Return to Transcripts main page
Quest Means Business
Trump Proposes Sending Troops to Guard U.S.-Mexico Border Wall Until Wall is Built; Dutch Lawyer Sentenced in Mueller Probe; Travel Chaos in France Amid Rolling Rail Strike; Netanyahu Backtracks on Migrant Resettlement Deal; Spotify Battles Deep-Pocketed Rivals; Gene Simmons: Streaming Artists Risk Being Short-Changed; Police Say there's Been an Active Shooter at YouTube Headquarters in California; Oklahoma Teachers Strike Over Pay and Working Conditions; Carnival Cruise Line Joins Fight Against Bermuda's Ban on Same-Sex Marriage. Aired 4-5p ET
Aired April 03, 2018 - 16:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
RICHARD QUEST, CNN HOST: The Dow Jones very strong late rally in the afternoon. Just around 3 o'clock we'll get the bits (ph) with that. On a
day (ph) oh yes, sir. Well done. A good, robust cavil (ph) that brought saving to an end today, Tuesday, April the 3rd.
Think of it as music investor (inaudible), Spotify has listed on the exchange. We'll have to view from Wall Street and Los Angeles as Gene
Simmons, our guest, joins me during this hour. Emmanuel Macron's maggy (ph) moment, France is hit by strikes challenging the president's economic
defaults. And Vladimir Putin's looking east, Russian leader hikes (ph) to the lines with Turkey. I'm Richard Quest, live from the world financial
reigning capital, New York City, where, of course, I mean business.
Good evening. And extraordinarily busy day on the market as Spotify lists on the New York Stock Exchange. Amazon has shrugged off a new and further
attack from President Trump. We'll look at both sides. China is threatening to match U.S. tariffs one-for-one if the U.S. offers up any
more. And the New York Fed names a new president. Those are the stories. Those are the market factors that move the market during the day and we'll
deal with them all.
We start then with Spotify. The shares ended today at $150, that closing price bartering (ph) the leading music streaming company of more than $26
billion. Investors aren't the only ones watching this closely. It's a huge deal for other unicorns, unlisted firms, valued billion dollars or
more, and there are many of them waiting in the wings, firms like Uber and Lyft seeing what sort of perception this listing gets.
Now, what really was extraordinary, the day to remember at the stock exchange. It was the longest opening of an IPO in stock exchange history,
and on the stock exchange floor I had a front row seat.
(BEGIN VIDEOTAPE)
I can honestly say maybe not since Alibaba rolled (ph) a couple of others do you get this large number of floor brokers all waiting to find out the
open prices.
STACEY CUNNINGHAM, NYSE GROUP COO: This is an event. I mean, this is certainly if you talk about the marketing value of a company coming to the
public markets, the fact that our market model shines during the price discovery process.
CLARE SEBASTIAN, CNN CORRESPONDENT: This will be the latest opening of an IPO in - that they can remember as far as they know. Essentially, it's a
free for all.
SHELLY PALMER, THE PALMER GROUP CEO: Look, there's nothing like an IPO and this is a listing, so it's a little different, and everybody's there, and
it's been an auction going on for the last, like, hour and half, two hours, to maybe now (ph).
QUEST: (inaudible) How long do you think it's got to go? Any idea?
MATTHEW CHESLOCK, VIRTU FINANCIAL EQUITY TRADER: Tremendous IPO and that's in the face of what's going on in technology right now. This isn't the
biggest tech IPO of the year, and it's being so well-received in the marketplace.
QUEST: Nobody really knows when this is going to actually happen.
UNIDENTIFIED MALE: It's getting close.
QUEST: Getting close. Getting close is the word. Shelly Palmer, it's getting close.
PALMER: It's getting close.
QUEST: What you're seeing today is a market performing to almost absolute perfection. Oh, now he's stead. He's range - he's tightened the range to
169 or whatever.
UNIDENTIFIED MALE: And a half.
QUEST: About 69 and a half, and he says if that holds he's going to open it.
SEBASTIAN: Well, I think we're breaking new ground, Richard, as we speak.
QUEST: Let's cut in. Let's cut in. Come on. Basically, what the guy in the middle - oh. There you go. Spotify looks like it's about to open.
UNIDENTIFIED MALE: There it is.
QUEST: (inaudible) feels like it's just getting burned (ph).
UNIDENTIFIED MALE: Yes.
QUEST: It was rambunctious. It was tortuous. It was long-winded, but it's enabled the most perfect of price transparency. Every market
participant was able to take in being bold (ph) and to see the way the designated (ph) market maker brought the price closer to close.
(END VIDEOTAPE)
Clare Sebastian was with me at the exchange and joins me now. So let's dot the Is and cross the Ts. The guidance price overnight was $132. The open,
though, was considerably higher.
SEBASTIAN: Yes, the open at $165.90 was a lot higher than that. As you saw, and as we witnessed down there, it took a little while for them to get
to that point even in the last half hour. As this played out, Richard, we saw them shift their reference price a little bit as they couldn't see a
way to open within what they were guiding, but now, obviously, it's down a little bit. It's closed around 10 percent of what it opened, but you get
the center (ph) to that, though, that there was any panic selling. There was a little volatility.
QUEST: Right.
SEBASTIAN: That's the situation we're in, but really I think this was just a continuation of that price discovery.
