Cuban: Networks Are 'Blowing It' On HDTV

Commentary
Cuban: Networks Are 'Blowing It' On HDTV
HDNet's co-founder says ABC, CBS, NBC and Fox are spending too much time on Internet video and too little on High-Definition TV.
By Mark Cuban
HDNet President and Co-Founder

Reprinted with permission from BlogMaverick.com

Dallas (December 27, 2006) -- There is an oft repeated business saying that sales organizations should "Go after the low hanging fruit." The meaning obviously is to close the easy sales before you have to work to climb after the more difficult sales. It's a maxim that is rarely wrong.

For major media companies, and an ever growing list of Web 2.0 video-hosting companies, the low hanging fruit right now is selling advertising around video content available via Broadband connections over the Net, and to a lesser degree, available through Video on Demand from cable and satellite.

Advertisers want to buy it. They are as ripe as ripe can be and sales-reps are grabbing their dollars before they fall from the tree and hit the ground.

HDNet's Mark Cuban

Because there is so much low hanging ad money there for the taking, many in both traditionally big media companies and Web 2.0 firms see it as the money pot at the end of the rainbow that will be the catalyst for future growth. No question it's a growing market, But the biggest Internet video bulls seem to forget that what is happening now is not very different than the introduction of Digital Satellite and Digital Cable to viewers and advertisers.
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Imagine if all of the sudden there was digital bandwidth available across the world. That anyone who wanted to buy a small dish, or add a digital set top box, could do so and easily receive access to Gigabits of bandwidth. of video. Right to their TV for anywhere from 30 to 120 dollars per month. Imagine what would happen to the TV industry. The change would be incredible. Channels would pop up out of nowhere. Just about anyone could create a channel and get it distributed across the country. Tens of millions of people would get what would seem like unlimited number of TV channels.

That's exactly what has happened over the last 12 years. The number of TV channels exploded. The amount of advertising spent on non broadcast TV exploded. But, here we are 12 years later and the distribution of those non network ad dollars goes to the networks that have an audience. Plain and simple. If you had an audience, you could get ad dollars. If not, not. If you are a network that cant draw a .1 for its prime time shows. Forget about it. Its not impossible of course, but you are gonna' have to work your tail off to get ad buys.
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"Bob Iger, Les Moonves, Bob Wright, Peter Chernin, why in the world are your networks not promoting the hell out of the fact that everything looks better in HD?"
-- Mark Cuban.
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Work your tail off may in fact be an understatement. Talk to people in the cable industry. TV Ad buyers don't like to make ad buys that require them to aggregate smaller network audiences. It's a hassle for them to buy 10 different networks, let alone 100 or 200. It's a hassle for them to audit the buy. There are actually services that monitor ads to make sure they ran and provide the results to advertisers.

If it's a hassle for ad buyers to buy 100 TV networks, how much of a hassle do you think it's going to be for them to buy 100 websites and get them audited? What's more, what do you think all those Web 2.0 sites who are easily selling video ad inventory today because it's a nice experiment for advertisers do when they can't sell their video inventory any longer? Or when the biggest advertisers tell them they have to work through a publisher network like Yahoo or Google in order for them to get a buy? Well, the first thing they are going to do is lower their ad prices. Which is exactly what we saw happen both on smaller digital video networks and on websites trying to sell display advertising. It's history repeating itself.

You know who has this figured out?

Google and Yahoo and the major media companies.

The Gatekeepers
They all know that ad buyers are never going to deal with individual websites to buy video ads. They aren't going to put themselves in a position where they have to deliver and audit video files across hundreds of sites. That's why Google and Yahoo and the big media companies are so excited about Internet video. They each want to be the one stop for Internet video advertising. They want their publishing networks to be gatekeepers to advertisers.

Google thinks they can monetize ads better and deliver them far less expensively (because of their data center delivery), Yahoo hopes it can do the same. The big media companies know they can bundle Internet video with their cable and broadcast audiences, along with their existing Internet properties to create a more comprehensive solution. Plus, if worst comes to worst, they bundle it as a free add if they need to implode the market pricing of Internet video. Which is exactly what I think they end up doing over the long run. The less Internet video can stand on its own as a business, the less Internet video sites can invest in content and promotion to create an audience and the bandwidth to deliver that content. That's a good thing for media companies who have to spend millions per episode for broadcast network shows and who get paid by the subscriber by cable and satellite companies.

It also makes it a smart move for them to cross license their content to create a YouTube competitor. Not that i think they can have the social impact of YouTube, or reach their traffic levels. They probably can't. But what they can do is drive enough of an audience that they can create a package that more economically and simply lets advertisers reaches YouTube users on non Google properties by combining their Internet, TV and YouTube Jr. sites into a single ad buy. Plus, if advertisers buy ads on their YouTube competitor as part of a bigger package, they aren't buying from Google. That makes it a smart move.

Which brings me to HDTV.

Click Cuban to see Part Two of
"The Networks Are 'Blowing It' On HDTV"

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Phillip Swann is president and publisher of TVPredictions.com. He has been quoted in dozens of publications and broadcast outlets, including CNN, Fox News, Inside Edition, The New York Times, The Washington Post, The Chicago Tribune, The Financial Times, The Associated Press and The Hollywood Reporter. He can be reached at swann@tvpredictions.com or at 703-505-3064.

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