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If You Live By Free, You Will Die By Free

ScuttleMonkey posted more than 4 years ago | from the give-it-away-now dept.

Businesses 251

Hugh Pickens writes "Internet entrepreneur Mark Cuban writes that the problem with companies who have built their business around Free is that the more success you have in delivering free, the more expensive it is to stay at the top. '"They will be Facebook to your Myspace, or Myspace to your Friendster or Google to your Yahoo," writes Cuban. "Someone out there with a better idea will raise a bunch of money, give it away for free, build scale and charge less to reach the audience."' Cuban says that even Google, who lives and dies by free, knows that 'at some point your Black Swan competitor will appear and they will kick your ass' and that is exactly why Google invests in everything and anything they possibly can that they believe can create another business they can depend on in the future searching for the 'next big Google thing.' Cuban says that for any company that lives by Free, their best choice is to run the company as profitably as possible, focusing only on those things that generate revenue and put cash in the bank. '"When you succeed with Free, you are going to die by Free. Your best bet is to recognize where you are in your company's lifecycle and maximize your profits rather than try to extend your stay at the top," writes Cuban. "Like every company in the free space, your lifecycle has come to its conclusion. Don't fight it. Admit it. Profit from it."'"

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251 comments

This Is Madness (5, Funny)

eldavojohn (898314) | more than 4 years ago | (#28595501)

Someone out there with a better idea ...

You mean I have to compete against innovation?!

... will raise a bunch of money, give it away for free, build scale and charge less to reach the audience ...

And my competitors can undercut me?!

This is madness! I demand protection against people trying to steal my customers with a better service/product and lower prices! Oh well, thank god I'm too big of a player for the government to let me go under.

Be warned fellow citizens, in my lifetime I have seen market after market reach the endstate of an American capitalism: protected stagnation.

Re:This Is Madness (5, Informative)

sys.stdout.write (1551563) | more than 4 years ago | (#28595665)

Indeed! My favorite part was:

run the company as profitably as possible, focusing only on those things that generate revenue and put cash in the bank

Companies should focus on making money?! Outrageous!

Read more of his blog, good sir (5, Insightful)

orthancstone (665890) | more than 4 years ago | (#28596199)

Companies should focus on making money?! Outrageous!

I know what you quoted seems like an asinine statement, but if you knew the full context you'd understand the point.

Cuban's been ranting extra hard this year on YouTube, labeling it as an eventual giant bust because the model will eventually fail without profit. He's saying that people, being so used to FREE content, will feel outraged by the concept of being charged to distributed their mundane crap videos online. Thus someone will come along with a better model and replace it (he's right, it is the nature of the Internet, and only the green people who have only been surfing it for a few years now fail to realize this...they don't have the years of knowledge that accompanies seeing sites/concepts being formed and replaced by the next greatest thing).

He's lashing out against these "free" practices because they are extremely difficult to break out of. Once you offer the free content to the people, they demand it stay free. You say "Companies should focus on making money?! Outrageous!" and he's responding, "How will they make it if they don't base their model on that in the first place?"

Re:This Is Madness (0)

Anonymous Coward | more than 4 years ago | (#28596313)

[quote]run the company as profitably as possible, focusing only on those things that generate revenue and put cash in the bank[/quote]

Thankfully, he's doing this with his business - the Dallas Mavericks.

Re:This Is Madness (0, Offtopic)

Ex-MislTech (557759) | more than 4 years ago | (#28596557)

I wonder if he knows his beloved money is fiat currency that is backed by nothing and
due to the derivatives bubble and the Fed secretly doling out 9 trillion it being depreciated
faster than most ppl can make it ?

Re:This Is Madness (0)

Anonymous Coward | more than 4 years ago | (#28596397)

No, no, you don't understand! He says that you only need to make money if you give your product away for free! If you charge for it, it doesn't matter if you don't sell anything and thus don't make any money! :)

Re:This Is Madness (4, Insightful)

hedwards (940851) | more than 4 years ago | (#28595673)

I think you're being overly optimistic. We don't protect stagnation we protect and encourage failure. The US government tinkers in the economy more than most other free nations do, and it's almost always in the form of bailouts, protecting failing enterprises, insuring markets without demanding regulator authority. It's been going on for several decades and it's led us from one bubble to the next, and it won't stop for at least one more boom bust cycle.

What he's really complaining about is that there's a competitor that's out there forcing the price he can get to roughly approximate the marginal cost of production. Which is shocking for somebody that presumably believes in capitalism. Shocking because a competitive market pushes prices to just above the marginal cost of output.

OSS is a good example in software, credit unions in banking and hopefully a set of large scale co-op health insurers in the insurance industry. Corporations hate them because they have to compete on both price and quality. If there really were nothing to it they wouldn't be trying so hard to kill it.

Re:This Is Madness (1)

falconwolf (725481) | more than 4 years ago | (#28595979)

What he's really complaining about is that there's a competitor that's out there forcing the price he can get to roughly approximate the marginal cost of production.

He, who, Mark Cuban? After building his own businesses, selling non-free stuff, Mark Cuban [wikipedia.org] became one of the world's wealthiest men.