QUEST: Do you get the feeling this high tier of the direct listing
[16:05:00]
Quest Means Business 031605
CLARE SEBASTIAN, COORESPONDENT: That was an iconic setting that was a bit of volatility that's situation we're in but really I think this was just a
continuation of that price discovery.
RICHARD QUEST, HOST: Do you get the feeling this idea of the direct listing, I mean it was it's not, it was tried out today some would say
privately that it was a cumbersome way it took a lot longer. It took maybe three hours, three and a half hours to the price discovery to the point
where they -- would you get the feeling they'll be more of them in the future?
SEBASTIAN: I think it's possible there will be. I think we witnessed down there, there was some frustration among traders that this took so long
their view was why don't you just bring in the underwriter and we'll be done in an hour.
We don't have to stand around for three and a half hours waiting for this to happen. But I think while it was cumbersome for those couple of hours,
it was less cumbersome in other ways. It was more accessible to resale investors, it wasn't just institutional investors coming in, it was
essentially an auction of existing. So this only woks for a company that isn't trying to (inaudible) but I think without even watching Richard. I
think it's possible we may see more.
QUEST: Was it an exciting day? I think we both enjoyed it down there in the exchange. You don't see that happen every day. Clare Sebastian thank
you. Now there was a very good moment.
We really saw how the New York Stock Exchange can poke fun at themselves and perhaps not take themselves too seriously. It started with the red
flag at the start of the Spotify day. Now look at the picture closely.
The Stock Exchange put up the Swiss flag to welcome Spotify to the New York Exchange. It got the country wrong. Spotify is in fact Swedish. Now they
fix the error quite quickly, in the day and even managed to poke fun at themselves saying it was a moment we owed to our neutrality in the process
of price discovery.
If that's not a turning moment in (Inaudible) I don't know what is. I spoke to Stacey Cunningham the chief operating officer at the New York
Stock Exchange. Well why Spotify chose this unconventional way of coming to the market.
STACEY CUNNINGHAM, CHIEF OPERATING OFFICER, NYSE: For a comfort in public markets they have a couple of different reasons why they might do that.
For some them it's about capital raise, for some it's about brand and raising their visibility so they can continue to grow.
For others it's about a liquidity event proving currency back to their existing shareholders and also a currency they can use for future M and A.
For Spotify it wasn't about those first two, they didn't need capital, and they didn't need that brand of visibility. But they did want t access the
public market. So they saw the value there and they felt this was the best mechanism for them.
QUEST: They also they didn't want to do any of dog and pony. I mean there was no ringing of the opening bell, the CEO isn't even here, you're
disappointed. Because I know you're sort of (inaudible) but it is nice to have an event.
CUNNINGHAM: This is an event. This is certainly-- if you talk about the marketing value of a company coming to the public market. The fact that
our market model shines during the price discovery process and it's unparallel value there's no marketing event better than what we're looking
at right now. So no we're not disappointed, it was never about the palm (ph) of circumstance for Spotify. We've been working with them for two
years and that was never their driver.
QUEST: Would you, again I know you're agnostic but these sort of listings are extremely can be extremely volatile they revolve an enormous amount of
greater risk than a straight forward IPO with an under writer underneath it and a book building. Because what's happening at the moment is literally
they're building a book between sellers and buyers. And would you recommend this as being (Inaudible)?
CUNNINGHAM: I certainly would never recommend the right path for each company, but we're going to present to them what is available out there.
And when you talk about volatility, we hit volatile events in the markets all the time. The markets are not immune to volatility. Our mechanisms
that we put in place, to prioritize price discovery, to take the time to find an equilibrium price and to be ready when there is volatility in
market. That's what we do every day. And this is what we'll see today.
QUEST: The fascinating part about it that it doesn't matter where you might want to buy Spotify shares. It doesn't matter which country your
watching this in anywhere in the world. All that matters is really in this computer age, a man on a phone, two men or women on a phone talking or
planning out prices.
CUNNINGHAM: Yes, and this why the human element has continued to be so important to the New York Stock exchange market model. Because you can't
ever replace that. You can certainly automate things, but this is why we see real value in that price discovery process and we keep humans part of
that conversation.
QUEST: So talking about the humans as part of that conversation, that Stacey was on about, Spotify needs to keep musicians happy humans as well.
Gene Simmons says artists are getting the short end of the deal with human devices because (inaudible) will be with me later in this hour. Something
to look forward to. Some better news from Tesla at last production numbers released on Tuesday met with a relief and Tesla stock was up nearly six
percent. Now the car maker built 2000 model threes last week. And the (Inaudible) doesn't need to sell more stock or borrow significant sums this
year, much to the relief of investors. Production is still short of it's target. Rebecca Lindland is from Kelley Blue Book joins me from there
Connecticut and we're delighted.
[16:10:00]
Now, so the reality with the Model 3 is it was a tough, hefty lift to get going, but they do now seem to be getting production under way.
REBECCA LINDLAND, EXECUTIVE ANALYST WITH KELLEY BLUE BOOK: They do, but they have a long way to go also, because the do eventually want to get into
the 3000 unit range per week and that's still going to take them awhile and it's still going to take them awhile to work through the backlog that they
have. And by awhile, I mean we're looking at potentially years, two years after the anniversary of when 400,000 or so or people put $1,000 down as a
deposit.
QUEST: Correct. Elon Musk's role in all of this, in the production difficulties, taking charge of productions, you're highly critical of that.
