The cover story of the May 1999 edition of Success magazine featuring streaming aggregator Broadcast.com founders Mark Cuban and Todd Wagner reads particularly interestingly here in mid-2002, offering insight into the aggressive and competitive nature of Cuban. It was of course this nature that would lead him to plan a business strategy by which (among other things), to quote the article, "build barriers to shut out potential rivals."

Since that article was published, Cuban sold his company to Yahoo!, whose subsequent royalty deal with the recording industry was used as the basis for the Librarian of Congress's determination of a statutory rate for the rest of the webcasting industry.

After the Librarian agreed that arbitrators' use of the deal as a benchmark for a statutory rate was not arbitrary, Cuban revealed in an e-mail RAIN that the deal was specifically crafted by Yahoo! to shut out small webcasters and decrease competition. Specifically, he wanted a "per stream" (as opposed to a "percentage of revenue" rate), since smaller webcasters would most likely not be able to afford to compete in that structure. The thinking was that smaller webcasters, who would be unable to afford to webcast on their own under such terms (because of the fixed rates), would be compelled to use the services of well-funded aggregators like the Yahoo! Broadcast service. See our full coverage of this story here.

It is now -- against this royalty determination -- that the industry of small webcasters is now fighting for their very existence.

Below are excerpts from the original Success piece:

"One of the hottest companies in cyberspace occupies a converted warehouse in Deep Ellum, an old, honky-tonk neighborhood nestled near the glass towers of Dallas's central business district. The warehouse roof bristles with satellite dishes that pull in TV and radio broadcasts from all over the country and, increasingly, the world. Downstairs, in a large room full of rack-mounted computer equipment, technicians transfer the sound and images to a Web site called www.broadcast.com...

"At the heart of this enterprise are Mark Cuban and Todd Wagner, the visionary odd couple who run Broadcast.com Inc. Together, these men have built the Internet's leading broadcast company. Their initial public offering (IPO) was one of the most successful win Wall Street history. Broadcast.com stock rose by 249 percent on its first day of trading, July 17, 1998. Cuban, Wagner, and the other original investors became instant paper millionaires; the company raised more than $40 million in operating capital.

(CONTINUED BELOW)

(FROM ABOVE)

"Guessing that Internet broadcasting might have commercial potential, they assembled what would become Broadcast.com in Cuban's spare bedroom, for less than $5000. Cuban put up $2,995 for a Packard Bell 486 PC, about $1,000 for network equipment, and $60 per month for an ISDN line...

"As e-mail flooded in from office workers in Dallas and homesick Dallas natives everywhere, Cuban and Wagner realized they might actually have a viable business on their hands. They launched a company called AudioNet and started pitching Internet distribution to radio stations and sports teams all over the country. The business model: Content providers interested in expanding their listenership over the Web would pay AudioNet to Webcast their programs. 'We licensed a lot of content for multiple years because nobody else cared about it,' Wagner says. 'I mean, we were creating something that didn't even exist. Internet broadcast rights -- what were those?'...

"I think we have the chance to change the way the world communicates and just make an obscene amount of money along the way." -- Mark Cuban

"Having created a viable revenue model, Cuban and Wagner needed a way to keep competitors out of their territory. So, they began putting together a sizable inventory of Internet programming that Web users would be able to find only at their site. The more content they controlled, the more difficult it would be for potential rivals to enter the market...

"This is the Internet, mind you, so Broadcast.com has yet to make a dime in profits. Although revenue has grown dramatically in the past three years, operating and marketing costs have grown even faster. The company lost $14.9 million last year on revenue of $22. 4 million. And the company's stock prospectus contains this chilling little disclaimer: 'The Company expects to continue to incur significant losses on a quarterly and annual basis for the foreseeable future.'

"Sitting in his modest cubicle on the main warehouse floor at Broadcast.com, Cuban waves a dismissive paw when I bring this up. "That's just lawyer stuff...I think we have a chance to change the way the world communicates and just make an obscene amount of money along the way.'

(CONTINUED BELOW)

(FROM ABOVE)

"In the looking-glass world of the Internet, where the most successful companies lose more money than their rivals do, all the emphasis is on building a sufficiently high profile that you become one of the coveted "portals," the sites that most people go to automatically whenever they want a given service...

"As Cuban and Wagner never tire of saying, their business strategy is really quite simple: provide compelling content, build barriers to shut out potential rivals, differentiate yourself from the competition. And do it all very, very quickly, because this is the Internet, the world's newest and potentially richest media market, and there are plenty of wealthy competitors drooling over your visibility and market share...

"'We always try to accelerate so there's no room for someone to pass us,' Cuban concludes. "To get to the front of the parade, you jump in front.'"

This column appeared in the May 1999 issue of Success magazine.