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Editor’s note: Mark Cuban published a post on his blog yesterday titled The Future of TV is……TV in which he proclaimed that consumers don’t want over-the-top video, but instead want to watch cable TV and VOD on their new, shiny HDTVs. Naturally we disagreed, and couldn’t […]

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Editor’s note: Mark Cuban published a post on his blog yesterday titled The Future of TV is……TV in which he proclaimed that consumers don’t want over-the-top video, but instead want to watch cable TV and VOD on their new, shiny HDTVs.

Naturally we disagreed, and couldn’t resist making our case with a post titled The Future of TV: Five Lessons for Mark Cuban — prompting him to pen a reply, which he sent via email. With his permission, we’re providing a very lightly edited version of his email below. It’s a point-by-point response to our post, so we recommend first reading that and his original essay first.

  1. Sports on TV. Horrible example.  The only thing that sells is sports during the day. That’s why March Madness and baseball work.  People can only get them on their computers at work. There is no reason to watch via VOD if you are sitting in front of your TV. Internet people may want to watch this way. The rest of the world just turned to CBS or the network carrying the game.
  2. This is the “I told you streaming works great ” example everyone uses. It’s a great example of what streaming on TV could be….if every content provider and TV Provider ignored the competitive threat of Netflix.  Why would the content owners continue to license the content to Netflix for peanuts and put at risk BILLIONS of dollars? Right now Netflix has been BRILLIANT at monetizing previously unmonetizable content. But as the balance of revenues change, so could their access. They already had to give up a 28-day window on movies. You don’t think that is their last concession, do you ?The other thing to note is the percentage of Netflix subscribers that already subscribe to a TV provider. Netflix has to be concerned that it will be easier for those people to give up Netflix if their TV provider expands their VOD offerings and allows for queuing of streams to a TV channel than it will to give up the TV provider.
  3. I own one of everything, from Blu-ray to Xbox/PS3/Roku/Seagate Direct to Hard Drive/Tivo and every satellite, telco and major  cable provider (at home or offices around the country). I make a point to know what is out there and how it works. I have spent points on Xbox, streamed via Blu-ray and used applications. All have value beyond their primary application. But they are complementary, not primary.Now some may say that you can only use your TV for one thing at a time. So whatever you are using it for is the primary application. Slingbox users will tell you otherwise.  TV Everywhere applications will prove otherwise. Then again, you have the problem I mentioned before and which Internet folks seem to ignore, the business model of content providers and TV providers.  They aren’t stupid. They won’t continue to give content away or sell it on the cheap at the risk of losing BILLIONS of dollars in revenue.
  4. Wrong again. Remember that thing called a router that gives you Internet access ? Your TV can offer Internet connectivity, but there is always another box between you and the Net.  How easy is it for most people to configure to make sure they get the streaming bit rates they need? Oh, and what about all the different 802.x standards? It’s hard enough to call Time Warner, wait till they have to call Cisco to get help and try to figure out why their Netflix is buffering all the time. Or when they can’t figure out why every time two of those new TV sets with Internet access are in use at the same time the Internet in the whole house slows to a crawl. And don’t even begin explaining why Internet video is all bit starved and looks far worse than anything you got or get in High Def  from your TV provider.
  5. I can’t say more people won’t cut the cord. That happens in every recession and its worse in a great recession. You got me there.

Picture courtesy of (CC-BY-SA) Flickr user Keith Allison.

Mark Cuban is the owner of Landmark Theatres and Chairman of the HDNet cable network. He blogs at Blogmaverick.com.

By Mark Cuban

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  1. Wasn’t this the same guy who made his fortune selling broadcast.com to some incredibly stupid people at Yahoo? (5.9 billion dollars for a company that never turned a profit and had no real assets). You would think he would have more faith in Internet video.

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  2. Regarding “Sports on TV,” if your local CBS is not showing your favorite team’s NCAA Tournament game in your area, you could watch the game on MMOD. ESPN3 works the same way.

    I’d rather watch my team’s game on a computer than 2 teams I care nothing about in HD on TV, but I think Mark Cuban is just the opposite.

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    1. I was going to post exactly that. And what if you are a fan of a team that’s not local? Odds are better you could catch those games online, but not on live TV.

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  3. Cuban’s rant doesn’t surprise me, he is a pro sports owner and he gets millions from cable/satellite providers. He is correct about the fact that content owners won’t give away their content for free, we the consumer are willing to pay a fair price but give us a-la-carte programming.
    I* was tired of paying $90 per month for the same crap so I got rid of cable, I get about half of my video content online.

    I am an average American not some billionaire that can afford every toy.

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  4. Some lessons for NewTeeVee and Mark Cuban:

    1) Cuban is right about sports. There is no way online alone only will be able to sustain the enormous rights fees commanded by live sports, at least not anytime soon. So for the foreseeable future, sports will need a TV outlet, and given a choice most consumers will choose to watch most sporting events in high-def (if not 3-D) on their big-screen HDTV most of the time.

    2) Cuban is also correct that boosters of online or over-the-top video delivery frequently ignore (of fail to understand) content owners’ business models. Sometimes even content owners themselves are slow to recognize their own interests, which is how Netflix has been able to build a large base of subscribers for its on-demand streaming service more or less as it wanted. But the studios have started to figure out that all-you-can-eat subscriptions are a lousy business for them, especially when someone else owns the subscriber relationship, and they’ve now begun to rein Netflix in. And no, the 28 day window will not be the last concession Netflix makes.

