The Future of TV: 5 Lessons for Mark Cuban

Mark Cuban is always good for a rant, and one of his favorite pet peeves is Internet video. This week, he’s complaining that all those evangelists of over the top video are ignoring the way average Americans use their TV, which is for cable and VOD, according to Cuban. “The future of TV is TV,” he concludes. “That is what consumers want.”

I hate to say it, but Cuban is right, at least in part. Most U.S. consumers still get their TV programming from cable, and the number of people paying for some type of TV service have in fact been increasing as people have been buying HDTVs. 90 percent of us couch potatoes now pay for TV, according to numbers released by Nielsen last week. However, Cuban assumes that this isn’t likely to change anytime soon — and he ignores everything from connected TVs to Netflix (s NFLX). Time for a few quick lessons, Mark.

1. Sports TV is Going Online

Sports has long been a cable TV stable, and Cuban — who owns the Dallas Mavericks — makes fun of YouTube testing the waters of live sports coverage with its recent IPL live stream. His verdict: Those are old ideas that didn’t work 15 years ago, so they won’t work now. Except they do. CBS streamed 11.7 million hours of video with March Madness on Demand, and the network’s video player was accessed by 8.3 million unique visitors throughout the tournament.

I know, that’s still dwarfed by broadcast numbers, but guess how many people watched March Madness via cable VOD? How about zero? CBS (s CBS) used to distribute much of the NCAA’s tournament for catch-up via VOD, but didn’t bother this time around. It just wasn’t worth the effort.

2. Netflix is leading the charge

Cuban essentially argues that consumers don’t want anything but cable VOD. I guess those 14 million Netflix subscribers didn’t get the message. Not only are they voting for cheaper and better ways to get their movies, they’re also increasingly embracing over-the-top video. 55 percent of Netflix’s subscribers used the company’s Watch Instantly service in the first quarter. And no, we’re not just talking about streaming a quick video to your laptop anymore. Netflix is now available through connected TVs, Blu-ray players, game consoles, the iPad… (s AAPL) and many more devices. In fact, the company aims to be on 100 devices before the end of the year.

3. It’s not about set-top boxes

A big part of Cuban’s rant is spent on making fun of people connecting their PCs to their TVs. Cuban is right, that’s not what the average consumer wants to do (even though I’m sure many of our readers have more luck with it than Cuban). Even dedicated set-top boxes for online video can be a hassle. However, millions of consumers already have connected their TVs, oftentimes without even realizing, since Blu-ray players offer a gateway to the Internet. Many of them stream Netflix now, and that could be expanded in the future.

Then there are game consoles. There are more gaming devices in American households than DVRs, and the majority of them are already hooked up to the Internet. Netflix streams video to all major game consoles, and Sony (s SNE) as well as Microsoft (s MSFT) have increasingly embraced live sports and exclusive programming. In fact, Microsoft is reportedly in talks for an Xbox-only TV channel.

4. The Future of TV is Connected

By the way, who said that you’ll need a second device at all to connect your TV to the net? An increasing number of TV sets are Internet-ready out of the box, and those devices are becoming more and more powerful. Sony, for instance, is expected to announce a TV set powered by a TV-specific flavor of Google’s (s GOOG) Android operating system later this month.

5. Cord cutting is real

Yeah, I know. I just said that more people are subscribing to paid TV services than ever, so how can cord cutting possibly be anything but a fad thought up by online video enthusiasts? Well, how about this: The Yankee Group estimated a few days ago that one in eight U.S. households are going to pull the plug or scale back on cable or satellite TV.

Those findings are not entirely isolated: Less than 22 percent of U.S. consumers think that their cable TV subscription is worth what they pay for it, and loyalty is generally very low: Two thirds would switch if someone offered them a better deal. Even more remarkable — those very consumers that love cable VOD as much as Cuban apparently does are also the ones that are most likely to cut the cord. Consumers thinking about leaving their cable company watched more than four times as many movies via VOD than households faithful to cable. In other words: The trendsetters and heady spenders are ready to leave, and they’re getting more and more options to do so.

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

Related content on GigaOm Pro: Connected Consumer Market Overview, Q1 2010 (subscription required)