Mark Cuban’s Business Model

A media maverick on the news industry

Mark Cuban is well known as the brash, combative owner of the Dallas Mavericks professional basketball team, the guy who looks like a big kid and sometimes acts like one. His outbursts can obscure his most notable attribute—he is an astute businessman.

Cuban made his fortune building and selling two businesses—the first a computer-services company and the second an Internet streaming-media firm named It was the media company that made him wealthy, and he has remained engaged in media since selling it to Yahoo more than a decade ago.

He’s an entrepreneur, first, and maybe last, and not by any stretch a journalist, but Cuban is the majority-owner of a cable channel, HDNet, whose regular lineup features a Dan Rather investigative series; two websites whose sole tasks are to ferret out corporate and government malfeasance ( and; and HDNet Films, the movie production company behind the prize-winning documentary, Enron: The Smartest Guys in the Room.

Cuban is media-savvy. He tweets (@mcuban); he blogs (at; he dances with the stars. He writes and talks about broad themes in digital media and is especially interested in what is the most pressing issue facing the contemporary news media—how to monetize its prodigious output. Put more simply: Can the news make money?

CJR Encore Fellow Terry McDermott engaged in an extended e-mail correspondence with Cuban, who answered questions on his Android-enabled telephone. Here’s an edited transcript of that conversation.

What is the future of journalism, assuming it has one? How can journalism monetize the web? I pay $9 a month for Netflix. Why won’t I pay the same for good journalism?
The future of journalism will be tethered to the future of profitability of the news business. If there are ways to create profits using news created by journalists, as opposed to partisan shouting, then it will prosper. The good news is that there are many upcoming opportunities for news organizations. One will be subscription models on portable devices. If iTunes offers subscriptions, it might—and the key word is “might”—create a new future for journalism. Another option might be a Netflix for news.

At its heart, Netflix is an arbitrage-based business. Netflix pays up front for content against an amount per viewing. They then sell subscriptions to the content. It’s not inconceivable that someone could do the same thing with news. Go to the big newspapers and offer them an amount that is equal to their net margins for their online businesses (online revenues minus costs) in exchange for the right to exclusively present the content to its subscribers. It would leave the right to newspapers to offer the same content behind a paywall, but not for free. It then could go offer a subscription with a monthly fee to the service.

So, for $7.95 per month, I would go to this site and get all the news I wanted for no additional charge. The service would learn from usage and pay more for the most-read content, less for less-read (knowing that some content providers may withdraw if the amount is not high enough). The real challenge would be in selling enough subscriptions. Do you need 1 million, 10 million? Is $7.95 too high or too low? I don’t know, but it’s a business someone—not me—should explore. Or possibly it is one that the major paper ownership groups should consider creating.

What would you do if you woke up tomorrow and found someone had made you CEO of Tribune Company? I mean, what would you do once you stopped crying?
I don’t think I would cry at all. I don’t know their expense levels, but they certainly have enough content to leverage and quite a few monetization opportunities.

Assuming you own Tribune Company: you could be both the content creator and the Netflix analog, correct?
The role would be of aggregator and sales organization. I don’t know if Tribune has the skill set to acquire and market a subscription product, but they can probably partner with someone who can. The former Netflix CFO is out there.

Would the subscriptions be broken into channels—for example, foreign news, tech, sports?
Hell no. The idea is to create as much value as possible for the subscription so that people see it as the best way to consume news.

Do you think there will come a day soon when you won’t want a physical newspaper? Could newspapers just give all their subscribers a Kindle or iPad and lose the trucks and the trees?
I don’t see that day coming until costs force the issue or there is a new technology that creates a new and compelling reading experience. The current e-book readers are not it.

On a separate note, not to pile on papers, but they are getting hammered on the head once again by Groupon and Google.

Next to the Yellow Pages, newspapers and local television dominated the local ad sales force forever. It has always been a core competency. The minute they saw Groupon salespeople in their accounts, they should have immediately put together a comparable product. The same for Google local ads selling for $25 per month.

Both companies are spending a shitload of money on creating or dramatically expanding local sales forces. It’s not too late for companies like Tribune to attack both businesses, but the clock is about to strike midnight.

Do you see a viable financial strategy for legacy media to add new products? Something like searchable archives of public records?
Everything they touch should be made available in a searchable manner. Data will always have value and that value increases as the amount of data increases.

“Touch once, available to all,” should be an immutable mantra to all. Add it behind a subscription wall and you increase its value and give people a reason to subscribe. They would be stupid to offer it as a stand-alone product.

What do you think the journalism landscape will be like in twenty years? Will you still have a hometown paper? What is the feasibility of more journalism start-ups?
No idea. No reason to even guess. Twenty years is forever. And again, putting any one data type as a separate business unit is pretty stupid. Customers buy digital data in as big of chunks as they can for as little money as they can. They want to know they are getting great value even if they never touch 99 percent of it. Just like Netflix.

