Mark Cuban Declares War On Free TV Online… But Misses Out On The Economics
from the protectionism-doesn't-work dept
There’s a myth out there among some newspapers folks that “if only” the newspapers hadn’t committed the “original sin” of putting content online for free, the newspapers wouldn’t be facing difficulties these days. It’s the kind of story that sounds good if you don’t look too closely at the details. Plenty of newspapers did try to charge and almost all of them failed. People were never that interested in paying for news online, and plenty of new sources of news were popping up for free online anyway. Charging was a dead-end model from the beginning — and to understand why, all you need to do is understand a little basic economics concerning the difference between infinite and scarce goods.
However, it looks like Mark Cuban believes in that “original sin” concept, and is posting a series of blog posts to try to prevent TV networks from making the same “mistake.” It started with the claim that anyone who thinks TV is going a la carte online is crazy, because the “content companies” will never give up the fees they earn from the networks. After a bunch of folks challenged him on this, Cuban added a second post asking a bunch of questions, but which did little to actually answer his critics. He (like NBC Universal execs) laughs off the “threat” of people switching to all online access to TV content, noting that very few people have done so. This surprises me, since you’d think that Cuban would be familiar enough with Clayton Christensen’s work to know that just because there are only a few early adopters (and the quality isn’t as good) that it doesn’t mean that it’s not a potential threat. In fact, those questions are basically the de facto list of questions that an “incumbent” player tends to ask when facing a Christensen-style “innovator’s dilemma” just before the upstart technology really begins to hurt the legacy business.
From there, however, it just gets silly. Cuban tries to stir up some sort of moral outrage among cable subscribers, exhorting them to call their cable companies and satellite providers demanding that they not allow any TV content online for free (as if it’s their choice). His reasoning?
Those of us who enjoy this matter of life should be completely outraged that there are those who are leeching off the money we pay to enjoy tv. Our check goes to pay our bill. The money then goes to pay for the tv network, which in turn goes to pay for the content. Its a system that works.
Like any good system, there are those that want to have their cake and eat it to. The content we pay for ? They want it for free. We pay for it, they want it for free.
How is that fair ? Where is the justice ?
We pay for the content. We should be able to get it where we want it, and when we want it. Those who want it for free ? They should pay too.
Yes, and newspapers shouldn’t be online for free. And music shouldn’t be online for free. But they are and they will continue to be. Why? Because of those basic economics. As Saul Hansell at the NY Times points out, this is the nature of competition. Sure, everyone would love to keep getting paid, but some enterprising content company is going to recognize that getting more attention is a lot more valuable in the long run than keeping its content locked up on cable networks. Those content providers are going to realize that by breaking free and getting the content out there, they’re able to stand out against those who lock up their content. They’re going to be able to score more viewers and from that, more advertising dollars. And that will hurt those who keep their content locked up — so, they’ll be forced to free up their content as well. It’s just basic economics.
Oh, and as for the whole “moral outrage” bit — it’s difficult to see how people who are already pretty pissed off about constantly rising cable TV prices are suddenly going to rise up and tell the cable companies to keep on charging them higher prices by locking up content. No. It seems likely that most of those folks are pretty excited about the idea that some of that content might go free, and can actually push down cable TV rates.
Filed Under: business models, cable, economics, free tv, mark cuban, tv
Comments on “Mark Cuban Declares War On Free TV Online… But Misses Out On The Economics”
Someone fire off a memo to Mr. Cuban… there are millions of freeloaders out there that are leeching their entertainment through the use of their television tuners and not paying anyone (GASP) to watch television (OUTRAGE)
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Incorrect – they are paying with their attention, and the price is all those commercials and product placements. Cost is not alway defined by money (GASP) or by blog pundits (OUTRAGE)
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I figured that you would be first to say that if no money is directly changing hands then it must be evil and possibly illegal.
That is how Cuban sees it and that’s what AC#1 was saying threw massive amounts of sarcasm (You may want to get your sarcasm detector realigned.)
