Deal Radar 2008: Joost

Joost is a peer-to-peer internet TV client software, launched by the Skype and Kazaa founders, Janus Friis and Niklas Zennstrom. The company?operated from Netherlands, UK and North America? was featured in Mitch Berman’s post on IPTV.

Joost offers users a desktop client that allows them to watch on-demand TV on the internet that is free and completely legal. Although, unlike other video platforms, Joost cannot be played on the users’ browsers, it does make up for the shortfall by offering features like chatting with a friend while a show is being aired. Though, Mac OSX on power PC or Linux is yet to be supported at this stage, users with Windows XP or Vista or Mac OS X (10.4 and later) on an Intel Mac can easily use Joost. In March 2008, the service went into an open beta stage eliminating the need for invitations and went a step further in attracting more users.

Though the service is free, there are analogous ads that are distributed between programs. David Clark, EVP and GM, Joost got busy monetizing interactive TV ads. He helped sign on more than 40 advertisers that include big brands like Sprite, Sony, Coca Cola and BMW. Apart from the ads interspersed between programs, there are small type and image ads on either side of the screen. I am not so concerned about monetization of the videos, since CPM for targeted video is relatively high. If the rest of Joost’s value proposition comes together, monetization won’t be an issue.

Its peer-to-peer technology benefits the channel owners by lowering the cost of distribution by restricting the amount of content that the servers stream out. Joost serves the content to some users and the rest of the data gets passed on from one user to another, thus moving the transmission costs from the channel owners to the users. Is this a great strategy? Is it reliable at full scale deployment? I have my reservations.

When Joost started out, content available was limited but quickly made up for it by signing content deals with the likes of Viacom and CBS. Incidentally, $45 million was raised in a venture round of financing from Sequoia Capital, Index Ventures, CBS Corporation, Viacom and Chinese billionaire Li Ka-shing. Under the deal, divisions of Viacom, including MTV Networks, Paramount Pictures and BET Networks, will license content to Joost.

Subsequently Joost signed content deals with Ministry of Sound TV, Warner Music, the production company Endemol, Fremantle Media, RDF Media and Diversion Media. In May 2007, Joost signed a deal with NHL for the distribution of its content, including vintage games and full game replays of the Stanley Cup Finals. Currently Joost, features more than 250 channels across various genres like cartoons and animation, sports, documentaries, lifestyle,entertainment and film. Further in August 2007, it also launched a new Widget API that enables third parties to make their own Joost widgets.

In December 2007, NBA unveiled its channel on Joost. The channel will enable fans to view complete replays of classic NBA games and video highlights of the 2007-08 NBA season. With excellent content deals and business ideas under its belt, Joost looks ready to tackle competitors like Bablegum, Youtube and Veoh etc.

According to TechCrunch, Joost is planning to embed itself into set top boxes and televisions. If Joost is able to carry out its plans, the industry will move further along in the direction of true IPTV. After all, viewing full-length videos on a computer is not pleasant. Most of the video-viewing on the computer is short clips.

Cisco-veteran Mike Volpi took the CEO job at Joost last year. IPTV is a humongous market opportunity, enough to attract someone as high profile and credible as Volpi. However, it remains to be seen, how the company navigates the complex world of Set-top boxes and Televisions, as well as Telcos, including technology and business model challenges.

In summary, I want IPTV startups to enable full-length video-viewing on the television set, not short clips on the computer. Can Joost deliver that experience? Remains to be seen.

This segment is a part in the series : Deal Radar 2008