Dot-Com Veteran Cuban Bets On HDTV Content

[Gregg Lengling]

Thu Mar 27,10:21 AM ET  

By Reinhardt Krause

Timing is one of Mark Cuban's fortes.


He co-founded Internet firm Broadcast.com. Then he sold it to Yahoo Inc. for $5.7 billion in 1999, just before the dot-com crash. His 28% stake was worth roughly $2 billion, reports said.


Now Cuban is betting on a new technology: high-definition television. His new company, HDNet Inc., is developing HDTV content such as sports, movies and other fare. The programming provides much sharper pictures than ordinary television.


Electronics firms have hyped the high-definition TV market since the 1980s. But only a few million HDTV sets are in use in the U.S.


Even so, Cuban and other HDTV programmers are stepping up their efforts. Started in September 2001, HDNet sells its programming to satellite and cable TV broadcasters, such as DirecTV and Charter Communications.It also sells high-definition programming on digital video disc and video cassettes.


Cuban, who acquired a 5.3% stake in Charter last year, talks about HDTV in this interview.


IBD: What are HDNet's goals?


Cuban: We want to be a national cable network getting great ratings with millions of entertained viewers and lots of happy, profitable advertisers.


We have a traditional cable network model. We charge for subscribers and sell advertising.


IBD: Does your strategy depend on HDTV going mainstream?


Cuban: HD will go mainstream - that's a no-brainer. But we are in a position to wait out as long as it takes.


IBD: Why has HDNet, which has emphasized sports content, diversified into movies and entertainment?


Cuban: They were always part of our entertainment package. We will always offer the best quality content, both in entertainment value and HD quality.


IBD: To what degree will sports drive HDTV?


Cuban: It won't. The price drops of TVs , along with the competition between cable and satellite to retain their best customers - who will be the first to own HDTV sets - will drive the adoption of HD.


No one is investing in producing or improving analog TV. The competition is for the HD set, and those prices are dropping 2% per month.


It's the new version of the personal computer market, where prices drop and features improve every few months. As people see HDTVs and HDNet in stores and at their friends' homes, everyone will have a price point where they say, "I have to have it."

   



IBD: There was once a lot of fuss about the sub-$1,000 PC. At what price point do you see HDTV sets hitting the market's sweet spot?

Cuban: We are there or close already. You will start to see the analog TVs go the way of the black and white over the next three years.

As far as what accelerates people to run to the store even though they don't need a new one, that probably comes when 42-inch, 1080i plasma screens and LCDs fall under $1,000. That should be no more than four years from now, according to the TV people I talk to.

IBD: Some analysts say five or even 10 channels in HDTV may not be enough content to attract consumers.

Cuban: There is enough critical-mass content already. This is the point: A person walks into a store and looks at two TVs. One is analog, one is digital. The digital set has 10 times the resolution, can get HDTV, play DVD and HD/DVD and play all analog and standard-definition signals.

The analog set can only play regular networks, and can't play HDNet, HDNet Movies, ESPN/ HD, Discovery HD, etc. The price difference is less than 10%. Which will that person choose?

IBD: The National Association of Broadcasters has griped that in 64 of the 80 markets where local broadcasters converted to digital, consumers were unable to watch the Super Bowl this year on ABC through local cable systems. Will the lack of local HDTV availability on cable or satellite set back consumer demand?

Cuban: It will set back the distributor who doesn't provide it. If a cable distributor doesn't offer it, you can be sure DirecTV and Echostarwill show (consumers) how to add an antenna to their HD boxes and take that subscriber away.

If satellite doesn't expand their offerings, the cable distributor will do the same thing right back to take their subscribers. That battle will drive HD.

IBD: Could you provide any guidance on HDNet's audience size?

Cuban: Nope.

IBD: Almost no advertising is produced in HD format. When will advertisers be interested?

Cuban: It's changing now. We have multiple advertisers, and it's growing. We're showing agencies what their ads could look like in HD every day. So they get it and realize that HD makes their products look much better. They also realize that HD ads are more viewable and much less likely to be skipped in a PVR (personal video recording) environment.

IBD: How many games will your basketball team, the Dallas Mavericks, win this year?

Cuban: Hopefully enough to get me jewelry at the end of the season