Playing Devil's Advocate with Mark Cuban - On TV

written by: Richard Kastelein

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Mark Cuban and I share a few things in common - we both worked as bartenders, we both come from modest backgrounds, we are both entreprenuers, we both have pretty similar moral radar (Grokster, activism) but that's probably where it ends.

Cuban is an American entreprenuer who leveraged the sale of Broadcast.com to Yahoo! for $5.9 billion in Yahoo! stock to rocket his wealth to #400 on Forbes' "World's Richest People" list, with a net worth of $2.4 billion. He has interests in the TV and Entertainment industry.

I am a Dutch Canadian that lives in a modest 'stad-house' in Groningen in the north of Holland - and have interests in sweat-equity-driven startups that seem to cost me money.

I usually agree with Mark's POV - which he wonderfully makes available  at his blog where he is willing to share his thoughts and welcomes commments. Find another guy that level who does the same. Not.

But I had to take issue with his latest:  How Google TV Could Hand Netflix the entire streaming universe. And I am replaying it in full here at Appmarket.tv

If I may Mark - play Devil's Advocate on this - with another point of view.

Mark: I personally can't think of anything stupider for the big broadcast networks to do than give their shows to Google for free. Why ? Because they are finally getting BILLIONS of dollars in retransmission fees from their distributors. This is new money. It is found money. It is money they are fighting for. Just ask Fox and Cablevision what they think of each other this week.

Richard: They are not giving their content to Google for free, they are blocking monetized and free programming that they make available on the web from appearing on Google TV.

Mark: The idea that they would take and fight for money from their distributors, who generally are the same ISPs that Google TV delivers content over, and then offer the exact same shows for free through Google TV, or any aggregator that expects that content for free is probably one of the dumbest concepts ever.

Richard: They are not offering anything for free - it's their choice to monetize, or not, the content they deliver on the web. Google is merely a platform for your TV to access the web.

Mark: Now if Google were to go to those networks and offer them money per month for every buyer of a Google enabled device or TV, that would be different. Then they would be a tv provider competing with the rest and they should take their money. Think Google will ever do that ? I don't.

Richard: Why should Google offer anything? It's the choice of content providers and distribution channels to monetize their inventory on the web. Not for Google to give them money for nothing.

Mark: So giving the same content they not only charge their distributors for, but also charge their local affiliates for to Google for nothing or for a share of revenue ? STUPID.

Richard: Once again, what the content providers and distribution channels choose to charge on their inventory available on Internet Protocol (IP) is their own choice. Google TV is merely a gateway to the World Wide Web - they are not dumbing down the web for TV (like app-driven architecture such as CE manufactures (Samsung, Philips, Sharp, Panasonic, etc), and others (such as Boxee, Yahoo, Roku etc) are offering, they are empowering consumers to explore and make use of the Internet on the big screen in their living room... in it's full glory.

Mark: If Google sticks to their guns of not paying up front for content like Netflix does, they will have handed Netflix the entire streaming universe on a platter.

Richard: Google is not in the game of paying for content for Google TV, they are a facilitator and access point for big screens to access the web. If anything Google might start buying up content providers, distribution channels and that side of the industry - much like they are already going to 'own' the future of distribution via their aggressive moves in the Fiber Optic space. - They can certainly afford it.

Mark: Did anyone else see the report that Netflix streaming consumes 20pct of download throughput during weekday primetime hours ?

If this is true. Its one more reason to think that Netflix has won the streaming wars and those broadcast networks would be moronic to give their content online away for free. Why ?

Richard: Then the networks need to stop offering their content for free on the internet and monetize it. Then they will make money when it's viewed on Google TV.

Mark: First of all, do you know the difference between Netflix and Google when it comes to content ? Netflix pays up front and offers minimum guarantees. Google and everyone else for that matter, pays a commission based on ad sales. (which works wonderfully on Youtube for them)

Richard: The big difference is, Google is not really in the business of doing audio-visiual content deals other than Youtube. And that's web based... and soon to be TV accessible via Google TV.