No one complains about Netflix, saying, “Ten bucks a month? Why am I paying for 19,900 movies and TV shows I will never watch?” They think $10 is reasonable if they get access to more video than they will ever watch. So they subscribe because it’s a unique value proposition.

News enthusiasts and others would look at $7.95 for the best news content if it was an exclusive source and there was a far higher perceived value.

What do you think of the monetization proposals that would somehow meter usage? Is that feasible?
Not a fan. It makes people calculate value and that’s a hassle that
will hurt sales.

On the success of Groupon, et al.: you’re absolutely right that old media
ad sales staffs have fallen behind the curve.

Not what I said. Sales people can only sell what they have. The fault
was on the part of management for not recognizing what was going on.

In many respects, the free fall of legacy media has been a
revenue problem. Old media has more readers and viewers than ever. For
whatever reason, advertisers have not followed them to the web. Why?
Not true. Advertisers have stayed with television and can’t get enough web video.
Newspapers are doing a decent job of monetizing the net. It’s just that
the Internet-only solutions for classifieds destroyed that business, 
and free Internet news hit subscriptions and, therefore, ad revenue.
Those losses, combined with very high legacy costs and huge debt, turned
the business upside down. Had there been no debt, the newspaper business
would have had the resources to respond.

Realize that the Internet companies made the same kind of mistakes.
When the bubble burst and cash flow and capital disappeared, what did
the Internet companies do? They folded or they cut to the bone and
killed much of their future. That opened the door for new competitors.

That’s why Google was able to come in and take over search. Yahoo
and others stopped investing. Heck, Yahoo sold a perpetual license to
Pay-Per-Click for not much more than $28 million. That’s how
desperate they were. Think if they had sold a license to Google on an annual basis. The entire Internet landscape would be completely different. Yahoo refused to spend money to keep alive even though it
was breaking even. Their stock price was freaking them out. There
would be no YouTube had they continued to support

was not unique. The list is long of Internet companies that did the
wrong things.
Point being that the challenge of staying the course and innovating
are not unique to old media. Far more net companies failed to innovate
and died than old media companies. In fact, old media companies
probably have a far higher survival rate through the transition of the
last four years than medium- to large-sized Internet companies did after
the bubble.

But hasn’t the horse already left the barn on free Internet news? Can it somehow be herded back in?
Nothing is ever written in stone in the digital universe.

I love that insight—that nothing is unchangeable in the digital universe. It’s an idea that could cost you a bunch of money. It encourages risk, informed risk, but risk nonetheless, doesn’t it?
Selective risk-taking.

Why have you sponsored journalism operations like Dan Rather on HDNet and the investigative start-ups and Are these selective risks? Or are they more properly seen as experiments with costs low enough that failure would not be a financial disaster? How do you measure their success?
The websites are because I have a strong distrust for the one percent of government employees who put their careers ahead of doing the right thing. These efforts were a response to that. If we catch one government crook or provide the information that allows someone else to do so, it will have been worth it. I consider it a small price to pay for doing a civic duty. I consider it a patriotic effort.

If sharesleuth continues to discover less-than-savory activity in the business world, it’s worth it.

Dan Rather Reports is part of HDNet, which has been successful. We don’t disclose any numbers for any of the ventures. They are no one’s business but ours.

Did you see this post on Bradford Cross’s Measuring Measures blog: “Why the iPad is Destroying the Future of Journalism”? The guy argues that subscription models are doomed.
He didn’t really say anything other than he doesn’t like subscription models and media should make their content available everywhere and sell more ads. Nothing new or interesting there.

First of all, the Internet is not the only place news is consumed. He doesn’t even reference the revenue aspects of physical media and location-based media. He doesn’t reference the connection media has with subscribers (under-monetized, but it’s there).

He also doesn’t discuss whether the traffic from search engines and even Facebook offers any monetary value. Just another Internet guy saying traffic must equal profits, so create more traffic. Doesn’t work that way.

The biggest thing he missed is the fact that there is just as good a chance that the ad revenue generated by Google/Facebook referrals can go away as quickly and completely as the ad dollars newspapers had generated via classifieds. The “incumbent” source of revenues is just as vulnerable today as it was in previous years.

The only thing he got right was the fact that silos are not the best way to sell content.

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Terry McDermott spent thirty years at eight newspapers, most recently at the Los Angeles Times, where he reported from more than twenty countries. He is the author of the upcoming The Hunt for KSM: Inside the Pursuit and Takedown of the Real 9/11 Mastermind, Khalid Sheikh Mohammed.