A Q&A with Mark Cuban

I had the chance to sit down on Wednesday (July 20) with Mark Cuban after he gave a talk at the AlwaysOn conference at Stanford.

We met up in the "speaker ready" room. Mark had spent the past two hours either onstage, or talking to various attendees and members of the media, and he'd just done a ten-minute podcast interview with John Furrier. Still, his energy didn't seem to be ebbing.

Our conversation focused almost entirely on Mark's film-related ventures (with a brief foray into TV talk). Along with his old buddy from the Broadcast.com days, Todd Wagner, he owns Landmark Theatres, a chain of 57 "art house" cinemas in the US; 2929 Entertainment, a movie production company; and HDNet, the first nationwide high-definition cable network. Not to mention the Dallas Mavericks, an NBA team.

Mark and Todd are in the midst of conducting an experiment that could rearrange the tectonic plates of the movie business. They're producing a series of movies that'll be shot digitally (with directors like Steven Soderbergh), and shown digitally in Landmark Theatres. But that's not all - the day the movies open in his theatres, they'll also be available on DVD and on HDNet's sister cable channel, HDNet Movies. (He calls this the "day and date" model.)

What follows is a lightly-edited transcript.

Scott Kirsner: I’m looking at how technology is changing Hollywood.

Mark Cuban: Not enough.

SK: Yes. Well, I’m looking at the love-hate relationship that Hollywood has with new technology. They adopted digital effects and non-linear editing – that changed everything.

MC: They adopted that.

SK: But digital distribution, and exhibition, for some reason – maybe a lot of reasons - they seem to resist that.

MC: Production is obviously internally and completely controlled. It’s just a cost savings. Why wouldn’t you? The element that people seem to forget is that, [the studios are] all public companies. Period. End of story. They’re obligated to support their shareholders and make them money. So it’s cost first. There’s not a reward for taking risk. Or rarely is there a reward. New Line, I guess you could say, is an alternative, with what they did with Peter Jackson, but they’re always going to be risk-averse. There are obscene rewards for public company CEOs. Just obscene rewards.

SK: It almost seems like they’ve painted themselves into the “Innovator’s Dilemma” corner. They can’t make a movie for less than $50 million, and they can’t market anything for less than --

MC: They can’t take chances. They can’t say, let’s change the way we do business. Which is truly the innovator’s dilemma. Somebody else comes in and pre-empts them.

SK: With the films that 2929 Entertainment is making, is the production going to be all digital?

MC: 2929 not so much, because that’s more Todd [Wagner]’s baby. But HDNet Films, that’s 100 percent HD.

SK: So with 2929, if a director wants to shoot on film, you say, go ahead.

MC: Yeah, because that’s Todd’s baby, and that’s the way he runs that side of it. He just wants to make great movies, and he’ll follow the director. Whereas with HDNet Films, it’s the exact opposite. Here’s the rules of the game: it’s going to have a day-and-date release, [on] any platform and every platform that makes sense for us, and it’s going to be shot in high-definition 1080.

SK: So I’m not sure if HDNet includes the Steven Soderbergh films?

MC: Yes. HDNet films are the six Soderbergh films, starting with “Bubble.” There’s “One Last Thing,” with Cynthia Nixon, “The War Within,” which is our movie about a sleeper terrorist cell, the Herbie Hancock movie. There’s ten in production or in post-production now. So they’re going to be coming in a steady stream.

SK: If I’m a regular patron of the Landmark Kendall Square cinema in Cambridge, how is digital going to change the way I experience going to the movies on Friday night?

MC: There will be more alternatives, more often. We’ll be able to have a steady stream of new, hopefully great movies, because we’ve got that production process in place, and we’re gearing toward the Kendall Theatre audience, as opposed to saying, here comes the next “Fantastic Four” and that’s what we’re trying to do. Being able to control the whole chain, to be able to say, look, we know it’s going to Kendall, through Landmark, we know it’s going to be day-and-date on HDNet, we know we’re gearing to an art house, independent film consumer, and so we’re going to make their lives as simple as possible.

From a resolution and technical perspective, once we’ve digitally enabled all the cinemas, you will notice a difference. You’re not going to see the cracks and the pops, because it doesn’t deteriorate over time.

SK: Is the programming going to change, in terms of maybe reacting better to what people like and don’t like? Today, a new slate of movies opens on Friday, and they play for at least that coming week.

MC: Only from the perspective that we can create more movies and better movies for a given amount of money. We’re not limiting ourselves just to our movies. We’re working with Graydon Carter, we’re doing a documentary on Hunter S. Thompson, we’re working with others to do great stuff.