Mark: So riddle me this batman. Netflix is on Google TV , correct ? Given that Netflix pays and Google TV doesn't, why wouldn't/shouldn't the broadcast networks offer all of their shows to Netflix as a way to reach Google TV users, knowing that they will get paid for their content. Paid HUNDREDS OF MILLIONS OR MORE for their content.

Richard: Exactly. What's available on the Web will become available on TV. Not to mention that Netflix has deals in place with most if not all the major CE manufacturer platforms as well as the IPTV space making their inventory available on Samsung Apps, LG, Panasonic, Boxxee, Roku, etc, etc, etc. But in this case, Netflix, and by proxy, the content providers have TO PAY via rev share for the opportunity to get eyeballs on TV via new distribution channels.

Mark: All you internet pundits want the broadcast networks to give the content away for free. THAT IS STUPID. Get Netflix to pay you on a per subscriber basis on a par with what your other TV providers pay you. Netflix becomes a competitive TV provider. BRILLIANT. You get paid. You reach Google TV users and non Google TV users.

Richard: Nobody is giving anything away for free.

Mark: Of course you basically cede to Netflix control of the streaming content world. You give their streaming only subscriptions a unique value beyond old shows and movies. Goodbye Hulu as well.

Richard: And what? Most studios and networks are frothing at the mouth at the pricing models of Apple (99 cents) and under ten bucks a month unlimited by Netflix... it's doing a deal with the devil for them. That's crap money.

Mark: Of course once they get the broadcast nets, how long until they add the cable nets like ESPN, Disney, etc., etc. ?

Back to the Netflix using 20pct of bandwidth. Now that they have gotten there, it is going to be easier for Netflix than anyone else to grow their bandwidth usage. They can add streaming subscribers at a controlled level and it could work. Growing their usage as a percentage of total bandwidth consumption quickly becomes a trojan horse in the streaming wars. They are consuming so much bandwidth, they literally are blocking out the ability of anyone to compete with them.

Richard: It's not just Netflix and it will be easy to grow their bandwidth usage - sure - in the future via Google owned Fiber Optics. Note, at Samsung Developer Day in London last week I reported.

"In 2014, 90 per cent of all TVs shipped will be internet connected," added Letts.

Blinkbox's co-founder and COO Adrian Letts pulled out some interesting stats while pitching his wares at the event, noting with particular interest that TV is the fastest growing sector in the IP market and is expected to overtake mobile and the PC by 2013 in terms of overall bandwidth use, or data consumption. A five-fold growth in three short years is expected.

It's also connected TVs in general.

Mark: If Netflix gets to 25pct do you think Google is going to be able to also get to 25pct during primetime and all of the sudden 50pct of the internet's bandwidth during primetime is allocated to streaming tv originated shows, movies and other video ? Of course not. And that's before consideration for Youtube. How much bandwidth in primetime does and will Youtube use ? After you combine Netflix and their growth to Youtube and its growth, what kind of internet bandwidth is going to be left for anyone else for streaming TV to millions?

Richard: Bandwidth is an issue. For sure. It will take time to solve it. But again - I reiterate, it's not just Netflix. It's all kinds of apps that stream videos on TV. It's all kinds of websites that stream video on the Web.

Mark: There will be big problems and lots of quality and delivery issues long before we get close to those percentages. Leaving Netflix in a phenomenal position. They get to adapt to a declining available bandwidth environment with an existing product , revenue and subscriber base. There is no such thing as equal access when you are blocking up 25pct of the lanes on the highway 24×7. The others can't even get on the ramp.

Richard: They are not the only players on the block - globally for sure. In the US, there's certainly competition on the web. And other models like Hulu as direct competitors.

Mark: Their competitors have to figure out how not only how to overcome the technical hurdles of reduced available bandwidth, but also a business model since no one will want to give content away for free when Netflix can pay them. Netflix is smart as shit.

