Some predictions come true, some dont…

Some were right, some were wrong, some were early. But its fun to look back and see which is which from 1999.

Despite what some people think after my Youtube thoughts, I’ve been a big proponent of User Generated Cotent for a long, long time. In fact, Broadcast.com bought a company, Simplenet.com, specifically to enable hosting for user generated audio and video. One of the biggest projects we had going on was software to enable individuals to upload their own videos (Remember that project Justin M ?). It wasnt a big stretch for us since we already had it in place for corporations to do the same thing. (contrary to what most people think, Broadcast.com made almost all its money from hosting corporate events)

BAck to the presentations I did, I way overstated the impact of the net on TV and the connectivity between TV and the net in the home. The key reason was that I expected broadband speeds to continue to grow linearly (is that a word :), and to be well past 25mbs actual throughput to the home by 2006. I was so off, i was telling people to expect 5mbs to 10mbs by 2001.. Oops.

The net stock market bubble bursting put a big clamp on capital investment and created disincentives for companies to spend on last mile infrastructure. Those disincentives continue to exist today as speed increases to the home are more from bandwidth recapture than laying of optics to the home (Verizon excluded)

Im holding to my prediction on Youtube. The complexity of rights issues. Their lack of DRM. And that doesnt even account for the stupidity of subsidizing Myspace and hosting how many videos on myspace pages, millions ?? The minute they try to monetize those videos, you can bet Fox will have their own solution waiting to release. No Youtube on Myspace ? No Youtube on how many other pages once they start to try to incorporate ads (Yeah I know they said they wouldnt). What happens to their traffic ? All of the sudden rather than being the darling, the articles will be talking about the dramatic decline in traffic.

If they dont incorporate ads, then thats even worse. Again, that means they are hosting the video of the net for free. Thats an ugly, no win business.

A word of wisdom to the Youtube folks, sell if you can. A word of wisdom to a potential buyer, the minute the labels see even the hint of deep pockets they are going to come after you for all your worth. It will be a Lawyers Employment Act. Just ask Bertlesman about being the deep pockets behind Napster. Its not different this time.

So how good are my previous predictions ?

Here are some goodies to laugh at:

This is a speech i gave at a UCLA Symposium in 1999

Notice the discussion point of User Generated Content..

This is a presentation I gave to ETV, also in 1999, with the focus on what I thought a Set Top Box would have in it .

And finally, this is a review of a speech I gave to SXSW music conference in 1999 where I predicted the end of MP3s as a commercial file format. I said you wouldnt be able to buy MP3s because they would be superceded by file formats with better encoding performance and DRM enhancements. I think Fairplay/Itunes and WMA from MicroSoft have pretty much proved me right on this one. Now as far as how songs will be sold and a few other things. I couldnt have been any more wrong. But notice the reference to “communities of interest”. I was right on there, I just was too lazy to do anything about it

MP3 Will Die, Executive Predicts

MP3 Will Die, Executive Predicts
By Loring Wirbel,

SAN JOSE, Calif. — Streaming media wars will characterize the turn of the century, and MP3 audio formats will be an early casualty, according to Mark Cuban, president and chairman of Broadcast.com, in Dallas.

MP3 will not fall victim to the Recording Industry Association of America’s attempts at censorship, but will fail because it will not scale as much as streaming media systems from RealNetworks or Microsoft, Cuban said in a keynote address at the MultimediaCom conference here in San Jose, Calif., Wednesday.

Although MP3 is an open format that does not carry the economic incentive of a proprietary streaming media system, it will not be doomed by its openness or lack of an owner, Cuban said. Rather, its lack of a compression advantage over RealMedia or Microsoft ASF files, plus the fact that it cannot be extended by new developers as software like the Linux operating system can, means developers will not find it attractive.

But recording-industry executives should not be smug or complacent about the death of MP3, Cuban warned. Not only is the Secure Digital Music Initiative likely to fail, Cuban said, but also the structure of music and film distribution networks will dissolve in less than five years in the face of Web-based distribution. Cuban said he predicted the six companies that control film rights distribution, and the five that control CD music distribution, will be either dead or changed beyond recognition by early in the 21st century.

Among streaming media specialists, Cuban predicted RealNetworks will be acquired within a year, not by a software giant like Microsoft or a traditional media giant, but by a telephone company or specialized carrier that wants to add streaming media capabilities to bandwidth-access schemes.

Cuban presented a unique vision of how bandwidth will be metered. He said downstream high-bandwidth channels such as cable-modem QAM or copper xDSL likely will retain their all-you-can-eat, unmetered status, even as customers exceed megabit-per-second rates. However, carriers will turn to usage-based pricing for return-path services, for customers who wish to reserve videoconferencing or upload significant files to the Internet, for example.

And Cuban saw an even more unusual replacement for film and CD distribution. He said charging customers by downloads of individual songs or movie titles probably will not work, in part because the search space of possible audio and video clips is so huge. Instead, he said, smart record companies will turn to a subscription-based service for a particular artist, in which a monthly fee will allow a select community to receive all new works by an artist for that month.