SK: I guess I’m asking, is the model of having eight movies showing on eight screens for a week going to break down?

MC: We’re open to anything and everything. We’ll try to learn and get smart about it. The fact that we’ll have digital cinema in there means we can do live events. Monday nights are typically terrible movie nights, so you might throw concerts on Monday nights. You might have Monday Night Football, if you do a deal with ESPN.

SK: Why hasn’t that worked in the past? People have tried it.

MC: You needed digital cinema. No one wanted to put up the money. In terms of live broadcasts, we’ve had great success doing college football games live. We haven’t done any concerts, but Regal has, and they’ve had sell-out audiences for concerts. I think that’ll change the movie theater business.

SK: What’s the pacing for the [digital cinema] roll-out, within Landmark? People were surprised when you picked the Sony 4K projectors. When are those going to be ready?

MC: That has been the problem, obviously. There is an issue there, but we’re willing to play that out, simply because, 4K is coming. It’s not a question of if, just when. And somebody had to be first. Sony made it attractive for us to be the first ones, and we took advantage of it.

SK: So are you waiting on them?

MC: For the first units, yes. We’ll probably roll out three, and then we’ll beta test them and debug them all, and go through that whole process.

SK: Will those three happen sometime this year?

MC: Hopefully by the end of the summer.

SK: Have you picked the markets?

MC: It’ll probably be New York, LA, and San Francisco.

SK: Is there going to be a convergence coming? Right now, we think of movies and TV as being two different forms of entertainment. “Desperate Housewives” and “Lost” are on TV, and “War of the Worlds” and “Star Wars” are movies.

MC: We’ve tried to license TV shows to show in theaters.

SK: I was just going to ask. You can imagine the season premiere of “Lost” next season – a group of “Lost” fans –

MC: -- Would love to go see it in a theatre. The problem is contractual issues on residuals. Their contracts right now don’t incorporate the ability to show theatrically. That’s been the inhibitor.

SK: So they don’t really even look at that as a revenue possibility?

MC: They didn’t up until we started banging on them about it. But it makes perfect sense. Don’t even charge people for it. Just have a “Lost” festival, to get people excited, get all the PR about it. Have people come to a theater, have someone speak who’s involved with the show, and get people fired up about it. It makes perfect sense. One of the things we’re working on with HDNet Films is to create a movie, and then extend it with a serialized TV show. So “The War Within,” this movie about a terrorist cell, there’s no reason it has to end there. It can continue –

SK: If it’s successful.

MC: Even if it’s not. When you’re shooting, shoot for 90 minutes of movie, and three hours of sequels.

SK: I do see the economic benefits. You’re at the location, you’ve built the sets, you’ve got the actors in costume. So just shoot more. But your production company would have to decide to invest in X number of hours of this content.

MC: When we’re programming HDNet, what shows are we going to run? If we’re going to have to buy shows, let’s buy shows that are extensions of the properties we already own.

SK: Have you started doing that with anything yet?

MC: We’ve started to work on it. We haven’t premiered anything.

SK: Will “The War Within” be the first experiment?

MC: That should be. I don’t know if we’ll be able to extend it as a series, because we don’t know if we can get all the actors back for some of the re-shoots we have to do. But the movie itself turned out great. Hopefully, it’ll be a great follow-up to “Enron.”

SK: So you do buy this idea that TV and movies may be converging.

MC: Bits are bits.

SK: This is all visual content. Sometimes, people might want to go to a Landmark Theatre to see it.

MC: And sometimes they might want it on a video portable device. Maybe they want it on their Sony PSP because they’re traveling. The idea is to give consumers the content where they want it, how they want it, when they want it, at a price they like. Simple concept, it’s just that nobody wants to do it.

SK: The exhibitors right now hate this notion of day-and-date release. The financial guys in the studios look at today’s revenue streams. They don’t like day-and-date releases, because everything becomes uncertain. “Are we going to get the same amount of revenue from a day-and-date release as we get today from a windowed release?” Is anything going to change that? Or do you guys need to be the experiment?

MC: We’ll be their experiment, and either it works or it doesn’t work. Part of what we’ll do is, we’ll share the back end with the theatres that enable us to do day-and-date.

SK: Some of the exhibitors, I think Regal and maybe some others, said “we hate this idea, and we’ll never show your movies.”

MC: But there’s a lot of smaller systems that showed “Enron,” even though we day-and-dated it on HDNet Movies, and those guys, when we sell the DVD, we’re going to take one percent of that, and split it all up. That’s a new revenue stream that they never got before. That’s found money. In essence, theatrical has become as much promotion for DVD and other exploitations, and the theatres aren’t rewarded for that.