Richard: I agree they are smart as shit. But again, they won't be consuming all that bandwidth themselves. Youtube will also consume plenty via their apps on Samsung, LG, Panasonic, Toshiba, Sharp, Philips, Loewe, Ericsson and every other CE player moving into the space. Not to mention the plethora of other video centric sites online.

Mark: Netflix is also great for traditional TV providers. TV works. TV works for any number of subscribers or viewers. 100pct of the digital bandwidth that TV uses is designed, managed and operated purely for the distribution of TV and complementary features. It will work.

Richard: It might. Depends on consumer adoption of Connected TVs. Samsung is happy that 40 per cent of buyers are even connecting it all at this point.

Mark: Netflix should end up as the only "TV" provider that truly works on the internet, Which means that content providers like the broadcast and cable networks can be paid by Netflix on a per sub basis for their subs who want to subscribe via the net, and from traditional tv providers for those who want buffer free, (relatively) full quality TV the old fashioned way.

Richard: There should not be an only of anything. Competition is better for everyone. If TV providers, broadcasters and cable networks want to make money... they only need to ensure they monetize it in any number of ways on the web. Then they will make money when Google TV owners watch it on TV. The other aforementioned parties also need to utilize the other platforms available - although they are under shared rev deals - such as Samsung. Samsung sells more TVs then anyone. It's probably more important to have a good app on their platform then worry about Google TV.

Mark: Oh, and one more thing. Expect your internet bills to go way way up as ISPs make it clear that all this video over the internet is going to require billions in upgrades. The irony is that while you may not like paying for cable channels you don't watch. You will end up paying for cable channels on the internet that you don't watch as well. In this case you will be paying via higher net bills for the extra bandwidth required to stream cable channels that your neighbors like to watch

Richard: Yes, bills will go up. And the issue of Net Neutrality will become more of a burning issue.

Consumer reactions? This kind of stuff seems to be making rounds Twitter.

Fuck you @ @ @ and @ for blocking your online content from . I will just download shows without ads & stream them.

About the Author

Richard Kastelein
Founder of The Hackfest, publisher of TV App Market and global expert on Media & TV innovation, Kastelein is an award winning publisher and futurist. He has guest lectured at MIT Media Lab, University of Cologne, sat on media convergence panel at 2nd EU Digital Assembly in Brussels, and worked with broadcasters such as the BBC, NPO, RTL (DE and NL), Eurosport, NBCU, C4, ITV, Seven Network and others on media convergence strategy - Social TV, OTT, DLNA and 2nd Screen etc.

He is a Fellow of the UK Royal Society of Arts (RSA) and UK Royal Television Society (RTS) member.

Kastelein has spoken (& speaking) on the future of media & TV in Amsterdam, Belfast, Berlin, Brussels, Brighton, Copenhagen, Cannes, Cologne, Curacao, Frankfurt, Hollywood, Hilversum, Geneva, Groningen (TEDx), Kuala Lumpur, London, Las Vegas, Leipzig, Madrid, Melbourne, NYC, Rio, Sheffield, San Francisco, San Jose, Sydney, Tallinn, Vienna, Zurich...

He's been on advisory boards of TEDx Istanbul, SMWF UK, Apps World, and judged & AIB awards, Social TV Awards Hollywood, TV Connect & IPTV Awards.

A versatilist & autodidact, his leadership ability, divergent and synthetic thinking skills evolved from sailing the world 24000 miles+ offshore in his 20′s on sailboats under 12m.

He spent 10 years in the Caribbean media & boating industry as a professional sailor before returning to Europe, to Holland.

A Creative Technologist and Canadian (Dutch/Irish/English/Metis) his career began in the Canadian Native Press and is now a columnist for The Association for International Broadcasting and writes for Wired, The Guardian & Virgin. His writings have been translated into Polish, German and French. 

One of Kastelein's TV formats was optioned by Sony Pictures Television in 2012. 

Currently involved in a number of startups including publishing TV App Market online, The Hackfest and Tripsearch TV. As CSO for Worldticketshop he helped build a $100m company.

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