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Quest Means Business
Disney Agrees Deal for 21st Century Fox; Tech Giants Furious at New Neutrality Decision; British Prime Minister Returns to Brussels; Disney Buys Up New Cast of Characters with 21st Century Fox Deal;
Aired December 14, 2017 - 16:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[16:00:00] RICHARD QUEST, CNN HOST: Closing bell on Wall Street ringing. Go on, start the bell, sir. Dow Jones Industrials are lower. Con Ed
ringing the closing bell. No records on the Dow, the Nasdaq or the S&P. In fact, the day very much in two halves, the way stocks fell in the
afternoon. And yes, you can stop ringing now. Oh, one, two, three. A strong, robust gavel. Trading is over worldwide on Thursday, it's December
the 14th.
Tonight, the mouse catches the Fox. Disney's deal changes the media world forever.
Life in the slow lane. Legal actions on the way as the U.S. government rolls back net neutrality.
And back to Brussels for Theresa May. The British Prime Minister insists, Brexit is still on course, even though there have been embarrassing losses.
I'm Richard Quest, live in the world's financial capital, New York. Where, of course, I mean business.
Good evening. One big story in the business world today. The house of the mouse takes over. Rupert Murdoch has sold off prized assets that's taken
him a lifetime to build up. Around the world, his assets, some $52 billion worth. And for Disney's Bob Iger, this still caps a career of deal-making.
It faces huge regulatory hurdles in many different jurisdictions. And we're covering it from all angles.
Let's begin with what each side actually gets. Of course, look at the assets on both sides. Disney has the movie studios. 20th Century Fox.
Fox 2000 Pictures. Fox Search Light. It has much more. It has entertainment channels, FX. You've got FX Sky, you've got National
Geographic. And this is also what the other side has. It has Hulu, as well. This is what Disney is picking up in terms of the assets that it's
buying from Fox.
There's one name on the screen that's particularly important for Bob Iger. It's this one. It is Hulu, a streaming service. Disney's platforms,
including Hulu, have a total subscription level of 46 million subscribers. Now, compare Hulu and Disney's current 46 to Netflix's 109 million.
Speaking on "Good Morning America," part of ABC, which used to be Cap Cities, which Bob Iger bought, or at least Disney bought in the 1990s.
Iger was clear, Hulu and all of this has made for Netflix in his sights.
(BEGIN VIDEO CLIP)
BOB IGER, CEO, DISNEY: We're not really looking to necessarily reach the scale of Netflix quickly. But we certainly aim to be, you know, an able
competitor to theirs. More importantly, we believe that this is the way of the future, to be able to reach consumers directly. There's clearly a
value proposition associated with that. But it's also something that consumers want. Because in doing so, you can tailor the offering to
consumers in a far more customized way. More personalized ways.
(END VIDEO CLIP)
QUEST: Shelly Palmer is our expert on all things streaming. Chief executive of the Palmer Group. Good to see you.
SHELLY PALMER, CHIEF EXECUTIVE, PALMER GROUP: How are you, Richard?
QUEST: The range of assets that we just saw, the studios, the television channels, you can see them there, Star, Sky, Hulu. Is this just about
streaming?
PALMER: Well, first of all, the future is about streaming. And whether you want to look at it as an isolated streaming tools or just the streaming
business, video is about streaming. And the players who are great at it, Facebook and Google and Netflix and Amazon, have taken a bite out of the
entertainment business, as we understand it. And so, you've got Rupert saying let me consolidate my assets into things that are live a temporal
like sports and news. And you've got Disney, a behemoth saying let me really shore up my streaming capability. This all makes good sense.
QUEST: So, Disney announced earlier this year it's going to start its own streaming network.
PALMER: Yes.
QUEST: And if it's going to do that, I mean, does it add Hulu -- we don't really know, do we, how they put these things together. So, is the Disney
streaming effectively just become Hulu?
[16:05:00] PALMER: So, they bought the rest of BAMTech, but they didn't own, which is a really significant streaming organization. Now they're
going to have Hulu. They do have their own streaming strategy that is sort of their own. When it comes out, Bob Iger has made it very clear, he's
going to take a big shot. He's going to make a big bet. And clearly today, he made a big bet in the future of video streaming. And so, Yes,
it's an obvious future. And makes all the sense. Like, it just makes sense.
QUEST: But, you know, again, I'm looking at what he's buying. And what he's already got.
PALMER: Right.
QUEST: Disney is huge in its own right.
PALMER: Yes.
QUEST: But Walt Disney studios, that are various divisions. But ABC.
PALMER: They're not big enough. They're not going to be big enough after this.
QUEST: Against who?
PALMER: Against tier one tech and its ability to distribute at incredibly low cost with incredible low cost of capital.
QUEST: Right, now let's just pause there. That's the point here.
PALMER: Yes.
QUEST: It's not that these Amazons and Netflix -- they're spending lots of money on production.
PALMER: Yes.
QUEST: But they're still relatively small in terms of the movie-making industry, compared to the big six.