Why?
LINDLAND: I'm not thrilled with that scenario. I think that Doug Fields, who is the vice president of engineering, I think he was doing the very
best that he could and the idea that Elon Musk needs to micromanage this production line doesn't really bode well for the management structure of
Tesla.
It's similar to Sergio Marchionne coming and running the Alfa Romeo line. I wouldn't feel good about that scenario either. So, I would like to se
Elon Musk get in a group of executives that he trusts, that he'll listen to and that will tell him no and he will listen to them and stop
micromanaging.
QUEST: Do you think Tesla is still too much a Musk enterprise? It's still perceived and run as if it is a one man show, even though, obviously, it
now has heft scale. It is, as you know, I mean it's not a huge volume carmaker, but it is a volume maker.
LINDLAND: Right. I absolutely think that we have to diversify that management team. And we need a consistent management team as well. We
need some stability in the teams that are running these different programs, so I absolutely do think that we have to get the focus off of Elon Musk and
onto a broader group of executives and manager and does.
QUEST: Right. OK, so in this scenario, we know the upper-end Tesla's, they may loose money but they're highly regarded. The Model 3, a lot of
people put money down then aren't getting production. Is the Model -- I guess really, has he got the product range? Forget all the space projects,
we've got space -- we (inaudible), just on Tesla, has he got the product range, in your view, for long-term sustainable success?
LINDLAND: I don't know that he does. It's a very fair question. When -- right now the new car market is about two-thirds SUV and he has a SUV, the
Model X. He has a beautiful sedan, a hatchback in the Model S and then the Model 3 is actually a sedan, which is arguably one of the least popular
model -- types of vehicles out today, that typical three box sedan.
So, I think that we need to start seeing a smaller Model X, whatever he wants to call that. I think that we need to see some more diversification,
but at the same time he's got to just get the Model 3 right. That's the main thing right now.
QUEST: Rebecca, the next time you're in New York, not that far away from us, please, I have a seat waiting for us to really to grip with automobile
industry (inaudible).
LINDLAND: Excellent. I look forward to it.
QUEST: Oh, maybe have to drive together. Right? We'll take a look at the markets -- the broader markets and the Dow (inaudible) and the Nasdaq all
ended higher and all sectors, in fact, were up to the good.
Amazon we've talked about, shares rose more than one percent even as the President attacked the company once again. European shares, they were
down, they'd seen a lot of what was happening, hurt by trade war tensions and the numbers on the first days of trading after our very long holiday
weekend in Europe as result. And (Euro) SMI, I mean that took the biggest beating of all off one and a quarter percent.
In France, Air France KLM shares are down four percent. Investors are worrying about the French labor unrest and how it's going to unbare(ph)
impact. Profits are probably quite badly. The strikes are affecting much more than just profits.
France saw it's first day of public transport protest. It most certainly was not a pretty sight. We'll be live in Paris, because this strike --
these strikes every two day -- two days of strikes after three days of working. It promises to be long and bitter.
(COMMERICAL BREAK)
[16:15:00]
QUEST: The French President, Emmanuel Macron's taking on the rail unions in a showdown that could make or break his presidency. Tuesday was the
first day, it's a series of rolling strikes by rail workers, it severely disrupted train services. In Paris is Melissa Bell and this is arguably
what was promised. What particular policy are they protesting against, if any?
BELL: This is a strike, Richard, that is really being led by the rail unions and what they're opposing is the liberalization, the opening up of
the rail market here in France. Also the end of the very particular sort of stature that rail workers have that gives them certain rights, the
government is proposing that people who joined the service now, would simply not get automatically those rights that the company that is the
National Rail French Company would be regrouped into one big entity rather than the three that exist at the moment and that various rail services
would be opened up to competition.
It is at the heart of what Emmanuel Macron is, Richard it is at the heart of what he was elected for and I think this is why these strikes are
potentially very different to anything that we've seen in the past because the government itself is going to be tested in its resolve; in its strategy
perhaps more than any other has before.
QUEST: And in that testing of resolve, Melissa, it can't afford to give in or to lose, which is why I believe people are calling it Macron's Maggie ph
Moment which is a reference to Maggie Thatcher and the miner's strike and the 1980's, which I do remember extremely well.
BELL: This is absolutely the moment, this is the test. We saw of course back in the autumn you'll remember, those reforms of the labor laws, they
seemed to get through remarkably smoothly. This time the rail unions are saying well wait a minute, Emmanuel Macron has never seen a strike by the
SNCF, the French Rail Workers before. He doesn't know what he's in for; we're going to make sure he folds. In fact it 36 days of strikes, just
like today they are planned between now and the end of June and that means so much more misery for commuters.
Emmanuel Macron has said he will see this through no matter what and interestingly Richard he's using that same strategy he used in the autumn,
that is the threat of presidential decree and he's saying to the unions, let's talk, let's find compromises, but this is going to get through
whatever happens.
QUEST: So I mean is that - - again it's two days of strikes for every three days work or some variance thereof, and there will be other unions
joining in; Air France for instance will be joining in. How much wider will this grow do you think?
