Newseek Article on Internet TV

[deacon blues]

Trashing the Tube
Is Internet TV finally here? Flip open your laptop and find out. The Lassie Channel is only the beginning.

By Steven Levy
Newsweek

May 14, 2007 issue - Disruption isn't what it used to be. Niklas Zennström and Janus Friis are known for marching into an industry and turning its business model into chopped meat. They made deadbeats of the music business with tune-sharing Kazaa and rendered telcos speechless with call-for-free Skype. Then a funny thing happened. After selling Skype to eBay for $2.6 billion, the pair paid more than $100 million to the record labels for Kazaa reparations. "That litigation meant we have a huge amount of understanding for [a big industry's] issues," says Friis, a 30-year-old Dane. This set the stage for a different approach in their next venture—a kinder, gentler sort of disruption.

The current target? Television. Their new project is Joost (pronounced like "juiced"), and the point is "to change the way people consume TV," says Swedish native Zennström, 41. This time around, it's more lovefest than war. Joost wants to be safe as milk for studios, an ace sales tool for advertisers and a permanent addiction for anyone with a broadband connection. Let YouTube fight off Viacom in a copyright lawsuit; Joost has signed Viacom as a content partner.

Load the free service, which went public last week, and your screen fills with video, essentially making your computer into a TV. It's not DVD quality, but it's watchable. The reason it looks better than similar ventures is that, like Kazaa and Skype, it makes the most of peer-to-peer technology, a fast and economical way to distribute bits. Everything on Joost is on-demand: no worrying about schedules. Since it's on the Internet, Joost has interactive features like chatting with friends while watching.

But the key to Joost's future is programming, and that's where the founders' newfound respectability is making a difference. The 100-plus channels that Joost carries include the mundane (MTV's "Laguna Beach"), the retro (The Lassie Channel), the brutal (Fight Network) and the cutting edge (Indie Flix). And better stuff is coming. New deals include the Turner Network (Adult Swim cartoons, CNN stalwarts like "Larry King Live") and Sony Pictures Television (library gems like "Charlie's Angels"). NEWSWEEK has also learned that Warner Brothers Television is the next bigfoot shoe to fall; WB president Bruce Rosenblum says he's starting a Joost science-fiction channel (with choices from "Babylon 5" to "My Favorite Martian") and a "Before They Were Megastars" channel (example: "Growing Pains" with a then unknown Brad Pitt).

CBS is onboard—by summer, expect to see "CSI" on Joost, along with lots of other Tiffany offerings. "Niklas and Janus are proven maestros in online distribution," says CBS's Quincy Smith, who, like other content execs, appreciates its security. It's reasonable to expect the other networks—which are already streaming their shows on their own sites and selling them on iTunes—to follow. Joost expects everyone to follow. "My job will be done when I have acquired the rights for every channel, every avant-garde French film, every soccer match ... every piece of professional content the world has to offer," says Joost's head of content Yvette Alberdingk Thijm.

Like old-style TV, all this will be paid for by ads—with only three commercial minutes per hour. "We can charge more because we'll target ads to users, and marry ads with interactive elements," says Joost's ad czar David Clark. Joost claims that 32 blue-chip advertisers, including HP, Coca-Cola and Nike, have already signed on.

In their ruffle-no-feathers mode, the founders are reluctant to talk about the day when there's enough programming on services like Joost for people to stop paying the monthly cable bill. "You have to take it step by step," says Zennström, who notes that Skype has yet to end traditional long-distance service.

Joost, of course, is only one of dozens of companies striving to make Internet TV so prevalent that one day you will just refer to it as TV. Since its content deals aren't exclusive, there' s no assurance that the Skypers (who still have day jobs at eBay) will prevail. "We tend not to look at how we position ourselves against those competitors," says Zennström. "We focus on executing our vision, seeing what our users want and getting as much content as possible."

Even if Joost does upend the video world, don't expect its founders to retire and channel-surf the infinite spectrum. "I don't watch TV myself," says Friis. More likely they'll be figuring out the next big business to disrupt—gently or not.

So, will we legislate away our computers or will we continue the charade?

[deacon blues]

Television 2.0
The founders of Kazaa and Skype believe their new product, Joost, can be just as revolutionary for the TV industry.

WEB EXCLUSIVE
By Steven Levy
Newsweek

May 6, 2007 - The Internet television startup Joost has an ideal pedigree for a company that hopes to disrupt the world of TV—its founders have been behind two similar upheavals, first with Kazaa (music sharing) and Skype (Internet telephony). In both cases Niklas Zennström, (41, from Sweden) and Janus Friis (30, from Denmark) were not the first in the field, but they built top-notch peer-to-peer networks that stood out. Kazaa cost them more than $100 million in a settlement with the record labels. Skype brought them $2.6 billion when eBay purchased the company, for which they still work. That money is seeding Joost, the ad-supported-via-Internet television service that was launched on May 1. The two are based in London, but they were in New York on launch day, when they sat down with NEWSWEEK's Steven Levy for a rare interview. Excerpts:

NEWSWEEK: Why start a TV company?
Niklas Zennström: We actually wanted to do it for many years but it was just too early. A year and a half ago, we thought it was time. We got really good insight because we were dealing with many of the media companies through litigation. [Laughs.] We actually started to develop relationships with them and started to understand their challenges and how they were looking at things.
Janus Friis: At Kazaa we were trying out many different schemes for advertising-supported business models. But back then no one was ready for that. [Content-holders] were ready for litigation. Now they’re totally ready for it, and they see the broadband audience of hundreds of millions of people, and while they have to protect the existing business mode they’re extremely eager to exploit the Internet.

