Mark Cuban foretells Netflix demise, sees a future filled with on-demand video
By Vlad Savov 
posted May 7th 2010 10:09AM
posted May 7th 2010 10:09AM
Mark's response tackles Netflix head on, and points out that the company's rapid growth is about to start working against it, with movie studios and other content providers likely to jack up prices and demand further concessions from the streaming service as it turns into a real competitor to cable companies. According to him, Netflix is presently getting its content at prices that are unsustainable, and his prognostication is that content owners seeking bigger levies -- together with the expansion of VOD choice, which he sees as foolproof compared to the overwhelming complexity that web streaming entails -- will lead to Netflix passing costs on to the consumers and losing out to cable operators. Irrespective of whether you agree with him, the whole exchange is well worth a read. Use the links below to get filled in.
He may be an egotistical jackass, but I think he's right.
@mooremic Agreed, I might not like it, but his theory is sound.
@mooremic
He is an egotistical jackass, he is right, an Netflix is already aware. Roku boxes, PS3, 360, Wii, embedded streaming apps in TV's? This has been going on for how long now? Netflix just needs more streaming content is all. It'll all get there. Between Netflix and Media Center, I'm covered.
@mooremic:
HIs theory is sound, but he's still wrong. If Netflix was able to provide content at the same time as cable providers, I will hand over money to Netflix so insanely fast. I don't care if it costs more or not, it's understandable that there would be a price increase. Being able to watch the content on any device I choose that can connect to Netflix vs. using some POS cable company device is all the difference in the world. Not to mention you could, probably, still ask the content from any computer with an internet connection. One bill per month to watch your content anywhere in the world vs only at your home on your couch because the cable is tied to your home.
Plus, after years of being ass-reamed by cable providers, I don't care if they go under or not. Netflix may have to increase costs, but if getting the same, or close to the same, content at the same time resulfts from those increases, it's fine by me.
@mooremic
I don't mind if Netflix will bring pay per view contents in addition to subscription contents. Cancel cable long time ago. I buy season pass from Amazon for shows that are not available on Netflix. It is still much cheaper than paying $60 a month for hundreds of channels I don't watch.
@Jordan
You know what, i completely overlooked the millions of devices Netflix is currently on. You have a good point. Phones will have Netflix eventually. My Windows 7 laptop/desktop has Netflix built in. My LG network player has Netflix built in. I dont mind paying the increase (slight increase) if they do. I can take all my content with me as opposed to only being viewed through a cable box. Netflix wont to bad even after the price hike (hopefully not in the near future) :)
+1
@mooremic - On the surface old Marky, Mark’s theory sounds sound ;^), but there are many underlying factors that are omitted:
1. Netflix is ubiquitous - Doesn’t mater if you move or what cable or ISP you have, it’s always there.
2. Netflix is in all the right places - Physical media, gaming consoles, DVRs like TiVo, Direct to HDTVs, Mobile devices, etc.
3. Netflix is a hit with a diverse crowd - Whether its grandma in Mobile AL checking the mailbox for physical media, or some hip college teen in San Fran CA streaming.
4. And last but probability most important - Netflix acts as a HUGE BUFFER to the torrent trade!
Hear that Hollywood studios? Yea, you go ahead and try to greedily squeeze Netflix for unreasonable sum$ and watch the reverse of what you perceive as potential new profits go the total opposite way! Today Netflix is saving your “milkshakes”! Sayin...
@mooremic
"...the expansion of VOD choice, which he sees as foolproof compared to the overwhelming complexity that web streaming entails..."
LOL Using netflix is way easier than using the cable company's archaic VOD/Guide/Menu system UI that lags everytime you press a button.
@mooremic
I agree on a few points. But my main problem with Netflix is that I want to be able to carry out single streaming purchases without being forced to take on a subscription.
Cuban's comments about Netflix's concession of the 28-day rental window actually undermine his argument, since Netflix did that to save money on discs and spend that money on expanding their instant streaming catalog instead, adding lots of previously unavailable TV shows and movies.
At the same time, he argues that VOD offerings will increase to compete with Netflix, but it's clear over the last few years that VOD has not done that at all...TV shows only have a handful of recent episodes, and free movie selections do not generally include popular and recent movies.
@Zpeed7 I use Hulu, Netflix and Apple TV because of the much better user interface when compared to Cox - my cable operator. I recently cancelled my $139 a month Cox HD plan and my TV viewing has improved greatly. I just buy the shows I want on Apple TV and for movies I choose mostly between Netflix and. Apple TV. I subscribe to free shows from hulu. Only regret is that I waited so long to be cable free!
