HDNet's Full-Court Cable Press

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Now that he's launched two high-definition TV networks, Mark Cuban — founder of streaming-media provider Broadcast.com, but best-known as owner of the National Basketball Association's Dallas Mavericks — is courting cable operators in a big way. While the TV images of him at the games are all about restless energy, when it comes to HDNet, he says he's prepared to be a patient investor. Broadband Week senior editor Karen Brown recently talked with Cuban about the HD picture and where the market is going. An edited transcript follows.

MCN: You've made a career of spotting potential in a fledgling industry and running with it. What attracted you to HD back in 2001?

Mark Cuban: Actually, I started getting involved with HD when I was at Broadcast.com, probably in '97. And in terms of what attracted me to it, it was a variety of things.

Initially, it was the fact that from a streaming-media perspective there was 19.4 Megabits of wireless bandwidth, and I looked at it purely from a streaming perspective.

But as I started watching high-definition television, it was just the simple composition. It was an amazing picture and that created a compelling opportunity. The only question was, what was it going to take to get it into every household? And as I looked at the industry, the stars were aligned. You had a situation where because the stock market was faltering, there wasn't readily available capital to invest in it, and Wall Street wasn't going to reward people for investing in a medium or technology that didn't have an immediate return. So that opened up the door.

MCN: So you are going to march right in. After two years has HDNet turned out the way you expected?

Cuban: It is happening a lot faster than I expected. I really expected it to be even slower than this. But I think people are watching to see what HDNet's doing, and more importantly, I think people are listening to viewers who have high-definition, who are getting us on Charter cable, who are getting us on DirecTV and saying, 'Wow. This is amazing.'

It's great content and it looks great. It's kind of like listening to stereo versus mono. You could go to the AM dial and listen to certain music, but it doesn't quite seem right, does it?

MCN: From the looks of it, you are going to be everywhere at the National Show. What's the decision behind that? Why the big push this year?

Cuban: We are starting to get distribution now. We don't want to get the cart ahead of the horse. And so now that we have got Dish [Network], now that we have got the [National Cable Television Cooperative], now that we've got DirecTV, now that we have got Charter, and we are very close on others, we wanted to let people know that here we are. And we have really increased our investment in original programming.

We have signed a lot of deals with major studios. We just recently announced Sony; we'll announce a deal with New Line here shortly, and we've got others to follow that. And we are spending — I don't know how many — more than $50 million on original programming.

MCN: Speaking of which, while you now have the two U.S. satellite operators, so far the only cable deal HDNet has landed has been with Charter. Are the cable operators hesitating for some reason, and if so, why?

Cuban: I don't think they are following late. I think if you look at, relative to other people they are signing — look at ESPN distribution. It's not like they've just thrown up everybody. Look at Discovery [HD Theater]. Look at any of the others. If anything, we have actually gotten more distribution than anybody else. We are leading the way and others are following.

But if you look at programming on other people that are up — other than ESPN, which is just doing so little in HD it doesn't matter — but literally, you look at the programming, and things that are running on other people who are announcing their networks now, are things that have already run on HDNet. They are getting things that we have already played.

MCN: So what are the prospects of other cable operators coming on board, and along what kind of timeline?

Cuban: I'd say you'll see — we already have one announcement that is in the bag that we will wait for NCTA, and then we will have another one we might be able to announce — maybe two that we will be able to announce there as well.

There are already other people that are showing us and up and running. We just wanted to wait and get some time after the EchoStar announcement and after the New Line announcement that will come out.

MCN: Yes, but so far the two biggest MSOs — Comcast Corp. and Time Warner Cable — have launched HD, but haven't bitten on Discovery HD Theater or ESPN HD. Do you have any feeling about those two cable operators?

Cuban: We are in great conversations with both. I don't want to jinx us. We've got nothing signed, but we have had great conversations with both.

MCN: When HDNet first went on the air in September 2001, it focused on sports fare. But since then it has branched out into many more areas such as news documentary, classic television series, and, of course, the HD Movies channel.

Cuban: Sports was the easiest to get at the time. Sports is nice, and don't get me wrong — we have the [National Hockey League] and we have Major League Soccer, so sports is important. But we have to have HDNet [Movies] and other programming as well.