PALMER: Well, think about it this way. Amazon has announced they're going to spend 5, $6 billion on original programming. Netflix, the number keeps
going up. Last I heard was $8 billion they're going to spend on original programming. I've got to tell you something, that's going to go towards
the studio side in Hollywood, because there aren't that many places that make great television or great video or great movies. But in practice this
is money pouring into this business from people who are not traditionally distributors of content. So, if you're going to compete in this world and
you're going to compete with -- you're going to find your way out of the traditional television business. The traditional theatrical distribution
business and find your way into the smartphones and handheld devices of a new generation of consumer, you have to do what Disney is doing.
QUEST: OK. So taking all of that, this deal has put -- this deal has put the sector in play.
PALMER: Yes.
QUEST: Who else now needs to watch out?
PALMER: Look, this is a -- this is a game of chess and checkers and the DOJ hasn't weighed in yet. Because we are still waiting for AT&T in that
deal to get done. This deal has to go through regulatory. You mentioned in your open there were some regulatory hurdles. It makes sense the DOJ
should let this happen and it should just be allowed to occur. But no matter how big these organizations get, they're still going to be, from a
viewer standpoint, from a user standpoint, significantly smaller in the streaming world than the big streaming competition. So they're going to
have to work hard to make it happen. It's all about numbers. And these are the new numbers. They laughed at Mark Zuckerberg when he bought his
chat app. They laughed at mark Zuckerberg when they spent all that money for Instagram. Who is laughing now?
QUEST: Good to see you. There's something magic though about the old studios.
PALMER: There is.
QUEST: History.
PALMER: Yes, Marilyn Monroe. It's awesome. And guess what? It will still be awesome. It's going to be distributed differently.
QUEST: All right. Shelly Palmer, thank you.
We deliberately weren't talking with Shelly about Rupert Murdoch, because that's the focus now. Murdoch may never have imagined it would end like
this. A picture with Bob Iger overlooking the London skyline is the final shot before the credits roll on this part of his career. He told Sky News,
of which he owns 39 percent and is trying to buy the rest of it, but the deal came together relatively quickly.
(BEGIN VIDEO CLIP)
RUPERT MURDOCH, EXECUTIVE CO-CHAIRMEN, 21ST CENTURY FOX: This started with Bob Iger, a friend of mine, sitting at my winery one evening, having a
couple of glasses and just talking about our businesses and the industry generally. Forces of disruption were happening. And that was all. Then
he rang me back a couple weeks later, and said let's have this conversation a bit more. And I said, that's only two months ago.
(END VIDEO CLIP)
QUEST: Murdoch is a classic newspaper man. Made his name in his homeland of Australia. Then, of course, in the United Kingdom with "The Sun" and
"The Times" and "News of the World." It wasn't until the 1980s when he got into movies. He bought 20th Century Fox -- as it was then -- from the oil
baron, Marvin Davis. And then Fox broadcasting. Following on from that, he got into Sky, and Star TV. Controversy, everywhere. Triumphs. There
were failed attempts to make the empire even bigger. Now he's come full circle. He's cutting back on the TV and the movies, and he's focusing on
the papers. Stewart Purvis is the have a former executive of Independent Television News, known as ITN. Stewart joins me from London. The way in
which Murdoch is dismantling the very empire that he built speaks volumes about the man, doesn't it? And his capacity to play this three-dimensional
chess of media markets.
[16:10:00] STEWART PURVIS, FORMER CEO, ITN: Absolutely right, Richard. Here's a man who nearly 50 years ago got off a plane from Australia, bought
an English Sunday newspaper, upset the British establishment, never really got on with the British establishment. But built businesses, bought more
newspapers, bought TV. Even last year, he bought some commercial radio assets. Now he's actually doing a deal to become smaller. I mean, we're
still in a bit of shock here. All the headlines about, you know, 21st Century Fox and Disney. I'm saying, the story is, Murdoch sells Sky. The
platform he spent years and years developing. The platform he had been trying desperately for seven years to take complete ownership control of.
And he's suddenly at the very moment maybe just weeks away from the moment when he could have had it all, he's decided he doesn't want it.
QUEST: Now I'm hearing two views. One is he didn't want to risk being found to be not a fit and proper person to own Sky. That's one view. The
second view is that this is just a genius foresight in getting out of old school, or old style. But getting 25 percent of the new Disney with its
streaming capability.
PURVIS: Well, it could be a bit of both. I mean, I personally always thought this deal was going to go through. And we'll find out, actually.
Because it's still going through the processes whilst American regulators look at the Disney/Fox deal. So, you know, if he was put off by the kind
of noise that's been around it, that's a little bit unusual for him. But there we are.
But on the other piece you mentioned, yes, absolutely right. I mean, he's basically telling us in this interview with Sky that actually he doesn't
really think entertainment has a future on television. So, you know, you read from that that he's selling his television interests, which are in the
entertainment area, so that he doesn't lose value on them. So, he's actually getting out as he would see it, at the best point in the market.
