Mark Cuban Shoots Straight
The media and sports billionaire and self-described "all-around troublemaker" opens up to Peter Lauria about the future of content, the state of basketball, and why news may be delivered on a Netflix model. Plus, revisit The Daily Beast chat with Mark Cuban at 2 p.m.
Not only is Mark Cuban a survivor, he knows how to survive in style. Cuban has barreled through at least two major boom-and-bust cycles, and thanks to good timing and business acumen, he remains a force in both media and sports, with an estimated net worth of $2.5 billion.
The most famous owner in basketball, he'll be cheering on (or barking at) Dirk Nowitzki, star forward for his Dallas Mavericks, at the NBA All-Star Game this weekend. That name—the Mavericks—fits Cuban's public persona quite well. At the height of the dot-com boom he sold Broadcast.com, an Internet radio company he helped found, for more than $5 billion in stock to Yahoo. Since then, Cuban has stayed primarily in the tech realm as the founder of HDNet but also has branched into television and film production.
Tech geeks aside, most of the world—the sports world, anyway—knows Cuban for making comments critical of the NBA. With billions to his name, he can well afford the $1 million, give or take, he's racked up for snide asides like "Ed Rush might have been a great ref, but I wouldn't hire him to manage a Dairy Queen."
He talks to Peter Lauria about today's tech-savvy CEOs, LeBron James, and cutting the cord.
Was selling Broadcast.com to Yahoo the smartest business move you've ever made? If not, what was the smartest thing you've ever done in business?
From a financial standpoint, it obviously is. But I would put teaching myself networking and becoming one of the first local area network integrators and developers in the country up there as my best business decisions.
While on the topic of Yahoo, give us your assessment of CEO Carol Bartz . Will she still be Yahoo's CEO this time next year?
No idea. I like Carol. She has the balls to do what is necessary, once they figure out what that is. However, like every mature technology company, they are looking for the next big thing, and it's not easy to find or create.
You described yourself at the UBS conference in December as an "all-around troublemaker." Indeed, you seem to relish the role of antagonist—to traditional media, to basketball referees. What is it that you find so gratifying about being a pain in the ass, for lack of a better term, to authority and/or the established way of thinking/doing business?
I love to challenge conventional wisdom. I'm a big believer that in business and in politics, when everyone is doing the same thing, none are probably as effective or successful as they could be. Typically it's not prudent for people within those industries, parties, or organizations to stand up and challenge the incumbents. It is usually a formula for losing a job, customer, or endorsement. My businesses are usually built around challenging conventional wisdom, so I tend to gain by taking the other side. It's been very profitable and entertaining for me.
Right now most sports franchises that try to win are vanity assets.
Before your most recent blog posts, you had a quiet spell.
Twitter has changed the blogging business. Pre-Twitter, if anything was on my mind, a blog post was the only way to go. Now a quick tweet can convey the message in a lot fewer words. So I blog when I have something to say. If not, not.
In your opinion, which of the traditional media company CEOs is the most tech-savvy?
This is going to sound crazy, but I think they all are. I don't think there are media companies that are ignorant about technology any longer. It's not like everyone in media companies is 75 years old and out of touch. The Internet has been around a long time now. Those 50-somethings running media companies have been using the Internet and earlier technologies since they were 20-somethings. This shit ain't new no more. The challenge for media companies is to balance hitting earnings-per-share numbers for shareholders or debt holders and finding money to invest in new technologies and create new business opportunities. Sure, they have lost subscribers and advertisers and advertising dollars, but many have managed to hang on, and some have thrived.
Look at your side of the media business. There are far more Internet-based content companies that have gone belly up the last few years than traditional media companies. Did they not get the Internet? Technology? And what does it say when two of the highest profile Internet content sites are Demand Media and Associated Content, neither of which has any desire to offer quality content?
You recently said that cord-cutting is a way for people to say they want more TV. Can you explain your reasoning?
I always have to crack up when I hear people bragging about how they "cut the cord," then they go on to discuss what they watch...all shows that were paid for and branded by virtue of their appearance on a linear TV network. They don't realize that they aren't saying they can live without TV. What they are saying is that they are willing to save money by waiting to watch the same TV shows everyone else is watching. That isn't anything new. That is the whole reason windows for content licensing exist. You can get any content for less just by waiting.
Maybe they can save even more money by waiting another year and renting the same shows from Amazon or buying the discount bin instead of paying Netflix.
How long is it before the complaints of "I don't watch 19,900 of Netflix's shows and movies, why should I pay $8.95 per month? I only want to pay for what I watch!"
Continuing with that thought, what do you think Comcast ultimately does with Hulu, the popular video-sharing site?
