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Mark Cuban on Internet TV: Show Me the Money

May 14, 2008 | Author: Ibex Marketing

Mark Cuban is the high-profile owner of the the NBA Dallas Mavericks, and also has been a driving force behind the growth of HDTV with his HD.NET enterprise. He also has something in common with about 10 million other Earthlings; he has a blog. In a recent entry, he tackles the question of whether video content delivered on the Web can be a success.

His starting point is a report by Craig Moffett of Bernstein Research, “And Now for the News…The Emperor Has No Clothes”. Moffett makes a number of excellent points, including the statistic that while the typical half hour broadcast TV show has 8 minutes of commercial programming, Web viewers apparently will not tolerate more than 2 minutes of commercials. From these two data points, he extrapolates that Web programming will make 1/16th as much money as broadcast programming.

Cuban then picks up on this, and adds the uncertainty of how many viewers a given show will be able to deliver for the advertisers. How do you know what to watch when there’s no schedule? Are TV networks making a huge mistake by putting their current TV schedules online for free? Will Web video be at the mercy of the search engines, relying on them to drive viewers to their content? He ends with the big question “The question is whether the dollars the big TV and media companies are creating online from the streaming of their current TV lineups are sustainable incremental dollars?”, drawing a possible parallel between online video and the sub-prime credit crisis.

The column is interesting, and I certainly agree with Cuban that the “bottom line is that something has got to give. Business as usual is not going to cut it.” However, I found a lot of lucid points among the reader comments that are worth consideration.

For example, one comment pointed out that advertisers might indeed be happy to pay 16 times as much for an online video ad than they would for a broadcast ad. If they were only one of two minutes of ads — rather than one of eight — in a half hour show, they might stand out more. And on the Web, if there’s no way to “TiVo” around the commercials, a lot higher percentage of the viewers will actually see the ad. And finally, the viewers of the Web content could be highly targeted for the ads. I was watching a broadcast show last night — no, I don’t remember which one — and I noticed an ad for Jaguar cars. I can tell you that I’m not in the market for a Jag, and I doubt I ever will be. I don’t know anyone with a Jag, and I don’t know anyone who is planning (or even hoping) to buy one. Yet the company apparently feels that by blanketing the US market with a prime time ad is a good way to reach their potential customers. On the Web, you can know a great deal about the person who is viewing your content, and you can match the ads to their profile. Targeted ads that are actually watched could well be worth a lot more than 16 times the cost per viewer of a broadcast ad.

Other comments made some good points as well. True, there is no schedule for a lot of the Web programming, but why not use RSS feeds to notify fans whenever a new episode or related program is posted? And don’t forget that there are other revenue models to consider; product placement can go a long way to fund programming. Have you ever watched any of the BMW “The Hire” episodes? (You can find them on YouTube.) Are they commercials or entertainment, or does it matter?

Television is changing, and the Web is going to be a part of the future of video entertainment. Nobody knows for sure yet just how it will work and who will pay for it, but it’s coming and I’m betting that it will be better than the broadcast system we had 20 years ago.