    What I think Cuban is overlooking is that the studios right now do not really have a transactional alternative to offer consumers. No paid download service offers even as much cross-platform flexibility and content portability as DVD or anything like the value proposition that Netflix offers consumers. So even if they rein in Netflix, I don’t know what that really gets them unless and until they can come up with a transactional business model that offers consumers content portability and device interoperability. Until then, consumers will keep signing up with Netflix. It’s essentially a race at this point between how quickly Netflix can build its user base and how fast the studios can come up with a workable alternative to non-transactional subscriptions.

    3) It may very well continue to be about the set-top box, or at least the “set-back” adapter if the FCC has its way. If it ultimately mandates a standardized interface between MVPD services and “smart” video devices, as it’s currently proposing, it could well lead to a new generation of integrated devices — whether on the set-top or baked in — that will eventually blur the distinction between QAM or satellite delivered video and IP delivered video.

    4) I think the jury is still very-much out on cord cutting. The Yankee Group’s forecast that one in eight households will cut the cord in the next 12 months would mean more than 7 million households. That sounds implausible to me without more data on the phenomenon than we have seen to date. Moreover, home entertainment is a bit like political elections. It’s a comparative exercise. You may hate your cable company, but it may be a better option than any alternative actually available to you.

    MVPD’s real long-term problem is not cord-cutters but never-connectors. Over time, as more content becomes available over IP platforms, and more young consumers grow up with that reality and start forming new households, getting the cable or satellite hooked up before you move in will increasingly be like getting the land-line phone hooked up: something your parents did way back when.

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  5. The fundamental flaw in Mark Cuban’s writing is an assumption that consumers have no choice in the world of artificial scarcity. In other words, if he broadcasts a movie on his HD net — and there’s no other way people can see it — they will, of course, watch it with him. This is bad logic, for the evidence in recent years (the ratings slides pre-dated online video) strongly suggests people simply aren’t interested. Intrigue and interest aren’t sufficient to support a passive, paid model, which is why I support his admonition about VOD. I’ve been saying that for a very long time. But even in that world, people will be highly selective and may, in fact, select an online source rather than that which is beamed in via cable. People with money are susceptible to false assumptions about people without it.

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    1. Definitely agree for the most part. Consumers don’t have a choice in a world of artificial scarcity, but that world no longer exists.

      In the future, the reality is that (1) the amount (and types) of content we consume is just going to increase and (2) the way we consume content will just continue to broaden. The Cable Companies & traditional Content Owners aren’t going to be able to keep up with young, scrappy companies that will innovate at the edges of those two principles– and that’ll be enough to disrupt the whole thing.

      More on the challenges in the space– and a “how to” disrupt it here: http://www.derekflanzraich.com/2010/05/how-to-disrupt-television/

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  6. That internet content necessarily looks worse than broadcast HD is pure BS.

    A 720p HD stream can be made to look far superior to cable at 2mpbs (or 4mbps for, say, the Pacific) in H.264, vs roughly 14Mbps Mpeg2 for cable distro. It’s more processor hungry, yes, but that becomes mot when (and when if the key) a web standard is picked. At that point, encoding instruction sets into main CPU’s or adding App specific decoding chips take care of that, and it’s a mater of time. Further, if your back end and players are programmed and tuned properly you can actually get a MORE consistent picture and playback with adaptive streaming technologies, especially if your watching using something like Boxee making an API call as opposed to a browser, which remains by FAR the weakest link in the video chain! (and something HTML5 will go a long way toward remedying anyway.

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    1. Not true. To achieve similar quality to MPEG-2, AVC (H.264) takes roughly half the bitrate. Keep in mind that broadcast HD in the US is 19.6 Mbps MPEG-2, regardless of whether the broadcaster is using 720p60 or 1080i30.

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  7. Hi,

    The Thing that Mark Cuban needs to do is a Cost-Benefit Analysis combined with the perspective of Time.

    I used to completely agree with Mark Cuban, not least network capacity and capability; However, times and technology change.

    Ultimately, the choice is to let consumers, who are all becoming more tech-savvy, hunt down what they want through less legitimate means, or provide it to them in the same way that allowed Apple to become the de facto standard in media-content provision without a single sector leader.

    Networks will improve, UI’s will become easier, access will not be scarce, whether it’s from FTTH providers, or DSL providers, 4G fixed or simple mobile internet, and all the content in the world will be available through one means or another.

    The Internet is the great dis-intermediator, and as websites owned by Sports-bodies have become their own profit-centres, so such evolution will continue.

    As mentioned by others, just how so many older people don’t get the latest fads in social-networking, yet many millions are completely au fait with them and wouldn’t be productive (socially or work-wise) without them, it’s this generation (of mindset) who will have no care for the network provider or any other false mythology from the world of scarcaity and gate-keepers control!

    Yours kindly,

    Shakir Razak

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  8. Paul, the Yankee Group didn’t say that those seven million households would all go cable-free, but either ditch or significantly reduce their pay TV commitment. That could also mean ridding yourself of premium channels. A lot of this may have to do with the fact that many recent HDTV buyers will face the end of their promotional cable TV subscription in the coming months. Paying 40 bucks a month for a nice cable package may seem like a good deal at fist, but see the price go up to $80 or more, and you might reconsider – especially if times are tough…

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    1. Agreed. You might. But I certainly wouldn’t invest in anything premised on cord cutting based on “you might.”

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  9. My take-away from this debate, Mr. Cuban seems rattled by the thought that his vested interests are at risk.

    To his credit, the following comment indicates that he — unlike some of his peers in the legacy big-media business — has moved beyond denial.

    “I can’t say more people won’t cut the cord.”

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  10. :):):)

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