BELL: Well I think the difficulty for the unions is that will not grow as wide as for instance the last time we saw strikes on this scale, which was
back in 1995. You'll remember that the government, the right-wing government of Alain Juppe in the end folded on the most controversial
measures, his reform of social security and
[16:20:00]
and pension because of the Brexit, the movement. It sort of seemed to take in the whole of France. There were two million people on the streets at
it's high (ph). This time it is said as their France wastes to elect their students (ph) rail workers, but beyond that public opinion is simply not
backing the movement on the same scale as it did back in 1995.
QUEST: Now, that's crucial, isn't it? Because without public opinion on their side, the strikers are onto a much more difficult, if you like,
project because I guess the answer is what's the clever money on at the moment? Macron winning or the unions taking him down? What do most people
seem to think is going to happen here?
BELL: Well, I'll give you the figure from the very latest poll, Richard, and that is 72 percent of people, polls believe that Emmanual Macron will
win the day, views of reforms will get through, and as you say, that is crucial. This is, after all, a president who has built his entire
political campaign, presidential campaign, presidency on the idea of this reform. And it appears that people back him. People believe he can do it.
People believe he will deliver. They also say, by the way, 53 percent of them, that they disagree with this strike. They disagree with the
disruption being cause, and I think that gives us an indication really of which way this is going to go. And again, this idea of using presidential
decree and negotiation could prove that it allows Emmanual Macron to do what no other president has achieved so far, and if nothing else to prove
that, in fact, France is perhaps more reformable than we thought it was.
QUEST: Melissa Bell, thank you for staying up to date tonight and joining us in Paris. Thank you. Now, President Vladimir Putin is on his first
trip abroad since he was reelected just last month. Mr. Putting arrived in Ankara in Turkey. It's a summit on the seven-year old war in Syria.
President Putin enjoyly (ph) met the Turkish president, Erdogan. I'll be joined on Wednesday by the Iranian president, Hassan Rouhani.
At the same time, the Russian president's in the middle of what's being called the Putin Pivot, and effort to court new friends in the east and it
will increase political pressure from the west. CNN's John Defterios is in Abu Dhabi.
(BEGIN VIDEOTAPE)
JOHN DEFTERIOS, CNNMONEY EMERGING MARKETS EDITOR: The diplomatic isolation of Vladimir Putin by the west isn't a word unprecedented, but if recent
history is any guide, the Russian president won't be left wanting for partners. He's made a big picot east to Asia, initially built around
selling oil and gas.
RICHARD CONNOLLY: Since 2014, Putin and other key members of the Russian Foreign Policy elite have been very systematic in seeking closer ties with
the likes of China, South Korea, and even Japan.
DEFTERIOS: Back-to-back deals in China when economic isolation was at its peak best illustrate the point. In 2013, he signed a 25-year oil agreement
worth $270 billion. A year later, a 30-year gas deal was inked for a projected $400 billion. And Russia has expanded its reach by adding
military equipment and nuclear know how. Recent contracts with countries like Turkey mean Russia is now a dominant figure in the nuclear power plant
industry with contracts in over a dozen countries.
CONNOLLY: To the Russian leadership, they like to see nuclear power generation sold to as many countries as possible. It makes Russia a lot of
money and it keeps people working in a high-technology industry.
DEFTERIOS: And President Putin keeps on pursuing more emerging market alliances. Five years ago here in the Middle East, Russia signed a $5
billion strategic investment with the UAE, and last autumn he made another major push inking deals with Saudi Arabia despite the deep partnership
between the kingdom and the Trump administration.
Putin did the same with the kingdom's regional arch rival, Iran, signing contracts pegged at $30 billion. While the Russian president is a wily
survivor, his economy under western sanctions did suffer when energy prices collapsed. After hitting a peak of nearly $2.3 trillion in 2013, GDP
shrank by $1 trillion three years later. French Energy Group, Total, is invested in Russia. It's CEO says he sees high-risk with the geopolitical
standoff.
PATRICK POUYANNE, TOTAL CEO: We can't be worried if continue to escalate any event around the world that clashes within big sanctions, and I'm not
sure the interest of everybody is to come back to a Cold War system.
DEFTERIOS: A diplomatic cold war is brewing, but an economic defeat seems less likely with Putin's new partners. John Defterios, CNNMoney, Abu
Dhabi.
(END VIDEOTAPE)
QUEST: China's foreign ministry's spokesman is doing nothing to ease tensions. He says Beijing is not afraid of a trade war and will be willing
to fight to the end.
(BEGIN VIDEOCLIP)
GENG SHUANG, CHINESE FOREIGN MINISTRY SPOKESPERSON (through translator): Everyone should be clear the tariffs is in response to Section 232 rather
than the Section 301 probe.
[16:20:00]
We have mentioned for a long time that China will not provoke a trade war and isn't willing to fight a trade war, but we are not afraid of a trade
war. If anyone insists and even fights at our door, we will resolutely fight and fight to the end.
(END VIDEO CLIP)
QUEST: Good grief(ph), Patrick Gillespie, will resolutely fight and fight to the end. That does not bode well with the U.S. about to consider more
trade tariff's on the back of the IPO, finding from the recent group commission.
PATRICK GILLESPIE, CNNMONEY REPORTER: Richard, China is showing that they will follow through on what they say, but remember, a week ago they said
they would come out with a tariff that came out on Monday. They did so. And what's really interesting is the timeline. They did this in seven
days.
