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Getting in the game

Sat, 05/31/2003 - 8:00pm
Jeff Baumgartner, Editor

A new crop of VOD players want to crack cable’s starting lineup,
but will there be enough business out there to sustain them?

Cable's VOD gridiron is still dominated by three players, but a new, hungry group of VOD server and software vendors are quickly moving in, hoping to play alongside the incumbents or create some playing time of their own.

This new breed of vendors are, for the most part, hedging their bets that cable will use the everything-on-demand model to clearly differentiate itself against DBS.

And, as far as MSOs are concerned, the more the merrier when the subject changes to VOD vendors.

Broadbus
Broadbus Technologies Inc.
• Founded: 1999
• Hometown:
Boxborough, Mass.
• CEO: Jeffrey Binder
• Employees: N/A
• Funding details: More than $15 million.
• Product(s): B1; expected launch Q3 ’03.
• Cable VOD career notes:
No announced trials or deployments, but the company’s road into cable will likely be smoothed to a degree by former Charter Communications exec Tom Jokerst, who recently joined Broadbus as CTO.
"Having [more vendors] come into the marketplace does a couple of things: it validates the on-demand concept, and it allows us to look at all of the different types of technologies and architectures that you're going to need over time to make even more content [available] on demand," says Mark Hess, vice president of digital television at Comcast Corp.

Comcast, like its MSO peers, is already well down that road. After starting off with VOD platforms that could support about 450 hours of content that consisted of mostly movies, Comcast has since shifted to a 1,500- to 2,000-hour model in markets such as Philadelphia and northern New Jersey.

In the initial MOD (movies-on-demand) model, servers are expected to store a few hundred hours of content per year. Under a future TOD (television-on-demand) model, that number could approach 700 hours in a 12-hour period.

Comcast's model in Phila-delphia represents "just the tip of the iceberg," says Jeffrey Binder, CEO of VOD newcomer Broadbus Technologies.

THE NEW PLAYERS

Broadbus, too, marks just the tip of the iceberg when it comes to the growing number of companies that hope to win business from or play alongside the existing "Big Three" VOD server/system providers: Concurrent Computer Corp., nCUBE Corp. and SeaChange International.

This crop of cable VOD hopefuls includes Callisto Media Systems, InfoValue Computing Inc., Kasenna Inc., MidStream Technologies, Movidis Inc. and VideoPropulsion Inc.

Additionally, Exavio Inc. emerged from stealth mode in late April to reveal it had raised $14.3 million in series A funding.

Although these new cable entrants claim to be different in one shape or form, they all have this in common: they desperately want to prove what they can do on the field.

Another shared virtue is the concept of separating the streaming from the storage. This is growing in importance as transport costs continue to drop much faster than their storage counterparts, and operators pursue platforms whereby the storage and the streaming scale independently of the other.

Another area that some in this group are trying to impress on the cable industry is lower cost per stream, enabled by the use of off-the-shelf hardware.

Callisto Media Systems
Callisto Media Systems
• Founded: 1995
• Hometown: Hull, Quebec, Canada
• CEO: Bruce Fischer
• Employees: N/A
• Funding details: N/A
• Product(s): Voyager (internal company software and Sun-made servers).
• Cable VOD career notes: No announced cable deployments.
The companies supplying the off-the-shelf gear are not wet-behind-the-ears rookies. Sun Microsystems, SGI, HP and IBM are among those on that list.

The "all-in" target cost set forth by the industry, a figure that includes transport and streaming, is about $150 per stream, says Kasenna Vice President, Corporate and Business Development Robert Greiner, a former Diva Systems Corp. executive. "That's not realizable today. The only way to get there is with off-the-shelf products," he claims.

InfoValue Computing Inc., another company new to the cable scene, gets its server hardware from Hewlett-Packard, but couples that with a software platform it calls QuickVideo OnDemand. "Using off-the-shelf hardware like HP's gives us a cost-effective solution," says Matt Maley, InfoValue's vice president of sales and marketing.

Cable's growing reliance on standards for VOD will provide the off-the-shelf proponents with ample opportunities as operators embark on new deployments or expand their on-demand libraries, says Ted Schremp, cable segment manager for HP's cable solutions division.

"In the past, there was this 'black magic' in the cable market, with a traditional view that it had to be a proprietary system," he says. "That might've made sense for first-gen systems, but now [cable] is looking to generation two."

THE VOD COMBINE

With so much to choose from these days, cable operators, like a draft scout, must decide what value each vendor can bring and what role it might play in their VOD plans.

What they'll probably find is that not all servers are created equal. Using the football analogy, one might be better at blocking, another at tackling, and still another might be the best at throwing the deep route.