QUEST: In terms of Disney and how they will perform, Disney obviously, the movies are familiar. Disney has less of a footprint elsewhere within the
international markets.
PURVIS: Yes. I mean, Disney has had a sort of inconsistent record in distribution. Sometimes it's been just a seller to networks. Sometimes
it's had its own brand of networks. I mean, the point I think is relevant, this is about regulation. You take this deal here in Britain. Murdoch is
having to go through a whole series of hoops to try to get control of what he wanted on this platform. But at the same time, the giants, the new
digital giants are coming into countries like the U.K. throughout Europe, throughout Asia and actually setting up amid the danger to call them
monopolies, but that's to many people what they are. So, to his point of view, he's being disadvantaged because he is seen as television.
QUEST: So, in terms of -- back to Rupert -- in terms of -- I mean, he's got the newspapers. People say he might fold the remaining news assets,
particularly in the U.S., the Fox News, Fox Sports, Fox Business, into his newspapers, join them all up again. He's still a news man at heart.
PURVIS: That' what he says. Though he is curiously unemotional about letting go of Sky News and Sky Sports, the two things he says news and
sports are the future. What I take from that, he likes Fox News and he likes Fox Sports and wants to develop those and who knows what he wants to
do in the number of stations he can own in the states. So, yes, that's the story. There as you see a fit with a news corp., which is a news-led --
mostly newspaper group. So, he can bring those two together. Very interesting tonight, he was trying to make clear that actually there is --
there will be I think $2 billion cashflow from this news and sport TV business.
QUEST: Stewart, it's good to see you. Thank you, sir, for coming in tonight. Thank you.
To Wall Street, where Disney shares were the top performer in the Dow. As you can see, they were up 2.8 percent. When you wish upon a star, the
shared price rises. Boeing was also good stock. The Dow closed in the red, and you can see why. Surrendering an all-time high. The S&P 500 was
also down. Paul La Monica. As you wish on a star, Amazon was up during the day. Netflix was up during the day. Never mind how they may have
closed. But they are all -- Google. All the competitors to Disney's new streaming. You would have thought they would have been down.
PAUL R. LA MONICA, CNNMONEY CORRESPONDENT: You would have thought that would be the case. But I think that investors realize that while Disney
now is an even more formidable content company, people aren't going to all of a sudden decide, you know, I'm not going to watch "Stranger Things" on
Netflix anymore, because I'm busy watching all of these shows on whatever Disney decides to name its streaming service, that is yet to come out. So
obviously, there is room for content providers that consumers already love. And that's why Netflix and Amazon I think will be able to withstand this
threat from Disney.
[16:15:00] QUEST: You've got to hand it to Rupert Murdoch. The ability to within two months for this -- or three months to sort of -- the leak that
Disney's interested.
LA MONICA: Yes.
QUEST: Get Comcast and others --
LA MONICA: Yes, Sony, Chatter into their briefly.
QUEST: Sniffing around. They drop out. Iger comes in. Who is the real genius here? Is it Iger or is it Murdoch, or both?
LA MONICA: I think we can safely say, Richard, that it is both. I mean, Murdoch throughout his history has been a bit of a renegade in the media
industry, not afraid to make changes. And obviously, this is in some respects a cashing in of the chips. Even though let's not weep too many
tears for Murdoch, because he obviously still has the "Wall Street Journal," "The New York Post," the news aspects of Fox, as well, on the
cable side.
But for Bob Iger to be able now to have the rest of the Marvel family, "X- Men," "Fantastic Four," "Dead Pool," and add that to the library that already has with all these other superheroes, then you throw on top of that
Pixar and the Disney princesses and Lucas Films. "Star Wars" is coming out, I'm going to see it on Saturday, no spoilers, please. I mean, Iger
has really made this company into a Hollywood juggernaut. The only problem is that everyone cares about ESPN on Wall Street.
QUEST: Right. One quick question, in the La Monica household, we use you as a barometer. What percentage is your streaming viewing versus your
television viewing?
LA MONICA: It is -- I would say for my wife and I, maybe about 40 percent, and for the two kids, I would say maybe 80 percent, because they're more
technologically savvy than their old folks/parents.
QUEST: Good to see you.
LA MONICA: Thank you.
QUEST: Used you as the barometer. Thank you.
As we continue tonight, and let's think about that for the La Monica household. They had better be careful. Net neutrality has gone. As we
continue, the slow lane for some unless you're prepared to pay more to go faster.
(COMMERCIAL BREAK)
QUEST: From the fast lane to the slow lane, the Federal Communications Commission in the United States has voted to repeal something known as net
neutrality. The rules that basically say everybody is equal on the internet. It's a big win for broadband companies like Verizon and AT&T,
which is attempting to buy Time Warner, parent company of this network.
It's a major setback for consumers and tech companies, so some say. Outside the FCC building in Washington, there were demonstrators to protest
against the ending of this net neutrality. Netflix has already promised legal action. Saying we're disappointed in the decision to gut protections
that ushered inn unprecedented era of innovation.