The U.S. came after this month long investigation on intellectual property thefts in China. They announced they would do tariffs. They're going to
come out with a list this week, then there's going to be 60 more days, we're getting longwinded talking about it, just listing all the steps here
Richard, so the U.S. just isn't built to slap tariffs on right away. Maybe they're trying to get more confessions from China, but the U.S. says they
wan to get tough on China and they're taking a lot more time to do it.
QUEST: Away from China, the new head of the New York Fed was announced, John Williams the Fed from San Francisco and an economist not .
GILLESPIE: We've met .
QUEST: We've met and we've had on this program. But not a (inaudible), (inaudible) matter(ph), I mean, obviously they all are after they get to
that particular level, but his guy is head of the FOMC, the trading desk and the New York Fed.
GILLESPIE: It's going to be a very interesting time for him to step into this role Richard, because you've got so much volatility in markets,
obviously there's always questions about how much cash or liquidity is available and the Fed is really overseeing that operation -- overseeing the
infrastructure of the plumbing, the health of financial markets.
There's also going to be question, not only about his financial market activity, Richard, but also the fact that the Fed -- that many people saw
this -- Fed critics saw this as an opportunity for a diverse, hire a woman or someone from minority background. They went with another white male and
that's causing a lot ire among Fed critics.
QUEST: All right, well let's put that to one side for a second. I mean, Bill Dudley is there at the moment.
GILLESPIE: Former Goldman economist.
QUEST: And -- former Goldman economist, but comes from the street. Tim Geithner, of course, was also well steeped in there. Do you think it is
essential to be trader or be a private sector economist with knowledge of the street?
GILLESPIE: I think he needs to -- his learning curve's going to be quite steep because you've got things that are very complex, like the repurchase
market, the refill market, which it gets -- it's too hard to describe in one or two sentences, but I think it's critical that the Fed president, the
New York Fed president has that financial market acumen. He has been learning side-by-side along FOMC colleagues like Bill Dudley and Jerome
Powell, the new Fed Chair. But, I think he's going to have to prove his strengths right away.
QUEST: Patrick, we'll leave it there for the moment. Thank you.
GILLESPIE: Thank you .
QUEST: Patrick Gillespie.
Now, some breaking new that I need to bring to your attention. The reports of gun fire at YouTube's headquarters in California. Now this is the
scene, it's at San Bruno in California. Reuters says Alphabet is investigating a possible gunfire incident. That's the parent company, of
course, of Google.
We understand that homes and buildings nearby and offices have been evacuated from the area and there have been a variety of 911 calls that
have been coming into the police. But so far, there's no -- well, you can see the size and scale of the operation that is now underway at San Bruno,
but there's no word on any details or any casualties or the nature of what's going on there.
We will bring you more details when we've got them. We'll take a break.
(COMMERCIAL BREAK)
[16:30:00] RICHARD QUEST, HOST, QUEST MEANS BUSINESS: Hello, I'm Richard Quest, there's more QUEST MEANS BUSINESS in just a moment. When Gene
Simmons, I guess will be with me to tell me what artists want from the Spotifys of this world.
And economic discontent in Trump country teaches in Oklahoma walking out, and as we continue, you are watching Cnn, and on this network, the facts
always come first.
President Trump says he's calling on the U.S. military to guard the border with Mexico until that border wall is complete. Let's go ask for
clarification after those comments. And as ambassador to the United States telling us it's not something the Mexican government welcomed.
A Dutch lawyer and son-in-law of a Russian oligarch has become the first person sentenced in the U.S. Special Counsel Robert Mueller's Russia probe.
A judge sentenced Alex van der Zwaan to 30 days in prison and a $20,000 fine after he admitted that he lied to investigators.
Well, now, workers in France have kicked off three months of rolling strikes which is already facing long lines and parked trains. Workers are
protesting against the French president's old proposed overhaul of labor laws.
Unions say pertaining to the privatization of rail travel, the government denies any such plans. Israeli Prime Minister Benjamin Netanyahu has
reversed an agreement with the UN refugee agency to send more than 16,000 African migrants to Canada, Germany and Italy.
In exchange, Israel wants to accept thousands of others of any among Mr. Netanyahu's coalition as well as residents of south Tel Aviv where the
migrants live opposed the deal.
Oh, now, let's return to the Spotify debut on the New York Stock Exchange. It comes as tech stocks facing unprecedented crisis of confidence. And
that's not only the challenge for Spotify. If you join me at the QUEST MEANS BUSINESS Jukebox, then I'm sure we'll find it too, and all two are
worthy of playing.
Now, the first question of course for any good sensible subscriber is how do you get more paid subscriber numbers. Getting subscription up is
important. Seventy one million people are currently pay Spotify subscriptions, but 90 million use its service for free.
Now it puts up with adverts between tracks, I used to be like that, I've just taken a paid subscription. Converting people like me from free bees
to pays is the key. At the same time it's fending off rivals which bundle stream with other content.
It's a tricky one which Spotify seems have managed so far. Now as Spotify's numbers increase on road, so have the losses. This should be the
turnaround yet, but the projections of the losses declined for around 460 million to just over $400 million a year.
And most crucially, arguably, besides keeping me happy or pay the bills, you've got to keep the artist happy. Taylor Swift brought her music in
2014 in a dispute over her value. However, truth be told, she did return some three years later.
So let's put this in terms -- we've heard about it from Wall Street point of view, from the investors point of view, now the music point of view,
Gene Simmons is the front man of the veteran rock group great Kiss.