Falcon

Re:This Is Madness (2, Insightful)

ArhcAngel (247594) | more than 4 years ago | (#28596005)

Yeah, it's too bad the blacksmiths and carriage makers of the early 20th century didn't have a government like we have today to protect them from the that evil Ford guy.

Re:This Is Madness (3, Insightful)

CannonballHead (842625) | more than 4 years ago | (#28596049)

The US government tinkers in the economy more than most other free nations do

It does? You mean the more socalistic a country gets, the less it tinkers with the economy?

I'm a conservative and I don't like the U.S. "tinkering" with the economy. But from what I understood, most other free countries tend to be more liberal (significantly) than the U.S. (and a lot of liberals in the U.S. complain about that. Hence the huge push for a national healthcare system at the moment?). And more liberal countries tend to want to regulate the market more. And regulate other things, too.

I'd be interested in seeing some backup for the claim that the U.S. tinkers more with the economy.

Re:This Is Madness (1)

Atlantis-Rising (857278) | more than 4 years ago | (#28596349)

I'm not sure what the grandparent meant, but I think the US does take more 'direct' action. Most other Western nations tend to have heavily developed regulatory structures in the first place, which necessitate less in-place tinkering after the fact.

Re:This Is Madness (1)

gad_zuki! (70830) | more than 4 years ago | (#28596439)

>he US government tinkers in the economy more than most other free nations do

No way. The European version of capitalism involves a lot more regulation and tinkering, heck look at all the protectionist anti-MS regulations slashdot cheers. The US is pretty free, but its fashionable to pretend its borderline-communist because someone go elected the right-wing nutjobs dont like.

Re:This Is Madness (1)

Yvanhoe (564877) | more than 4 years ago | (#28596559)

I think you're being overly optimistic. We don't protect stagnation we protect and encourage failure. The US government tinkers in the economy more than most other free nations do, and it's almost always in the form of bailouts, protecting failing enterprises, insuring markets without demanding regulator authority. It's been going on for several decades and it's led us from one bubble to the next, and it won't stop for at least one more boom bust cycle.

Heh, socialism is better done by liberals, conservatives suck at it. If you want good government tinkering instead of thinly veiled money diversion, elect a true socialist liberal ;-)

Re:This Is Madness (1)

maxwell demon (590494) | more than 4 years ago | (#28595737)

And my competitors can undercut me?!

Actually, if your services are free to the customer, in order to undercut you your competitors will have to pay his customers for using his service.

Re:This Is Madness (2, Interesting)

maxume (22995) | more than 4 years ago | (#28595823)

Only if you insist on pedantic sematics.

For instance, you can provide more value for free (say, faster, more accurate results). Not quite undercutting free, because free is free, but you are giving more away, which is similar enough in concept.

Re:This Is Madness (5, Informative)

wjousts (1529427) | more than 4 years ago | (#28595931)

And my competitors can undercut me?!

Actually, if your services are free to the customer, in order to undercut you your competitors will have to pay his customers for using his service.

Actually, the mistake you are making is thinking that you are the customer from companies like Google or Facebook. You are not, you are the product. The advertisers are the customers.

Re:This Is Madness (0, Offtopic)

interkin3tic (1469267) | more than 4 years ago | (#28596215)

Be warned fellow citizens, in my lifetime I have seen market after market reach the endstate of an American capitalism: protected stagnation.

There's only one solution: kill eldavojohn to save the economy!

Re:This Is Madness (1)

eldavojohn (898314) | more than 4 years ago | (#28596369)

Be warned fellow citizens, in my lifetime I have seen market after market reach the endstate of an American capitalism: protected stagnation.

There's only one solution: kill eldavojohn to save the economy!

I like the way you think.

You're a shark, I like sharks. You're hired ... or bought out ... or men show up at your door and break your legs and urinate on your servers. It doesn't matter, it's all roughly equivalent to me. So long as the investors know the threat has been neutralized and taken care of; everybody that was in power stays in power and at the end of the day that's all they care about.

What's that? You're declining our offer? You're going to write a letter to your senator about anti-competition this and anti-trust that? Good, he and I have been running out of petitions and complaints to wipe our asses with when we play golf every Sunday after mass.

Live free, die hard (5, Insightful)

AKAImBatman (238306) | more than 4 years ago | (#28595517)

"Like every company [*deleted*], your lifecycle has come to its conclusion. Don't fight it. Admit it. Profit from it."

Fixed that for you. No business survives beyond their normal lifetime in the market. This is particularly true of technology companies which are forced to constantly reinvent themselves or become obsolete. While companies who sell a product can sometimes extend that product out a bit longer thanks to support contracts and BS marketing techniques, this is not sustainable.

What you end up with is the slow death spiral that was the hallmark of companies like SGI, SCO, and Novell. These companies followed the same business model for too long, slowly bled marketshare, and eventually reinvented themselves at the last minute, made a deal with the devil, or went out in a blaze of glory.

The lesson is simple: No matter how much of a cash cow your current product line is, you need to be investing in the R&D to compete in the next generation of products. Otherwise your competitors will get there first and make you ancient history.