[16:20:00] The rules have been controversial for years. Many internet users have struggled to understand them. So, let us explain net neutrality
through the eyes of CNN Money, Jon Sarlin.
(BEGIN VIDEOTAPE)
JON SARLIN, CNNMONEY PRODUCER: If the internet is a highway, vehicles or content providers, can't pay more to use a special fast lane. Think of it
this way. All content is created equal in the eyes of the internet provider. That's the basic tenant behind net neutrality. So, if the
internet is neutral, then the internet providers are treated basically like public utilities. Comcast or AT&T, they couldn't slow down or speed up
certain content like Netflix or Hulu. But if net neutrality ends, some companies are going to be stuck in that slow lane. And customers might
stop using sites that never seem to load. The rules that made the net neutral were put in place during the Obama administration.
BARACK OBAMA, FORMER PRESIDENT OF THE UNITED STATES: This set of principles, the idea of net neutrality has unleashed the power of the
Internet and given innovators the chance to thrive.
SARLIN: But now things are going in a different direction. Ajit Pai is now the chairman of the FCC. He's a former lawyer for Verizon.
AJIT PAI, CHAIRMAN FCC: Entrepreneurs are constantly developing new technologies and services. But too often, they are unable to bring them to
market for consumers, because outdated rules or regulatory inertia stabbed in the way.
SARLIN: To him, repealing net neutrality will lead to innovation that will get the government out of, quote, micro managing the internet. The
internet providers will have more money. They'll then invest more in infrastructure and will have faster streaming. But while deregulation
certainly has earned the praise of the telecommunications industry, on the other side of the coin, you have tech companies and consumer advocacy
groups.
UNIDENTIFIED MALE: We don't want our internet to start looking like our television cable. We don't want to have tiered access. We don't want to
have all the things that have really stifled innovation in other industries.
SARLIN: For those who want to keep net neutrality intact, it's a matter of Internet freedom. Repeal would mean that internet service providers can
choose how affordable and fast certain content is. That is, there will be a slow lane and a fast lane. So, this summer, some big tech giants like
Facebook, Google, Netflix, they participated in a day of action to advocate for net neutrality. But really, it's the small companies and the startups
that have the most to lose if net neutrality ends. They don't have the deep pockets to pay the toll to access the faster lane. The open question
now. Will repeal of net neutrality lead to innovation or to a traffic jam?
(END VIDEOTAPE)
QUEST: Mozilla is one of the companies, many companies that took a stand against the repeal of net neutrality. Mitchell Baker is Mozilla's founder
and chairwoman, joins me from Austin, Texas. Good to see you ma'am. Thank you for taking time to speak to us this evening.
MITCHELL BAKER, CO-FOUNDER AND CHAIRWOMAN, MOZILLA: Of course.
QUEST: Why don't you buy this argument that getting rid of net neutrality will spur innovation?
BAKER: Because losing net neutrality spurs the innovation that Verizon or the ISPs are interested in, and that meets their business practices and
that works well for them. But it doesn't spur innovation that challenges them or is irrelevant or has new ideas that just don't make sense to
Verizon. And we need that kind of innovation that is spread out and that all of us could actually attempt, because there's lots of new things to be
invented and big problems to solve. And sending all that through Verizon's business planning and Verizon's decisions doesn't benefit any of us, except
for the ISPs.
QUEST: I was listening to the chair of the FCC there, who says, you know, outdated regulations of a different era in a multifaceted environment,
where people do have choice. You know, if you wish to switch. Now, I know it's t that easy in some parts of the U.S. to switch ISPs. But the goal
here -- the FCC believes is that it will spur greater growth.
BAKER: Well, three of the five FCC commissioners believe that. So secondly, the idea that there is choice is very important. Because for
many people, they are not. Something close to half of Americans don't actually have choice. And so, this idea that consumers are going to
exercise choice or that the market works or that telling people how badly you're treating them is an answer, it just -- it's like a fantasy if you
have no choice. And even if you have a second choice, if they're both bad, like how does that help us? Like, if you have got two companies and
they're both treating you badly, well choices exist in theory, but it doesn't have any real meaning. And so that is a fundamental problem with
the whole new system.
QUEST: One of the things that puzzles me in the administration's decision is that though a big company is on both sides. So, it's not as if it was a
sort of one-way bet. Why do you think the administration decided, or the FCC chair decided to get rid of it?
[16:25:00] I mean, why do you think he favored the ISPs and the communications companies over the providers?
BAKER: Ah. Over the providers of web services or internet websites or apps that were familiar with.
QUEST: Yes.
BAKER: This is an ongoing battle about when you pay, you know, where does the money that's generated by the internet go. And so, the
telecommunication companies, which you know provide the access or sometimes it's called the pipes, are also interested in the revenue or money that the
application providers or Google or Facebook are generating. And so, underlying this is a fight for those economics. And so, the size -- there
are big companies on both sides. You also find the big companies from the internet side, you know, are engaged with smaller companies, as well. And
so, it's not exactly a big company/small company piece. It's who actually has control over all of the content. And how many new players can get
involved?
