Only a moron listens to Mark Cuban

by Mathew on September 29, 2006 · 22 comments

As my friend Mark Evans points out, billionaire sports-team owner and media mogul Mark Cuban is often a refreshing blast of sanity amidst the hype and hoopla surrounding Web 2.0 and Internet business models in general, but his recent diatribe on YouTube and how only a moron would buy it is a little off the mark, I think (pardon the pun).

I wonder what someone like Mark might have said about a little Internet venture called Broadcast.com way back when the first Internet bubble was being inflated. Would they have said that only a moron would pay $5.7-billion for such a wild dream about the future of online video? I bet they would have. Luckily for Mark, Yahoo wasn’t listening and it coughed up enough cash to make him a billionaire, and now he can play with his sports team and tell everyone else how stupid they are. I think Don Dodge and I are on the same page.

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As Umair points out at Bubblegeneration, YouTube is trying disrupt the entire video value chain, and has gotten a least a couple of rights-holders interested in pursuing that opportunity, and others such as NBC seem to be thinking along the same lines. That doesn’t mean YouTube will necessarily succeed, nor does it mean that someone should pay $2-billion for it. But there is value there.

Update:

Fred Wilson says we should stop the YouTube hating, and points to a great rant from music industry gadfly Bob Lefsetz, as well as a recent piece on YouTube with comments from Chad Hurley in the New York Times. And Jason Calacanis has some further thoughts on the issue, in which he says that YouTube’s genius has nothing to do with technology, and everything to do with distribution.

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  • http://www.en-dash.com/blog Jake

    But don’t you think Yahoo! wishes that they hadn’t blown $5.7 billion on Broadcast.com? I can’t say I’m familiar with the little details but as far as I can tell that was a hilarious moment in the middle of a ridiculous bubble fueled by similarly-absurd acquisitions. I think Cuban would have advised Yahoo! that that money would have been better spent on creating actual content or actual infrastructure. But like I said, I don’t know the details of the Broadcast.com acquisition–maybe Yahoo! did get its money’s worth.

  • Mathew Ingram

    I think you’re probably right, Jake — I think Yahoo does wish they hadn’t paid so much, because as far as I know they haven’t gotten anything close to that kind of value from it. That doesn’t mean buying it was necessarily the wrong thing to do, just that they overpaid. In the same way, I think YouTube could make a sensible acquistion for someone, depending on the price.

  • http://plexusity.wordpress.com marie germain

    Matthew: I concur. Mark is now motivated by TV advertising for his sports franchise. Disingenuous of him. Most of the content at YouTube is copyright safe and downright fun. Better than reality. It’s real reality. I think Mark creates controversy to get press of the web kind. What those 2 young men have achieved at YouTube is outstanding. It would be foolish for Universal not to play–in fact I think they are at the bargaining table. The other lawsuit launched in July is one journalist about a video in the low six figures. The Google Belgium ruling ignores the fact that content can be blocked–these newspapers willl have to prove that they were ignorant of this simple string of code. Ya ambulance chasers smell blood–but the studios (music, broadcast and screen) and authors ponder whether lawsuits are short-sighted. Viral distribution is irrevocable. It’s what the web is. Sharing. Collaborating. Cuban is going to yell himself out of credibility. Or should that be past-tense. We’re between the shor-tail and the long-tail on this one. I call it the medium-tail.

  • Mathew Ingram

    I would agree, Marie. Thanks for the comment.

  • Stu

    Youtube is “better than reality”? No. Just no.

    And I bet if Cuban didn’t have any interest in broadcast.com, he would’ve said that paying 5.7 billion for broadcast.com is moronic. Seriously, since then, what do you think they’ve gotten out of that? Nearly 6 bllion dollars, that boggles my mind. It makes eBay’s 2 billion for Skype seem reasonable. :D

    To the left of this input box, it says this blog is worth $243,881.28. Wonder what Mr. Cuban would have to say about that. :D

  • Rockwell

    “I wonder what someone like Mark might have said about a little Internet venture called Broadcast.com way back when the first Internet bubble was being inflated. Would they have said that only a moron would pay $5.7-billion for such a wild dream about the future of online video? I bet they would have.”

    To echo what a few have already said, yes, he probably would have said that had he not been involved with the company, and he would have been right.

    If someone with deep pockets buys YouTube (and give the valuation, it would have to be someone with relatively deep pockets) they are going to get crucified by copyright holders.

    My predicted outcome: YouTube does get acquired, they crack down on copyright, and another offshore YouTube clone comes around that disregards the copyright issues. People like YouTube because you can get free on-demand TV, including copyrighted material – without that material there is still value, just a lot less.

  • http://www.robhyndman.com Rob Hyndman

    Generally I think it’s true that Cuban is being a troublemaker. But I certainly don’t think it’s true that most of the content on YT is copyright safe – that may be true in terms of numbers, but the “here’s my cat wearing suspenders” stuff that is so much of the copyright safe material just won’t ever generate any revenue. The revenue will be earned off the back of material that won’t be copyright free, IMO.

  • http://www.robhyndman.com Rob Hyndman

    Oh, and one other thing – my sense is that Don is definitely not right on the law, particularly after the Streamcast decision this week. It’s simply not true, as he says, that “YouTube has “significant non-infringing use” which is a proven legal defense against copyright lawsuit”. What was murky before the trial reconsideration in Streamcast is now even more so. And any discussion about YT valuation is, IMO, wild speculation until that murky legal future is cleared up, or until the content owners show their hands.

