TWC, Joost in talks; Comcast turned online video site down
PHILADELPHIA (AP) – Online video site Joost is shopping itself around to different cable TV operators, but at least one has declined to buy it, according to people with knowledge of the talks.
As CED reported last week (story here), Time Warner Cable, the nation's No. 2 cable operator that recently separated from parent Time Warner Inc., is in talks with Joost for a possible acquisition, according to two people who spoke on condition of anonymity because they were not authorized to comment on confidential negotiations.
TWC will only be interested if it can buy Joost at a low price, which might not be difficult in this market.
But new news is that Philadelphia-based Comcast Corp. already turned down Joost, which approached both cable operators, one of the persons close to the talks said.
Comcast, the nation's largest cable TV operator, owns a competing online video site called Fancast, which also streams TV shows, movies, clips and other video.
Joost began with much fanfare in 2007 (story here), co-founded by Janus Friis and Niklas Zennstrom, the same people behind Internet phone service Skype and Kazaa, the file-sharing site. It has minority investments from Viacom Inc. and CBS Corp.
It started as a peer-to-peer site but wasn't successful, then switched to online video. But Joost suffered from poor traffic and had trouble making money.
In March, Joost had 523,000 unique visitors to its site, compared with 41.6 million for top online video site Hulu.com, according to comScore Inc. Fancast had 833,000, while TV.com, which is owned by CBS, had 3.5 million.
Joost approached Time Warner Cable because it thought the cable operator was a bit behind in online video, one of the persons with knowledge of the talks said.
Building an online site from scratch isn't easy, and it takes time to build up viewership. Time Warner Cable also could buy Joost for its technical expertise in online video, especially when it comes to authenticating subscribers for access to the site.
Cable operators and networks are working together on online video endeavors. They want to give cable subscribers access to cable TV shows online. But customers must be proven to be paying subscribers through an authentication process that's yet to be finalized.
New York-based Time Warner Cable is testing this subscriber-only concept with HBO, owned by its former parent Time Warner Inc. in Milwaukee. The trial began in early 2008, and subscribers can watch HBO shows online through a specially created Web site.
Joost can give Time Warner Cable a leg up in online video, although the cable operator could also park videos at its Web site for Road Runner, the company's broadband service.
Joost's problems aren't a result of advertisers cutting back in this economy because they're still buying online video ads even if they reduce spending elsewhere, said David Hallerman, senior analyst at research firm eMarketer.
He expects online video ads – ads shown in video form wherever it appears on the Internet – to increase by 43.5 percent to $1.05 billion in 2009. