of their apps are free, so Apple doesn't even get revenue from those apps. And they say that they -- you know, the fees they charge, the 30
percent are comparable across the industry. So that's Apple's argument.
This is going to take, Julia, a couple of weeks. And if you look at the attitude of the Judge in some of the court filings that are out there, it
really could go either way here.
CHATTERLEY: Yes, and that's the challenge because what you are doing here is you're challenging the entire business model really of how Apple is
running these app systems and the 30 percent commission that they take. So it's not just relevant for Epic Games, it will be relevant for every app
developer on the operating system, as you mentioned, but also, it applies to the likes of Google as well and how they operate. So this could really
blow a hole in their business model for all of these Big Tech giants that use this kind of system.
SEBASTIAN: Yes, this kind of sort of marketplace that has become so ubiquitous. I think that's the central question here. Can you run this kind
of marketplace under your own rules when you're talking about a billion iPhone users or Amazon, where they of course have the marketplace, but that
competes with their own products? I think this is going to be really closely watched.
Also for Apple, which is facing other legal headaches. Okay, Europe, which charged it with abuse of its monopolistic power last week. But again,
Julia, I think it's worth bearing in mind, what happens if it goes Apple's way? Are we then sort of now entrenched in this world where the Big Tech
companies are just getting bigger and bigger? And then we go back to the question of, is that actually a force for good?
CHATTERLEY: Yes, unquestionable and back to the regulators to answer all of those. Clare Sebastian, thank you for that.
All right, up next. The runaway unicorn startup, Pacaso wants to democratize second home ownership in a red hot real estate market. We've
got the CEO to explain.
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[09:42:40]
CHATTERLEY: Welcome back to FIRST MOVE. Real estate startup, Pacaso is officially the world's fastest unicorn. Within five months, the company hit
a $1 billion valuation. Pacaso sells co-ownership shares in second homes. Properties are divided into fractions that are bought and sold separately.
The company makes its money through a 10 to 12 percent markup on each property and a one percent home management fee.
And joining us now is Austin Allison, CEO and cofounder of Pacaso. Austin, great to have you on the show. Did I get that right?
AUSTIN ALLISON, CEO AND COFOUNDER, PACASO: Thank you for having me. Yes, you nailed it exactly. So Pacaso is on a mission to make second
homeownership possible for more people.
We are effectively creating a whole new category of ownership where you can buy a beautiful second home in a beautiful location for as little as one-
eighth of the cost, and it is analogous to do-it-yourself co-ownership.
Imagine if you and a group of friends decided that you wanted to own a home together in the second home market. You can certainly do this on your own,
but it's very difficult. So Pacaso it makes it easy. We handle everything from aggregating the owners to making available financing to managing the
home throughout the life of the property.
CHATTERLEY: So it's like a timeshare.
ALLISON: No, it's actually very different than a timeshare. The big differences are number one, it's a single family home as opposed to a
commercial hotel or resort product. But number two and probably most important, probably, this is true home ownership as opposed to resort
timeshares which are the rights to use.
And here's the test I like to use, Julia, imagine if Pacaso, the company, were to just go away and disappear. In that scenario, the owners would
still own a real home in a real market that has real intrinsic value. You can't say the same about a commercial timeshare program.
CHATTERLEY: Okay, so talk to me about how many people have got involved in this. And what happens if a person buys an eighth for example, or two-
eighths, and then decides, you know what, I want to sell it on. Are there any restrictions on who they sell it to? And do you get a cut of that sale
when they sell it on, too?
ALLISON: Yes, so Pacaso and co-ownership in general is growing very quickly, faster than we could have ever imagined. We've had more than a
million people visit our website and more than 60,000 people inquire about buying a Pacaso home or learning more just in the last six months following
our launch. So there's an incredible amount of demand for second homes at a lower cost.
[09:45:10]
ALLISON: In terms of how it works, yes, you're exactly right that you can buy more than one eighth. It all depends on how often you plan to use the
home. So, what we typically find is that one or two families will purchase a quarter of the home, and three or four families will end up purchasing an
eighth.
So on average, we see about five to six families per home. And the way that Pacaso makes money is we charge a service fee, that's 12 percent of the
total price and that covers all of the services that we provide from aggregating the buyers, to setting up the legal framework, to making
available financing all the way through to managing the property throughout its life.
CHATTERLEY: And so if the price of the home falls, and admittedly, we're not seeing much of that right now, quite frankly, you still take a cut of
the resale value even if the person is in negative equity and sells out.
ALLISON: No, actually, we just charge a service fee one time upfront. And then after that, when you go to resell your Pacaso, it works just like a
normal home, repay a standard real estate commission. But any appreciation in the underlying real estate goes to the owners, not to Pacaso.
We retain no ownership in the property after the home is fully sold. And yes, you're exactly right, the real estate market is super-hot. There's a
shortage of supply and an abundance of demand. So we're anticipating the prices will continue over time.
CHATTERLEY: Okay, so I'm going to ask you for specifics now, because you said one million hits on the website, 60,000 people showing interest. How
many people who have families have actually bought in? Can you give me that number?
ALLISON: No. We're private property, so we don't have our specifics. But it is growing super-fast, I mean, faster than we could have ever imagined.
CHATTERLEY: Now, I'm allowed to ask, though, and you're allowed to say no. What do you say to the criticism that, as we've just discussed, the
property market is hot. There are people out there that are struggling to get on the housing market already. And you're sort of fueling with an
investment vehicle in a way allowing people to buy second homes, whether it's for an investment or for fun or otherwise, sort of propping up prices?
