Mark Cuban is Wrong

Mark Cuban is Wrong

Summary: A few weeks ago, Mark Cuban blogged his thoughts on the challenges that broadcast TV networks face as they move towards the on-demand programming format of the Internet.  It's a provocative piece with a dire message, particularly as he concludes...


hollywood.jpg A few weeks ago, Mark Cuban blogged his thoughts on the challenges that broadcast TV networks face as they move towards the on-demand programming format of the Internet.  It's a provocative piece with a dire message, particularly as he concludes...  "On demand video. Unlimited choice. Sounds so good. Everything you always wanted, right at your fingertips. It doesn't work."  Now this is Mark Cuban talking, a new media guy who made his fortune on the Internet, not some entrenched old media type trying to protect his out-dated business model.  So when Mark says that today's linear broadcasting format is a far more efficient way to program TV shows, you can't help but to stop for a moment and listen hard.

Mark’s argument centers on the importance of broadcast television’s unique ability to create captive audiences… an advantage it derives directly from its linear programming format.  For example, when FOX schedules “House” directly after “American Idol” on Tuesday nights it does so with the specific intention of capturing the spill-over of viewers from one program to the next.  This not only maximizes ratings, it’s an effective and efficient way of exposing viewers to new programming and developing viewer loyalty.  In an on-demand world, this kind of captive audience is nonexistent, and according to Mark this will make it far more difficult and expensive to launch new programs and develop loyal audiences.  This problem is further compounded by Mark’s assertion that if "there's one certainty in the TV industry” it’s that “programmers are going to be wrong 95% of the time" in their ability to pick programming hits.  In his view, were it not for the safety net of having a captive audience, Mark implies that the TV industry would be in dire straits as their ability to pick winning programs is so bad… and he warns of exactly such pending chaos as going on-demand will remove that safety net.  While I can’t argue with his logic behind the benefits of a captive audience, I cannot help but feel that Mark is missing the big picture and that he may be prematurely throwing the baby out with bath water. 

In my view, the big reason why it’s so difficult for programmers to pick potential winners is due to the inefficiency and limitations of the broadcast medium itself.  Due to the scarcity of prime time slots that’s inherent in the linear programming format, programmers are forced to choose a very small percentage of available projects/shows.  So for every project that gets the green light, there are countless others that didn’t make the cut.  And the probability that potential winners were rejected is very high.  As Mark points out himself, some of today’s top rated shows like “Lost”, “Desperate Housewives” and “American Idol” almost didn’t make it on the air.  But what if programmers didn’t have to take such high risks and they didn’t have to choose that one from a pool of a hundred or a thousand.  So instead of making that one big bet, what if they took the same development dollars and spread it out amongst a number of different projects.  This is precisely what Internet TV will allow them to do… something they really couldn’t do effectively and efficiently on broadcast TV.

Simply put, since there are no time slots and distribution scarcity on the Internet, the whole process of programming will be democratized.  Many shows that would have never have seen the light of day under the old system will now get their day in the sun.  This will result in what I call the rise of "Fat Belly” programming.  This is not the "Long Tail" of user-generated short-form clips like those found on YouTube, nor is it the "Big Head" of Steven Spielberg’s blockbuster movies and billion-dollar TV franchises like Dick Wolf’s Law & Order.  Today, and despite much effort by independent and studio-backed producers alike, the Fat Belly doesn’t really exist because Hollywood’s existing distribution outlets foster an environment of extremes... you’re either a superstar, or you work as a waiter.  If Hollywood was a country, it would be a nation with no middle class.

But as the abundant distribution capacity of the Internet inevitably gives rise to Fat Belly productions, the business models and practices that dictate programming today will change materially.  For instance, more and more development projects will be subjected to the Darwinian process of survival and popularity by the viewers themselves over the Internet, and not by studio executives in pitch meetings (not dissimilar from what we see today on YouTube).  In fact, networks will shift much of the programming responsibility of choosing winners to the viewing audience itself.  So instead of risking millions of dollars upfront buying multiple episodes of their uncertain selection, programmers will keep track of all them to see which ones gain traction and then further invest in those with Big Head potential.  So at the end of the day, such shifts in the underlying dynamics of programming will enable the TV industry at large to experience much higher success rates because the Internet will bring efficiency to the process of programming by tightly matching viewers’ desires with programming alternatives.

Yet having said all that, don’t look to the established TV industry to lead the charge and jump on this opportunity.  And when a new media billionaire like Mark Cuban pushes the alarm button, you can just imagine how fearful and paralyzed the entrenched Hollywood executives must be about the on-demand future.  Instead, the players that are positioned to pave the way, and therefore the ones to watch in my opinion, are the new online video ventures that are specifically designed from the ground up to accommodate the efficient carriage and distribution of Fat Belly programming.  The two that come to mind are Veoh and Brightcove.  And it’s telling that they are both backed by ex-entrenched media moguls, Michael Eisner and Barry Diller, respectively.  These startups have the opportunity to do to  Hollywood what Google is currently in the process of doing to Madison Avenue.  Just as Google used the highly accountable ad format of “pay-per-click” to turn the world of advertising upside down, Veoh and Brightcove can blaze the trail for Hollywood to survive and succeed in a world that’s driven by on-demand programming… even without a captive audience.

