CAD for the Rest of Us

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A Fuzzy Image for Internet Video

Internet video once lured many smart investors into squandering their fortunes, but now many have been scared off -- and other alarm:clock news from the land of private venture funding.

Internet video has long intrigued entrepreneurs with its potential. In today's revived, post-bubble startup market, though, there's surprisingly little financial or entrepreneurial activity focused on launching new Internet video products. Sure, Microsoft, Apple, Real, and others have developed video players. And Google recently launched a Beta version of video search and the peer-to-peer video-sharing standard BitTorrent has become a cult hit. But few players can boast of winning big in the Internet video arena.

A few years ago, a number of stars from the early Internet decided to make Internet video their next stand, including the founders of Netscape and Macromedia. Their projects have been a slog, though. And we suspect they now wish they'd rested on their laurels.

We recently viewed a demo of a video portal from Netscape alumni Mike Homer and Mark Andreessen, called the Open Media Network (OMN), which is a not-for-profit outfit. Site visitors can access a free program guide to download public TV and radio programming, movies, podcasts, and video blogs, and even submit video.

While OMN seems reasonably promising, it's powered by Homer and Andreessen's for-profit, venture-backed company Kontiki, which has been slow to find its footing. Kontiki is a content management software platform developed to disseminate video as cheaply as possible. Currently, it has trials underway with the BBC and NBC.

However, Kontiki's last round of financing was an $8 million investment in December 2004, and it included just one VC firm, the Barksdale Group, which has since disbanded. Since most owners of video content have had a hard time monetizing their assets via the Internet, companies like Kontiki, which are in business to help them do so, continue to struggle.

Another struggling Internet video startup is Akimbo, which offers a TiVo-like service, delivered via a broadband Internet connection, that allows viewers to watch Internet videos on a TV. A scathing review of its TV-via-the-Internet product in the New York Times called it "a train wreck...It might just walk away with High-Tech Turkey of the Year." Despite an investment from Kleiner Perkins, whose partner William Randolph Hearst sits on Akimbo's board, Akimbo appears to be a loser, unless it can dramatically improve its value proposition.

Two Web video companies with brighter prospects are CinemaNow and iFilm. CinemaNow offers video downloads to PCs and, like Netflix, charges a subscription fee. Unlike Netflix, though, it offers popular adult films as well. CinemaNow's investors include Menlo Ventures, Microsoft, Lions Gate Entertainment, Cisco Systems, and Blockbuster.

IFilm is similar to CinemaNow, but has taken a more "guerilla" approach, serving up popular Internet video clips (think Steve Ballmer dancing), music videos, and video games, in addition to feature films. iFilm claims to have been profitable for the past couple of years. And it's backed by an impressive roster of investors, including Eastman Kodak, Sony Pictures Entertainment, Yahoo!, and Vulcan Ventures.