ALLISON: Yes, it's a really interesting question. And actually, we help to soften some of that demand in this crazy housing market. And the reason why
is because second home, and we focus primarily on second home market.
So when we look at second home markets, what we're seeing is a large percentage, in some cases, more than 50 percent of homes being purchased in
these second home destinations are by second home buyers. And second home buyers only use their homes on average five to six weeks per year, which is
a really inefficient use of the housing stock.
So what we do is we enable up to eight families to purchase one second home, which relieves pressure from the affordable housing tier because
without co-ownership, all of those aspiring second homeowners would be competing with primary owners near the median price point.
But with Pacaso, they can up level their buying power and buy six to eight times as much home through this co-ownership model.
CHATTERLEY: What about global ambitions? Geographical spread? Other countries? It's a model that I can see working just about anywhere.
ALLISON: Yes, you're exactly right. So, you know, for me, let me just step back before I answer that for one question and say that, you know, the
mission of the company is really about enriching people's lives and making this dream possible for more people and this is something that my wife and
I were fortunate to experience about seven years ago when we became second homeowners and we want to make that possible for people all around the
world.
So right now, we're in about a dozen markets west of Colorado. Over the course of the next few months, we'll be expanding east, so by the end of
the year, you can expect to see Pacaso in almost every major second home market throughout the U.S., as well as internationally.
CHATTERLEY: Are you profitable?
ALLISON: Actually, we are. We reached profitability very quickly.
CHATTERLEY: I can imagine.
ALLISON: Yes, we are fortunate to have a really great solution to a really big problem at just the right time. I mean, pre-pandemic, when we surveyed
our target audience, 75 percent of families aspire to own a second home. And what the pandemic has done is intensified that interest because more
families have to rethink work, so we're seeing a lot of demand for second homes and that certainly has created a tailwind for our business.
CHATTERLEY: Austin, fantastic to have you on the show. Great to see what you're doing and keep in touch, please.
Austin Allison there, the CEO and cofounder of Pacaso.
All right coming up: from frustration to invasion of one of the world's most famous football grounds, angry fans calling for change. The details,
next.
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[09:5:02]
CHATTERLEY: Welcome back to the show. Sunday's English Premier League match between Manchester United and Liverpool postponed after hundreds of
angry fans forced their way into United's Old Trafford Stadium. They called for the ouster of Americans' Glazer family, the owners of Manchester United
over the decision to join the failed European Super League.
Alex Thomas is live for us now. It's known as the Theater of Dreams, isn't it? It's more of the theater of nightmares after that performance. Fuel on
the fire of deep skepticism about the Glazers' family's motives with Manchester United.
ALEX THOMAS, CNN WORLD SPORT: Yes, and how embarrassing for the Premier League, which is the most successful product of its type, goes out to more
than a hundred countries around the globe, millions of TV viewers tuning in for this marquee match between the two most successful clubs in English
football, Manchester United against Liverpool, the oldest biggest rivalry in the sport and it didn't happen.
The fans protested to stop the game and they succeeded. Greater Manchester Police clearly overwhelmed, they had to call in support from neighboring
police forces just to clear away the protesters who broke onto the pitch. At the moment, no fans allowed into stadiums still because of COVID
restrictions.
So the fans made their point. Some would say they went over the top because there was some severe violence. But we've had two interesting developments
in the last few minutes. I've been frantically typing just before I was waiting to go on air to you, Julia, the Manchester United Supporters Trust
has penned an open letter to Joel Glazer and he is the owner of Manchester United.
No one wants what happened to Old Trafford to be a regular event, they say, and I'm paraphrasing here, but it's the culmination of 16 years of your
family's ownership we feel more sidelined and ignored than ever before. They're demanding changes for personnel on the board, a share scheme for
fans with voting rights.
They want answers by Friday. This is the only way to move on. We suggest you take it, which sounds awfully threatening. Have a listen to what other
fans said on Sunday.
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE: The reason there's so much frustration is they've not communicated with the fans for 16 years and that leads to this kind of
anger we've seen on this level.
UNIDENTIFIED MALE: They only think about money, don't they? You know, that's all they're interested in -- money. That's their only motivation.
They don't care about English football. They don't know the culture.
(END VIDEO CLIP)
THOMAS: And a statement from English Premier League bosses as well in the last few minutes, Julia, they say the actions of a few clubs in relation to
the Super League, this is, cannot be allowed to create such division and disruption. We're determined to establish the truth of what happened over
that breakaway plan and hold those clubs accountable for their decisions and actions.
The Premier League suggesting new rules and regulations. A new owner's charter, saying breaches will be subject to significant sanctions, but none
of the clubs that tried to break away have been punished yet, and maybe that's part of the reason why the fans are still angry -- Julia.
CHATTERLEY: Yes, probability of change at Manchester United? It's been 16 years.
[09:55:01]
THOMAS: Not in the short term, but they are still hundreds of million dollars of debt against the club. Maybe if someone came along with a big
offer, the Glazer family would decide to take it, but that is pure speculation at this point.
CHATTERLEY: Yes. It has got to be a big one. Alex Thomas, thank you so much for that.
All right, that's it for the show. If you've missed any of our interviews today, they will be on my Twitter and Instagram pages. Search for
@jchatterleyCNN. They will be there in the coming hours.
In the meantime, stay safe. "Connect the World" is next including a one- hour special: India's COVID catastrophe, an in-depth look at how bad it is, how it happened, and how you can help.
Stay with us. That's next.
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[10:00:00]
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