  • http://dondodge.typepad.com/the_next_big_thing/2006/02/interview_with_.html Don Dodge

    YouTube is not Napster. YouTube has substantial noninfringing use, Napster did not. YouTube has short clips of video, Napster had full length songs. Sampling is legal.

    The record industry is a monopoly of 5 companies. TV and movies are made up of hundreds of independent producers. The record industry lost money every time a user downloaded a full length song. TV and movie people lose nothing a user views a short clip.

    Content producers are making deals with YouTube…they didn’t with Napster. we wanted to make a deal and become the iTunes of the time, but the RIAA wouldn’t hear of it. We told them Gnutella and its derivatives would be unstoppable. They didn’t believe us. Their loss.

    Don Dodge

  • Mathew Ingram

    I must have missed the “cat in suspenders” clip, Rob — that one sounds good :-)

    As for the legality issue, I’m not sure anything is clear anymore. Substantial non-infringing use seemed to be a protection before, but with the “inducement” test added to the mix it’s hard to tell where a court is going to come down. I would agree with Don that fair use might come into the picture, but then that too might change if YouTube starts making revenue from what it hosts…

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  • http://www.robhyndman.com Rob Hyndman

    Don,

    I’m not sure why you think that any sampling is legal. First, it’s certainly true that one of the fair use considerations is the portion extracted, but you can’t credibly argue that uploading 10 minutes of a Daily Show episode is fair use. It may well be a smart way to get attention to the clip, but it’s infringement, plain and simple. Wish it weren’t, but it is. And most of the infringing material is like that. Whole music videos. Whole commercials. Large chunks of TV shows, and so on. We’re not talking about 20 words in a paragraph, or a few bars of a song here. And of course it seems pretty well established now that just about any recognizable sampling of music is not fair use, and must be licensed.

    And the Streamcast case has made it very clear that despite substantial noninfringing use the potential for liability is still enormous – particularly after the reconsideration at trial, which seems to have found inducement on the simple basis that there was much infringement going on – ie, regardless of intent. And there is simply no credible basis for arguing that there isn’t massive infringement happening on YouTube. As long as this is the case, there is a sword hanging over YouTube’s head, regardless of what anyone thinks about how the musicco’s and movieco’s ought to marketing their media.

    Finally, the issue here is not whether some content producers will do deals with YT – obviously, some will and some have. The issue is about the ones who won’t, and how much of the monetizable content on YouTube that represents, and what they would do if Daddy Warbucks tried to buy YouTube. Times have changed, and the mediaco’s are waking up, but trusting them to not shake down first-movers seems a little naive to me, frankly. For every Warner that seems ahead of the curve there is a Universal. Universal’s recent threats might have been negotiation theatrics, but that’s as vivid a demonstration of how they see this as I think we need to see, for now.

    I’m not saying it’s ideal. But it is the way it is. And I think all Cuban was doing was calling that out.

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  • http://www.agoracom.com George Tsiolis

    Rob, my position on this has been clear from Day 1 – and I clearly agree with you and Cuban. YT has substantial issues that make it premature to discuss valuation. I believe Silicon Valley has been trying to create a Web 2.0 poster child out of YT for the purposes of kick starting the IPO market but I continue to argue that Wall Street is simply not going to create deep pockets at YT that can be picked by Universal and others.

    We simply have to get away from evangelizing the likes of YT and others that have no real business model. Otherwise, dot-bomb 2.0 is just around the corner and that is bad news for everyone.

    Best,
    George

  • http://www.agoracom.com George Tsiolis

    B2B Revenue Model For YT

    I’ve often wondered why YT doesn’t create a B2B revenue stream by charging businesses anywhere from $9.99 to $99.99/month to host their videos. For example, I was at a recent conference for publicly traded small-cap resource companies in Toronto. I’d love to take quick video clip interviews of CEO’s on the floor and make them available to investors around the world that could not attend as a way to promote my brand – and would gladly pay $50/month to have YT host and serve them. As a paying customer, I get my own customized corner within YT that I can use to promote my brand.

    I suspect there would be thousands of companies that would do the same and the economics are far better than the current YT model. Specifically, YT generates a steady revenue stream at a substantially lower cost b/c you can bet my interview with Don Bubar of Avalon Ventures isn’t going to be streamed anywhere near the latest clip from the Daily Show.

    YT has the technology, the platform and the brand. Now they just need to build a real business model around it that doesn’t depend on “borrowing” other people’s content.

    Until then, Mark Cuban is right.

    Best,
    George

  • http://www.robhyndman.com Rob Hyndman

    Well, OK on the Lefsetz thing – I’ve left my comment there. I’m not sure I would have used “great” to describe the rant. And I’m not sure anyone ought to go around inviting comparisons with Mark Cuban on the topic of how they’ll be remembered after they’re gone. Really, I just think Bob ought to put down the bong and relax a little, and maybe actually respond to what Cuban said. Fred, too.

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  • Mathew Ingram

    Aw, c’mon Rob — Lefsetz does a great rant. I’m not saying it made much sense, but it was a great rant. Especially the part about Mark not having the balls he says he does, and how soon the young become old farts — that’s gold, baby.

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