Mark Cuban sounds like old media

Image via CrunchBase

It’s sort of amazing how Mark Cuban, a guy who cashed out of his company at the right time–the peak of the dot-com boom–has turned against the very instrument of his wealth creation, the Internet, which he calls, “dead.” Let’s remember, Yahoo paid Cuban nearly $6 billion in stock for Broadcast.com, which is now more or less defunct. The smartest thing Cuban did after creating Broadcast.com was pull most of that money out of Yahoo stock and brace for the crash, which again, he did with near-perfect timing.

My friends who worked for Yahoo during the boom were happy to convert their stock to cash and put an addition on their house. But Cuban’s billions have entitled him to have a seat at D7 with Walt Mossberg and Kara Swisher, in order to lament YouTube and Google’s rise. You know, the Evil Empire:

MR. CUBAN:If you have to pinpoint one thing, you’d have to say when Google bought YouTube. They didn’t get into it with a focus on monetizing it immediately. As a result, it just took off, and the message was ubiquity and volume. And if your focus is ubiquity and volume without an understanding of how you’re going to make money off of it, you don’t pay attention to all [the things that go into that].

MR. MOSSBERG:So instead of saying it’s dead, why doesn’t it occur to you that it’s an opportunity for you again?

MR. CUBAN:Because it’s like fighting Microsoft. YouTube has gotten so big that you’re not a standard unless YouTube adopts you. And that’s a big fight.

Funny, I think at one point there was a little startup run by two Berkeley Grad Students that was crazy enough to take on Microsoft, Yahoo, Lycos, Altavista and is doing pretty well for themselves. Later in the interview, Cuban continues:

MR. CUBAN: What makes it even worse is that YouTube is willing to subsidize the cost of your bandwidth. So anybody can create and distribute for free basically, but the real cost is marketing. And that’s always the big cost—how do you stand out and what’s the cost of standing out? And there’s no limit to that cost.

How dare YouTube subsidize the cost of your bandwidth! Cuban seems to think that anyone who wants to distribute videos that people actively choose to watch (as opposed to the old model he favors of shoving broadcasts down people’s throats) should be set up to have to pay for the privilige. In other words, any innovations in form or content better come from a well-funded team of producers, writers and Hollywood vets, not two guys in Brooklyn with autotuning software. That way, Cuban can find something he can put on HDNet, his cable channel which was recently dropped by TimeWarner.:

MR. CUBAN:I go to “Funny or Die” [a comedy video Web site]. We’re doing a show with Svetlana, the Russian Whore and Ambassador, that we’re going to convert to HDNet.

I think I’d rather see Autotune the News with Dan Rather. But, Cuban says,

MR. CUBAN:Right. That’s what video for the Internet has become. It’s become a testing ground for mediums that actually have revenue.

In other words, Cuban isn’t totally against interactive video and utilizing new technology to give viewers what they want– as long as the cable companies and cable networks can use it as a free incubator for fresh content for their own businesses, that is:

MR. CUBAN: Right, because now a social network in front of your TV using Tru2Way [a technology for delivering interactive services over cable networks] on your Verizon or Time-Warner or whatever it may be, now you’ve got four people sitting there and you can create different types of applications with multiple people sitting there. There’s more bandwidth to create new types of applications.

According to Cuban then, YouTube on your powerful do-anything computer=bad, some exec continuing to program what you see on your crappy Time Warner cable box, including dropping HDNet=good.

Look, Cuban is entitled to his opinion about this. But the idea that YouTube is anything less than a sea-change in video delivery is misguided by any measure. And Cuban’s criticism of YouTube’s lack of profits, despite being part of one of the world’s most profitable companies, is laughable and cynical. When he sold Broadcast.com, cnet quoted analyst Ken Fleming as saying, “Like most Internet companies, they have a pretty small revenue base and they expect losses for the next few years.” That didn’t stop him from doing what he thought was best for the company, which is selling it to Yahoo.

Cuban’s experience in selling off a marginally viable business for a huge profit, only to turn around and criticize the next such deal is a little bit pot meet kettle, isn’t it? It certainly can’t be sour grapes–after all Cuban made $5.9 billion in Yahoo stock on Broadcast.com, whereas YouTube went for the pittance of $1.65 billion of Google stock. But then, there is the matter of what Goofus and Gallant Yahoo and Google did with their new baubles. As I mentioned, Broadcast.com is basically dead. Meanwhile YouTube is a cultural force and huge driver of traffic. There’s almost no question that if Page and Brin wanted to turn on the advertising spigot, they could do so.

But Google’s instead doing something that tech companies have ignored for far too long: subsidizing and incubating the YouTube concept to figure out how to best turn it into a viable business. You could argue that YouTube is a toddler now, far too old for such care, but there was a time when companies spent years under the protective care of their investors before being thrown out into the marketplace. Spencer Ante, Business Week editor and author of Creative Capital explained as much in his book on the “first” venture capitalist, Georges Doriot. Doriot believed in releasing a company to the marketplace only once it could thrive, not when its investors wanted to quickly turn a buck. Cuban therefore, besides sounding very old media in his devotion to the network model, also sounds stuck in the dot com bubble, expecting companies to have profitable business models from the moment of their inception, despite his own company’s lack of the very same.

Even so, Cuban’s repudiation of media companies that don’t follow the network/broadcast model is difficult for me to understand. It’s as if, after cashing in on the greatest technological revolution in history, he now wants nothing to do with the messy business of making it all work.

Excerpts taken from An Interview With Mark Cuban – WSJ.com.