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.
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