Eyebrows went up when Google Inc. recently agreed to spend $1.65 billion US for YouTube, the most popular website for free video clips. But that figure could be blown away one day if some emerging companies achieve their much broader visions for the future of online TV.
These companies are building flexible online networks that can host content, serve up ads and dish out interactive features. While "viral" video-sharing sites like YouTube focus on individual clips— many pirated— these new internet TV platforms are designed to host full-fledged channels that content creators can control.
One of the best positioned is Brightcove Inc., which on Monday is taking the wraps off an internet video network that handles virtually everything for content creators.
Aiming to serve everyone from garage auteurs to major media companies, Brightcove offers free publishing tools and runs video wherever publishers want it.
That could be on the central Brightcove site, which is accessible through the video search functions at Google, Yahoo and AOL. Or content publishers can use Brightcove to run video on their own separate, branded sites. Or they can syndicate it to third-party websites, such as blogs or MySpace pages, where the content might run alongside user-generated material.
All those videos can be sold as paid downloads or streamed for free, with ads. Brightcove will sell ads and pool them among its customers, or it will plug in commercials that content creators sell themselves.
"They can launch a business in our system in a week," said Brightcove's founder and CEO, Jeremy Allaire, who formerly was chief technical officer at "Flash" graphics creator Macromedia Inc. before it was acquired by Adobe Systems Inc.
It's not a new idea that the abundant bandwidth of the internet could become the delivery mechanism for thousands of TV channels— including new special-interest stations that would struggle to crack the cable or satellite lineup. We heard that pitch in the dot-com heyday.
But after a slow ramp-up, more than half of U.S. internet subscribers now have broadband rather than dial-up. And the explosive growth of video-sharing sites, YouTube included, has helped convince advertisers that the medium has legs (though the term most commonly used is eyeballs).
These trends have helped Brightcove draw $28 million in funding from such companies as Time Warner Inc.'s AOL LLC, Hearst Corp., General Electric Co. and IAC/Interactive Corp. And Brightcove's flexibility has attracted diverse publishers trying to expand their broadband video presence. National Geographic, the Travel Channel, Warner Music, The New York Times and The Washington Post are all Brightcove customers.
So is Barrio 305, a Miami-based internet-only channel devoted to the tropical hip-hop music flavor known as reggaeton. Brightcove pumps Barrio 305's videos to free sites in addition to Barrio 305's own pages. That gives the upstart network such wide dispersal that it hasn't mattered that Barrio 305 has yet to persuade any cable TV programming buyers to offer its package.
"We can bypass these traditional media agencies, and we can get out directly to our audience," said Antonio Otalvaro, one of the three brothers who founded Barrio 305. "Our primary audience is online. They're not watching TV."
Brightcove wins big praise from Forrester Research video analyst Josh Bernoff, who says Allaire "has really got it all figured out."
Even so, Brightcove is not alone in holding video publishers' hands as they step into the internet.
NBC Universal recently launched an internet video distribution system called NBBC (short for National Broadband Co.) that is working with NBC affiliates and even traditional NBC rivals such as CBS Corp. and News Corp. NBBC is a marketplace where content owners and third-party sites can agree to share content and ad revenue.
"You can syndicate over millions of sites, each one of which will drive somewhere between one stream and a million," said Mike Steib, NBC Universal's general manager for strategic ventures. "Website partners can say, 'I'd love to have Vibe.com (clips) and NBC News and product reviews from CNet, and Saturday Night Live'— the website owner tells you what fits best for their audience. Being able to create that, we think, is the next big thing."
Another key player, Maven Networks Inc., is headquartered in the same Cambridge office complex as Brightcove. (The ties aren't just geographic: Allaire briefly served as an adviser to Maven before founding Brightcove in 2004; Maven licensed a video publishing tool to him and owns a minuscule stake in Brightcove.)
Like Brightcove, Maven is hosting video for customers and giving them quick, mouse-click methods of positioning content and setting up ad campaigns. Unlike Brightcove, Maven doesn't want to double as a video portal or dip into the ad business. Maven gets paid when viewers check out one of its customers' videos.
Maven's CEO, Hilmi Ozguc, is a tech veteran who sold an online ad company to ExciteAtHome— which flamed out when its big dreams got way ahead of the early state of U.S. broadband penetration. Retrenching, Ozguc started Maven in 2002 "with an eye to this broadband future" and has raised about $30 million, mainly from venture capitalists.
Maven's customers include CBS-owned College Sports Television and The Weather Channel. Maven also powers aspects of NBBC's system, while 20th Century Fox uses Maven to show movie trailers.
"The whole industry is being transformed," Ozguc said.
So deeply is it being changed, in fact, that web video companies will have to smartly evolve as content coming over the internet is routinely funneled not only to computers but directly to living room TVs. This will require navigating around or working with cable companies, for example, that make a good deal of their money controlling what you see on TV.
Consumers would also benefit from better methods of finding all this stuff, since traditional web search engines were built to read text.
None of these obstacles are insurmountable, but whoever can solve them would likely create an enormously valuable enterprise. Sure, YouTube sold for $1.65 billion, but Bernoff predicts "there will be multiple multibillion-dollar companies" before all is said and done.