Investors Tune Into Web TV
Investor's Business Daily, July 16, 2007
Jul. 16, 2007 (Investor’s Business Daily)—
Do you want your Web TV?
If so, you’re in luck. Among the fastest-growing fields online is streaming video content. And that content is quickly moving beyond short, amateur YouTube clips.
Two startups among those generating the most buzz in online video are Joost and VeohTV. Joost, which launched in testing phase in April, promises 150 Web “channels” of fare, including original content and repeats of TV shows. Veoh recently began trials of its VeohTV.
Joost and VeohTV are similar, but have one big difference. Joost will play content hosted just on its own Web site. Veoh will have its own content, but will also let users browse the Web for other video content, which users will be able to play on the Veoh site. Consumers ultimately will decide the winners and losers in this fast-emerging field.
Veoh is testing a software upgrade application that functions as a Web browser for video only and hopes to make it available to the public later this year. The company says the software offers a simple interface directory of more than 100 video channels, including NBC, Fox, CBS and YouTube.
Veoh is attracting about 15 million visitors a month, up from 4.5 million in January.
Dennis Miller, a general partner at Spark Capital, has placed his bet on Veoh. Spark was part of Veoh’s $12.5 million second round of funding, announced in April 2006, and reportedly was part of a $26 million third round completed last month. Miller recently spoke with IBD about Web TV.
IBD: What is your view of Joost?
Miller: They’ve got rock-star founders (Niklas Zennstrom and Janus Friss, who also launched peer-to-peer pioneer Kazaa and Internet-telephony pioneer Skype) that get a lot of attention and who have been disruptive historically. That gives them the benefit of the doubt and attracts a lot of hype and publicity around what they want to do.
But I think their approach is misguided. Joost is still a closed platform, where they have to get a number of content providers to give them stuff. They do have a nifty player (user interface). But because it’s a closed system, I don’t think they’ll be able to blend the best of what’s on the Internet with the best of TV.
IBD: Joost is aiming to get its software integrated into Internet-connected set-top boxes. Would that put Joost in a better position?
Miller: If they add that functionality and move to that place, it will help. But you still have a number of content suppliers, such as NBC and Fox, that want to build their own Web destination. And Sony (NYSE:SNE) wants to move stuff to (Sony-owned video site) Grouper.com and relaunch that. Major network executives are pushing a lot of stuff out onto the Web because they want to be agonistic as to the platform. I don’t think there’s any loyalty to one site. CBS.com does not mean anything to a Web surfer. They want content when and where they want it. They’re (Web surfers) using social networking as a launch pad, pulling music, defining who they are, discovering things through friends. That’s a much more creative discovery path for tomorrow’s consumer.
IBD: And Veoh has a better solution?
Miller: We like Veoh’s distribution platform and technology. And we like their CEO (Dmitry Shapiro, who earlier founded peer-to-peer network security firm Akonix Systems) and what he’s done before Veoh. We think the player (interface) is very good and we liked the combination of (former Disney CEO) Michael Eisner and Time Warner (NYSE:TWX) as investors. The group of investors came together very nicely and they have insights into what the studios are thinking and how to get access to content. Time Warner TWX has the largest aggregation of intellectual property out there. Eisner (while at Disney) was the protector of the crown jewels and has always been the guy to err on the side of caution. His approach was, “You’re not going to touch my stuff unless you pay for it, or we’ll come after you.” Who better to go out and proselytize this new distribution platform? Veoh is also creating a player that allows people to go out and browse the Internet and grab the best content out there. It’s a TiVo (NASDAQ:TIVO) for the computer.
IBD: What will it mean when streaming video on the Web can be moved to the TV set?
Miller: It’s been described as the Holy Grail. I think we’re still a couple of years away from seeing it happen. The Apple TV box is nifty, but it’s tied to a lot of what is Apple. I think that, theoretically, Web TV is very disruptive and very interesting. I still think these are two separate worlds that will blend somewhere in the middle.
Now, I say this with the bias of being a business guy. I’m not a 14-year-old gamer who says, “Hey, I play a lot of PC games, this is a lot niftier now that I can expand and can communicate and do that on my TV set.” I think the hype is greater than the reality of the impact it will have.
IBD: What might get in the way of this transition?
Miller: There’s huge institutional momentum against that merger happening. The guys who are the gatekeepers now also control a lot of the content. Comcast CMCSA, for instance, has its cable network as well as being one of the largest Internet service providers. Are they going to want to see that toll diminished dramatically because people can access all this stuff and pay you a single rate for your broadband connection? I think there a lot of institutional inertia that will make it difficult to see that happen as quickly as people are suggesting.
IBD: But at some point will the Internet become an alternate cable channel?
Miller: Over time those worlds will probably blur. People won’t think about cable and the Internet as widely distinctive services. You look today and see your cable provider is also your Internet provider. The Internet pipes today are creaky. Too much data is being pushed down, so we have to fix the plumbing here. (We need to find a way) to build better boxes so that Web TV is a seamless experience and can be navigated in a way similar to cable.
The cable operators and satellite operators want to own the delivery methodology into the home. The Internet guys are saying they have to reduce the power of the gatekeeper wherever possible. I don’t have a crystal ball on what that will look like five years from now, but I don’t think consumers will care if the delivery comes from fiber, coax (cable), wirelessly or whatever.
IBD: Competition is getting heavy in video streaming. How will it shake out?
Miller: You’ll see some fairly significant consolidation and only a few will reach critical mass, when they can get 20, 30 or 40 million unique visitors and start delivering 500 million page views a month. People won’t want to go to 10 different Web platforms to find content. They’ll want one or two. And whoever figures out how make it easy to do, where people can move content around and get everything they need, they’ll win.
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