@mooremic Actually, he is so, so wrong. People are ditching cable like they are their landlines. The cable companies are the antithesis of innovation. Their content offerings in VOD pale in comparison to the vast 24-7 offerings of the Netflix catalog. It's also far more economical to pay $9 bucks a month for 8 DVDs/month + unlimited streaming, than paying $5 bucks per movie for a 24 hour watch window. At least for me, I can watch and return 2 DVDs/week on the 1 DVD plan. Even if you are lazy, and only manage 4 DVDs/month, it's still a better deal. As Netflix streaming becomes more ubiquitous on more instant viewing platforms and expands their streaming catalog, they are the future. Also, who is to say HWood wouldn't raise the rates on cable companies. The price of the VOD has gone up over the years too. The only potential competition for Netflix at this point is Apple's iTunes. I think Mr. Cuban gets some things right, but he is wrong about this.
@Frankenstein Black
Exactly so. In fact, if anything, Netflix will make Cable companies moot - at some point streaming live broadcasts will enter its business model, turning it into a hybrid of u-verse and on-demand distributor. Time shifting has reached its logical conclusion, which is to say, we should be able to watch anything we want, when we want, as soon as it "airs". Airing will be a simple "release date" at some point, leaving us to watch programing at our leisure. How commercials will adapt is anyone's guess. Netflix is the future.
@bwl
I contemplate cable VOD stacked up to Netflix and I've just gotta laugh. When the wife saw our streaming disk for the Wii, her immediate response was "cable's dead". Cable just can't compete on price, selection, or convenience.
Cable can perhaps compete based on new material. However, I think that will only get them so much.
Once you've tried Netflix streaming, it is far too tempting to dump cable. It's worth at least double what they're charging for it when you stack it up against vaguely similar cable options.
@Jordan If you have to pay per view, they blew. Netflix is amazing.
Well duh...
@JD01JD
Please add "Well duh" as a tag for this story tia
I think logically he's point makes sense but in reality Netflix is popular and profitable because "it just works". It's the same business model Apple has used. Just focus on making a product that works. When last did you have to call Netflix about a VOD error and then also compare that to when last you called your cable company about a VOD error.
@Omoks
I haven't had to call my cable company for VOD errors, but that's because I don't use their VOD services. The point stands. Netflix does work really well, and dollar-for-dollar I find it to be a much more satisfying service than my digital cable.
@CtrlBurn
I use netflix, and I rip all those blu-rays to my 2tb nas (more storage necessary soon, it's getting full), and make my own 1080p VOD
This guy is such a jerk I almost can't read this article, LOL but his is right.
@RLJSlick He's a moron and he's wrong. Netflix offers VOD and it's far superior to anything offered by the cable companies.
Cable companies are doomed. They'll just be another pipe. People will get all of their video off the net.
He's been thoughtful and consistent on this since YouTube first came on the scene. You may disagree with him, but he has the perspective from the (minor) TV network POV. Even his HDNet is moving vastly more money around in licensing and franchise fees than these upstart web video distributors can imagine. Money trumps all.
I think he is right as well. We have already seen quite a bit of concession from Netflix with some of the movie studios over rental windows, the next logical step is further concession.
There's still plenty of room between Netflix's $9-20/month, and the current pricing of cable packages that include VOD. Not to mention the people who won't give up the quality of Blu-Ray that is very difficult to get streaming, but is very convenient as a disc rental. Yes, the cable companies might find a way to beat Netflix, but it won't happen anytime soon.
@myopiczeal Shipping a 50GB blu-ray movie is far cheaper than steaming it on-demand.
@Wallyum Shipping a 50gb blu-ray isn't the only cost associated with that though. They have to, you know, actually buy the disc in the first place. Thousands and thousands of times over.
@myopiczeal Bandwidth is cheap. I'm willing to bet the wholesale rate Netflix enjoy is below 6 cents per gb. If you consider xbl HD movies @ 720p with 5.1 audio averaging 8 to 11gb in size netflix could distribute those today at far less cost than shipping, storing, tracking, managing and handling "hard" media.
Netflix is not just one stop, its cheap. It has a huge library. My cable company keeps the last 4-8 episodes of the top 8 or so shows. Netflix charges a flat fee for movie rental, which is the thing they get paid for. Cable can try to imitate Netflix's model, but then they are they going to rent movies for a flat monthly rate rather than $5 ala carte. I doubt it. This isn't the first time Mark Cuban was wrong.
"Netflix passing costs on to the consumers and losing out to cable operators"
Oh gosh, I hope this doesn't happen. EVER! We all know this may happen eventually. Its always a "to good to be true" this day in age. Well, Ill enjoy my Netflix subscription until the big distributors crack down with those concessions Mark talks about.
BTW: Torrent FTW!!!
Last time I checked the price of a movie on On Demand with Comcast, it was $8. For one movie. No thanks.
I'll keep on with my $9 a month Netflix subscription which allows me to watch about 8 movies a month. It'll be years until On Demand can compete with Netflix's prices.
@firehazard
Or quality.
@firehazard Comcast never competes on quality.