UPDATE:  This just in from the NY Times and the San Jose Mercury News… Microsoft is jumping in to finance Fat Belly productions.

Topic: Software Development

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  • No, you have it wrong Robert

    You dont consider the most important issue, economics of creating programming.

    you say "
    Simply put, since there are no time slots and distribution scarcity on the Internet, the whole process of programming will be democratized. Many shows that would have never have seen the light of day under the old system will now get their day in the sun."

    you might want to do your homework. I promise you that there are multiple cable outlets that will take just about any programming if its free.

    you make it, they show it. it may be 2am, 4am, whatever,but im sure they will even offer it from their website on demand. on the internet (whoopee !). Again , for free.

    now how you pay for the production of the programming is a completely different issue.

    The cable network will gladly give you half the ads and let you sell them. Or they will sell them for you and give you a percentage. Website and on the air.

    In either case, unless you are spending far less than RocketBoom for production, you will end up going deeper and deeper in debt.

    and as far as your fatbelly. Who is going to fund it all and take the risk ?

    go to any downloadable content site. There are thousands upon thousands of shows, movies, videos, all produced hoping they would just capture back their costs. Few do.

    The thing about the gatekeepers in hollywood, if they say yes, they pay you . Most if not all of your costs. then they commit to spend a lot of money promoting you.

    If you do it and throw it out on the net, YOU pay for it. The producers who take that risk, particularly in todays internet, will have anything but a fat belly. In fact, they will be working as waiters hoping they get free meals so they dont starve.

    The internet has been open and darwinian for years. The concept of producing content for the net and seeing if it works isnt new. its been tried over and over again. It continues to be tried.

    magazines, newspapers, movies, serialized shows, you name it have spent nickels to tens of millions trying to figure out how to repetitively draw enough revenue to content to just pay for its production.

    The only glimmer of success has come from very low end productions or big brand names producing complementary content into an existing revenue stream. Another way to describe those big brand names ... gatekeepers.

    Look at jib jab. Perfect example of success. They put their stuff on the net. It exploded virally. What did they do ? they sold their production and creative skills off to the highest bidder. A gatekeeper. A network. And they were smart to do so.

    You are right about the fact the net is very darwinian. Its so darwinian and open that the cost of attracting an audience for all but the few virally fortunate is out of reach.

    You are also right that the networks may use the net to evaluate and get feedback on pilots. But the key word here is networks. They are the ones that can afford the 10s of millions of dollars per year to create 10,20,100 pilots to test. And if that much money is being spent on producing content, its business as usual.

    in the end, it doesnt matter if the gatekeepers are TV networks or individuals on the net voting with their pocketbooks (by viewing ads or paying for content). The true darwinian battle is to create great content. While there will always be Jib Jab like exceptions, the reality is that the cost to product content that can compete will not be cheap.
    • I can see both sides of this one

      I think you are forgetting about creative financing! Take a prospective sitcom for example, and apply some open-source thinking. Actors volunteering their time with the hope of making money later. The same thing for all the production people. Everyone chips in (or get a VC-type investment), and kicks out a few shows. Now you shop it around and see if there are any takers (there would be MANY outlets to try).

      That was the low end. At the middle range, you have a VC company that has a stable of actors and makes a dozen or so shows. If one doesn't make it, you scrap it and re-use the actors (mix and match) in different shows. The Stargate/SciFi people and their Vancouver home comes to mind. Isn't this how Hollywood started out?

      At the high end, a rich company hires the best people and they produce a show. The chance of it failing is much less than the cheapo company - so the return could be more.

      In the Streaming Paradigm - broadcast networks are gone. Companies such as Yahoo! are positioning themselves to become the media portals of the future. I see combinations of product offerings - monthly subscriptions and new movie rental fees. I also see an opening for "free". Either you pay for HBO and get commercial-free movies - or pay nothing and get movies chock full of ads. Your CHOICE!

      Not only that, but Yahoo! can get user counts and demographics to market to ad companies. Even if a show only attracts 1000 people at a time (per hour say), you could charge the ad company based on that count. Even at low viewership levels, a show could pay for itself. These viewer counts are also used to PAY the production companies. If your show gets 100,000 views per week, at 10 cents a view you end up clearing 10 grand a week (this is a very low viewership). These production companies make their own deals, and the "Friends" show can command more than the "Top Model" show (given historical viewership levels).

      The producers get paid. The actors get paid. The "broadcast" companies get paid and the AD companies get great demographics AND feedback to more effectively target customers. What's not to like?
      Roger Ramjet
    • one things for sure...