SK: Do you buy the idea that 3-D is going to save movie theaters?

MC: 3-D would be a nice change, just like Imax was. It’s a nice alternative. Not all movies are going to be done that way. We’ll support 3-D, when the projectors are there. That’s fine. It’s a great evolutionary process. But it’s not the salvation. I think the salvation is knowing who your audience is. There are very few mediums of entertainment where a 16-year old hanging out with his buddies is going to be the same place where mom and dad are going to want to go for dinner and a movie.

SK: But if we talk about the 16-year olds for a second… I’m intrigued by the idea that the quality of video games has gotten so good, maybe the theatre needs to change to be more like a theme park theatre, where you’ve got smoke and lasers and seats that shake.

MC: No. Because you know what? Even if you had the ejector seat and all that stuff, mom’s still downstairs. Or your friend’s mom is still downstairs.

SK: I’ve been really interested, with NetFlix, in that they know more about me as a NetFlix member –

MC: - than you do.

SK: Well, certainly more than Sony does or NBC Universal.

MC: No question. I agree 100 percent. As they build their audience, the knowledge they have is the ultimate in permission marketing. Blockbuster has the same information. They just don’t use it as well.

SK: Is there anything you guys think about doing there?

MC: We’re trying to partner with all of them. Particularly in a day-and-date environment, it creates a whole different type of marketing approach. “Go to the theatre, but if you can’t make it to a theatre, pick your outlet, but we’ll charge you a premium.” It makes the value proposition for going to a theatre even stronger. If the movie is $8 or $10, but the DVD is $34.95, or the pay-per-view is $29.95 for the first month of release. But if you want it, and you’ve got kids and can’t make it out, but you still want to talk about it around the watercooler at work – we enable you to do it.

SK: What are some of the things that haven’t been paid enough attention to, in terms of the way that movies, or entertainment video, is going to play out over the next couple years?

MC: I think the windows have been a problem. The consumer hasn’t been paid enough attention to. We’ve created so many new ways to watch movies, personally – forget the theatres.

But if you want to watch a movie on this laptop, and we went to the store to buy a DVD, and you wanted to watch it on a flight to New York, you’d have to have that DVD and any of the others you wanted to watch. You’re juggling five DVDs, and it’s a pain in the ass. It should be easy as the day is long to copy your DVD onto a hard drive. Simplification. Keychain drives, so that if you’re in an airport, and there’s a kiosk, it should be easy to pay $4.99 and pop it into your USB port and watch the movie. When there are video iPods, there’s no reason that you shouldn’t be able to carry your iPod around and plug it in [to a kiosk.]

SK: It does seem like that mobile device presents this massive opportunity. When you ride the train, or you’re at the gym, that’s a time when you can’t consume your own movies or video today.

MC: It’s crazy you can’t. People will pay the price associated with simplicity.

SK: In terms of the HDNet/2929 experiment, being a producer and owning theatres. Are we getting back to the days of Paramount owning theatres and producing movies for them?

MC: I hope so. We’re vertical. We’re very, very vertical.

SK: You seem to have a pretty high degree of confidence that that’s the way to go.

MC: I get to control the whole experience. I get to make movies that fit my theatres, fit my television networks, fit my production methodologies, and control the whole sequence. The hard part is making great movies, obviously.

SK: One very last thing. What about movies like “Tarnation,” the movie that was made last year for less than $500 on an iMac. It got into Sundance, and was named one of the ten best films of last year by a New York Times critic. Those types of people – is a Landmark heatre going to be an interesting distribution channel for them?

MC: We want it. If it’s a good movie that we think we can sell, we want to show it.

SK: How would they get your attention?

MC: Send me an e-mail (mark @ hd.net). You couldn’t name a person whose e-mail is more available than mine right now. I get a thousand e-mails a day.

SK: So you’re going to watch a thousand movies a day, from a thousand directors?

MC: Or I’ll get somebody to help me watch them. It’s a lot cheaper to buy a [finished] movie than it is to create a new movie. I’d love to have people send me movies. The only qualification I’d put on them is that it’s shot in high-definition. And now you’ve got the HDV cameras, and that’s, you know, not great, but it beats the hell out of digital video. “Pieces of April” and other good movies were shot in it.

SK: Are you interested in what Current TV is doing? Have you followed that?

MC: The Al Gore thing? I hope it goes well for them, but they’re short-sighted, because they’re not working from high-definition. That’s my prerequisite. Either you buy that it’s all going HD at some point, or you don’t. And I don’t think there’s any question that it’s all going HD. Shooting in digital video right now is like shooting in black-and-white. It’s a throwaway.