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Incorrect – they are paying with their attention, and the price is all those commercials and product placements. Cost is not alway defined by money (GASP) or by blog pundits (OUTRAGE)
Ohhh…so you’re saying that when music fans download songs for free, they are paying for it not with their money but with their attention, thereby allowing the band to sell more concert tickets, merchandise, and other scarce goods while increasing their popularity and exposure? Gotcha.
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Only if the music comes with advertisements and product placement.
The thing that irks me is that I pay for cable out of my wallet, and then i pay again through watching commercials.
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But how do advertisements and product placements pay for themselves? Merely watching them does nothing for the content provider; companies pay broadcasters to air their advertisements, and then they get their money back *when consumers who saw the ads go and buy their products.*
Free music works the exact same way–more listeners hear the music, more listeners become fans, and more fans means more revenue for bands. It just doesn’t come as a result of selling plastic CDs (although plenty still comes from selling songs–fans overwhelmingly pay for music from the bands they support).
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“so you’re saying that when music fans download songs for free, they are paying for it not with their money but with their attention, thereby allowing the band to sell more concert tickets, merchandise, and other scarce goods while increasing their popularity and exposure?”
Sorry, no. The music is the product (tv show) not the commercials (bounty quicker picker upper). Turning music into one long informercial isn’t exactly to anyone benefit (see viewership numbers for infomercial for more information)
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Like I said in my other post here, how do advertisements work? When you watch the content(shows) which are free, you yourself has stated that you “pay” for it by viewing commercials, thereby increasing the chances that you will go buy those products. Sure, some people will not buy those products; they will just continue watching shows for free. But the shows are nevertheless paid for by those consumers that do.
Similarly, free music reaches a lot more listeners in today’s market. When you listen to the content(music) which is free, you “pay” for it by becoming a fan and buying other services/products that they may provide, as well as increasing their asking price as a result of their popularity. Sure, some people won’t buy a thing from them; they’ll just keep on listening to free music. But quality music is nevertheless paid for by those that do.
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Sorry, no. The music is the product (tv show) not the commercials (bounty quicker picker upper).
Remember, when it comes to commercial TV, the program is not the product. YOU are the product, and the advertiser is the customer.
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Incorrect – they are paying with their attention
Um. That’s the point we’ve been making here from the beginning. That’s a huge part of the economic models we discuss, which you insist don’t exist.
as are the internet users you (gasp) turd (asswipe)
It’s always amusing to me when a content provider believes it is their actions that directly drive demand for their content. People inherently all have their own perception of what something is worth, and if you believe your content is worth more than the majority of the target customer base believes it is worth, you will not be able to sustain enough market share to exist. In the case of news, these people believe they are worth their weight in gold, while the average consumer believes news and facts are something that should be shared freely… only in the “news” organizations do they believe they should come at a premium.
These people need to stop looking at how to adapt their current business models and just go back to the drawing board. Start over with the basics of marketing and apply them to the new standards, technology, and existing examples of success, then seek to design something that works. Beating a dead horse doesn’t mean it will ever live again.
“Like any good system, there are those that want to have their cake and eat it to.”
So would that ALSO refer to the stations that I pay for and still have to watch commercials on?
It’s amazing how a sword can cut both ways.
If commercials can support the hugely more expensive “over the air” method of distribution then the difference between that and the costs of “over the internet” distribution is pure profit.
I’ll still watch the commercials, same as I do now, but there’s not a snowballs chance in Jamaica that I’ll be paying to put up with commercials. Ever.
Hulu
I think hulu is closest to getting it right so far, and between hulu and Joost I have very little need for bittorrent and even less for actual cable. (Now to convince my girlfriend of that!)
I’m a little disappointed in hulu’s latest boxee fiasco. If they were smart they’d realize that the advertising money is there to take. With cable, you can only fit so many commercials into so many channels and hours, but there are an infinite number of separate streams potentially going at once.
Of course, if for some reason what I want to watch can’t be found via approved means, I’ll still find it, but more often than not it’s without advertsements.