He also believes new artists are getting short-change. Gene, good to see you, sir, you join me from Los Angeles.
GENE SIMMONS, MUSICIAN: Nice to see you again, Richard. I remember when you were over at the house, but that's just for you and I.
QUEST: It is just for you and I and it's not a visit I will forget in any -- in any life time nearby.
[16:35:00] Gene, what -- OK, Spotify has opened up an entire new vista for artists to get their music played and into the hands of different people.
But you say, it's not a fair deal.
SIMMONS: Oh, I think fair is being kind. Look, it doesn't affect me and I've said this a few times before, Kiss' America number one gold record
award-winning group of all time. You know, the real money, I'm afraid people get very upset when I use that word is in live concerts and all that
stuff.
Recorded music has become unfortunately like throw-aways, and the cloud, it's over here, it's over there. So people can get it for free, why should
they pay for it? But I think you correctly position this in terms of a business model.
And that's why I don't want to comment wax-poetic or prolific on that -- in that area. I want to go back to the poor starving artist who is writing
their first songs and recording it and so on and so forth.
Spotify is worth $25 billion or so they say, record companies have invested in it, they're getting paid, Spotify is getting paid, add revenue if that's
the model or this and that.
Everybody is getting paid except the people that create the stuff that you're streaming. And on the day where there's a revolution and
legislators wake up to the fact that the people that are getting short- changed are not the fans, not --
QUEST: Right --
SIMMONS: Not anybody except the artist that create the music that goes out there. There's going to be hell to pay.
QUEST: So Spotify will say of course that they do pay the artist, we're talking really -- it's like the old --
(LAUGHTER)
It's like the old lie, you know, we're talking -- we know the price now, we're just talking about the value or the other way around. I mean, that's
really what you're saying, you want them to be paid --
SIMMONS: The problem is -- the problem is, there's no discussion or argument. The problem is that legislators don't understand what
publishing, writers' royalties or anything is.
They just look at -- I mean, maps that came in and everybody, you know, were sitting on their thumbs, record companies included --
QUEST: Right --
SIMMONS: They had no idea of the tsunami that was coming. So it's going to take a while for the laws to change. Trust me, they will change because
on the day when all the artists or most of them stand up and say --
QUEST: OK, sir --
SIMMONS: We're out of streaming my stuff. The Beatles held out forever. Some things got to change, there's no business model --
QUEST: But there's no --
SIMMONS: Or for new artists.
QUEST: But until artists withdraw their support as Taylor Swift did --
SIMMONS: That's right --
QUEST: But then came back and -- and do you -- you know as well as I do, it's people like you, it's the big names that have to withdraw on the back
of saying give more to those at the --
SIMMONS: That's precisely the point that -- you know, there's a historical lesson I used to teach sixth grade, blah-blah. Either it was Sparta or the
Troy-sians(ph). The men would constantly go to war, that was their business model.
The women didn't want the men to go to war so they decided to withhold sex. Guess what happened? The men didn't go to war. So on the day that the
writers, performers and so on wake up and force legislators to pass laws to make this a viable business for the people that create all this stuff that
everybody is streaming.
So everybody is getting paid --
QUEST: So --
SIMMONS: Billions here, billions there --
QUEST: All the --
SIMMONS: Except the people that write the song.
QUEST: Which you know, you're a political realist. Are the votes in this issue to get legislators to actually take this up. Why should they -- and
we're going to be talking a moment or two about you know, Oklahoma teachers and money for the --
SIMMONS: I call it the Hillary syndrome.
QUEST: Go on --
SIMMONS: When you've got famous people right in front of the White House going, they're stealing my material or worst to that effect, and we have
enough known faces, the masses are swayed. That's what happens.
Stocks plummet -- look, I don't know if you know Rihanna or a few others, they opined on social media that they no longer follow a certain
technological -- I don't want to say their brand -- because as soon as these ladies, you know, with their huge social media said they're no longer
following that, the stocks plummeted.
So there's power to be had in artists getting together and deciding I don't want to give away my --
QUEST: Right --
SIMMONS: My stuff for micro pennies on the dollar. In the old days --
QUEST: Right --
SIMMONS: You'd sell one song, two songs on both sides for a buck, 20, and then it went down --
QUEST: Right --
SIMMONS: And now it's micro pennies.
QUEST: So last question sir, we know it's a battle. Spotify has 70 odd million and 93 million free. You've got Apple Music, you've got Pandora,
can they all survive?
SIMMONS: My friends in Wall Street who I speak with regularly because I'm involved in a few ventures myself are very bullish on Spotify. They've
been -- you know, it's a Swedish company, they've been able to figure out somehow, somewhere how to be at the right place at the right time with the
right thing.
[16:40:00] Spotify is still the big dog on the block, people still prefer that over --
QUEST: Right --
SIMMONS: Pandora and some other things. But anything is possible. But let me tell you what I would do.
QUEST: Go on.
SIMMONS: What I will do is what Netflix did to the movie industry is to create content that you can't avoid. So if --
QUEST: Right --
SIMMONS: Spotify came to us and say Kiss, you're going to do the last show ever, it's only available on Spotify for X number of dollars. All of a
sudden, you have millions of people coming on and creating a new business model which is exclusive --
QUEST: Right --
SIMMONS: Programming. Anybody can listen to the Beatles and Led Zeppelin, Kiss on anywhere and everything. But if you create programming, you're
going to get subscribers, and I want a big slice of that because I am really important.
