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Joost Revises Its Business Model

If at first you don’t succeed, try try again.  But if “Plan B” doesn’t work either? Then what? Do you call it a cautionary tale? Chalk it up to the nature of the game? Or do you try a new course yet again?  For the once high flying internet video startup, Joost, which has been spiraling toward trouble, it’s door number three.

On Tuesday, the company announced in a corporate blog that it will restructure its business model to incorporate a white-label service aimed at providing video distribution technology. (The video site will remain but no longer be the company’s singular focus).

Joost cited the economy as a key factor in its decision.  On the company blog, CEO Mike Volpi wrote that it had become “increasingly challenging to operate as an independent, ad-supported online video platform…. We have built a solid technology platform that there is demand for in the marketplace, and look forward to this new chapter for our company. At the same time, we’ll continue to operate and its associated video applications.”

While the challenges of earning a living off advertising had to figure into the calculus to shift focus, Joost’s problems run deeper and have been apparent for a long time. Simply put: the company’s service never matched up to the demands and behaviors of the consumer marketplace.  Timing, programming, and concept never fully came together.

Cycle back the calendar to May 2007 and Joost was a hot, hyped peer to peer video platform still in an invitation only beta.  The founders were coming off of huge success in the creation and sale of Skype.  Expectations were high.   The company was able to raise an unheard of $45 million in its first financing. There was a high profile CEO, big dreams, and talk was all about the future of TV.  But things change fast in the Internet world.

When Joost launched, the company built its offering on a peer to peer distribution platform instead of a browser application.  The logic of the architecture made sense from an engineering standpoint.  It had the potential to be an efficient and cost effective way to stream video.  Its proprietary nature also made for (potentially) defensible intellectual property.  But the need for client software ran contrary to tendencies in consumer behavior.  Web users favored browser based web services.  They weren’t interested in adopting something new unless the incentive was large.

Unfortunately for Joost, that incentive wasn’t something the company could fully control.   Content owners were seeding the marketplace to see what distribution platforms stuck.  Instead of gambling on one distribution platform, they offered the same program to five.  If you wanted to watch a show as a viewer, chances were you could find it in three or four different places. Only narrow selections were exclusive (though Joost did an admirable job of trying to acquire solid programming).

Joost wasn’t able to offer the programming depth or exclusivity of content necessary to become “Must See TV.”   It was merely one of many. And without that lure there was little incentive for customers to be loyal. 

Web video two years ago was about quality of service and temporal availability; a combination of conditions that didn’t make it easy for a start up service to succeed. 

By September 2008, the landscape Joost inhabited had become notably different.  Consumers itching for internet sources of video content had an abundance of choices.  They had YouTube for shorts, or they could watch premiers from NBC at Hulu. They could order on demand programs from Amazon, or watch streamed videos bridged straight to the TV with Netflix’ Watch Now.  They could go to a TV network’s website, explore the Xbox Live platform, tune in to Apple TV, buy at iTunes or sample flavors from a host of others choices. (Not to mention the traditional TV offerings at their disposal). 

In the second half of 2008, the video buffet was loaded and Joost was just one dish on the table.  To counter, Joost abandoned its application approach and redeployed a Flash-based browser offering.  Unfortunately, the change was too little too late.  Any early advantage was lost.  The buzz wasn’t to be recaptured.

Joost 2.0, the Flash version,  hasn’t drawn audiences in droves. According to a New York Times report, Joost’s May 2009 traffic draw was less than 650k unique viewers – a pittance compared to Hulu (more than 8 million) or YouTube (more than 75m).

So now its Joost Version 3.0.  Joost the Technology Company.    (Joost the video site will also remain .. but the expectation is the consumer face will become a much smaller focus.)

As part of the transition, layoffs are expected.   CEO Mike Volpi will also step down.  He’ll be replaced by VP of engineering Matt Zelesko. Stacey Seltzer, SVP of international business development and content acquisition will reportedly manage business operations.    Volpi will remain on as the company’s chairman.

Is the prognosis any better with the company adding B2B service provider to its repertoire? Maybe… but its hard to believe this isn’t going to be the company’s third strike.

Back in April of 2008, Metue did an in depth profile of three early IPTV companies including Joost.  The article was titled “The Struggles of Web Video.”  That post seemed to remain relevant when Joost switched to the browser the following September.  Now, with many more months behind, it seems relevant again.   To replay an old take in a slightly updated version:

Our April profile ended saying “the plight of the [companies] harkens back to the oft debated mantra “Content is King.”  As a distribution platform, they seem to be finding that no matter how good your deliver mechanism, you’re only as good as what you have to show.  A sustainable video platform requires a consistent slate of worthy programming. 50million viewers today will be gone tomorrow if the content pool dries up. Whether it’s Joost, or Babelgum…Daily Motion or another … the efforts to reinvent the wheel of video seem to be leading back to a single realization: Distribution methods change (and are changing),  but without control of content, it’s anything but a certain path to success.  As has been said for years, ‘Content is King.’

When Joost shifted to the web, they were trying to sneak around some of the consumer adoption challenges that had hampered them.   The challenges of content ubiquity, on the other hand, still remain.  That being the case, as impressive as Joost’s technology is, and as capable as their team, it’s remains questionable whether they’ll stand out enough from the pack to succeed.   The competition is already intense. In various forms, Apple (Apple TV and iTunes), Microsoft (Xbox Live and some Silver Light applications), Netflix (Watch Now), Amazon (Video on Demand), Sony (Connected Entertainment ) and Blockbuster (coming soon) are all offering (or planning to offer) video on demand services. There’s also free ad supported alternatives from every TV network, Hulu and a handful of others.  Adding to it, today’s challenging advertising climate won’t help when it comes to revenue generation for an ad supported service like Joost.

With so many challenges, when the official announcement of the shift to a web delivery version comes, one has to wonder if a eulogy might be a better format that a press release?  The road for Joost’s success is an uphill climb.

That was last year’s take (slightly condensed).  Now, it’s another year later  and another business model adjustment.  A shift of focus from one difficult market and entry into another that may be just as difficult. 

It’s sad to say but that “uphill climb” may be going from steep to treacherous.

Related Articles from Metue
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Joost in the Browser: Relevant or Redundant
IPTV Redux: Joost to Re-Invent in the Browser
IPTV in Trouble: Looking Closely at Joost, Babelgum and Daily Motion
IPTV in Trouble: CTO Changes at Babelgum and Joost
Contemplating Disruption: Will Internet Evolution Hurt Big Media?
Anything you Can do I Can Do Better: Fighting for TV PC Convergence
Networks Take $129m from Internet Video
Joost Gets an Agent: CAA signs Deal
Will ISP Throttling Hurt Online Entertainment?
Comcast Investigated for Throttling Net Traffic
Hulu Gets Stewart and Colbert
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Kangaroo Project: BBC and Rivals to Build Internet Video Site
Microsoft TV Group: Looking Back and Ahead
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Joost Hires Mike Volpi

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