AOL has been a subject of much debate within the investment community and the broader blogosphere of late. The once proud Internet pioneer has been hemorrhaging subscribers while corporate parent Time Warner has made no secret of its desire to seek "strategic" alternatives for the venture. This comes just five years after the merger ($300B combined market cap at the time) was supposed to be the ultimate combination of technology and content.
But amid all the turmoil, AOL appears to have gotten something right with the announcement of In2TV, a free streaming video-on-demand service for broadband users. In2TV will leverage the thousands of episodic shows in the Time Warner content library and provide them to viewers via an advertising-based revenue model. Initially, the slate of shows is eclectic to say the least, but obviously this is a small sampling of the power of this delivery model if initial returns are successful.
While the announcement has been discussed at length in the blogosphere (and among the investment community), I've seen very little about the technology that is going to power In2TV. In conjunction with the In2TV announcement, AOL disclosed plans to offer a "DVD quality" format called Hi-Q. Hi-Q is being developed in conjunction with Kontiki.
Kontiki is an interesting company that was arguably ahead of its time having launched in 2001 before broadband access and converged networks were ubiquitous. The company provides high-quality video distribution through the use of P2P grid technology. The company is shipping version 5.0 of its software, and named Todd Johnson (of Jamcracker fame/infamy) as its new CEO in August.
In essence, computers that wish to access the streamed content agree to make a portion of their PC cycles available to Kontiki as a content cache. While hardly a unique approach, Kontiki has been at the forefront of pushing this model as a legal, enterprise-class technology. Unlike widely regarded (but legally questionable) P2P grids such as eDonkey, BitTorrent, Kazaa, Grokster, etc...Kontiki has layered a series of security protocols into the fabric of the network that [theoretically] allows the content owners/distributors to maintain control and prevent piracy. As a result, their business has evolved into primarily providing secure corporate training, marketing and sales content.
Kontiki has a rather impressive list of clients, and had garnered minor attention in the media/blogging/consulting circles a few months ago for powering the BBC's IPTV foray. It's unclear whether this was a competitive bid, but I'm guessing Kontiki's existing relationship with AOL/Time Warner played a role here [Kontiki powers AOL.com's movie trailers on the Moviefone site].
While certainly an impressive validation of the technology, as IPTV gains momentum, this market is being attacked by a number of established players in addition to some well-funded startups.
Competition in this market appears fierce...
- Just a few months ago, Time Warner Cable announced plans to offer broadband subscribers 75 cable channels as digital streams on their PCs [note: in a small trial in San Diego]; powered by RealNetworks (RNWK).
- BitTorrent received nearly $9 million in VC funding in September; as the company seeks to capitalize on the enormous popularity of its open-source technology [whether BitTorrent can convince publishers its a friend and not a foe remains to be seen]
- Sling Media's Slingbox appliance/service has received rave reviews from just about anyone who's laid eyes on it and calls into question the model for whether or not users need to pay for licensed content if they're paying for it via another medium already
- The venture world is pouring money into the space...Akimbo (DFJ, Kleiner Perkins), Brightcove (Accel), Rawflow (Benchmark - also an investor in Kontiki), Veoh Networks (Shelter) are but a few
- Google (GOOG) and Yahoo (YHOO) have made their own push into this market [with mixed results to date] and the popularity of Apple iTunes (video service was a hit the second it launched) also serve as daunting alternatives
This will be an interesting test, not just for AOL as they attempt to stop the hemorrhaging, but also for the viability of P2P grid technology as a means of distributing high-quality video content in a secure manner. Will customers willingly hand over a piece of their PC in order to see the Hi-Q quality episodes on In2TV? Time will tell.
Related Articles:
- Om Malik: The Archive Monetization Principle
- Michael Parekh: On AOL.com Running Warner Reruns on Demand
- Time Warner/AOL Press Release
P.S. The fact that AOL included V in the initial lineup borders on genius. If there's ever been a better science fiction mini-series, I've not seen it.
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