Internet video revolution redux

Internet video revolution redux

Veoh
Networks Inc hopes to radically change how people watch video online,
offering software that not only finds and plays programs from anywhere
on the Web but also offers the look and feel of traditional TV

By BRAD STONENY
NY TIMES NEWS SERVICE, New York

Sunday, Jul 15, 2007, Page 19

 

The creators and consumers of user-generated Internet content like video-file sharing site YouTube and social network MySpace.

Dimitry Shapiro brings an unlikely gadget into meetings these days: a TV remote control.

As chief executive of Veoh Networks, an Internet video company based in
San Diego, Shapiro uses the remote to navigate the company’s new
software program, VeohTV, on his laptop. The software acts like a Web
browser but displays only Internet video, presenting full-length
television shows and popular clips from the Web’s largest video sites,
like NBC.com and YouTube. It lists those videos in a program guide and
plays them in a small window or across the entire screen.

 

 

 

 

The product, now in a private testing phase, will be available to the
public later this year. It has the potential to be a popular and
practical way to watch online video. But like a long line of other
innovative high-tech tools, VeohTV could also threaten and alienate
traditional media companies and even cause some of Veoh’s Internet
rivals to consider legal remedies.

For the last two years, Veoh Networks has operated a video-hosting Web
site, Veoh.com. The site works much the way YouTube does, with a few
notable exceptions. The company does not impose any time limits on the
length of videos and does not use digital fingerprinting technology to
filter out copyrighted material. That has led to some rights holders to
complain that Veoh has fallen behind in protecting intellectual
property.

 

"Person of the Year" for 2006 on Dec. 16, 2006

Nevertheless, Veoh.com has been growing
fast: It draws about 15 million visitors a month, up from 4.5 million
in January. Veoh Networks is a private company and does not release
financial data. YouTube, by contrast, gets more than 100 million
visitors and serves up more than 3 billion video clips a month,
according to several market research firms.

 

This image, released by Veoh Networks Inc, shows a view of its software Veoh TV.
PHOTOS: AGENCIES

"It’s impossible to compete with YouTube as
a video sharing site now," said Josh Bernoff, a vice president at
Forrester Research. "Veoh is a good example of a company that decided
to go off in a new direction."

That direction is VeohTV. To support the new effort, the company raised
about US$26 million this summer from investors, including Time Warner;
Goldman Sachs; Spark Capital, a venture capital firm in Boston; and the
former Disney chairman Michael Eisner, who joined the Veoh board and
counsels Shapiro, a 38-year-old, Russian-born engineer. The company
introduced VeohTV as a beta product last month, making it available for
testing to a group of invited users.

I found VeohTV to be easy to use. Once the software is downloaded to a
computer, it offers an easy-to-navigate directory of 114 video
channels, including listings for CBS, NBC, Fox and YouTube. On the NBC
channel, there are dozens of episodes of Heroes, 30 Rock and Studio 60
on the Sunset Strip. On the Fox channel, there are several full-length
episodes of the dramas Bones and 24.

Those shows are free and available for streaming on the NBC and Fox
sites. The VeohTV player, Shapiro said, is just giving them a new
audience.

"There are full-length episodes at Fox.com, but many customers don’t
know how to find them," he said. "The Web browser is fine for short
clips. But if you just want to sit back and watch video on the Web,
this is what you will want to use."

Major media companies, however, are more interested in protecting their
copyrighted programs. Veoh does not ask for permission to play material
from other Web sites, though Shapiro says he wants to strike
advertising-sharing deals with content owners to ensure that shows
appear in high-quality video. But Veoh does not think that it needs
consent because VeohTV is doing nothing more than playing what is
already online, including any commercials shown during the programs.

The networks may disagree. By only offering video, VeohTV omits all the
other advertisements on the network sites. For example, people who
watched an episode of Heroes on NBC.com last week also saw for 40
minutes a banner ad for McDonald’s on the same page. VeohTV users
watching the same episode would not see the banner.

Rick Cotton, the executive vice president and general counsel of NBC
Universal, said that streaming full-length television episodes drives
traffic to other parts of NBC’s site and exposes users to the ads on
it. And the right to play those shows is valuable, he said, pointing to
the still-unnamed venture between NBC Universal and the News Corp to
create an online repository of their TV shows and movies. Sites like
MySpace, AOL and MSN have already entered into commercial agreements to
display the venture’s content.

"This material has value," Cotton said. "The notion of taking it and
generating traffic with it needs to be negotiated and needs to be done
with the agreement of content owners." That’s why NBC and the other
major studios are keeping close tabs on VeohTV’s business model.

For some video content, VeohTV can act as a digital video recorder,
turning a video stream – meant to be viewed on the Web – into a
downloaded file on a user’s hard drive. VeohTV users can record a
YouTube video, for example, even though YouTube, owned by Google, says
its terms of service specify that videos uploaded to the site will only
be streamed.

Other software, like the recently released RealPlayer 11, by
RealNetworks, can turn streaming video into downloads as well. But
according to Ricardo Reyes, a YouTube spokesman, VeohTV steers users
away from its ads while violating YouTube’s contract with its users.
Reyes says the company is watching Veoh carefully. In response, Shapiro
says his software provides an easier way to do something that is
already technically possible on YouTube.

Shapiro and his backers are aware their product will disrupt current
business models. So have many technological innovations in the past, he
argued, and Veoh hopes to build a large audience while courting large
media companies. That creates an apparent contradiction that will be
hard to resolve. Veoh maintains that it does not need permission to
list and play other companies’ videos inside VeohTV. But it also wants
to play nice.

"We are going to try to be friendly to content owners," said Todd
Dagres, a partner at Spark Capital who serves on the Veoh board. "We
are going to try to be the white-hat company."

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