Boiled down, they can either put it up themselves and make money, or they can decide not to (and that’s their choice) and not make money. Seems like a no brainer to me, but what do I know?
Am I a bad person for clicking on the “comments” link just to see what nonsense Harold is spouting off each time a new post goes up?
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Yes.
Someone should make a script to blank out any comments he posts. Every now and again I think I might agree with him, but he always seems to say something so impossibly wrong that, after the nosebleed, I have forgotten that I agreed at all.
I miss angry dude.
And the big companies will try and get legislation
At times like this is when the free market get’s trampled on. Companies will “fight” the new trend towards free content online by trying to get legislation passed that protects their industry. I can already see it happening, because most companies go that route when they can’t compete for whatever reason, and it’s the consumers who suffer.
Oh well, we’ll see how this on goes I guess.
Learn from the music industry.
I just don’t get the thinking of media business execs.
Stop worrying about the people who are watching your content for “free”. And start giving your paying customers what they want. I watch all my TV online for free (without ads). I watch most of my movies either through Netflix of bit torrent networks (for free).
Serve ad free, dvd quality content at the day of release and I will happily pay 99c for a TV show and 3-7 bucks for a movie depending on how good it is.
But they refuse. They are spending too much time worrying about the pirates and fail to understand that DRM is a myth and they need to *compete* with piracy by giving their paying customers VALUE.
It’s so simple.
Re: Learn from the music industry.
SCUMBAG!
You should be buried in a hole so deep, you’ll never see the light of day for the rest of your undeserved life!
Give me money!
Re: Re: Learn from the music industry.
troll.
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Now if THAT isn’t the pot calling the kettle black!
Cuban’s wealth is the product of him doing the right thing at the right time in a time of stupidity and excess.
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isn’t that how anyone gets wealthy? I certainly wouldn’t want to be doing the wrong thing at the wrong time now would I? On every business transaction there’s a winner and a loser. Mark was smarter than yahoo. This is how business works.
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AMEN!
Dear Mr. Cuban:
A system that works, is it?
Let me tell you why it doesn’t work, from a customer’s point of view.
Every year, it seems my cable bill goes up. I’m a consumer who “bundled” internet access, phone, and cable into one, supposedly easy package.
My phone bill is $40 a month. My internet access is $50 a month. My cable is a staggering $100 per month.
These prices include all the fees, taxes, and equipment rental.
So why this charge?
All the bundled items work off the same infrastructure. I can understand the costs of supporting the infrastructure, but not at $90 per month, per customer.
As for that $100 remaining: I get nothing but damn ads. Worse, ad windows have increased to an average 22 minutes per 60 minute block. That’s 38 minutes of your so-called content.
For this price, you can keep your crap. I find other ways to enjoy content, and yes, it’s at no cost to me (well, aside from the $50 access fee).
I am finding this new content because the distribution system you believe in is failing me, the paying customer.
I’m tired of paying for channels I don’t view.
So, take your business elsewhere, to a country who is deprived of your content. Because as more networks discover, on demand distribution is now the “rage”.
You can either adapt, or fail. I couldn’t care less as I can only assume you own a station which I pay for but never watch.
Sincerely,
A pissed off cable subscriber.
Re: Dear Mr. Cuban:
Exactly so. Battlestar Galactica ended its amazing run this past Friday night. Monday morning, I cancelled my cable subscription. The lady at the cable company I was talking to on the phone tired her damndest to get me to just down-grade my sub. I kept telling her no, that I only watched one show and that it was off the air now. She really kept at it and kept at it. Finally, she accepted what I wanted to do.
Now the Sh!tty thing is, according to TWC’s website, bundling phone + high-speed internet *should* cost me only $75 per month, which would almost exactly cut my bill in half. I asked the woman how much my bill would be now that I dont have the cable going on……my bill dropped from $125 per month to…..$95 per month, before taxes, fees, etc.
What utter BS.
