Mark Cuban debates Boxee founder

a lively debate with mark cuban [boxee blog]

My buddy Mark Cuban and the founder of the open-source Boxee online video browser software have a debate of sorts going about the future of Internet video distribution. Mark has posted a piece entitled, Why Do Internet People Think Content People are Stupid? To which, the Boxee founder, Avner Ronen has responded and created a dialogue with Mark on the issue.

Basically, Ronen thinks that the future of video distribution is going to move completely to the Internet, with customers getting de facto a-la-carte video by virtue of the numerous options that will be available to them on the Internet. Mark takes a different tact, arguing that cable operators won't let free programming (ad supported) on the Internet eat their lunch because they'll introduce better and richer video on demand offerings. Mark also argues that the Internet infrastructure - both the last mile connections into homes and the streaming sites like Netflix can't handle the amount of traffic that would be directed at them if everyone threw away their television and relied solely on the Internet for their video needs.

I think the day is coming when the Internet infrastructure - both last mile and at the video source - will be better capable of sustaining the streaming video bandwidth needs that Ronen envisions. DOCSIS 3.0 will help a lot.  However, it likely will take years until that infrastructure could handle the quantity of data that would be transported if everyone watched TV that way.

And let's not forget -- The economics of online a-la-carte are the same as cable provided a-la-carte. They just won't work.  In my previous post about the problems with a-la-carte distribution, I wrote about how the economics of advertising dollars, which are an important percentage of programmers revenue, are supported by channel surfing - accidental viewing of channels in a cable lineup. Most networks rely on those accidental viewers. Take them away by only offering the channels a-la-carte, and many niche channels - full of rich, diverse content - lose significant advertising revenue and cease to be profitable.

Today's modern cable systems are simply a more efficient way of delivering on demand programming.  They are a contained platform serving finite geographical areas and network operators can efficiently provision for the on demand usage on a neighborhood by neighborhood basis. 

Mark and Avner's debate offers some thought provoking discussion. But, given the current online video offerings and the ease-of-use for the average customer, traditional cable television continues to win this debate. Only cable offers the wide diversity and quality of programming for only a few dollars a day. Plus, it works when you turn on your television. Compare that to Boxee, which requires a user to buy and set up and program their own version of a computerized set-top box, and still only offers the limited programming of YouTube and occassionaly Hulu.com.

Comments

[Jack]

I agree that boxee has a long way to go before it can replace cable for most people. However, your closing comment is completely off base. Boxee now offers dozens of internet video feeds(outside of Hulu).

[Carey]

Good commentary here. People often look at these situations too much from just the consumer's viewpoint. While content a la carte seems efficient, consumers don't always know what they want, and have gotten very comfortable "sampling" or channel surfing. It's the same argument as saying Google will control all Internet traffic as people search for what they want. Much more time is spent in online content discovery than directed searching. No way I'd make micropayments to sample and discover new things, and those new things would rarely get created and stand on their own without the opportunity to get bundled.

[Davis Freeberg]

Spoken like a true industry insider. If you want to criticize boxee, I suggest that you at least try the product first. The program does not cost anything and neither does most of the content. It may take years for cable to develop faster broadband infrastructure, but the future is already here today when you look at Verizon and AT&T.

[JC]

Re-runs, trashy reality shows, and constantly repeated recent hit movies? This is the "rich, diverse content" available on cable networks? Puh-lease. Gimme a break!

In my opinion, a lot of these networks deserve to go out of business, especially if they are relying on "accidental" viewing for revenue. If this is true, doesn't it mean their programming isn't really desirable enough to attract real viewers?

I think those cable networks with the highest quality programming would survive a switch to an a la carte model just fine. Some valuable niche programming would likely be lost, but in this day and age, that could still be distributed via the Internet for those that want it. This wouldn't "dumb down" programming, it would improve it by getting rid of all the fluff.

[Rebecca Rachmany]

The debate is fascinating, and of course nobody knows the answer. As a consumer, I hope to soon get all my content free, all the time, anywhere. As someone who makes money in this industry, I hope we can hit the consumer up for every last dollar... the truth will be somewhere in between. With 500 channels, how is it that you can still charge extra for premium channels? With emusic, how is it you can charge a premium for mainstream music? In short, nobody knows how this will play out in the end.

What's been most fascinating for me in this debate is how hard it is for people to debate in a civil manner. When big boys debate in a public forum, you'd expect them to watch their tongues and tempers. I guess they've been watching too much of those niche channels they've been talking about. ;-)

[מרכזיות IP]

Well, Cuban is wrong. Most of what the cable industry uses for delivery is the same technology as the internet. The key is creating the proper business model.