QUEST: We will not disagree, sir, let's not leave it too long before we get together again and talk about these issues. Thank you sir.
SIMMONS: My best to you.
QUEST: I need to update you on some breaking news. Police in California have confirmed that there is an active shooter at the YouTube's
headquarters in California. These are live pictures, this is the scene at the moment.
Police are urging people to stay away from the area. Multiple 911 calls have been received, and according to officials from the city of San Bruno,
the city has triggered what it's calling a massive police and fire response.
Google which of course is the owners of YouTube, Alphabet is their parent company says "we are coordinating with authorities and we'll provide
official information here from Google and YouTube as it becomes available.
These are the pictures at the moment. So just what we don't know versus what we do know, we don't know any casualties, we don't know any details
about any injuries or anything like that.
The only thing we can tell you is the police have now confirmed there's an active shooter, a gunman at the YouTube headquarters in California. And
when we have more details, I will continue to watch it.
This is QUEST MEANS BUSINESS, you're watching Cnn.
(COMMERCIAL BREAK)
QUEST: The school and (INAUDIBLE) halfway over in Oklahoma, it hasn't even began. Teachers in the state have staged a second day of walk-outs, saying
they can barely afford to do their jobs.
Now imagine being a teacher in the world's biggest economy and not getting a pay rise in some ten years. Not only that, you're all fending over the
same periods brink up by 28 percent.
(COUGHING)
Excuse me. These are the realities of Oklahoma, their teachers saying they've taken up all kinds of other works just to survive.
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE: I have been teaching algebra for 13 years. You know what? I'm going to put the 1X through. On top of the teaching job, I also
drive a bus part time. I also do lift, I do Uber.
Well, there's a price surge, I'm part of a little agency --
UNIDENTIFIED MALE: And I said but time --
UNIDENTIFIED MALE: I believe that on top of my teaching and my coaching, that I've got six or seven part-time jobs.
[16:45:00] UNIDENTIFIED FEMALE: I'm waiting on my students sometimes or my students parents or some of my old customers, saying why aren't you back?
Are you not in education anymore? Did you realize that you're not making enough --
UNIDENTIFIED FEMALE: The patio --
UNIDENTIFIED FEMALE: OK.
UNIDENTIFIED FEMALE: It's -- I won't say embarrassing, but it's just more of the realization of how far Oklahoma is to come to like get educators
what they need.
(END VIDEO CLIP)
QUEST: The state promised teachers a pay rise, teachers said it's not enough, they rejected the rise that was offered to them. And instead, they
posted pictures of decades-old textbooks held together with duct tape and classrooms that are falling apart.
Now, let's be blunt here. Oklahoma is not a state wrapped through economic problems or one that's full of far left anti-Trump protesters. Oklahoma's
unemployment rate is snap on wallet, if you live in Rapids(ph), right about 4.1 percent.
Growth is 30th in the country, 30 out of 50, and it is one of the most solidly Republican state in the United States. Kathryn Bishop is the vice
president of the Oklahoma's Teachers Union.
You rejected the pay raise that was approved by the legislature of the state legislature. And you -- bearing in mind that, as one state
legislature says, and you know, we've just passed a million -- $447 million tax increase, it's a substantial amount, I don't see lawmakers doing
anything else this year for education funding.
KATHRYN BISHOP, VICE PRESIDENT, OKLAHOMA TEACHERS UNION: Right, it's -- I would -- I would probably correct and say we did not reject the teachers
pay raise, we know there's other pieces that need to be funded, and one of those is funding into our classrooms.
And that's why 25,000 teachers, support professionals, parents, students came out yesterday and even more came out today to have their voice heard
that we need to invest in our students, we've neglected them for over a --
QUEST: Why? Why have they been neglected? Because there's one thing I've ever learned, is that parents tend to be extremely vocal, particularly
middle class parents tend to be extremely vocal when their children's education is at stake.
BISHOP: You know, that is a -- that's a great question because we have to stand firm, and we have to let our voice be heard that we can no longer not
invest in our students. Not invest in our core services.
And that's happened over the last decade that Oklahoma has continued to cut its revenue sources time after time and time again, and not invest in our
core services.
QUEST: So what is it you're wanting? What is actually -- I mean, besides better pay in the pocket, obviously for your members, but this idea of
classroom services, what do you want?
BISHOP: We're needing funding into our classrooms. What they propose and passed the other day, we need them buy one text book for every student. We
have technology that we can't even keep up.
We have students that are studying in broken chairs, textbooks that are being held together by duct tape. And we have class sizes that range
anywhere, sometimes 35 to 40 students, and that's not -- that's not acceptable for our students.
QUEST: OK, so I think you would accept surely that you're not going to be able to write these wrong of several decades in one year. How far are your
members prepared to stay out on strike or to involve themselves in industrial action to get a long-term solution here?
BISHOP: So we are ready to stay as long as it takes. So to have a deal that was negotiated in good faith that makes an investment in our children
at what was passed this past last week was a down payment.
We know that it's going to take several years to make that out, but we need to make that --
QUEST: Right --
BISHOP: Down payment more meaningful that we can --
QUEST: Sure --
BISHOP: That we can help our students.
