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Summary:

Mark Cuban has another lightning rod post up over on his Blog Maverick entitled The Great Internet Video Lie that discusses the futility of over-the-top video delivery. Cuban’s a fun blogger to read because he takes a position and goes all-in with it. His post begins: […]

Mark Cuban has another lightning rod post up over on his Blog Maverick entitled The Great Internet Video Lie that discusses the futility of over-the-top video delivery. Cuban’s a fun blogger to read because he takes a position and goes all-in with it. His post begins:

Internet Video. Its the salvation for content creators everywhere. Its the end to dependence on the big bad meanies, the cable and satellite companies. Right ? Hell no. The concept that “over the top” video creates a valid business alternative for content creators is as misguided an internet business myth as there is.

For grins, lets say you want to start a business for which you want to stream, live or on demand, any video. Any quality. You want the ability to reach merely 10k simultaneous viewers. Not a big number. In fact , its a tiny number. Its certainly not competitive with any form of traditional TV, but its a starting point. So to stream 10k simultaneous streams, what are your choices ?

The only real choice, Cuban explains, is to use one of a handful of CDNs, and those CDNs are prohibitively expensive. Those high costs make the CDNs just as much of a gatekeeper as the cable and satellite providers. In fact, given the technical limits of broadband, cable and satellite operators are a better bet than trying to go over the top with your video.

The limitations of live broadband video were certainly on display last week during President Obama’s inauguration, when the throngs of online masses choked the web sites of CNN, CBS and ABC. So Cuban definitely has a point there.

But that’s not to say that Cuban is entirely right.

The issue of the CDN as gatekeeper is an economic one, if you can pay the bill, your content goes up as you like. But negotiating agreements with multiservice operators could run into other impediments.

Just look at Epix, the upcoming pay-TV service from Viacom, MGM and Lionsgate. Those are three huge companies with brand-name movies. And yet, Epix will be launching online first because the channel doesn’t have any agreements with carriers. The New York Times reports:

“Cable executives say privately that they have little interest in carrying the channel, which could partly be a negotiating ploy. But it does not appear that [Epix is] remotely close to a deal with any of the major cable companies.’

The caveat here is that we have no idea what is going on with the negotiations between Epix and other parties and it could all be chest puffery. But if it’s having a hard time getting the James Bond catalog distributed, what chance does an independent creator have?

Then there is the issue of reach. If I do a deal with one CDN, I can reach the whole world. To just blanket the U.S. I have to repeat that negotiating process with all the domestic cable and satellite operators, and then again if I want to go international.

The technology keeps changing as well. When I spoke to Roku a few months back about bandwidth caps, they weren’t concerned because video delivery technology kept advancing to allow better-quality streams at lower bit-rates. This will continue to change the economics of broadband delivery.

There are definitely business issues with delivering video over broadband (even YouTube has yet to pull its own weight). But as a concept, it shouldn’t be abandoned altogether. And that’s no lie.

  1. Chris, thanks for the comments. The difference between the examples I gave and EPIX is that EPIX is asking to be paid by the MSOs. If they considered MSOs and Satellite Providers to be CDNs and offered to pay them for hosting services, they would already have carriage.

    And I love what Roku is doing, but even Netflix doesnt have to worry much about reaching huge simultaneous viewership numbers.

    If you want some interesting reading on the math of the problem, look at the literature regarding switched digital IP delivery over cable networks

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  2. Mark,

    What are your thoughts on how p2p technologies could help alleviate the bottleneck issues that you brought up?

    Thanks,

    Charles

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  3. Chris, I think Mark’s post would have been more interesting if he would have provided some context on who is making false claims regarding the capacity of CDNs and their ability to compete with traditional TV. I know there is a lot hype as with everything else internet related, but I seen any reputable person making those claims, have you?

    I don’t know what the numbers were for Tiger Woods epic US Open showdown last were, but it was brilliant and a lot of people would have missed it had it not been for the CDN’s steaming it in real time. I realize it wasn’t a primary revenue generator, but someone must have thought it was worth the expense.

    Didn’t some kid start broadcast.com so they could hear basketball games that they otherwise wouldn’t hear over the radio? Just sayin.

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  4. @Mark, you are correct. I was thinking more along the lines of how prickly those gatekeeper relationships with traditional cable companies can be. See: Time Warner cable and Viacom getting into snit over carriage fees.

    @Greg C. – Tiger Woods did do some good numbers for that nail-biting US Open finale last year

    There were more than 5.5 million streams served that day between NBC and the USGA, and the USGA had 600K concurrent users at its peak.

    The video for the day was good, but you wouldn’t abandon your oldteevee for it.

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  5. The revenue side is more “gating” than transport.

    FWIW here’s what I said elsewhere.

    Generally I disagree with Mark on most things on principle. He’s always talking his book. Always. He’s wrong that the CDNs will be the new gatekeepers. But there will be gatekeepers nonetheless. IF you had all those one-time events lined up TODAY, you wouldn’t have any way to pay Akamai or Limelight. Pay per View? Subscription? Prerolls? FAIL. Whoever figures out a revenue model that scales as big as the events that Mark hypothesizes will be the gatekeeper. I’ll go out on a limb and say it will be the big brand advertisers who will hold the keys.

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  6. The founder of Veoh just posted a pretty insightful response to Cuban: http://blog.veoh.com/blog/?p=138

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