Re:Live free, die hard (3, Interesting)

MyLongNickName (822545) | more than 4 years ago | (#28595577)

Tell that to this company [wikipedia.org].

Re:Live free, die hard (1)

AKAImBatman (238306) | more than 4 years ago | (#28595793)

I fail to see the contradiction. While the article is light on details, it seems clear that Kongo Gumi kept on top of the latest technological developments over the millennium and a half they were in business. Clearly the construction technology has changed from the original Shitenno-ji temple they built to the Osaka Castle to modern skyscrapers.

If Kongo had remained in the business of building temples and not kept pace with construction technology, they would have been out of business over a thousand years ago.

Re:Live free, die hard (1)

iamhigh (1252742) | more than 4 years ago | (#28595939)

Interesting, but I am willing to be they reinvented their business several times. I doubt they would have stayed in business using tools an techniques from 578.

Re:Live free, die hard (2, Insightful)

Anonymous Coward | more than 4 years ago | (#28596517)

Interesting, but I am willing to be they reinvented their business several times. I doubt they would have stayed in business using tools an techniques from 578.

Tell that to the Vatican

Which country do you live in? (4, Insightful)

Colin Smith (2679) | more than 4 years ago | (#28595681)

ixed that for you. No business survives beyond their normal lifetime in the market.

Well. that's clearly not the case.

Goldman Sachs, Bank of America, JP Morgan etc etc etc. If you have a friend in the government, you can get them to tax the people to guarantee your profits.

 

free markets (1)

falconwolf (725481) | more than 4 years ago | (#28596303)

ixed that for you. No business survives beyond their normal lifetime in the market.

Well. that's clearly not the case.

Goldman Sachs, Bank of America, JP Morgan etc etc etc. If you have a friend in the government, you can get them to tax the people to guarantee your profits.

In a free market none of these companies would have been bailed out. Instead they would have been forced to declare bankruptcy, then those competitors that did not make bad decisions would have continued to live.

Falcon

Re:Live free, die hard (0)

tgatliff (311583) | more than 4 years ago | (#28595909)

I agree... Its called capitalism... If true capitalism existed, then large companies would be rare because competition would quickly reduce their profit margins to the point where very little money could be made.

Also, Mark Cuban seems to misunderstand how industries are supposed to work. If you never OSS anything, how can we expect to ever continue building on something?? Meaning, if we have to pay a license to someone like Microsoft and/or Oracle forever, how can one expect that additional future advanced systems can be cost effectively built??

Finally, Mr Cuban made his money during a very unique time were pension funds and VCs had a massive liquidity orgy. Those days are over, and Mr. Cuban should accept that he was more lucky that smart...

Re:Live free, die hard (0)

Anonymous Coward | more than 4 years ago | (#28596189)

If true capitalism existed, then large companies would be rare because competition would quickly reduce their profit margins to the point where very little money could be made

I think the opposite. If true capitalism existed there would be 1 gigantic company because it would have been able to integrate to the point where it locked up all the raw materials.

Also, one gigantic company would be able to hire the most goons to physically destroy their competitors' infrastructure.

Re:Live free, die hard (1)

falconwolf (725481) | more than 4 years ago | (#28596219)

I agree... Its called capitalism... If true capitalism existed, then large companies would be rare because competition would quickly reduce their profit margins to the point where very little money could be made.

In a true free market and capitalism there's another reason large corporations would be rare, because many would have their corporate charters revoked [pdf warning] [lclark.edu]. Such as Exxon, those people who had their lives wrecked because of Exxon Valdez, have not received a dime from Exxon. And Union Carbide, for it's Bhopal disaster [wikipedia.org]. There are more than 1000 Superfund sites [slashdot.org] listed, many created by businesses, which taxpayers will pay to clean up if they are ever cleaned up.

Falcon

Re:Live free, die hard (2, Informative)

MrCrassic (994046) | more than 4 years ago | (#28596013)

Zildijan, a very prominent manufacturer of drum cymbals, has been around for 400 years. Source: click [wikipedia.org]

Sumitomo has been around since 1590.

IBM has been around since the early 1900s, and they are still hugely relevant today.

These are obvious exceptions to the rule, but it does show that if a company has a good thing going and can play its cards right, it can survive a long, long, LONG time.

Re:Live free, die hard (1)

AKAImBatman (238306) | more than 4 years ago | (#28596231)

IBM has been around since the early 1900s, and they are still hugely relevant today.

They are still hugely relevant by making punch card readers and typewriters? Or are they hugely relevant for constant innovation and invention? (See: IBM R&D budget)

Sumitomo has been around since 1590.

And they're still a medicine and book store, right? Or did they reinvent themselves as a copper smelter in the 1800's with a revolutionary technique, then expand into [wikipedia.org] "banking, warehousing, electric cable production and more"?

Zildijan, a very prominent manufacturer of drum cymbals, has been around for 400 years

That's the closest company you've named to being able to continuously milk a product for an extended period of time. Of course, as your own link shows, the Zildjian company has gone through a number of improvements, changes, and reproductization of their product lines over the years. The cymbals you purchase today are a long way from the original cymbals of the 1620's.