Although every new player is talking about streaming/storage decoupling and lower streaming costs, one company that industry insiders believe is doing "something really different" is Broadbus.

"The strategy is to create a new class of servers," Binder says. Broad-bus expects to deploy its "B1" servers in the third quarter. Those servers will leverage an architecture based on massive amounts of dynamic RAM rather than ROM-based disk drives.

Broadbus is banking on a belief that the DRAM approach will be required as the industry moves past MOD and into the early stages of TOD.

Some competitors have criticized that approach, claiming that Broadbus is four to five years ahead of its time, with costs two times the going rate. Binder counters that Moore's Law is on Broadbus' side.

The number of streams that can be squeezed out of a hard drive is a function of its spindle rate, access time and track density. Bit density, a function of DRAM, tracks better with Moore's Law, Binder claims. Spindle rates are about tapped out, "so you're reaching the limit of speed a disk can spin."

DURABILITY AND VIABILITY

infovalue Broadband Streaming
InfoValue Computing Inc.
• Founded: 1994
• Hometown: Elmsford, N.Y.
• CEO: Monsong Chen
• Employees: N/A
• Product(s): QuickVideo OnDemand (software). Uses HP’s off-the-shelf ProLiant servers.
• Cable VOD career notes: Current business has come through the IP side of the house and with hotel chains. InfoValue has yet to announce a domestic cable deployment.
In addition to technical approaches, the economic durability of these young companies will also have to be considered by cable operators before they decide to put them in a game situation.

With competition coming from all directions and with so much at stake, it's questionable whether MSOs are ready to place much risk on fledgling companies that may or may not have the required financial staying power.

Yet some companies are quick to point out that their survival is not solely based on how quickly they can generate cable revenues. "We're a small company, but we're financially sufficient because of our IP business," InfoValue's Maley says. "We're not betting the company on cable."

Kasenna is also a relatively safe bet, says company CTO Satish Menon, because the company already has revenue coming in from a variety of sources, and should soon break even.

Financial status aside, operators will gain confidence in VOD's younger vendors if they've gone through the integration effort and prove that they have a stable platform, says Ed Huguez, president and CEO of VOD upstart MidStream Technologies.

THE INTEGRATION CHALLENGE

kasenna
Kasenna Inc.
• Founded: January 2000
• Hometown: Mountain View, Calif.
• CEO: Mark Gray
• Employees: 52
• Funding details: $40 million
Product(s): OmniBase (entry-level), SpeedBase (mid-range deployments), GigaBase (large-scale VOD).
• Cable VOD career notes: Kasenna’s first disclosed cable VOD trial is with Mid-Hudson Cable of Catskill, N.Y. The operator is coupling Kasenna’s servers with N2 Broadband’s OpenStream VOD platform. Kasenna is a spin-off of SGI.
As the saying goes, there's no "I" in team. There's also no "I" in the VOD acronym, so operators will also be checking to see if these new vendors can play nicely with others.

What the new VOD players don't have is the integration experience or "pain" that nCUBE, SeaChange and Concurrent have gone through, Comcast's Hess points out.

"They (the incumbents) are fully integrated into the Motorola and S-A systems and the various EPGs, set-tops and billing systems," he says. "They also have content management and propagation [systems] that enable servers to talk to other servers."

N2 Broadband hopes to ease many of those concerns with OpenStream, a platform based on published interfaces.

But James Kelso, vice president and general manager, broadband systems for SeaChange, questions whether all of those moving parts will work together as well as N2 and some of its partners might hope. Integration "is the hardest thing in VOD," Kelso says. "Everything is slower with partners, always."

Before new equipment is added, notes Steve Necessary, president of Concurrent's XSTREME division, operators must ask themselves what problems it might solve, but also what problems it might create.

"As more parties are introduced into that mix, by definition, it will get more complex and difficult," Necessary says. "With that increased complexity comes increased cost."

SHOW THEM THE MONEY

Although most of the new players don't appear to be concerned that a market for them won't soon materialize, it's hard to say at this point whether they're really on to something or chasing ghosts.

Depending on whose numbers you look at, the overall market opportunity appears to be both expanding and contracting. Concurrent, for the quarter ended March 31, reported VOD revenue of $8.5 million, down from $14.6 million year-over-year. SeaChange, on the other hand, said VOD revenues jumped 58 percent to $16.3 million year-over-year for the quarter ended January 31.

MidStream Technologies
MidStream Technologies
• Founded: 1997
• Hometown: Bellevue, Wash.
• CEO: Ed Huguez
• Employees: 60
• Funding details:
$46.75 million
• Product(s): IP2000; new product currently in the works.
• Cable VOD career notes: Company claims to have multiple installations with cable operators, including some in greenfield areas and in legacy, incumbent VOD systems, but has not yet announced details. Recently agreed to license nCUBE’s “nABLE” VOD platform.
[click here for sidebar]
"We feel it's over-populated right now," Cox Communications Vice President of Multimedia Technology John Hildebrand says, of the growing number of VOD vendors. "You've got three incumbents that are kind of going along okay, but nobody's making a killing here."