In this model, he predicted, the current “MP3 rebels” who post bootleg live performances to websites will be encouraged to join “communities of interest,” similar to fan clubs, where they will be given incentives to post semi-legitimate recordings of an artist to a fan group and become part of the more informal licensing structure of the future.

The biggest challenge companies like Broadcast.com will face in the future, Cuban concluded, comes not from media traditionalists or other streaming media specialists, but from “the little kid effect,” stemming from the 10-year-old who invents the next killer application for the Web to avoid doing the day’s homework.

THe more things change, the more they stay the same. Even on the net.

24 thoughts on “Some predictions come true, some dont…

  1. eMusic sells indie music MP3s and is the second bigest online retailer of digital music behind iTunes and Yahoo are very interested in selling Mp3s from the big 4 so you will probably be wrong on that one also….

    Comment by Matt -

  2. I would like to add to the GooTube and Apple download service mix.

    1. I think that Apple has seen that the shelf life of its music download service to be fairly short. With technology and bandwidth both lowering barriers of entry at a rapid pace they are not so dumb as to concede that they have an end all be all product.

    2. Though Mr Cuban is right that the opportunity is there for individuals to use after market software to convert GooTube videos into something workable for portable players, how many people will be enterprising enough to actually do this? Yes I concur that there will be a minority that do have the technical guts to actually go through with the process, but the vast majority of teen and pre teens that compose such a large base for the Ipod would rather bug their parents for a $50 Ipod card then actually go through with it.

    3. Apple’s real threat I feel is on the horizon, and that is for wide spread access to wireless internet and more people have interenet enabled phones that double as a personal music player (Motorola Q, LG Chocolate, any Palm device). Once the validity of the technology is there who cares that you have a 300 gig Ipod when one can just access millions of free vidoes and songs from the likes of Yahoo music, Gootube, and MySpace.

    Apple and Steve Jobs are very smart very intuitive beings, they know that they have a short life on a product such as the download service and probably already have the next gen in the works somewhere. Remember even the Pony Express only lasted a year.

    Comment by Jay -

  3. Hello Mr. Cuban,
    I’m a senior at Ithaca College and am currently working on a project analyzing your new idea for a movie theatre just for kids. My partner Alex and I have found some interesting results in our research concerning what parents would want in order to make this idea appealing. Feel free to contact me anytime or

    visit me at http://sorethumbmedia.blogspot.com!

    i’d love to hear from you :-D

    Comment by rachel -

  4. Interesting to read this entry now with the news that Google is looking at purchacing youtube for billions. looks like youtube took your advice to sell :)

    I think you last line should read:
    The more things change, the more they stay the same. And the more they stay the same, the more they look like they are about to change. Even on the net.

    Comment by Arash M -

  5. I was a VP at Napster when we were being sued by the record labels, so I know a little about copyright infringement. YouTube has “significant non-infringing use” which is a proven legal defense against copyright lawsuits.

    The Sony BetaMax case was won on the basis that video recorders were used for many other legal purposes that demonstrated significant non-infringing use. Sony could not be held liable for the misdeeds of some of its users. It is the responsibility of the copyright owner to identify infringing material and take action to protect it.

    I do agree that targeting advertisements to random videos will be a challenge and CPC/CPM rates will be low. But, YouTube has a huge audience and will figure out how to monetize it.

    I wrote a blog “Mark Cuban Loves YouTube”, taking a page out of the Mark Cuban publicity book. The blog is about Internet copyright law and my experiences at Napster. http://dondodge.typepad.com/the_next_big_thing/2006/09/mark_cuban_love.html

    Comment by Don Dodge -

  6. I think you’re waaaay off on YouTube. The copyright concerns are real, but user generated still has the edge on copyrighted material. This guy does some great monthly analysis of the most viewed content on YouTube: http://nomansblog.typepad.com/no_mans_blog/2006/09/youtube_trends_.html

    What’s more, YouTube gets too much focus in terms of digital video. According to ComScore, MySpace videos and Yahoo videos are the top two online video sharing sites, with YouTube trailing at 3rd: http://www.comscore.com/press/release.asp?press=982

    But yes, they’re all growing. That’s why I think you’re off. The demand for video content is HUGE. Consumers are craving it right now. YouTube will prosper because of that. Copyright concerns will not be able to thwart demand.

    If I were to advise someone not to buy a company, it would be not to buy the publishers that have copyright concerns. While YouTube is supplying the demand that consumers are craving, the publishers are sitting on their hands and worrying about infringment.

    Comment by John -

  7. Your prediction on mp3 is a good assesment of how they’re not (currently) viable for selling music, but you’re way off on it’s proliferation compared to these other formats. Anything with DRM is going to work poorly as opposed to an unrestricted format. Until buying DRM secure music allows for the same flexibility (in terms of devices it can be used on AND price) as mp3s, the formats will not work.

    Comment by rafa -

  8. Mark, I think you are wrong on the YouTube issue. I explain my reasons here: http://utubeblog.wordpress.com/2006/09/29/mark-cuban-atacks-youtube-again/

    Comment by utubeblog -

  9. Here’s another goodie to laugh at: you shorting IIG the second time. You should have taken your winnings the first time you shorted it and then walked away.