Re:Live free, die hard (1)

Todd Knarr (15451) | more than 4 years ago | (#28596331)

Actually I think IBM's corporate continuity goes back to the late 1800s. Tabulating Machine Company was formed in 1896, and the Bundy Manufacturing Company (another of the 4 that merged to form CTR Corporation, which eventually became IBM) was founded in 1889.

Re:Live free, die hard (1)

timeOday (582209) | more than 4 years ago | (#28596205)

The lesson is simple: No matter how much of a cash cow your current product line is, you need to be investing in the R&D to compete in the next generation of products. Otherwise your competitors will get there first and make you ancient history.

Really? Look at Microsoft, they have been paranoid of being eclipsed since day #1, and followed exactly the strategy you suggest, pouring untold billions into R&D - with scarcely any effect. Look at google, spinning off services madly, yet all their profit comes from their original business.

So I am leaning towards another simple conclusion: it's hard to make lighting strike twice. Maybe Microsoft's investors should have taken home the company's windfall profits home as dividends all these years instead of plowing them all into making sure google would be invented at Microsoft, which it wasn't.

Re:Live free, die hard (1)

timeOday (582209) | more than 4 years ago | (#28596247)

PS props to Apple for bucking the trend and making lighting strike seemingly at will. I think Jobs must have sold his soul to the devil.

Google (5, Insightful)

hobbit (5915) | more than 4 years ago | (#28595555)

Google doesn't live by free. It lives by selling advertising.

Re:Google (1)

Twillerror (536681) | more than 4 years ago | (#28595973)

Exactly much like NBC, CBS, or ABC.

I think the thing missing is some underlying infrastructure that companies can tap into. I used to subscribe to Slashdot, but quite frankly I don't anymore because I'm just too damn lazy.

The cable market tends to work okay. You can argue price, service, etc, but the idea of subscribing to a master provider and getting sub-services seems like something internet companies could really use.

Internet TV is begging for this. I don't mind paying for Hulu...even if it does have some advertising in it. I like my cable TV, but the entry point for cable channell is still way to high. Internet TV chanells could easily tie into Hulu...which in turns ties into a large subscription.

I'm suprised Google hasn't built this to be honest. It be nice to pay for Hulu thru my Google account...any number of valuable services would popup just like iPhone apps.

Re:Google (1)

B'Trey (111263) | more than 4 years ago | (#28596089)

Which is exactly why Mark Cuban is so misguided. No one lives by free. That is, you might start up a business that lives by free and last until your money runs out, but you either find a way to monetize your customers or you go under. Companies which "live by free" actually live by a business model that includes free but isn't exclusively free. And such businesses are no different from any other business. Every business, regardless of whether or not it has free as part of its business model, faces competition and threat from other businesses. It's the way capitalism works. Woolworths and HQ, for example, didn't go out of business because of anything to do with "free." But they were still out-competed and failed. If you take the reference to "free" out of Cuban's comments, he's simply describing the challenges facing any business in a capitalistic system. Cuban of all people should know that.

Re:Google (1)

vainvanevein (1428547) | more than 4 years ago | (#28596407)

I think he means companies that "live by free" are ones that give content or a service away for free and attach advertising to it.

Cuban Hater (-1)

Anonymous Coward | more than 4 years ago | (#28595565)

Smartest thing he's ever uttered

Re:Crazy old witch (1)

MyLongNickName (822545) | more than 4 years ago | (#28595645)

Yup. And scientists gave us nuclear bombs. That's why I don't listen to anyone with a kolidge degree. Fuck global warming. Fuck losing weight. Fuck a 13 billion year old universe.

Re:Crazy old witch (0)

Anonymous Coward | more than 4 years ago | (#28595857)

a 13 billion year old universe.

The apparent age of the universe would depend on the observer's tau.

Re:Crazy old witch (1)

eldavojohn (898314) | more than 4 years ago | (#28595717)

Aren't these the guys who ruined the economy?

It's easy to drop the blame on MBAs. And being a software developer I don't think much of them. I would urge you to refrain from placing all the blame on them ... it would be similar to saying "Isn't it software developers fault that copyright law is violated at large today?" Listen to this recent This American Life [thisamericanlife.org] episode on the situation that was created by rating agencies. By the way, the first two parts of that are amazing and I feel more informed just listening to those three episodes [thislife.org] than I do listening to any news outlet.

Your blame would be more appropriately placed on the rating agencies like Standard and Poors or Moody's and Fitch. There's probably a few MBAs working there. Or maybe the people who were playing those rating agencies off each other to get their securities rated higher? Or maybe the people who knew these securities were not AAA but bought them anyways and treated them as such (and that was a worldwide problem). It was an entire environment that created a problem for the world economy.

I'm not fan of Cuban but I don't think he was a part of any link in this chain of failure.

Re:Crazy old witch (1)

dyingtolive (1393037) | more than 4 years ago | (#28596085)

Personally I much more resent the idea that certain people imply that MBA's are capable of doing anything as significant as destroying an economy.