Re: Dear Mr. Cuban:
There is only one problem: Nobody forced you to take cable. Stick an antenna up. Enjoy what you get for free. When you want more, the cable company will gladly sell it to you.
Nobody is forcing you.
Re: Re: Dear Mr. Cuban:
Force you? no they don’t do that. They stifle the market to where you have no real options. They go to your local, state, and federal levels of government in order to get strangleholds on the market so even tho you aren’t “forced” your choices are severely limited. Oh and I did out up rabbit ears and get 25 HD channels over antenna. I also get most of my sci fi fix off of bit torrent and Hulu and Netflix. True free enterprise always pervails. And when done with intelligence can even save you money.
not really
The money then goes to pay for the tv network, which in turn goes to pay for the content.
Like in newspapers and magazines, advertising pays for the content. The subscription fee pays for distribution.
Early Adopters
I remember when I called my phone company years ago to kill my land line. The lady I talked with was shocked, and I was the only one I knew who made the leap. Today, more than half my friends/family have ditched their land lines.
A couple months ago, I called the cable company to kill my subscription. The guy I talked with was shocked (had to explain 3 times I wasn’t moving to a new location), and I’m the only one I know who has made the leap.
You know what? It’s an easy transition.
Choice of programming
Quality shows on American TV don’t usually last long. When they do, they morph into the classic soap-opera format quite often. (Let’s hope Fringe and Dollhouse have a good run.)
But, I’ve used Hulu, TV.com, and Joost with my laptop connected to my 42″ LCD more and more frequently. Surface, a South African origin show, was good but only ran one season.
Hex, from GB, is also quite good. (Think OC meets Supernatural.) But only the first season is available legally.
I am sometimes busy: I use my cable DVR often. But if I miss that, I’ve caught the show online instead. And my cable company can’t stop what I stream/download. I use DSL.
switching to all internet access
He (like NBC Universal execs) laughs off the “threat” of people switching to all online access to TV content, noting that very few people have done so.
It seems that in these demographic stereotypes, I’m always one of the few.
Umm Hulu?
Umm Broadcast.com was basicly designed around the idea that he is now bashing. He made all his money by selling something that was basicly just like Hulu.com.
And why does he think that people that are watching online are getting it for free. NBC, ABC, CBS, FOX, BBC, Sci-Fi, Hulu, etc etc etc all have ads attached to the videos on thier sites. So it would seem they are making more money (no cable company or broadcaster that needs a cut) per view than when you pay for cable.
Personally I think almost every day about ditching cable.
Learn from the music industry.
I’m an early adopter. I’ve had not cable TV for 10 years. I consume TV and Movies primarily by downloading them, plus I use Netflix and go to the theater occasionally.
Subscription Cable’s days are numbered as more and more people realize how easy it is to stream Internet downloaded content to their flat screens. And it will only get easier, and more available. (See music industry)
People don’t have to “threaten” to drop cable. They are already doing it.
I’ve been considering getting rid of cable. I can download pretty much anything I want, with the exception of news shows (which I rarely watch anyway). I guess I’m just afraid of change. I do like the convenience of being able to turn on the TV and find something to watch though.
NAIL ON THE HEAD
“Oh, and as for the whole “moral outrage” bit — it’s difficult to see how people who are already pretty pissed off about constantly rising cable TV prices are suddenly going to rise up and tell the cable companies to keep on charging them higher prices by locking up content.”
Exactly. Faux-moral outrage.
the hard cold reality of this
is that as we move more and more to a global economy and the business day becomes 24×7 more people are not going to be able to watch their favorite show in the time slot picked by the networks . That being said, online is the next best thing if you want to remain up to date and don’t want to pay for a DVD box set when/if they are ever released.
I for one am one of those non-traditional hour workers and if it were not for the online availability of the shows I like I would have been forced to drop it
I read it as sarcastic
When I read the post this morning I took it as sarcastic. It seemed like a warning to content providers to not lock up their content and be more inclined to deliver on demand.
