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Six Questions: Mark Cuban


Mark Cuban
Mark Cuban

By : Erik Gruenwedel | Posted: 02 Apr 2010


While widely known as the mercurial owner of the NBA’s Dallas Mavericks, billionaire entrepreneur Mark Cuban has had his share of pop culture notoriety, including short-lived TV stints on “WWE Raw” in 2009, “Dancing with the Stars” in 2007, and 2004 reality program “The Benefactor,” in which Cuban offered to give $1 million to a winning contestant.

Cuban struck it rich when he sold Broadcast.com (started in 1998 with a college buddy to stream licensed audio and video files over the Internet) to Yahoo for $5 billion.

He is also heavily involved in entertainment and media, owning Landmark Theatres, HDNet and Magnolia Pictures, among other interests.

In 2006, Cuban teamed with director Steven Soderbergh (Traffic, Ocean’s Eleven, The Informant!) to produce the independent film Bubble, which was the first movie released simultaneously in theaters and on DVD.

Home Media Magazine caught up with Cuban (in between games against the Portland Trailblazers and Golden State Warriors) to get his take on Hollywood’s increased interest in tweaking release windows.

HM: Can a proposed retail window by studios for DVD and Blu-ray Disc releases exist in a rapidly evolving digital world?

Mark Cuban: Absolutely. Windowing is a business decision that can just as easily survive online as off. The real question is which content will benefit and which will be hurt by it. I think the concept of windows has already disappeared for smaller releases. Magnolia and HDNet release movies on video-on-demand (VOD) before they are in theaters. For smaller movies, this creates word-of-mouth and promotion for titles that helps theatrically and on DVD. It also allows us to spend far less money on promotion.

On the flipside, huge studio films going out to 2,000 or more screens benefit more from having the theaters be the primary outlet. It’s expensive, but the windows assign a value proposition to each platform of distribution.

HM: Can studios put the lid back on the Pandora’s Box of packaged-media margins with the presence of $1-per-day kiosks such as Redbox?

Cuban: I think they can; I’m just not sure they would want to. I think what we will see with the $1 guys is that movies will be bundled. You have to take the bad with the good in order to get the number of ‘A’ titles you want. $1 rental kiosks are going to be a great, a long-term place to stuff through a ton of product and get paid by the unit. In today’s world, that’s not a bad thing, even if it cannibalizes some DVD sales.

HM: With Disney cutting four weeks from the U.K. theatrical window for Alice in Wonderland to expedite the title’s release on disc, why are theater operators nervous when most movies generate 80% of their box office in the first three weeks of release? After all, there is still a nine-week period of diminishing returns (and even lower margins) before the title is released on DVD/Blu-ray/VOD/download.

Cuban: It’s more that they are afraid moviegoers will start to make purchasing decisions based on how long they have to wait for the DVD. In other words, why spend $12 to $15 dollars per person at the movies when I know it will be on DVD in only three months? I don’t think three months is short enough to impact attendance, but there is some number that will [think that]. The real question is whether or not they would sell enough DVDs to compensate for the cannibalization and can the movie theaters survive if they do?

I think the real answer is to allocate some amount per DVD or online sale to theaters that show the film. Theaters usually make 50% of the ticket price, or say $6 for big 3D movies. They may be open to allowing day-and-date release if the studio were to pay them for every DVD sold in the theatrical window. So to get an Alice in Wonderland DVD in the first nine weeks of release, the consumer would pay a little more, say $29.95, but $6 per unit would be split among all the theaters that played the movie.

I could only see this happening for big-budget movies where there is a lot of anticipated demand. People aren’t going to pay a premium for a small-movie DVD no matter when it’s released. This isn’t going to happen anytime soon, but as there is more data on the economics of day-and-date releases, you could see some interesting things happen.

HM: Why don’t theaters offer titles for sale on DVD/Blu-ray/VOD to consumers immediately after the screening?


Cuban: We have done that at Landmark. It works OK, but the physical cost of distribution makes it tough as a profit center. We have also tried offering the soundtrack for free, but it’s tough to get the music side on board. And we have experimented with offering a free download as well. But we really didn’t see it changing people’s viewing habits. People who go to the movies like to go to the movies, and that’s why they go.

HM: Are you a fan of the so-called “digital window” whereby new-release titles could be offered for download ahead of packaged media?

Cuban: Depends where the download is being hosted and what the economics are. The problem with 100% of the digital-download sites right now is that they all only sell on consignment. You don’t make a nickel until a download is sold. Contrast that to physical DVDs where Wal-Mart, Best Buy, Blockbuster, etc., all take physical delivery and pay you for that. Now they have a right of return, but because they have made the commitment to the product, they work harder to sell it. With iTunes etc., they just sell whatever they sell and it really doesn’t matter which product sells. So I will always give the preference to the distributor who commits to units rather than the store that sells on consignment.

If someone wanted to see a digital window, it would take minimum sales guarantees to make it work. It’s hard to say no to cash from a new source. So at that point, the digital window could appear.

HM: Would you ever release a title simultaneously across all distribution channels at different price points, with theatrical/3D premium priced?

Cuban: If you go to your TV provider’s VOD selection, you will probably see Magnolia Pictures (magpictures.com) releases already playing. We have a movie, The Eclipse, which just got a great review in The New York Times. It’s been playing VOD for almost a month now. It comes out on Friday in select theaters and then nine weeks or so after that, the DVD will ship.

VOD is priced from $10, theatrical is normal pricing, and DVD is traditional DVD pricing.
 

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User comments

Commented by Ted
Posted on 2010-04-02 16:13:37

Mark is a savvy businessman, and he really does get the digital media. Especially when it involves entertainment. He's been known to push the limits of the envelope, and if any one understands how to bridge the conundrum of windowing and dvd sales-Mark Cuban is the guy.





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