QUEST: Surprisingly, the rest of the world is watching. Thank you very much for joining us tonight from Austin. We appreciate it.
BAKER: My pleasure.
QUEST: Before making its decision, the FCC invited comments via its website. Millions of people responded. Well, it looked as if millions of
people responded. Until you looked a bit closer. And then you discovered nefarious people using stolen identities. Luckily for us, Laurie Segall
went to discover more.
(BEGIN VIDEO CLIP)
LAURIE SEGALL, CNN SENIOR TECH CORRESPONDENT: The Obama administration ramped through a massive scheme that gave the federal government broad
regulatory control over the internet.
TERENCE GORDON: Not me. I did not submit that to the FCC.
SEGALL (voice-over): Yet posted under his current address, a paragraph long opinion on the highly contentious net neutrality vote. In his name.
GORDON: Not only was my right privacy compromised and breached, but so in a larger sense was the democratic process.
SEGALL: Terry Gordon is a retired director of network engineering in New York City and his identity has also been used to spout political beliefs.
It started earlier this year. The FCC called for public opinion on whether to end net neutrality. The regulations put into place in 2015 dictated
that internet providers had to treat all content the same when it comes to speed. Ahead of the vote, the FCC called on the general public to leave
their thoughts. And then something strange started happening.
ERIC T. SCHNEIDERMAN, ATTORNEY GENERAL, STATE OF NEW YORK: The internet is the public square of the 21st century. Unfortunately, the internet is
also the crime scene of the 21st century.
SEGALL: Of more than 20 million comments made to the FCC, the attorney general's office and multiple independent studies say that millions of the
submitted comments are fake. On both sides of the debate. The irony? Terry has worked in technology for decades and actually has some pretty
strong views on the demise of net neutrality.
GORDON: Let's keep net neutrality laws so that everyone is on an even playing field.
SEGALL: A spokesperson for the FCC said that people whose identities were stolen should submit a complaint contesting the fraudulent comments. But
the FCC isn't removing them. And was unable to provide CNN with any evidence that they looked into who was behind the millions of fraudulent
remarks. For Chris Basco, whose mother's identity was also used to weigh in, it felt personal.
CHRISTOPHER BASCO, SON OF MARGARET BASCO: My mother's name, it is Margaret Mary Basco. She sadly passed away on June 9th, 2017. There is no way she
could have posted that comment.
SEGALL (on camera): How did you feel when you saw your mom's identity used for essentially a political opinion?
BASCO: It was when I saw the date. That's when I really got angry. How close in proximity it was to her death.
SEGALL (voice-over): Here's what Margaret thinks about net neutrality. According to the comment fraudulently made with her name. The
unprecedented regulatory power the Obama administration imposed on the internet is smothering innovation.
BASCO: It was a little message, something she never did. I would probably have to explain what net neutrality was to her to begin with.
SEGALL: The FCC General Counsel said the commission didn't rely on any of the alleged corrupted comments to draft the document that was up for a
vote.
BASCO: I feel that this was something that was in a system that at a moment's notice could be deployed anywhere for anything.
SEGALL: Increasingly, we're all at risk of this type of threat. More hacks mean more of our personal information is floating around for anyone
to use.
GORDON: You can use very simple technology to influence people without knowledge of those that you are really impacting.
(END VIDEOTAPE)
QUEST: That's Laurie Segall.
As we continue after the break, central banks in their decisions and women in economics. Diane Swonk will be joining us to tell us why there aren't
more women in the world of economics. After of course, we have discussed what those Fed, Bank of England, ECB. What did they do? It's after the
break.
[16:30:00] (COMMERCIAL BREAK)
QUEST: Hello, I'm Richard Quest. There's more QUEST MEANS BUSINESS in just a moment. When Theresa May says she's disappointed as she heads into
Brexit talks in Brussels. And the Simpsons are going to Disneyland with a whole new cast of characters at Disney's disposal.
As we continue, this is CNN. And on this network, the facts will always come first.
Here's been a deadly collision between a train and a school bus in the eastern Pyrenees region of Southwestern France. A CNN affiliate BFM TV
says at least four people have died, and about a dozen have been injured. Emergency crews are looking for other survivors and retrieving injured.
President Vladimir Putin had some positive words for his U.S. counterpart during Putin's annual end of year news conference. He said Donald Trump
has made some, quote, fairly serious achievements since taking office. He dismissed U.S. investigations into possible collusion, saying the issue was
dreamt up by Mr. Trump's political opponents.
Six months after the deadly Brentford fire in London and the victims were remembered on Thursday at a memorial service. It was attended by the
British Prime Minister, Theresa May, and members of the Royal family. The fire engulfed a residential tower, killed 71 people. An investigation is
still ongoing.
Super Thursday for central banks. The BOE and the ECB kept rates on hold. Only one day after the Fed made its move. Diane Swonk joins me from
Chicago. We should of course, put this into context. The Fed moved, the BOE did move at its last meeting. So, they're waiting to see what happens.