      Mark your dead on about the content... Publishing Content = King

      But "Mark" these words, there's a very high probability that a next Googs will come from IPTV!
    • Pistons beat Mavs!

      What ever happened to you Mark? You made your fortune by embracing change and moving quickly. Now you are saying that the status quo will reign supreme. If only! You have gotten complacent in your "old" age, and have taken your eye off the goal. Maybe "my" Pistons will shake you out of your trance when your Mavs get trounced . . . ;)
      Roger Ramjet
    • The only thing that matters

      Is a good story. A good story will capture the imagination. If it captures people's imagination, then the viral sell begins.
  • The equipment Manufacturers see the writing on the wall

    In a recent trip to NAB, I was amazed at a few things. First I was seeing RED the new HD camera for around 20k second was the release of Sony?s new HD camera that will only cost less than half of what it's inferior SD predecessor cost, Third was the Announcement of Avid that they are going to release their high end editing software for significantly less than it's predecessor.

    The trend that I see is that we are moving to an on demand world, but the days of huge productions with million + budgets is quickly diminishing. In it's place we will find many small efficient production companies producing highly targeted content and significantly reduced budgets. 30 second ads are out and ads that are integrated directly into content are in. Profits for individuals producing the content will be comfortable, but large conglomerates that require a cast and crew of hundreds to produce a show will suffer.
    The change is upon us and the only people that don't see it are the big media and advertising companies.
    • Maybe

      I agree for the most part, but the ISPs and TelCos still have their hands around users throats. If they manage to get their silly tiered access plans for the Internet by congress and enacted into law, the little guys will still have more problems getting their content seen than the BIG guys will. The people with the big money want to maintain their advantage and control, and guess what. Congresscritters listen to the people with deep pockets. --gk
    • Is that our future?

      The high cost of quality production is the cost of the EQUIPMENT? Give us a break.
      This will make the cost of good actors CHEAPER? If it did by some bizarre collection of market forces, they will have to stick to the stage!!
      New technology will make the painstaking work of creative digital manipulators CHEAPER?
      Is the future a vast meal of productions using people's relatives as actors and technicians. We spend the rest of our lives watching each others home movies?
      Bob G Beechey
  • Mark is Right - he is touching on the bigger issue

    This discussion barely scratches the surface of a much bigger issue -- the narrowmindness, inbreeding, and lack of diversity for the viewer/reader with all emerging new media.

    We download our favorite '70s music and podcasts to our ipods but never listen to the radio; we shun the local newspaper and read only Google News on Sports or Entertainment or the few limited tech topics we care about; we don't listen to the radio or TV, we watch streamed or online videos of Desperate Housewives and nothing else; We type away on chat boards arguing vehemently about whether Romulans and Klingons are the same or different enemies but are clueless about the United Nations, Iran, Iraq and the rest of the world;

    Get the picture?

    With the rise of interactive, on-demand, self-chosen, self-absorbed multimedia there is a huge loss taking place.

    We no longer expose ourselves to anything outside our self-chosen sphere of interest.

    This is very serious. We are breeding an entire "Myspaces" generation that lacks the normal exposure to ancillary news and current events such as politics, international affairs, labor and government relations, or even sports and news in areas outside our direct employment or interest.

    Just watch Jay Leno to see how dumb the "man in the street" has become.

    In the past, media provided cross-pollenization: We listed to a sports game on TV and see news clips/newsbreaks about current events.

    We sit through the local newscast to heard the weather report and get a couch-drive-by snapshot of the day's current events.

    we flip through the pages of a newspaper looking for classified ads and casually scan headlines and possibly read a few stories we didn't think we were interested in, etc. etc.
  • it's called fear!

    You don't have to be a tech-futurist to see that traditional tv programming is going down the same path as the US (GM/Ford only) Automotive small car market! Choice will rule...

    Anyone can:

    = "reason to end net neutrality."
  • Watch 'Amazon Fishbowl', Marc

    If "networks" don't seize the 'net-demand reins and hold on for the wild ride, they'll be left eating dust like the RIAA and MPAA. It will be interesting to see how well's 'Fishbowl' with Bill Maher does... because all that's really needed for 'Net-TV to take off is for the established cable channels to start 'broadcasting' over the 'net. They've got brand recognition, they've got audience loyalty... they can produce content -and- sell advertising spots (or ad-free) as well as anyone else, and do it over the web instead of, or as well as, the cable or the 'air'. Disney, et al, can do so as well... can NBC/ABC/CBS? Why not? With transmission speed/capactiy, eventually cable/net/pc/tv will converge to just delivery media... if it goes 'wireless' as well, to include cellular ...old-style broadcasting 'bytes' the dust too. It's not a question of if, but when... and who does it right. It's too bad 'America' is so tied up in milking the customers and the 'rights' that transmission speed/capacity lags behind other parts of the world. If cable channels 'broadcast' ('stream') over the web... I'll be signing up for some season tickets, for either individual shows or the channel package, particularly when I hook my PC or just the 'net up to my large HD LCD screen.