There are a lot of people ditching their cable companies and subscribing to Netflix, but I don't think many people are going in the other direction. If cable operators want to be the sole content providers in the future, they better clean up their acts and stop treating their customers like ATMs.
It will be an interesting ride for sure. Yes, I agree that prices will rise for netflix streaming, however, I think people will be willing to pay a bit more for it than they are. My cable (Uverse) bill is like $79, not including internet. My Netflix bill is $9.99 (don't remember if there are any fees). At my current consumption, I would pay $15 a month for it without so much as a thought. If it went up to $20, though I would have to think about it.
The problem with VOD (at least from my current Comcast perspective) is I don't even have the option of getting VOD unless I subscribe to the > $50 month cable service. Which is why I'm sticking with my < $15 month Netflix.
On top of that a lot of the Comcast VOD movies are an additional $5!!! Honestly it's not even a competition at this point, Netflix wins hands down. Of course this could all change which is what Mark is suggesting. But I think a LOT would have to change before Netflix goes away.
Thank god, for Pirate Bay.
What's the over/under on years until some cable or satellite company tries to buy Netflix?
I haven't had cable or satellite TV for 5 years. There's no way I am ditching Netflix for on demand anything.
Ok Mark, while you're at it, figure out why the hell we haven't won an NBA title yet.
Signed, every Mavericks fan.
I just don't understand how they can consider cable competitive. VOD on cable has been outragously expensive for movies for a long time now (so much so that I'd jump in the car and go to the store before renting a VOD) and the pay channels are 15$+ a month and the cable box and its interface is terrible.
@bp968
What I want is a provider that you can order every station and channel à la carte.
So, say I'm living in Los Angeles, but I also want to be able to watch my home town channels in Augusta. I'd like to be able to pay for that ability.
I'd also like to see the channels on cable/satellite stacked like they are OTA. E.g. KABC in LA is channel 7; OTA HD feed is 7.1, the ABC Weather channel is 7.3 and so on.
It's probably a licensing and FCC nightmare, but that's what I'd like to see.
@ytilanigiroon
Don't we all. At this point though I think its become clear that the cable companies know that their revenue would plummet and the channel companies (like, say, bravo, or MTV, lol) know they would wither and die if people were allowed to pick and choose channels. I suspect most people would pick the local channels and major stations (CBS,NBC, etc) and the sports channels and then a good mix of Discovery owned stations (with some folks grabbing Scifi, etc). Most other channels would wither and die. (no loss really).
In other news, Mark Cuban can't shut up and talks about stuff that he doesn't know about.
I love how the author of this post seems to think that Mark Cuban, Mavericks Owner, is more relevant than Mark Cuban, I'm rich because I'm a savvy media mogul. He's not an NBA owner that happens to know a bit about this subject, he's a authority on the subject that happens to own an NBA team.
@WhyFi
You hit the nail on the head. People seem to forget that Cuban was one of the forefathers of streaming media. Hell, the guy even paid for Grokster's legal fees against MGM. As bat-shiz crazy as the guy is, he knows what he is talking about.
On another note, I love me some Netfilx, but seriously, how long can this go on? There is no way Hollywood, Comfinity, TWC and all the other bad boys are going to let this go on much longer. For those who say Web this and Web that: Yes it is awesome, but we are so in the minority. It is also a gigantic PITA unless you are tech savy,and even then it is still a pain due to the Flash factor.
I know I will get downranked into oblivion, but the best thing Netflix ever did was use Silverlight....
@WhyFi
While this may be true, most people only know him as "that asshat that owns the Dallas Mavericks".
My earlier post was basically a quip about how Cuban should be more concerned about my precious Mavs than a business he currently has no capital tied up in. However, I see him as being wrong on this matter, mainly because as long as it's cheaper for me to rent from Netflix and own an Xbox 360/PS3/Wii/Roku box, cable companies can snork off with their current pricing structure.
Movie studios and the like should be glad Netflix exists, because most of the people I know with Netflix subscriptions (myself included) are people who otherwise would be scouring Pirate Bay and other torrent services. At least they are getting a cut, instead of watching their wares get raided all over the Net.
@hnbc34
But NetFlix is the pioneer making web content so much easier for us to all watch. NetFlix Wii is insanely easy to use, just pop in the disc and watch! They're doing what they need to do, get NetFlix streaming in millions of households, once they have that it's only a matter of serving up more web content, that is currently trapped in flash, to their users.
The only way the cable company could win is by cheating/being anti-competitive, by squeezing internet downloads via BS like application-specific throttling or download caps while excluding their own services from those very restrictions.
isn't this the same guy who was involved with the 3do?
I have been a Netflix user for years, and while they weren't all that great at first, with time they continue to get better. To state that Netflix will decline in favour of VOD from network providers is reach at best. Network providers are offering the latest episode, and snippets of other shows, their selection is nowhere near what Netflix has to offer. Not to mention, the only content streaming from network providers are TV shows, not movies AND TV shows.