I think it stays alive to serve the purpose it has been serving all along: letting people watch TV at work. Where is the one place you don't have a TV, can't just pull out your iPad/iPhone/iTouch/viewing device and hook it to a network? At work. Which is where a huge chunk of TV viewing over the Net takes place. So there is no reason to shut it down. That said, it wouldn't shock me if certain content was only available during the day in any given time zone.
You own the Dallas Mavericks NBA franchise, and you've been involved in the bidding for the NHL's Pittsburgh Penguins and MLB's Chicago Cubs, as well an investor in the nascent UFL. Are you just the typical free-spending billionaire sports fanatic or do you see a value proposition in owning sports franchises?
Right now most sports franchises that try to win are vanity assets. They aren't great businesses. There are structural problems in every major sports league that have to change for them to become good businesses.
Will there be an NBA or NFL lockout next season? What do you think are the key similarities and differences between the NBA and NFL negotiations?
Can't comment unless you want to pay the fine.
Prior to LeBron James' announcement that he was going to the Miami Heat, you predicted on your blog that he would stay in Cleveland, writing, "The sports world is full of uncertainties. When in doubt go for the love." Nearly halfway through the season, what are your thoughts on fan reaction to James' choice and how the decision has worked out for him?
His choice is his choice. I don't think anyone outside the state of Ohio has a problem with the choice. It was how he handled it. It turned him into a villain. But given that the Heat are playing the best basketball in the NBA right now, it has worked out very well for him and I'm sure he would do it all again if he had the chance.
On your blog, you've been outspoken about how a la carte media businesses will have a hard time surviving because they are easily disrupted by technological innovation. What are your thoughts on The New York Times' pay-wall plans and News Corp.'s iPad-only newspaper, The Daily?
As long as everything behind the pay wall is free to paper subscribers, it absolutely will work. They are assigning a value to their Internet content and offering it for free to the people who pay them the most money, their subscribers. None of those subscribers are going to feel upset they are getting something others cannot get. The pay wall will make the subscription decision easier. Compare it to the bundled services that cable and telcos offer. A bundle of cable TV and telco services worked well. Add to it wireless cell service and it worked even better. Bundles of valued services work.
Pay walls change the message to the subscriber. They are now in a partnership with their subscribers and can start creating value that goes beyond the cost of the daily paper. Why couldn't News Corp. use its movie assets and stream a free classic movie every week for free to its subscribers? The marginal cost is next to nothing. Why wouldn't it? Or a free digital book from its publishing group? It can completely change the value proposition for newspaper and magazine subscribers.
It also allows multiple media companies to consider forming a "Netflix" for news content. Netflix at its heart is an arbitrage on the value of content versus the cost to acquire subscribers. How many subscribers can it create from the cache of content it has paid for?
Why couldn't all the media companies that have a pay wall work together to offer joint access to all of their content for an additional $5 or more per month and share it? They could conceivably get millions of subscribers and share that revenue based on actual usage.
Each of these is a far better business model than throwing up content on the media website and then praying you get enough traffic and a high enough CPM to pay your bills, all the while giving your paper subscribers, who are paying you $30 per month or more the "well, it's free on the Net" reason to consider dropping the subscription altogether.
Apple, Google, Netflix, and others are all moving aggressively into streaming movie and TV content and are in active licensing negotiations with providers of that content. Do you think that one of these companies will decide to just buy a movie studio or production company outright to both give them control over their own library of content as well as the capability to produce new content instead of just striking licensing deals, particularly if the terms offered by the incumbent content creators is undesirable?
Buying a library of content will open the door and allow them to test some things, but they very quickly fall into the trap of every content originator, paying the money to produce new content. That's a new business that is very, very difficult and expensive. There is a ton of competition, and competition increases costs. YouTube is having a challenge making money, and everyone gives it content for free!
What are your thoughts on what's in store for the economy and the stock market in 2011? Are we headed for a double-dip recession? Jobless recovery?
I have no idea. Neither does anyone else. So my advice is to be careful. Whoever tells you they know what is coming is lying to your face. Always remember that in the stock market, no matter what you are buying or selling, there is someone else on the other side of the trade. They aren't making the trade with you because they want to lose money or leave money on the table just for you. They think you are a moron for doing the trade.
You've been in a battle with the SEC over allegations of insider trading in the sale of shares of Mamma.com. In 2009 a court dismissed all charges against you, but last year an appeals court reinstated the case. Where do things stand now?
I can't give any details but I'm told the Office of the Inspector General is coming out with a report. You might want to check with them. But I can't wait till it is over. It will be my longest blog post and I will lay out every detail of what it's like to be chased by a conscious-less bureaucratic machine
If you could be any fictional character, who would it be and why?
None. I like my life better.
Peter Lauria is a business writer, previously a senior correspondent for The Daily Beast covering business, media, and entertainment, and before that a corporate media and business reporter for the New York Post covering music, movies, television, cable, and radio. This interview was his last as a senior correspondent for The Daily Beast.