Re:Crazy old witch (1)

MrCrassic (994046) | more than 4 years ago | (#28596095)

I don't know about you, but if he somehow became a billionaire entrepreneur, then he must have done something right.

Re:Crazy old witch (1)

TooMuchToDo (882796) | more than 4 years ago | (#28596221)

I wouldn't call being at the right place at the right time doing something right. Most people call that "luck".

Re:Crazy old witch (1)

Hijacked Public (999535) | more than 4 years ago | (#28596547)

He certianly benefitted from good timing, but Broadcast.com was a profitable venture on its own before Yahoo bought it. He also had enough financial skill to sort the good offers from the bad. It isn't like everyone in the dot com business made out like bandits.

Consider that Slashdot sold to Andover in the same time frame, then on to LNUX not long after that. Cuban owns the Mavs and Taco's LNUX shares probably wouldn't buy an ice cream cone.

Re:Crazy old witch (0)

Anonymous Coward | more than 4 years ago | (#28596373)

Just like Bernie Madoff, amirite???

Re:Crazy old witch (1)

sgt scrub (869860) | more than 4 years ago | (#28596287)

If you've ever worked for Cuban (audionet/broadcast.com) you would know this "epiphany" means he is up to something. If you make the mistake of putting him in the same box as the morons running banks and car companies you will be putting yourself in the same boat as the people that REALLY ARE in that category (yahoo.com).

Isn't this true of almost all businesses? (5, Insightful)

Palestrina (715471) | more than 4 years ago | (#28595591)

Whether you are selling automobiles or donuts, there is going to be competition, and you are only as good as your last quarterly earnings report. In any case, competition and barriers to entry has more to do with the nature of the technology and lock-in and lock-out factors like propriety interfaces and patents than it is concerned with the business model. Maybe the point is just that with a free model, you have less room for error in your strategy?

Re:Isn't this true of almost all businesses? (2, Interesting)

Braedley (887013) | more than 4 years ago | (#28595769)

Techdirt has a post [techdirt.com] saying just this. Cuban fails to realize that all his arguments don't apply to only free models, but rather any business that sells a product or service, regardless of the price (free or otherwise).

Sounds self-contradictory (2, Informative)

GodfatherofSoul (174979) | more than 4 years ago | (#28595595)

So, you have to only invest in what is profitable, yet at the same time you have to invest in research (which by nature isn't profitable) to find the next product that will be profitable when your old products are outdone? And, what's so insightful about saying that someone coming along and giving away your "free" product for even "freer" is some inherent danger to free services? If I bake cookies for a living, and some philanthropists starts giving away cookies of a similar recipe for free (with his business logo on them), of course my business will be hurt.

From Mark Cuban? Take it with a grain of salt (3, Interesting)

i_want_you_to_throw_ (559379) | more than 4 years ago | (#28595613)

So he built broadcast.com, sold it to Yahoo! and made a ton of money: what else has Cuban done? I mean really?

I tend to take everything he says with a grain of salt.

Re:From Mark Cuban? Take it with a grain of salt (2, Insightful)

192939495969798999 (58312) | more than 4 years ago | (#28595891)

He's indirectly asking us to learn from his example. Build a free empire, then sell it at its peak, before anyone realizes that it's unsustainable.

Re:From Mark Cuban? Take it with a grain of salt (0)

Anonymous Coward | more than 4 years ago | (#28595915)

what else has Cuban done?

Two words: DALLAS MAVERICKS

Need I say any more?

Re:From Mark Cuban? Take it with a grain of salt (0)

Anonymous Coward | more than 4 years ago | (#28596023)

Agreed. Why is this even news worth commenting about. Cuban was a lucky schmoe during the first Internet bubble. Winning the 'lottery' doesn't all of a sudden make you a 'smart' person worth listening to.

Re:From Mark Cuban? Take it with a grain of salt (1)

dfghjk (711126) | more than 4 years ago | (#28596157)

While I couldn't agree more, I looked for this comment earlier in the Andreeson article and didn't see it. Both are worthless.

Re:From Mark Cuban? Take it with a grain of salt (1)

orion67 (591651) | more than 4 years ago | (#28596217)

what else has Cuban done? While it's easy to poke fun at Cuban when he behaves like a spoiled child, most people would agree that he's made some very wise business decisions. Between his basketball team ownership and his involvement in many other businesses like HDTV programming, there is plenty of evidence of "what else" he's done. One small example: you know those three-sided 24 second clocks on top of the backboards in the NBA now? Probably wouldn't have happened if Cuban wasn't listening to his customers: http://creatingcustomerevangelists.com/resources/evangelists/mark_cuban.asp [creatingcu...elists.com]

Re:From Mark Cuban? Take it with a grain of salt (1)

jd2112 (1535857) | more than 4 years ago | (#28596315)

Let's see... He founded a company, Sold it for several metric sh*tloads of money before the market crashed, and, and... There's got to be something...

Oh yeah, he was on Dancing with the Stars.

STFU, Cuban. (4, Insightful)

Anonymous Coward | more than 4 years ago | (#28595615)

You got lucky because Yahoo was dumb and made you a billionaire at the height of the dotcom bubble. There are no remnants of the service you founded anywhere on the Internet. You are the equivalent of a lottery winner and have zero credibility.

