Exchanging Emails with Mark Cuban

The host of The Mark Cuban Show in front of the camera.

Mark Cuban must love email. On every one of his HDNet promotionalspots, he asks viewers to email him. And the word is, he responds tonearly all of his emails — usually within 48 hours. It didn'ttake quite that long for him to get back to me. Maybe I made thequestions too easy.

Video Systems: In July 2000 when you first approached FoxSports about broadcasting Dallas Mavericks games in HD, had you givenany prior thought to starting an HD network? How did the idea comeabout?

Mark Cuban: I wanted to understand different network andcontent providers' perspectives on HDTV, and that of consumers, andwhat the driving factors would be. Talking to Fox helped provide thatperspective and [helped me] understand the opportunity, which in turnwould help drive the decision to launch a network or not.

VS: Was a more modest, incremental approach everconsidered?

MC: We wanted to be the first established HDTV network, so wehad to do it right.

VS: Phil Garvin, general manager and COO of HDNet, says hewas able to come up with a production model that took 80% of the costout of traditional HD production. How important was it to approachHDNet from a blank-slate perspective?

MC: The idea was to do it in a way that was successful. Wesaw what Unity Motion had done in HD, and we saw what traditionalstartup networks did, and we wanted to take the best from them whilerealizing that this was much more like starting a cable network in 1980than a digital network in 1999. Like the market back then, the driverfor adoption was the differentiation from the traditional TVexperience, and we have to be able to survive the early period until HDreaches critical mass.

VS: Phil says when he presents you with two options, youalways take the risky option. He also says his senior engineer, GlenValenta, is willing to take risks and try new things. Is this a mantraat HDNet, and if so, are you its source?

MC: No. I hate risks. I just want to do what is right for thebusiness. When we decide to do something, it may be considered riskyrelative to conventional wisdom in the industry, but I pick that choicebecause I think it's the best path to success.

VS: In several ways, HDNet seems to be a mirror image ofBroadcast.com. They both rely on using new technologies in verydifferent ways. Are these early days of HDNet reminiscent of your earlydays with Broadcast.com?

MC: Very much so. Lots of naysayers, lots of people sayingit's bad timing, lots of big companies not sure what to do in thespace, lots of educating of advertisers, and a lot of technologicalchange in the consumer space. In 1995, we knew that the 4K 386MHz PCwould turn into an $800 1GHz PC fast enough that the PC and the 'Netwould be mainstream. Today we know that analog TVs will go the way ofthe black-and-white TV over time, but that it will happen in anadoption curve that as it happens seems slow, but when we look back in20 years will seem amazingly fast. That's just the way replacementtechnologies are adopted.

VS: With Broadcast.com, you caught lightning in a bottle.You were in early and out at the right time. Can you foresee anyscenario where HDNet would create a similar financial windfall foryou?

MC: Not really. There was a stock market boom then. We justrode that wave. In this case, the fact that the stock market is a bearmarket helps us tremendously. It makes capital very difficult to comeby, and the market not only doesn't reward technology risks like it didin the late '90s, but it punishes companies that make investments inuncertainty. That leaves the door open for us to compete. If we were ina market like the days of the 'Net stock market boom, we would never beable to do this because every media company would put out pressreleases mentioning HD and their stocks would go up 20 points.

VS: In the technology game, how important is it to get inearly?

MC: All you have to do is look at the early days of cable.Anyone who thinks that the networks on analog cable, the most preciousreal estate in the industry, got there because they are thebest-programmed is sadly mistaken. They were there first. In thisbusiness, the best way to win is to get there first.

VS: What happens in 10 or 20 years when HD programmingbecomes commonplace? The cable networks that have become successfulhave done so by offering specialized programming. Your programming isspecialized now because of its delivery format. But when ESPN beginsbroadcasting sports in HD, and CNN begins broadcasting news in HD, whatwill you do to remain viable?

Mark Cuban’s eponymous sports talk show is recorded in bothstandard and high definition. The high-def version airs regularly onHDNet.

MC: There will be three or four years when the audience isstill not big enough for the majors to cost-justify broadcasting in HD.There is no way they are going to be able to send HDTV cameras to everybureau and every video news stringer that CNN uses. ESPN would have toinvest in new trucks, new cameras, new studios, or vast upgrades.That's a big decision for Disney to make in this market at currentstock prices.

Networks that license content from third parties will have to goback and get permission, if they don't have it, to convert content toHD, then they have to see if they can even convert that content. Anycontent can be upconverted, but not all content can be converted andlook like HD content. Traditional networks showing anything but contentcreated in HD or in film have some big issues to deal with. If a showused special effects, chances are they were mastered on tape, so allthose special effects will have to be recreated. If a show was done onfilm, chances are it was mastered on tape, so the network will have togo back to the rights holder and find all the original masters and EDLsand remaster the show on film and then convert it to HD. Lots of showsdon't even have all the info, or it's buried somewhere impossible tofind.

