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Mark Cuban Answers All Your Questions, Part 1

My guess is that Mark Cuban doesn’t sleep very much. In addition to his various entrepreneurial activities, including an attempt to start up a new pro football league, he also managed to respond to a great many of the questions you all posed on our superfreako user-generated Q&A. (The only thing missing is a question about who he wants to win the NBA finals that start tonight; I am guessing it’s the Cavs.)

Thanks to all of you for your great questions. And thanks especially to Mark for the answers, which I am pretty sure you will find as fascinating as I do. Because he did such a thorough job, I’m going to break his answers into two posts. Below is the first; the second will follow in a day or three.

Q: As a longtime and passionate consumer of music, I really enjoyed your latest post on the current state of the music industry. I think the contradictions the music industry predicates itself on, as you pointed out, are ripe for a Freakonomics study. My question is this: How can the music industry as we know it survive without DRM — and yet, conversely, how can they survive with it?

A: The question really is how can the music industry survive with DRM. DRM doesn’t change whether or not people steal music, because all music is already available to those who are willing to steal without DRM. So the music companies spend money on DRM in a futile effort to protect music when that money could be spent finding better ways to sell music, or could be used to reduce the price of music.

Q: How long will it be before pro sports teams start giving partial ownership of the franchise to players, instead of paying a salary to the star players? It could get around the salary cap and it would give the star players incentive to invest themselves with the team since they would get a cut.

A: Never, because players will always be replaced at some point.

Q: As a fan, I feel the No. 1 problem with the NBA is inconsistent refereeing. I would say about a quarter of the games I watch seem to be made less fair by the referees. What can the NBA do to improve the impartiality of officiating?

A: It would cost me too much money to answer.

Q: How far are we away from a hedge fund buying and actively running a professional sports franchise?

A: I think a hedge fund controlled by one or two individuals will own a sports team at some point.

Q: Professional soccer/football teams have for years used “junior” or “youth” teams to develop talent. While the American major sports have the NCAA as their feeder system, do you think this is a project the NBA could use, where they could develop local talent?

A: Yes. If the NBA didn’t prevent it, I would quickly create an organization that mirrors what hockey does with its juniors programs, and how basketball and soccer players are developed outside the U.S. I’m a believer that you should be able to pursue whatever profession you choose, and the NCAA shouldn’t be able to stop you if that profession happens to be in a collegiate sport they control.

I’m not advocating that 15-year-olds play in the NBA, but I am saying that a 15-year-old who has dreams of being in the NBA should be able to play on the same team year-round and have the opportunity to have the same coach year-round. That college-age players shouldn’t be limited to practicing with only four players on the court in the summer, or whatever other bizarre rules the NCAA has put in place, any more than a violinist, opera singer or software developer should be limited in their efforts to be the best they can be at their profession

Q: Do you ever tire of hearing from Pittsburgh sports fans, begging you to buy their troubled franchises? As a lifelong Pens/Pirates fan, I am hoping the answer is “No – and I’ve got my checkbook out right now.”

A: No. I’m proud to be from the ‘Burg and I’m a huge fan of all Pittsburgh sports.

Q: Do you plan on bidding on the Cubs at all? As a fan of the other Chicago team, I’m beginning to think they really need some help.

A: It depends on what assets are offered for sale as part of the transaction.

Q: On another blog, you were quoted as saying, “The stock market is probably the worst investment vehicle out there” and that you should only invest your money when you have an informational advantage. First, do you own any stock? And second, what kind of investment opportunities do you think present information asymmetries?

A: I own stocks that are strategic to my private investments. I typically make the investment and hold it for an extended period of time. I buy stocks with the hope that I will never sell them.

As far as information symmetries, I don’t know that there are any. Unfortunately, most people forget that whenever they buy or sell a stock, there is someone, usually a professional investment firm, on the other side of the trade. I’m pretty sure the other side isn’t there with the intent of losing money.

Q: Has scouting in the NBA evolved? Does MLB’s trend toward Moneyballesque statistical analysis play a larger role in the NBA given the growing number of high-school and foreign players entering the league versus NCAA players of yesteryear?

A: It’s certainly evolved. The one variable that makes most Moneyball-type scenarios unworkable in the NBA is coaching. The difference in styles between MLB teams is minimal, while the difference in style between the Spurs and Suns is dramatic. A player may thrive in one and struggle in the other.

Stay tuned for Part 2 of Cuban’s answers in the near future.