Mark Cuban's Argument

Mark Cuban and Boxee debate over at their blog: http://blog.boxee.tv/2009/03/21/a-lively-debate-with-mark-cuban/ I commented on the exchange, I'm re-posting here. There are lots of words but this is an important debate. Most of what I say below will make more sense if you read the full exchange over at Boxee.

Cuban offers a few good points, some better than others. I don't understand the outright dismissal yet, because if you go oint by point, there is validity to both sides here.  

There is no reason why something like Boxee couldn't convert a significant portion of cable subscribers. What you have right now is cable television providers charging consumer a lot of money for a ton of services, most of which go unused. The main reason why I switched to using a central media center instead of continuing to pay $230 per month for television is because I can get the vast majority of my content online. There are some shows that are on channels like HGTV, where I can't get them from their website or purchase them on an episode by episode basis on Amazon.com/vod or iTunes, but we basically decided to stop watching them.  

Cuban raises an interesting point here: "The concept of “users always want choice” really really sounds nice. It makes for a great panel argument. But the reality is that its not true. Ultimate choice requires work. Consumers like to think they have choice, but their consumption habits say they prefer easy." He goes on to use youtube as an example, which doesn't really apply. I think the core problem is that there are end users who sit down on the couch and flip through the channels or read through the guide. With an antenna you pick up a handful of broadcast channels who offer a bunch of content, but it's not that much. It takes some effort to go to hulu and search for shows. The advantage that Boxee has here is that they can simply implement that functionality and deliver content to the user in a passive manner. They can do this faster than the cable company can. 

Another concern that I share with Cuban is the saturation of bandwidth because we're going to be watching so much television. While I think it will be awhile before we reach this point, consumers who want to go this route will need to be prepared to spend more money on a higher bandwidth line, if it's available.  

What we have here is two extremes (one free, one expensive). After people start switching to a central media center and watching these shows on a web browser or through Boxee, the providers of that content will monetize it by sticking in advertisements. Boxee and other media center software providers will probably need to charge users (monthly or a licensing agreement) in order to facilitate the deals with the content providers. Cable companies will be forced to reduce their fees to stay competitive and both will implement the features that end users want.  

An example here is when the RIAA was able to make their CD prices stick, simply because there weren't really alternatives. When CD burners were cheap enough, consumers stopped purchasing CDs (despite the legality). Now that iTunes provides a fairly priced song, more and more people are purchasing those and the CD prices have come down since the 90s. I think we'll see more and more content being offered through amazon video on demand and iTunes. When the revenue falls enough, cable companies will be forced to change their offering. The challenge for them is to make sure they can still pick up the $22 billion per year in subscriber fees.