Is Joost supplementary to traditional television, or will things like it supplant the current TV model?
Zennström: New technologies very seldom completely replace things—they’re usually complementary. Certainly TV is not going away. It is exactly similar to what we’ve seen with Internet telephony. Skype didn’t make telephony go away. There are actually more telephone calls being made each year. The same thing with file sharing—it’s actually making people buy more music.

Don’t people buy less music and incur fewer long-distance charges?Zennström: Yeah, it becomes a competitive pressure on the established medium. But in the near term, this is certainly complementary, and then we’ll see in the long term [what happens]. Obviously we think that the Internet offers tremendous benefits for how you can deliver television. There hasn’t been a lot of innovation in television distribution since the TV was invented 50 years ago.

What distinguishes Joost from all the other Internet television companies?Zennström: Many other companies are being very focused on video. We’ve tried to make a TV experience here, and at the same time, you also have companies like cable companies doing IPTV, which is kind of bringing, just taking TV and sending it down the Internet pipe. So we’re trying to [take] the good thing from TV, with the full-screen experience and everything, but still the good thing, the interactivity from the Internet.

Did you have any doubts whether the big content companies would deal with the former Kazaa guys?
Friis: If you asked that question six months ago, probably we would’ve said that we didn’t have any doubts, because we have to present a brave face. But we would certainly have had doubts, because we were just getting started. We spent a lot of time out there, explaining what we were doing, explaining to all the whole range of media companies, small ones, bigger ones, independent and established. We had really tried to take all their concerns into consideration from the beginning. We know that they want a certain level of security. We built that in. We know that rights are a very fragmented thing. I think over time the momentum built up.

On one hand, it’s impressive that you have deals with companies like Turner. But while you have “Anderson Cooper 360,” it’s not the regular broadcast. You have Comedy Central but not “The Daily Show.” When do you guys get all the good stuff?
Zennström: At some point we want to have everything, but you have to take it step by step.
Friis: With the current roster of deals, you have TV classics, but you also have some of the current big hit shows. You’re tasting what’s to come. You need to have patience to do this.

How will people eventually get Joost on their living room sets?Zennström: A TV screen and a computer screen are kind of the same today, there’s no big difference. One has a built-in tuner, the other one doesn’t. If you also take a look in our technology, there’s no proprietary software that requires Windows. We could relatively easily compile this for a set-top box. It’s something that we thought about from day one with some technology choices that we made.

Are you planning a live component for Joost?Friis: Live is one of these things that obviously we’re working on and we’ll build into the peer-to-peer fabric so that people could do it.

Will Joost eventually be able to handle high-definition television?Friis: The peer-to-peer network gets more and more robust as it grows, but the video quality itself comes down to the actual last-mile connection. Right now we’re doing TV quality, or in some cases, near-TV quality on a very low broadband connection, actually around half a megabit, because we want everyone who has any broadband, even fairly slow broadband, to be able to use it. But then we’ll be improving everything so that it will also be able to take advantage of higher bandwidth connections. On an 8-megabit connection, for instance, you can do HDTV. So it’s totally within the realm of possibility to do HDTV, as well.

But even your content deals aren’t exclusive. People will be able to watch some of the same shows in four or five places.Zennström: That’s why we need to be really focused on executing our vision, really looking to what our users want. And of course we need to think about getting as much content as possible.

You say you will have hundreds of thousands of channels. How will people find what they want?Zennström: It’s a matter of having smart technology that makes sure that the channels you’re getting are not necessarily the same as the ones I'm getting. Based on my preferences and viewing habits and all these kinds of things, people should be able to stumble on content in different ways. Obviously, the very specific one is search. That’s easy. We’re also experimenting with new user interface metaphors to make it really easy to browse through hundreds and thousands or tens of thousands of channels and see what’s on. Another interesting course is visiting things that are recommended by your friends—channels that are inspired by what your friends are watching.

Are you interested in pay-per-view?Friis: Some high-value content like movies and sports events will be pay-per-view, just because that’s the way the economics for those things work. But right now we’re totally focused on opening up the ad model.

Are either of you big TV watchers?Friis: I don’t watch TV at all. I buy DVDs, and that means that I typically get the shows several years late, but then I have them and I can watch them when I want.
Zennström: I'm a frustrated TV watcher. I tend not to have a lot of time available, so when I come home at night or whatever, and I turn on the TV and go through my programming guide, either I have to jump into a show and miss the beginning or have to wait. I don’t have the patience to wait, so I tend just to watch the news.
Friis: And you also don’t have the patience to program a TiVo.
Zennström: Sometimes I do that, but I'm not very good at that.

You sold Skype to eBay. Would you consider a similar sale with Joost?Zennström: When we were building Skype, we had absolutely no plans for exit or to sell the company at all. We were focused on building a long-term sustainable great business that would change the way people communicate. We had a fantastic opportunity to do this at eBay. At Joost we don’t even have any discussions, contemplations or anything about what is our exit strategy.
Friis: There’s a big difference between us and entrepreneurs who are building a company to try to sell it. What you tend to do then is build products, and we are not building products. We want to change the way people consume TV. That’s much bigger than building a product.


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