Our differentiation is going to be great content that originated in HD 1080i at 30 frames per second, because no one else is doing that. There are others that will be able to do sports, but can you name one other network or organization that is originating things like HDNet World Report, Over America, True Music?

Everyone is doing things in 240p, to make it look like film. We don't want to make it look like film.

MCN: What other programming are you now missing that you hope to add?

Cuban: Just more and more timely features. Breaking news I think is something we hope to add. We're not going to have a news department and we aren't going to compete with CNN [Cable News Network] or anything like that, obviously.

You'll see us add much more music content. And I think you will see us add more lifestyles stuff, because we can take advantage of having trucks that no one else owns. We can take advantage of having crews across the country, and having production facilities across the country to be able to do HD — and things that differentiate us that take advantage of the fact you can use the differences that HD offers to create compelling content.

So we'll take advantage of what makes us unique. We don't have to protect any old masters or any legacy businesses. I don't have to say, 'Well we have been doing it this way for 20 years and this is the way we have to keep on doing it.' So we'll try to invent new rules where we can.

MCN: You don't have to be a fogey, eh?

Cuban: Yeah, exactly. I mean, I don't have to worry about what Wall Street expects from me. I can invest in things, I can try new things, I can experiment. I can do pretty much anything.

MCN: You may be facing some competition soon. In Demand recently announced it would be assembling an all-HD channel. What does that present for you?

Cuban: Two things. One, no one ever says they have enough HD. So it's not a problem that there is more HD. When I talk about it, it's not like I am concerned about competition.

Two, they have to go out and get carriage just like us, even though they are owned by the MSOs. And I understand how the economics work. Unless they are go and just — I know personally how much I am having to invest, and I know I don't need to show a return for the next couple of years or the next five years. Somehow I am guessing their ownership is not going to feel the same way.

MCN: Does the tie to the cable operators directly make it any more or less a threat?

Cuban: It will be more a negative than a positive, because they are all publicly owned.

MCN: What do you think about some of the cable operators talking about making HD a paid tier? What are your thoughts on that?

Cuban: How it starts isn't the issue — it's how it finishes. The fact that it is a separate tier isn't a problem to me at all. You have to do it in what makes the most economic sense. But the reality is, over time it will become the basic cable. That's just the facts of life.

Where it becomes interesting is, as the MSOs try to free up bandwidth by pulling networks off of analog and putting them on digital, and whether or not they tier those, and how the cable networks deal with the fact they aren't part of basic cable anymore.

That's where it gets interesting.

MCN: While there is a buzz these days about HD, the reality is a relatively small number of households — estimates range from 3 to 4% — have the ability to view HD. What needs to be done to make this a mass market?

Cuban: Nothing. It already is. We are just asking the wrong questions.

MCN: So what is the right question?

Cuban: Ever buy a TV because of the digital comb-down filters? Do you use your picture-in-picture? Well, when you go to buy your next TV, if two TVs side-by-side were the same price, and one was high-def and one wasn't, which would you buy?

MCN: Probably the high-def.

Cuban: That's all you need to know.

MCN: You think that will drive the decision, huh?

Cuban: Yeah. No one says 'I'll take the one with the same price and less features.' There are two TVs: One is color and the other is black and white. Which one do you pick? That's it.

TV manufacturers just have to compete, and HD becomes prevalent. MSOs just have to compete with DBS, and HD becomes prevalent, because that's just the nature of technological competition.

MCN: Yes, but the only purchasing problem people may have is that even though the prices of the units have come down, they are still looking at $1,200, $1,400.

Cuban: You can find them for $700, but your point is well-taken. But the same thing applied to PCs, and the prices will continue to come down. And then you've got the cost of a plasma [screen TV], which will continue to come down and feature sets will go up, and LCDs. In three years, is it likely plasma will cost under a thousand bucks? Yeah, absolutely, and it will be for full high-def at 1080i.

And so will people walk into a store and say, 'You mean it's time for me to buy a new TV and I can find one that fits on my wall for under a thousand bucks?' Yeah.

It's just like now, you look in the stores and home surround-sound theaters are the big thing. I think someone said there are 16 million homes that have big-screen TVs and home-theater setups? That's huge.

MCN: Should we start writing eulogies for analog TVs?