    Comment by Ed Parsons -

  10. It doesn’t matter how many times you’re wrong, you only have to be right once…as I think you might say. Selling Broadcast at the height of the bubble…and then collaring your shares, pure genius.

    btw, according to MarketWatch and Comscore–Fox and MySpace are already winning in digital video, even when you take out YouTube videos viewed on MySpace…see “MySpace trumps YouTube, Google Video, etc.” from MarketWatch 9/26

    Comment by Striddy -

  11. Hey most of your predictions are right on target!
    At least you didn’t come up with the :CueCat! :)

    Comment by KDcrazy -

  12. Glad to see you pat yourself on the back for something Mark. You need to do that more often…

    Comment by Scott Boswell -

  13. Mp3s are dead? Isn’t that like someone in 1972 predicting vinyl would die? Yeah, vinyl died, but not until the early 90s. So, uh, yeah, you are right about mp3s.

    Thing is, really, my mp3s will never die because there will always be a way to easily convert them to the form du jour, or the digital music players of the future will always support them. Now my 8-track collection, that’s another story!

    Comment by Char -

  14. I think you nailed the YouTube prediction right on. That site is riddled with copyright infringement. Simpsons, Chappelle Show, pretty much all it is.. is rips of movies, tv shows, etc. The user generated content is nice, but I would estimate at least 50% of it to be copyrighted material, based on my own viewing habits at least.

    YouTube is also incredibly easy to clone. For literally $10, you can buy a flash delivery of video set up and start your own youtube clone. In the future, it will all be the layout of the site in terms of browsing the content, rather than sharing since share codes (the object embed code) will be on all sites everywhere with their own proprietary stamp. Between their bandwdith bill and legal bills, and the fact that what they do can easily be cloned, they’re going to have an uphill battle.

    Comment by Dave -

  15. You weren’t really wrong about broadband speeds… you were wrong about them in the US. The rest of the world already gets it.

    Comment by Jeff -

  16. i totally respect that you are willing to stick to your predictions, and particularly the youtube one. it’s fun to look back and see which predictions came true, but i think a lot of people never do that.

    Comment by Tim -

  17. Myspace already hosts videos. Where have you been? You talk like you know but from the sounds of it you dont even have a myspace account.

    Comment by Isaac -

  18. Here’s a solution for YouTube’s copyright woes. Move the company to a country that will look the other way. In Thailand people sell DVD burns on the street. YouTube.com should just adopt the same strategy as online gambling.

    Comment by fast eddie -

  19. Marc, What do you think of what Tom Green is doing on his website? – http://www.tomgreen.com – he’s started a nightly live call-in show at 11pm EST. They just did an article about it in the LA Times:

    http://www.latimes.com/entertainment/news/la-fi-tomgreen24sep24,1,1723837.story?coll=la-headlines-entnews&track=crosspromo

    Comment by John -

  20. LOL @Mark..your predictions were not bad.

    My mentor told me a long time ago that predicting is for slaves ,reacting right is for
    kings.. ;)

    Comment by Ron D -

  21. Wait wait wait wait…. hold the phone. Broadcast.com made money? ;)

    Comment by Tom -

  22. As Mark mentions, this Video-Sharing concept was already explored in 1999-2002 era. Off the top of my head I can think of 4 user-generated video sites: VideoShare, PopCast, iClips, SpotLife. All gone by 2002. The economics are a bit better now in terms of bandwidth costs, but volumne has increased, so it’s still a big cash burner. Also still no concrete interest from advertisers so far. I imagine that eventually there will be ad intrest over time, but not as quickly as the execs think it will.

    I think YouTube will be acquired. It’s too big to fade away (but I guess one could say the same thing about Napster). Not nearly for the price they are looking for, maybe in the low $100MM’s. Still a decent ROI for Sequoia Capital. Take the money, if it’s on the table!

    Basically, the only value is the brand. The traffic really is secondary, but still risky since high volumne with negative margins means steadily increasing losses.

    Acquirer would likely have to:

    1) Screen most popular user-generated content for cleanliness.
    2) dump all other user generated that hasn’t been screened
    3) Implement a full screening of newly submitted content. This will make a lag between submission and appearance. Also it will be an additional operational cost (paying for screeners).

    Comment by Chris D -

  23. Mark, you said “Thats an ugly, no win business”. I could hardly disagree more … as YouTube will be sold for big dollars. That is what they are after, no?

    Comment by Joe Allen -

  24. You may have been too lazy to do anything about “communities of interest” at the time – but it certainly isn’t too late. I don’t think huge social networking sites are the end all answer – I think the most popular “social networking” sites will be relatively small, focused and be used fanatically.

    What will be interesting is finding a better way than links and trackbacks to let these “mini-social” sights to share information in ways they can all understand.

    Basically, if I want to show how I am doing in my Office FootBall Pool to members of my blog, or my San Antonio Spurs fansite (sorry, had to throw that one in there), then it should be simple. Drop-dead simple. And gadgets aren’t the answer – not until their is a standard anyway.

    Rob

    Comment by Rob La Gesse -

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