You are a stupid fratboy who got rich thanks to an ill-timed power grab by an unwise corporation, not a respected voice whom anyone cares about. Please enjoy your "broadcast.com" (lol) windfall in private and stop talking in the presence of others who might report your idiocy. Thank you.

Re:STFU, Cuban. (1)

TheVelvetFlamebait (986083) | more than 4 years ago | (#28596141)

Aside from simple envy, I fail to see why you hate him so. Perhaps all he did was get extremely lucky, perhaps there was a bit of skill involved. Either way I really don't see why he's a stupid fratboy, or why his opinions are idiocy.

Re:STFU, Cuban. (1)

PeanutButterBreath (1224570) | more than 4 years ago | (#28596327)

Either way I really don't see why he's a stupid fratboy, or why his opinions are idiocy.

Well, there's crap like this. . .http://sports.espn.go.com/nba/playoffs/2009/news/story?id=4157481

Re:STFU, Cuban. (5, Insightful)

OrangeTide (124937) | more than 4 years ago | (#28596383)

AC is right. Cuban's success is at least partially due to serendipity, I would argue that is mostly due to that.

It's not envy that people hate on Mark Cuban. Because many of us respect people who built up their fortunes, even if we hate the things they do. Examples would be Larry Ellison, Steve Jobs, Bill Gates, Warren Buffet, George Soros, etc.

That said, Mark must have some skill in the negotiation room to have sold his company. The ability to market your business to another business is a pretty unique skill. But if he did that trick today he would be in the same position as many of my friends who have done that. Have enough money in the bank to support themselves for a couple years until they sell their next start-up.

Winning it big on one shot is not as impressive as consistent success to me.

Re:STFU, Cuban. (0)

bogjobber (880402) | more than 4 years ago | (#28596489)

It's not his fault Yahoo overpaid. I think it's a pretty good sign of his business sense that he is one of the few .com billionaires that has kept and expanded his wealth. Since he sold broadcast.com he's been a successful investor, most famously creating the HDNet TV channel and turning around the Dallas Mavericks.

What have you done to make anybody trust *your* opinions? You won't even publicly post your opinions under your own name. At the very least, treat him like another blogger and criticize his opinions, rather than the business that he sold ten years ago.

Is it just me or is slashdot asshattery getting worse than normal? I can't believe how many completely substanceless posts such as this are modded up in this discussion. How is this possibly considered informative? Show a little restraint people.

I disagree. (3, Interesting)

apodyopsis (1048476) | more than 4 years ago | (#28595623)

I disagree.

I think that when any technology - be that DVD, FaceBook, Internet Explorer - reaches a mass audience and is perceived to be good enough to meet the users needs it is more or less impossible to dislodge even when there are technically superior products out there.

The only way a new product will ever dislodge a entrenched rival is when they offer something unique and compelling or are readily interchangeble with the old one.

I kind of get what they are saying, but I see more evidence of entrenched mass market products that are seen to have reached an acceptable level of functionality and ease of use.

Re:I disagree. (1)

AKAImBatman (238306) | more than 4 years ago | (#28595995)

I disagree with your disagreement. If that were true, then why are DVD sales dramatically declining?

http://www.broadcastingcable.com/article/190848-DVD_Backend_Is_Dwindling.php [broadcastingcable.com]?
http://www.icv2.com/articles/home/11879.html [icv2.com]
http://www.nypost.com/seven/12042007/business/dvd_isaster_sales_806649.htm [nypost.com]
http://www.cinemablend.com/television/Sales-Decline-Portend-Possible-DVD-Doomsday-2110.html [cinemablend.com]

Meanwhile, digital sales of video content are on the rise:

http://www.reuters.com/article/pressRelease/idUS148561+29-Aug-2008+BW20080829 [reuters.com]
http://www.michaelgeist.ca/content/view/1621/125/ [michaelgeist.ca]

I'll grant you that online sales of video content is still a developing market. But it is a market that is clearly putting a dent into the traditional distribution model of DVDs.

I think your confusion stems from far too narrow a view of the market. You're looking at Bluray discs and noting that they are failing to dislodge DVDs en masse. The reason is that Bluray is not the future. The market is going a radically different direction with its technology.

Re:I disagree. (1)

Maximum Prophet (716608) | more than 4 years ago | (#28596379)

why are DVD sales dramatically declining?

Market saturation?

I can get almost every movie I want (older titles) borrowed, used, or from the library. VHS tapes wear out much faster than DVDs, and even when a DVD gets scratched, a little polishing compound will bring it back. I saw some DVDs at Staples that would self destruct after 48 hours. For $0.25 - $0.99 I might have tried one, but the titles were terrible and they wanted $5.00 each. No thank you.

A lot of the online content was never available on DVD because it didn't have enough audience to justify a pressing. Online will take over because it offers relatively instant gratification, a big feature that DVD and Blu-ray can't match. People like getting what they want.