Who knows when the ECB is next going to move?
DIANE SWONK, FOUNDER, DS ECONOMICS: That's exactly right. I do think it was interesting that the ECB, like the Fed, also saw stronger growth next
year. We're talking about the strongest synchronized global growth in 2018 in probably a decade. I think that's very important. It's one of the
things we're sort of seeing. The momentum from the end of 2018 is a high jumping off point for 2018. And this is global in scope. It also seems to
be a global in scope phenomena is the lack of inflation for both the year - - both in Europe and in the U.S. and that missing on inflation, of course, even here in the U.S., we saw two dissents on the Fed's voting panel. And
here in the U.S., when you vote to dissent, you're often voting for people who can't vote.
[16:35:00] And so, when Charlie Evans, the president of the Chicago Fed and the Neel Kashkari, the president of the Minneapolis Fed voted in their last
vote of the year, they're probably voting for other people. So that's a big issue that's facing both the U.S. and Europe right now.
QUEST: We have a moment or two more today. So, let us just grab this thistle on inflation. The lack of inflation after eight years of ultra-
uber low interest rates, with unemployment down 4 percent in the U.S., similarly in the U.K. It is a conundrum. Do you believe the rules on
inflation have changed?
SWONK: I don't believe the rules have changed, but I do think we constantly have to sort of look the shifting ground around us. Not only is
there the Amazon effect and the, you know, flood of online and more comparative shopping that's going on. We also have -- and that's sort of a
substitute for globalization. So, it's having the same effect that globalization perhaps had in the 1990s that was pushing down inflation. We
don't have a lot of productivity growth. Which is not the phenomena that we had before. But what's interesting is even in Germany, where labor
markets are much tighter than they are here, you're still not seeing that wage acceleration. And, of course, there's many different reasons for
that. The unions in Germany actually opted for job security over wage increases. But these are real -- it is a bit of an issue going forward.
QUEST: We want to talk about women in the world of economics. Have a listen to Janet Yellen.
(BEGIN VIDEO CLIP)
JANET YELLEN, FEDERAL RESERVE CHAIR: In terms of the kinds of research that's done in the field, I think also a greater diversity, more women and
minorities may change the focus to some extent of the questions that people choose to look at and the analysis that they bring in, range of thinking
that bears on research and all of that would be a healthy development.
(END VIDEO CLIP)
QUEST: Why do you think more women do not go into the world of economics and become economists? I mean, you know, obviously there are many. But
not as many as --
SWONK: Not enough.
QUEST: Why is it?
SWONK: I was the only woman in my class, believe me. You know, it is -- they have done a lot of studies now. And we know it is one of the last
bastions, really. To think it's harder to stay in economics as a woman than it is to stay in a STEM. research as an undergraduate, that really is
sort of disappointing. And we know that women economists, when they're married and they're economists, or even if they're not married, when they
put together research, they're not cited the same way as men.
There really is pretty systematic kinds of things we can look at to show that if you were to do more blind research out there, and not have the
names attached or the sex of the person producing the research, would you have a different kind of citations, and different kinds of reflections from
the group itself and economist itself. You remember, all of the men who are tenured professors in economics get to vote on who gets to join their
club.
QUEST: Naked, raw sexism. Do you think that's what it is? At the end of the day, we have to understand, you know, why the next generation are not
wanting too into the world of economics. One can put it to a certain extent, you say you're the only woman in your class. But if you look to
the future, do you get the implication or the feeling that younger women do want a career in economics?
SWONK: Actually, you know, they do join economics, but they drop out more than other professions, as well. Which suggests, again, something
systemic, in its not because of the rigor of the course. They're doing other things that are rigorous, as well. So that can't explain it alone.
I do think also one of the things that I as an economist, one of the things you see by not having this diversity out there, you see a lot of research
that originally said, you know, women don't stay in the labor force because they just want to opt out and have babies and opt on a mommy track, opt on
these different tracks. That's just garbage.
Actually, what we know now is the choices women are given in the labor force are different than the choices that men are given, even in their
first entry level job. And having been there myself, I can certainly attest to, it wasn't exactly fun. What's disappointing, is that it's still
there. And, you know, it's hard for me to even change the name of chair of the Federal Reserve back to chairman, because I think it should be just
chair. I'm going to call Chair Powell, he's a wonderful guy. I'm going to call him chair Powell. Because frankly, I don't want to lose the sense
that a woman will once again be chair of the Federal Reserve. And I think we should start to think of these things as just a fact, rather than only
firsts.
QUEST: You know, it's funny you talk about that. I had to mention his name on a broadcast the other day, and that's exactly what I was thinking.
Do -- I instinctively went to say, meanwhile, chairman -- and I thought, nope. Diane, wonderful to see you. Thank you. Have a great holiday.
SWONK: Thank you, Richard.
[16:40:00] QUEST: As we continue tonight, as Theresa May is toughing it out in Brussels. The British Prime Minister is facing EU leaders a day
after an embarrassing defeat in her own Parliament.