Still, those that are relatively new to cable VOD are optimistic about their chances. "We may see an announcement with an associated vendor this year and some initial deployments next year," HP's Schremp says.

Binder concedes that Broadbus, to be viable and successful, will need deployment toeholds in the near-term, even before true TOD takes shape. "The word we're getting from a variety of MSOs is: 'there is room for you in our world'," Binder says.

One of the challenges ahead for N2 Broadband and its OpenStream platform is to expand beyond Time Warner Cable markets and further legitimize its approach to VOD.

And it's well on its way. Mid-Hudson Cable of Catskill, N.Y. marks the first announced, non-TWC operator to try the N2 platform. Mid-Hudson, which supports north of 20,000 customers on the Motorola platform, is basing the trial on the N2 back office system and servers from Kasenna.

"The test system was installed and (began) streaming content in about five days," says N2 President and CEO Reggie Bradford.

Indications are that there are deals to be struck, money to be made, but not all MSOs are in the same position when it comes to VOD. Comcast is also investigating new VOD architectures, but believes it can replicate what it has already done in Philadelphia.

"It's still a little early to necessarily have the end-game architecture when we have an architecture in place right now that can meet the current and 18-month's future needs," Comcast's Hess says.

Cox Communications is in a much different position when it comes to VOD, having disclosed VOD initiatives in less than a handful of markets.

Movidis
Movidis Inc.
• Founded: November 2001
• Hometown: Westlake Village, Calif.
• CEO: David Adleman
• Employees: 10, primarily engineering.
• Funding details: $2 million; seeking Series B funding.
• Product(s): Molecular Media Server (MMS) 1000
• Cable VOD career notes:
No deployments or trials announced. Most of company’s management hails from video conferencing mogul Polycom Inc., but cable VOD roots are forming. James Armstrong, a former VP at Diva Systems, is Movidis’ VP of engineering.
Early this year, Cox issued a request for information (RFI) to VOD vendors for the operator's Motorola markets. "We've received some responses back, and we're now preparing an RFP (request for proposal) for a second VOD vendor," Hildebrand says.

Cox will be looking at all-comers. "We think it's the right time [for an RFP]," he adds, noting the recent "onslaught" of new VOD players.

Although Cox does not plan to replicate Time Warner's Interactive Services Architecture (ISA), it is interested in using multiple server vendors in its VOD markets. In one possible scenario, Cox could stick with Concurrent's interfaces and back office and work in other server companies.

"Concurrent has also said that they are completely willing to interface to other VOD server vendors," Hildebrand says. Another option could involve N2 Broadband, which provides a "nice solution," he adds.

Necessary confirmed that Concurrent is presently in discussions with other server vendors about potential partnerships, but no final deals have been made. But if any are consummated, they will likely be driven by cable operator requests.

Still, working with other server vendors, "doesn't rank high on the priority list," Necessary says.

nCUBE, meanwhile, is being much more proactive in this area, offering to license its "nABLE" VOD platform to other server vendors. MidStream is the first server vendor outside VOD's "Big Three" to explore that option (see sidebar, pg. 32).

 

nCUBE opens up

MidStream first to license nCUBE's 'nABLE'

In a deal that could mark a paradigm shift in the way VOD's top vendors do business, nCUBE recently struck a deal to license its "nABLE" platform to video server startup MidStream Technologies.

The non-exclusive deal allows MidStream to license and distribute nCUBE's VOD software and applications and match it with MidStream's line of next-gen video servers. MidStream will package the combination under its own brand. Integration activities are already under way.

"We are out marketing this solution right now," says MidStream President and CEO Ed Huguez. "As soon as a customer is interested in this solution, we'll be ready for them."

"This is about choice," adds Mike Pohl, nCUBE's president and CEO. "We're giving [cable operators] what they want."

In some ways, the separation of VOD software and hardware closely mirrors how Time Warner Cable is approaching VOD in many of its markets, using N2 Broadband's back office platform and matching it with servers and applications from Concurrent, nCUBE and SeaChange.

For nCUBE, the licensing approach will open new channels for the company's software, but the company will continue to support and enhance its hardware platforms, Pohl points out.

Although Concurrent and SeaChange have yet to follow suit with their own licensing programs and officially welcome new VOD hardware vendors into the fold, it appears that the next wave of scuffles will likely be fought and won on the back office battlefield.

For an extended, full-text version of this article, please visit www.cedmagazine.com.

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