Cuban: Analog TVs? You can still find black-and-white TVs, right? So they will never completely disappear. There will always be the under-the-counter ones in the kitchen, but just like when we were growing up the black-and-white found its way into the kids' room and it found its way into the basement, again, the same thing will happen here.

MCN: When it comes to promoting HD, what kind of effort would you like to see from the industries involved, including consumer electronics, cable operators, cable programmers, studios, TV networks, retail stores?

Cuban: What it is going to take is rather than — like, [the Consumer Electronics Association] goes out there and has all of these road shows and everything …

MCN: Their Digital Cities promotion?

Cuban: Yeah. To me that's kind of a waste, because it's nice, but it's not the killer app, if you will. You just need to plant HD sets and receivers in influential people's homes. Folks like yourself need to get it at home. If you had it at home, you wouldn't have to ask me questions about, 'is it going to happen?'— you'd know.

MCN: So you'd do it like the crack dealer who goes out and gets people hooked on freebies?

Cuban: Yeah, that's exactly right. It's like getting on the 'Net. If you try to explain to someone what it's like getting on the 'Net, it never works. They have to get used to it and experience it, and all of a sudden it is part of their lives. And it was like someone was telling me last night — once you start watching stuff in HD, everything else looks fuzzy.

And so that's the key. You have to get people in Hollywood to have it at home. People at the studios — the content creators — have to have it at home, because then they won't want their content to look ugly.

MCN: So is that something that consumer electronics does, or do you think the cable operators and other entities have to go do that?

Cuban: I think the people at the MSOs, the ones that work at the top — once they start getting it at home and seeing it on a daily basis, they will want more, and just let the selfish part of it push it.

MCN: A lot of the technical geeks already do.

Cuban: Well, the geeks do, yeah, because that's what they have to do. But they have had it for five years. But on the flip side, the guys that are in marketing, the guys that are in sales, the guys who work in the regional offices — once they get it … the guys who work in television stations, the guys who work in any content-origination organization — once they get it, forget it.

MCN: But do you think there needs to be any kind of coordinated effort between these guys to do any kind of promotion?

Cuban: Nah. I don't want a coordinated effort. I don't want them to get any smarter.

MCN: You want them to stay stupid?

Cuban: In not so many words, yeah. The slower it is, the better for me. I'm in no rush. I'm serious. There is no rush for me at all.

We'll continue to make investments, and the longer everyone else takes, the more I get to establish all of my programming, the more I get to take risk and see what works the best, the more I get to develop our technology, the bigger the library I get to create. So when someone else needs content, they are going to have to come to me and I can syndicate to them all of the stuff I've already played on HDNet.

MCN: So does that mean you want things to go slower?

Cuban: Oh, I'm in no rush. We want to sign up MSOs as quickly as possible, but in terms of everyone else, they can take 10 years and it won't break my heart. The slower it goes, the longer it will be before the traditional cable networks jump on board, because it doesn't make economic sense for them. And they can take their good old time, because by the time they do that, I will be on my fifth, sixth or seventh network.

MCN: Speaking of that, what's next for you once you get HDNet developed?

Cuban: Well, let's just get it all developed and fully distributed, and we will go from there. We're creating content in every niche that can be multipurposed in a lot of different ways.

MCN: So what's your next channel for HDNet?

Cuban: We'll just stick with what we've got now and we'll go from there. I don't want to give away an advantage here.

MCN: Is there anything else you want to add? Anything you think people are missing about HD?

Cuban: I don't think people are talking to users — I don't think you get enough end-user stories. I think people are missing the point. They are talking about the sales process, and it's not optimal, but it is getting better. But they don't talk about the user experiences in terms of what people think when they get it.

People think 'Well, HDNet will be in trouble.' No one says they get enough. No one thinks you can have too much HD. People love it. We get people who have the network on eight, 10, 15 hours a day. They never turn it off. They never change the channel. That's good and bad, I guess, for us, but I don't think there are enough people really getting out there.

And the second thing is, no one is questioning the people in the industry that don't have it. How can you make decisions if you don't have it?

MCN: Well, you'll need to buy them all an HD set.

Cuban: They are big boys and girls. They can buy their own. They have got enough to call the local cable company or DirecTV or Dish and demand they get HD.

You know what? If it is the future of your industry and you don't know how it works at home …

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