Networks will find out very quickly that if they put up content thatis upconverted and not full 1080i-level quality, that their product isgoing to look terrible next to ours and HD networks like Discovery andPBS. Think about the impact on their brand. We are going to havenetworks whose content not only looks dated, but it looks like crap andconsumers are not going to be very forgiving. It would be like havingan all black-and-white network today, but acting like you are trying topass it off as current.

Finally, and this to me is the biggest issue for traditional,vertically integrated networks that have lots of content: If thecountry went 100% HD tomorrow, because so much of TV programming intheir libraries is done or mastered on tape, those companies would haveto take huge write-offs of those libraries for Wall Street.

I will explain what I mean. I own Rysher Entertainment. Two of thetitles we own are LifeStyles of the Rich and Famous and StarSearch. Both of these titles on the surface would be perfect forHDNet. Who wouldn't want to see Lifestyles in full, beautifulHD? With the success of American Idol, there has been lots ofinterest in bringing back Star Search. The problem is that theseshows are on tape. They are worthless to HDNet. I can't use a singleepisode out of the hundreds and hundreds that we have. If HD wereubiquitous tomorrow and we were a public company, we would have towrite down the value of those shows to next to nothing. That is thesame problem that any public, vertically integrated media company has.The day they turn off analog spectrum, the media world is going to losebillions and billions off the value of their libraries, and theyare going to have to spend billions to maintain the value ofeverything they have that is not in HD.

So that is going to buy us some time competitively.

VS: In your opinion, what is the single biggest obstaclepreventing the widescale adoption of HD?

MC: Nothing is going to stop HDTV. The ball is alreadyrolling down the hill. Pricepoints on digital TVs are dropping like arock, and performance is increasing with every new model. So it's aforegone conclusion that analog will go away and HD will take over. Noone is going to pay more for an analog TV than a digital TV, and whenthat pricepoint crossover time comes, as it has already come forbig-screen TVs, manufacturers will stop making analog TVs so thequestion will become moot.

What will accelerate HDTV adoption are tuners being built into TVs,which I think will happen starting next Christmas, and for standards tobe in place for connecting cable to HDTVs. If those standards are notin place sooner, it will slow things down, but it won't stopthings.

VS: From a consumer standpoint, why is it so hard to getHD in homes?

MC: Where are you shopping? It's not hard at all. You walkinto a store, you ask for an HD-compatible TV and a tuner to go withit, you take it home, and set it up. If you want more than over theair, you add cable or satellite, whichever meets your needs thebest.

The question, though, reminds me of the ones I used to get in the1980s when PCs were coming out. ‘Why is it so hard to buy aPC?’ Then in the '90s it was, ‘why is it so hard to get onthe Internet?’ It's a reporter's question, not a question thatreflects reality.

VS: Phil estimates that only 5% to 10% of the high-defsets — in excess of 2 million sets — in American homes areequipped to receive high-def signals. How frustrating is it from yourstandpoint that manufacturers of set-top boxes are lagging so farbehind the apparent demand for their products?

MC: Not at all. It buys us time. If every set already hadtuners, every major media company would already be in this space. Thisis a good thing, not a bad thing.

VS: This fall you plan to introduce three new HDNetchannels and distribute them via cable providers and MSOs. Is this thenext step in your plan to take HD to the masses?

MC: Yes. We will be wherever it's easiest for consumers toget us. We know that at this stage of the HD lifecycle, HD viewers area customer that pays their bills, doesn't churn, and has their friendsover to show off their sets. The perfect TV consumer. Both cable andDBS need to fight for that customer and we want to be the icing on thecake that helps either or both.

VS: Rumor has it that you read the AVS Forum (www.avsforum.com) copiously every day. What's the best insight you'vegained from monitoring high-def user groups?

MC: I do, multiple times a day. They are my beta test group.When we screw up, we hear about it. You tend to get every perspective,which allows us to know what early adopters' perceptions of us are. Youalso get some newbies, which give us some focus group-like research toget their perspective and how their absorption of HD in their homesworks.

They also allow me to throw up some trial balloons and see how theyrespond.

VS: How long are you willing to operate HDNet before itstarts turning a profit?

MC: As long as it takes.

VS: Why are you funding HDNet, and why have you becomesuch a vocal proponent of HD? What's in it for Mark Cuban?

MC: Lots of fun and money in the long run.

To comment on this article, email the Video Systems editorialstaff at vsfeedback@primediabusiness.com.