(COMMERCIAL BREAK)
QUEST: The British Prime Minister, Theresa May, insists Brexit is on course, despite her government suffering a humiliating blow in Parliament.
Theresa May is facing EU leaders in Brussels. Less than 24 hours after the defeat. Lawmakers will now get to vote on the final deal before Britain
bows out, and the government won't be able to make any changes before the vote. The fears are holding up, putting pressure on Mrs. May as she heads
into phase two of the talks.
(BEGIN VIDEO CLIP)
THERESA MAY, BRITISH PRIME MINISTER: I'm disappointed with the amendment. But actually, the EU withdrawal bill is making good progress through the
House of Commons. And we are on course to deliver on Brexit, and remember last week, the President Juncker said that sufficient progress had been
made to move on to phase two of our negotiations. Yesterday the European Parliament overwhelmingly voted to accept that recommendation too, and I'm
looking forward to discussing that deep and special partnership for the future.
(END VIDEO CLIP)
QUEST: CNN's Bianca Nobilo joins me from London. I mean, an element of schadenfreude from the other leaders. Weren't there? You know, ho, ho,
ho, you got a bloody eye, a black eye in your own Parliament. But as you reminded me yesterday, all leaders come to this, knowing that they're only
one stage themselves from problems with politics at home.
BIANCA NOBILO, CNN WESTMINSTER: That's quite right. And, in fact, it's just expected in a democracy. In some EU leaders at the council today have
actually come out in support of the Prime Minister, saying that. Saying this is just politics. And it's to be expected. The Prime Minister said
the bill is making good progress. I suppose in relative terms, it is. And I hate to break it to you and the other viewers of the show, Richard. But
this is just the committee stage. There's a report stage, there's a third reading, it's got to go through the House of Lords. This bill is going to
look very different than it does now when it reaches the final stage, anyway.
QUEST: That said, let's move strictly then to phase two. And the difficulty of phase two. You know, the council is obviously going to
approve it, bearing in mind the commission president and the council president are in favor. So, what should we look for, and how long do you
think phase two, the trade part, the future relationship part will last?
NOBILO: The Prime Minister and the head of the EU Commission want to see a framework for that future relationship done by March. That is ambitious.
This was already an incredibly tight timetable. And as David Davis, the Brexit secretary, said this morning, it's now even further compressed by
this government defeat last night. I think compressed is putting it mildly, too. This is almost a Konstantina effect. They have very little
time.
[16:45:00] But, of course, they can't start the trade discussions in earnest until after the U.K. has left the EU. And then when it's a third
country, they can begin those discussions. But the foreign secretary, Boris Johnson, has been out speaking today, saying that Britain is hoping
to strike a deal with Japan as soon as possible after Brexit. So, there is certainly an eye on that already from the U.K. side.
(BEGIN VIDEO CLIP)
BORIS JOHNSON, BRITISH FOREIGN SECRETARY: The point I would make to our Japanese friends, our partners, is that we intend to build a deep and
special partnership. As Theresa May has said, with our friends and partners in the European Union. So that the U.K. remains the best place in
this hemisphere to come and invest and develop your companies.
(END VIDEO CLIP)
QUEST: There's only one problem, Bianca. It was the Japanese earlier, immediately after the referendum late last year, they were the ones that
took the highly unusual step of writing to the British government saying on behalf of Japanese companies they wanted clarity for the very large
automakers and others that have invested in the U.K.
NOBILO: They did say that. In fact, the Japanese have actually been fairly outspoken on the Brexit process. I remember that the ambassador,
the Japanese ambassador for the U.K., spoke to you, Richard, and offered officials to intervene and offer advice on the Brexit negotiations. They
do want more clarity, but both the Japanese foreign minister and Boris Johnson said they were both confident that a mutual recognition of trade
standards agreement could be struck to make market access easier. Very soon after Brexit. So that's really optimistic language from both of them.
And very consistent with Boris' glorious vision for Brexit, which he has pushed the entire time as one of the leading Brexiteers in the U.K.
QUEST: Bianca, good to see you. Thank you. Keep watching, you've got a busy week ahead as stage 2 and phase 2 gets underway.
As we stay with Brexit, the former head of the WTO says he doesn't think any post Brexit relationship will be as good as the single market. I asked
Pascal Lamy what's the best relationship that they can hope for?
(BEGIN VIDEOTAPE)
PASCAL LAMY, FORMER DIRECTOR GENERAL, WTO: I think the best is to keep trade open. Now, if the British do not want to remain in the customs
union, they do not want to remain in the internal market, it's probably a sort of Canada/EU-like agreement. Which is way, way less open than the
internal market. But I think it will take time. More time than expected. I don't think a minute something like this can be negotiated within a year,
which is what it should be in order to be ratified by 2019. And, you know, we are in a process where the United Kingdom is slowly, very slowly,
realizing that getting the egg out is not only painful, but it's also costly.
QUEST: How prepared are the Europeans, the EC side, to make the concessions necessary to get a status just underneath single market customs
union? Granting that it can't be full, but a free trade, Canada-plus deal?