Re:I disagree. (1)

orthancstone (665890) | more than 4 years ago | (#28596325)

I think that when any technology - be that DVD, FaceBook, Internet Explorer - reaches a mass audience and is perceived to be good enough to meet the users needs it is more or less impossible to dislodge even when there are technically superior products out there.

Popularity may make certain products last well past their expiration date, but old junk eventually gets canned. DVD will go away, Facebook will be replaced, and IE's losing market share all the time to competitors. 10 years ago you could've argued which was the best of 5 or more search engines. Now you'd have a hard time thinking of 5...period.

Really, is that you, Satan? (2, Insightful)

Missing_dc (1074809) | more than 4 years ago | (#28595637)

The summary sounds like a seduction attempt.....

Like bad legislation, they must constantly introduce evil ideas into major corporations and the general subconscious knowing that eventually, bit by bit, we will accept, and thereby do evil.

It is a game of relativities and waiting.

Google should worry about its BlackSwan (0)

Anonymous Coward | more than 4 years ago | (#28595667)

I just surfed to blackswan.com and got a message that it had 'just been registered'.

WE live in an art economy. (3, Insightful)

tjstork (137384) | more than 4 years ago | (#28595671)

WE live in an art economy. That is, at the consumer level, the systems that we use are often judged by their novelty and their entertainment value. I would think most social networking sights ultimately wind up as a sort of a performance art piece, where we are the performers. We get bored with it, and move on. To say that you need to fund R&D is almost besides the point. Social sites need to have R&D, for sure, but what they really need is insight and hitmakers. You have to run them almost like record companies and make stars of the designers, changing things every time based upon the new view of the artist.

Product Anyone? (1, Insightful)

Anonymous Coward | more than 4 years ago | (#28595685)

How about creating and selling a product that people want to have and are willing to pay money for? That seems to be more intelligent than giving away for free. The majority of the "for free" company will cease to exist when the next internet bubble (the "Web 2.0" bubble) will burst, ya know...

Re:Product Anyone? (1)

Maximum Prophet (716608) | more than 4 years ago | (#28596479)

The problem is that there are products that people want, but they don't know they want it. Art is the classic example. Do you want a painting by Joe Shablotnic? Joe has to give away some of his art before anyone will buy it.

A problem with the internet, is there are thousands of Joe Shablotnics out there, and they all are giving away their art. A consumer can simple move from one Joe to another as each starts to charge for his work. Soon, no-one can make any money.

As far as the free companies failing, 4/5 of all companies fail in the first five years, so this isn't surprising.

A bit naive (2, Interesting)

xednieht (1117791) | more than 4 years ago | (#28595697)

Over-simplified. While Free is certainly not a sustainable business model, I'm not sure I see the connection between the topic of the article and the companies that were used as examples. Google, MySpace, and Facebook are not free by any stretch. They offer free services on the consumer facing side of their value model, but on the business end they generate plenty of cash from charging for the eyeballs they bring to advertisers.

Twitter is the only company mentioned that has been reluctant to monetize their traffic. Not because they can't, but more so because of some philosophical reason they choose not to. Yet despite that there are third parties that are monetizing Twitter's traffic, as in:

http://tech.slashdot.org/story/09/07/05/2151220/uSocial-Sells-Twitter-Followers-By-the-Thousand [slashdot.org]

1998 all over again (2, Insightful)

Anonymous Coward | more than 4 years ago | (#28595701)

Cuban's advice is so 1998. Build up mind share, then cash out and let the company crash. It worked for him.

Any company will shrivel and die if it doesn't adjust, even a company that was once at the top of the Fortune 500. Free has nothing to do with it.

Black swan theories (1)

OzPeter (195038) | more than 4 years ago | (#28595755)

In being Australian, I grew up with the notion that Black Swans were the norm. It was only when I went to Europe did I see the funny looking white swans.

Good. (1)

John Hasler (414242) | more than 4 years ago | (#28595799)

> Internet entrepreneur Mark Cuban writes that the problem with companies who have built
> their business around free is that the more success you have in delivering free, the
> more expensive it is to stay at the top.

It is best that no one stay on top.

free vs non-free (0)

Anonymous Coward | more than 4 years ago | (#28595819)

Question: If you live Non-free, would you not die Non-free also?

If anything, he's got it backwards (4, Insightful)

Zigurd (3528) | more than 4 years ago | (#28595825)

As others have pointed out, free online services are no more susceptible to a Black Swan Competitor, or even an ordinary competitor, than any other business. If there is a distinction, it is likely to be that free Web services are especially governed by first mover advantage and category domination such that they are less in danger from Black Swans than, say, a trucking company or a chain of coffee shops.

bizarre (1)

FranTaylor (164577) | more than 4 years ago | (#28595907)

How is google free?

The advertisers pay.

People who want premium services pay.

The rest of us pay with our time and our eyeballs, looking at ads.

So.....just like all businesses (3, Insightful)

imgod2u (812837) | more than 4 years ago | (#28595925)

This is different than any other business.....how?
The longer something remains in the market, the more the profit for that item approaches zero. Even paid service. The only time this isn't the case is either in a monopolized market or when government steps in. That's why companies in the free market have to constantly innovate and come up with new things that the competitor doesn't have. This notion that any business model can guarantee that you'll make money forever once you've come up with one idea is a myth.