The pirates are doing a better job of content delivery that’s why it’s popular. I can grab that TV episode I missed 2 weeks ago via torrent instead of waiting for the rerun. If I could turn on my TV a stream any episode I wanted then I might not look at torrents as an option. I know for a fact my wife, and less tech-savvy people, would never seek out torrents.
You are a Thief
Every time you go to the bathroom during a commercial you are guilty of stealing television.
"...advertising dollars"?
Eventually, companies paying to advertise their product(s) are going to realize that they might just as well be throwing their money down a bottomless hole, to no purpose, and advertising dollars will dwindle to the point where those relying on them to stay in business will fail to stay in business… or, they’ll continue being really, really stupid (because, after all, there’s a sucker born every minute).
(OK, everyone who actually pays any attention to even 5% of the ads they see/hear… raise your hands…)
(OK, everyone who actually pays any attention to even 5% of the ads they see/hear… raise your hands…)
It depends. It sounds shallow, but if there’s a cute girl in the ad, I’m likely to stop and watch it.
I watch everything I need on Fancast now. I rarely have to watch actual tv anymore.
moral outrage absurd
This is absurd “We pay for the content. We should be able to get it where we want it, and when we want it. Those who want it for free ? They should pay too. “
No you don’t get the content where you want or when you want. You get it where cable wants it and when the TV stations want you to have it. If you go stream it online for free you get it where you want and when you want. Anyone with half a brain should be able to figure that one out.
Right now I get basic cable and that is it, and I don’t pay a dime for the first year. $10 is about all I can stomach to pay for television. So when the time comes for me to pay there is a good chance we’ll just drop it, now huge reason for that is because of all the online streaming we can do, but without that streaming I know we wouldn’t do any over the basic cable.
So the obvious question here is this guy paid for by cable companies?
I killed off cable
I told my cable company (cox) to take a hike this month. I increased my bandwidth and canceled my cable subscription. I’ve been loving Hulu, Fancast, and my netflix since. I also bought a roku box and have been using that like it’s going out of style. Screw paying for content. IT’S FREE! What I can’t get from the above mentioned sources, I get from torrents, so I am not missing a thing I used to pay $114/mo for. Now I pay $64 (internet+netflix) and I am a lot happier, all with the same content. Loving it, simply loving it.
The fuss over entertainment
“…but some enterprising content company is going to recognize that getting more attention is a lot more valuable in the long run…” – that explains it!
It used to be common to put a few goats in a flock of sheep. The goats weren’t popular with the sheep; they butted and kicked for no apparent reason, and were generally disagreeable.
But, when it came time to shear (or slaughter) sheep, you lead the goat or goats through the process, and the sheep followed. This made controlling sheep, normally very difficult, an easy task.
So, now we have entertainment goats. And, instead of the sheep doing something useful, they follow the goats slavishly through the entertainment slaughter house.
So, how does this make the goats stupid???
Cost of Cable
For anyone who thinks that they are paying twice by watching commercials on cable networks, go take an business class. Cable networks charge much less for advertising space, besides when you pay for cable you are buying a better service which includes better picture quality and numerous other services. Oh yeah, and how many people get their internet service through a company that solely provides internet services? What do you think will happen to the cost of internet services if companies are relying strictly on revenue generated by the internet? I agree with Mark Cuban on his point, there has to be a point when the American public realizes that nothing is free, all those services that provide free content are distributed out over the internet which is provided to you by someone.
The way of the future
I dropped my cable service and get “EVERYTHING” online. And save roughly 70 dollars per month. Anyone that says it’s more expensive to offer everything a la carte doesn’t truly understand the free enterprise business markets. Yes if I purchased every show on NBC that they offer it would cost more but who watches Doctors @ 11 in the morning. And I have no problems takin money out of the cable companies pockets. After admitting throttling competitor’s sites trying to put download limits on service, they deserve to lose business and I am obliged to help. As soon as the local phone company rolls out their new uverse I will remove cable entirely from my house.