QUEST: Many of our viewers watching in around the world, many of them will be watching and thinking, my goodness, you know, U.S. is the wealthiest
country in the world arguably, no way, you can put in Qatar there or Singapore.
But you know what I mean, and they're talking about old text books and broken furniture, so and this in a Trump state. What's gone wrong?
BISHOP: It is -- it is making sure that we have the revenue, and when you have a legislature that is year after year cutting all of your sources of
revenue, much of those come from taxes. When you have just chopped away, chopped away, chopped away, then we see ourselves in a hold.
[16:50:00] QUEST: Please come back and talk more about this, fascinating to hear your point of view from Oklahoma tonight, we appreciate it, thank
you. As we continue on QUEST MEANS BUSINESS, Bermuda has outlawed same-sex marriage.
Carnival Cruise Line is stepping up the pressure on the island to reverse course, but the LGBTQ community in Bermuda does not want or at least the
(INAUDIBLE) does not want future boycott as a tourist destination.
They require some explanation which we'll hear after the break.
(COMMERCIAL BREAK)
QUEST: Allow me to update you on the breaking news. Federal police are now responding to a shooting incident, the situation that's at YouTube's
headquarters in California. Now YouTube worker has tweeted, he was barricaded inside the room where he managed to safely leave the building.
He says he heard shots and saw people running. Another employee has told Cnn she saw a person that was shot on the patio where the staff eat.
Google says that the company is coordinating with the authorities and will provide official information from Google and YouTube as it becomes
available.
We'll obviously watch this. We have no more details in terms of whether they were any injuries or whatever. So when we get those details we'll
bring them to you as soon as we can.
Carnival Cruise is joining the legal fight against Bermuda's ban on same- sex marriage. Now Carnival is pardoning without Bermuda to oppose the law, the law changes in just a few weeks ago means two major Carnival divisions
registered in Bermuda can no longer conduct same-sex marriages on their ships.
Joining me now is the director of OUTBermuda, Zakiya Johnson Lord, good to see you, thank you.
ZAKIYA JOHNSON LORD, DIRECTOR, OUTBERMUDA: Thanks so much for having me.
QUEST: So as I understand it, same -- marriage equality, same-sex marriage was allowed and then the government has banned it.
LORD: Correct. Well, they've offered domestic partnerships, so last year, they offered we had marriage and it was fine.
QUEST: Right --
LORD: This year, one of the members of the department put for us a domestic partnership bill which is not marriage, and that went forward.
QUEST: Right. Why though -- because some have been calling for a boycott.
LORD: Sure --
QUEST: Of Bermuda as a tourist destination. Which is something that OUTBermuda is not in favor of, why?
LORD: We're not in favor of a boycott, I just think that it lacks nuance, right? Like it definitely doesn't support the American(ph) we want to,
right? Like LGBT Bermudians are working in hospitality, right? Like our businesses.
All this will depend on it. And we are still moving forward, right? So it's important to remember that. You know, I think there are jurisdictions
that are worthy of a boycott because the people and the -- are not for it.
Bermuda doesn't fall into that category. What we need is backing and support.
QUEST: Yes, there's backing --
LORD: Definitely --
QUEST: But you've got backing and support. You've got backing of support of some of the major companies like Carnival --
LORD: Sure --
QUEST: And others --
LORD: Recently --
QUEST: But without having some want of a better --
LORD: Sure --
QUEST: We're a business program. The blunt financial threat --
LORD: Correct --
QUEST: You're fighting this battle with one hand tied behind your back --
[16:55:00] LORD: Correct, I would agree. But also Bermuda is like a very -- interestingly situated, a wealthy country, right? Like a lot of Fortune
500 companies are on our shores, on our stock market, right? For your audience in particular.
And we know that people are leaning in a more progressive way. And so not only this for Bermudian people, but Bermuda and our allies, right, are
asking folks to know more about it.
QUEST: So how are you going to fight this battle? I mean, you clearly lost the argument because the law have been changed --
LORD: Yes --
QUEST: Therefore --
LORD: So we're taking it forward though. We're taking to the --
QUEST: But how?
LORD: We're taking it to the courts, right? So we're going back to the courts to ask them -- we think it's unconstitutional.
QUEST: Right --
LORD: Right, so we book same-sex marriage under the current domestic partnership, it's unconstitutional. It's -- I mean, and it's not so much
that -- because people are questioning whether or not, you know, other places don't --
QUEST: Right --
LORD: Do it as well. It's the rolling back of rights that I think is also problematic from an organization such as ours, right? So yes, we're moving
forward, but to give someone something and to take it back, that is where the nuance and the difference between Bermuda and other places, that is
where the difference comes.
QUEST: Sure, thank you very much indeed, much appreciated --
LORD: Thank you --
QUEST: I'll call you, thanks very much indeed. Now, as we leave you tonight, let me remind you that we are watching a situation in California.
You are looking at pictures from the YouTube headquarters in San Bruno, California.
The police have confirmed -- to use the unfortunate phrase, an active shooter is at-large on this building. YouTube is part of Google, Google is
owned by Alphabet and Google is saying that -- obviously when there's information.
But we do not know exactly what the situation is. So that is QUEST MEANS BUSINESS, I am Richard Quest in New York, we will follow this breaking news
all the way forward. I'll see you tomorrow and as always.
Whatever you're up to in the hours ahead, hope it's profitable for the busy day.
END