At first thought he was arguing against it (2, Insightful)

Dan667 (564390) | more than 4 years ago | (#28595959)

But he is making a valid observation. If you sit on your business model you will end up like the RIAA and be clinging to it as everyone else passes you by. Cash in while you can knowing it could die abruptly, and make sure you have enough R&D to have the next product in the chamber. It is the only way to do business (and actually that has very little to do with a free business model).

Re:At first thought he was arguing against it (2, Interesting)

PPH (736903) | more than 4 years ago | (#28596153)

Right. Because you could just as easily live by free and die by proprietary. Or vice versa. Its all about how you leverage your core competencies, extract the maximum amount of profit, and then either sell out or invest your profits in the next big thing. What 'free' tools buy you is the ability to hang onto as much of your revenue as possible (free as in beer) and be able to move to better platforms as time goes by (free as in speech).

I've seen too many proprietary products priced based on how much revenue the customer has, effectively skimming profits off the top. And then the cost to switch (either to reduce expenses or improve processes) is designed to ensure lock in.

Bah! (1)

Lumpy (12016) | more than 4 years ago | (#28596009)

Create a success.
Build it.
Sell out to the first buyer.
Start another new thing.
Watch as the thing you sold get's killed by free.
Repeat.

Honestly, dont get married to your creations, sell it and move to the next one while bankrolling. you'll never die by free.

Cuban: King of bad examples (1)

jedidiah (1196) | more than 4 years ago | (#28596053)

The problem with pointing to Google and snickering about how they give
away their product for free is the fact that they exist in a product
area that has always been gratis to the customer. This is ironically
enough much like SPECTATOR SPORTS where the vast majority of customers
get their "content" for "free". Most of the eyeballs that see Cuban's
games are "freeloaders". It's been this way since before the Internet
or even Television.

Cuban is the perfect example of the sort of businessman that derives
most of the value of his business from the fact that most people get
to use it for free. ...ironic really.

If You Live By NOT Free (2, Insightful)

Atreide (16473) | more than 4 years ago | (#28596079)

This is absolutely same for non free business.

If you specialize in a niche and it disapears or someone else gets better at it
then no god will help you.
Evolution works against you and you end up in stomach of some competitor.

Look at Microsoft.
Desktop is now only a small part of business.

They went after servers only ~10 years after desktop was launched.
Now they are in office, cloud computing, search, even gaming and a lot more.

Look at Oracle. They develop not only database but also application.

Look at IBM. They went for service years ago.

Look a Dell. They are going for service for a few years now.

Look at Apple. They are selling mp3 and service around it.

This is simply wise corporate development.
That is called diversification.

Taking advise from Cuban (3, Informative)

C_Kode (102755) | more than 4 years ago | (#28596143)

I'm not sure I would take to much advise from Mark Cuban. First, he is a hard worker, but with Broadcast.com he was in the right place at the right time. Beyond that he hasn't exactly made a lot of great desciions. The major investment into HDnet hasn't been that fruitful and the major investment into Register.com was a debacle. He traded a rising star point guard for a bad apple 35 year old point guard. Today, he just spent $25M on resigning that bad apple point guard (now 36 years old) that isn't half the player he onces was.

I'll pass on advise from Mark Cuban.

Some have a life cycle, some don't. (1)

Animats (122034) | more than 4 years ago | (#28596307)

"Like every company in the free space, your lifecycle has come to its conclusion. Don't fight it. Admit it. Profit from it."

As I point out occasionally, that's definitely true of social networks, which have a short life cycle of coolness, like nightclubs. It's less true of useful services, like PayPal or eTrade. (eTrade got into trouble because they got into home equity loans [marketwatch.com] as a side business. One of the headaches of running a financial business is keeping the guys who want to do "big deals" with company assets under control.)

eBay is an especially good example, because 1) it has a real revenue model, and 2) there's a strong network effect in having one big auction market rather than many little ones. It's going to be tough for someone to knock off eBay. Many have tried and failed.

Google isn't free (2, Informative)

sesshomaru (173381) | more than 4 years ago | (#28596453)

Look, how hard is this, Google isn't selling search services, Email, document publishing software, or the like.

Google is selling eyeballs, just like broadcast tv, broadcast radio, etc. They aren't selling anything to their users, they are harvesting their users and selling them to advertisers. They are able to sell stuff that's pretty well targetted through their search and Email.

The tradeoff of charging for their stuff would be that they would become a lot less valuable to advertisers, and people who are paying to use them would resent the fact that they are "paying for advertising."

So Google's service isn't free, it's just the Mark Cuban isn't their customer. Unless he's buying ad-space with them, in which case he's just not very bright.

THE HORROR! (2, Funny)

greg_barton (5551) | more than 4 years ago | (#28596511)

Someone out there with a better idea will raise a bunch of money...

My god, that would be a MERITOCRACY!

THE HORROR! KILL IT WITH FIRE

mod DowGn (-1, Redundant)

Anonymous Coward | more than 4 years ago | (#28596555)

America. You, BS4D addicts, flame
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