P.S. My great big HTPC looks so cool since it replaced my DVD, Blu-ray, and tuner in my home theatre. DAMN the man save the empire
Erk
modern TV times
I agree with Cuban’s concept, in particular the last paragraph. I surfed for any info about FREE TV because Im appaled how much Comcast is asking, including the federal charges. There is only one channel PBS thats commercial free, even during Presidential Speech they ran commercials which I consider absolutely rude! Since they changed to digital on some rainy days some channels stop working and say poor signal, so I dont understand why spending so much for such a poor service.
Free is the way to go.
Mark Cuban is like a billionaire, why is he bitching about free TV. TV should be free anyways they already make lots of money from commercials. If all TV was free of course they would have to have commercials, everyone would win more people would be watching TV. And networks would have higher Ratings.
More viewers = more ratings = more revenue from ads
'Free TV'????
I have been trying for some time now, at least locally, to wake people up about this scam that has be committed against us all. It’s a travesty. I can’t even get a letter to the editor printed about the subject, and here’s why:
1. Remember (For me about the 1960’s and 1970’s) the last time you heard the expression: ‘Free TV?’ Or, the first time you heard the expression ‘Pay TV?’ Ring any bells? This was the initial introduction most us older folks had to a new concept, ‘cable TV.’ The arguments, pro and con, were the same then as now–namely: ‘why should I pay for something that is free anyway?’ And, the argument for: ‘Yes, but now we don’t have as many commercials’, which was based on a pretty universal concept: we all despised commercials then. As for me, I feel suckered. I despise commercials even more now.
2. The article does mention how we pay more, in seemingly small increments, for ‘pay TV’–until we are paying twice what we started with–in some cases triple. This is, of course because we were tired of paying whatever to our old provider and were ‘bewitched’ by ads enticing us to move to another provider for substantially lower introductory rates. By now, we are all cognizant of just what ‘introductory’ means: ‘You’ll have this rate for 3 months, and within one year (many times, much less), you’ll be paying exactly what you paid your previous provider (many times, much more).
3. The result of all this? We now pay for more advertising time than we do for actual programming. And, I’m not just referring to the channels we are forced to accept as part of a preconceived ‘package’ plan, whole package plans devoted to only one subject–yep, commercials. I also referring to the length of commercials between programming segments. Just watching Oprah will prove this point. Yes, I really think we’ve been duped, with the consequence that I am trying desperately to find some way to watch only what I want for free. And, I don’t mind paying a little to occasionally tune into HBO, or one of the other ‘commercial free’ premium channels’. I do not, however feel it’s necessary to subscribe–why pay a monthly fee when you’re lucky to find more than 4 hours of original programming in any given month? Why pay for constant repeats–more repeats than original programming?
This is why Satellite, Direct, Cable, HD, etc; are scams designed to entice us all into paying for yet something else we don’t really need, and provides less and less quality product(s).
And, precisely what do we owe the entertainment industry anyway? We never hear them protesting these overlong and industry saturated advertisements. We know that those dollars are what pay them. And what do they do with our money? Indulge themselves to whatever ridiculous behavior suits them and spending millions each year for never-ending self-congratulating awards shows.
And what thanks do we get from them? How about the constant threats of prosecution if we should have the temerity to copy a movie or music cd and give it to a loved one as a present–thus ‘depriving’ these spoiled little ego-maniacs of their ‘just’ rewards. Give me a break!
Please excuse me now, I am working a removing all entertainment trivia from my PC. I know, I’m a dreamer, unlike the writers in Hollywood who keep offering up the same old garbage and no real new creative presentations–reality TV? Don’t be silly–anyone with half a brain can see that they’re all scripted–this seems to be the limits of the ‘writing talent’ these days–that and constant ‘retreats’ of the same old tired material. I’m all done now–just want to have some choices about what’s on my TV–Mark Cuban can kill my sweet patootie! Thanks for this opportunity to vent.
OOPS
OOPS. My apologies. Forgot to edit before I submitted. Had more confidence in my typing than it deserves.