PASCAL: I think this is perfectly -- the EU will -- the red line of the EU is if you don't accept free circulation of people, you have to leave the
internal market. That's it. And what the EU will say, is the moment U.K. becomes a third country, there needs to be a border with checks for origins
of products, or with checks for regulation of services, for instance. But I think the EU, on this phase, are really, really very open-minded. What
remains a very difficult issue is this Irish border, which basically has been fudged in the deal which was passed last week, and which remains a
thorny issue, because of the politics and the economics of that.
(END VIDEOTAPE)
QUEST: As we continue tonight on QUEST MEANS BUSINESS, Luke Skywalker is from a distant galaxy. Homer Simpson is from Springfield. And Mickey
Mouse spent time as Steamboat Willie. Now they all have one place to call home.
[16:50:00] (COMMERCIAL BREAK)
QUEST: When you wish upon a star and you bring the two together, what do you end up with? Disney's capture of Fox, creator of the deepest vaults of
intellectual property in cinema and popular culture. Bringing the famous franchises all under one roof. And possibly under one streaming device.
This is extraordinary. Take a look over here and you will see what's coming together. First of all, you've got X-Men, that will reunite with
the Marvel cinematic universe, which Disney bought in 2009. Wolverine will share digs with the Avengers, all in the same Fox/Disney house. And then
legendary series like "The Simpsons" will join franchises already in the Disney locker. "Star Wars," which is still being milked with the "The Last
Jedi" releasing today. And off-screen benefits, just oodles everywhere. "Avatar," James Cameron's, "Avatar," which owns outright, the highest-
grossing movie of all-time. Only months after it opened, "Avatar," a theme park of its animal kingdom, Pandora, in Florida. It doesn't get better
than that. Frank Pallotta we need you, sir, to explain and help us understand that this is a true colossus being put together with regulatory
concerns, perhaps.
FRANK PALLOTTA, CNNMONEY MEDIA REPORTER: Perhaps. Now imagine for a moment I offered you a streaming service that had "Captain America" Luke
Skywalker, "Moana," the Na'vi of "Avatar." That would be something you would be interested in. You would pay maybe a lot of money for that
streaming service. That is the name of the game here. Disney has for years had one of the biggest vaults of intellectual property with its
animated movies, its Disney princesses, and now it's just getting even bigger than that.
QUEST: It's also got the studios. Which, of course, is the only part of horizontal integration between the two. Does it keep both the Disney
studios and all the various affiliates of Disney studios and the 21st Century or the 20th Century Fox bit?
PALLOTTA: I think it definitely does. It's going to be interesting to see what kind of material they're going to be using from Fox. Fox has Fox
Searchlight, which is very prestigious. Maybe even makes Disney an Oscar contender. It's always been this very family-friendly place. Maybe it
starts making a little bit more of adult content. You look at something like Marvel Studios, you have a character like Dead Pool, who was an R-
rated Marvel superhero. Maybe Bob Iger was saying maybe we'll even make R- rated Marvel movies going forward.
QUEST: In the same way that AT&T's chief executive sort of made it clear when talking about buying Turner, Time Warner and CNN, we know what we're
buying. We know what we've got. We're not buying CNN to destroy it or ruin it.
PALLOTTA: Right.
QUEST: Disney is not buying the racier assets of 21st Century Fox only to gut them.
[16:55:00] PALLOTTA: No, not at all. I would say the big ones that they are buying here is the Marvel characters. They're also buying "The
Simpsons," as you are saying. That's going to celebrate its 30th anniversary in 2019. And then you have "Avatar" that's going to have
multiple, multiple sequels. Remember, "Avatar" it's the biggest movie ever made, $2.7 billion around the world when it was released.
QUEST: Netflix is the largest streaming service, but it is only one and who knows who will be there in five, ten years' time. Is Hulu the gateway
through which this goes, or does Disney now continue with its Disney streaming service that it said it was going to start, or does it fold it
all in?
PALLOTTA: I think they're going to have multiple services. You have to look at this almost like streaming is the new cable television. Disney for
years had ESPN, Disney channel, ABC. Why did anyone always say, why don't we put all your stuff on ESPN? Because they diversify. Maybe we will see
instead of a big six studios or multiple cable channels, maybe we'll see all these different streaming services and Disney will sell a package of
ESPN and Marvel and Hulu and "Star Wars" and you'll have to buy it for a high price.
QUEST: Good to see you, sir. I could talk more.
PALLOTTA: Good to see you.
QUEST: Profitable Moment after the break.
(COMMERCIAL BREAK)
Tonight's Profitable Moment. The genius of Rupert Murdoch spotting the way and the trend of the industry. And not being afraid to dismantle an empire
that's taken a lifetime to put together and still have 25 percent of the new media. Brilliant. And that's QUEST MEANS BUSINESS for tonight. I'm
Richard Quest in New York. Whatever you're up in the hours ahead, I hope it's profitable. Let's do it again tomorrow, please.
END
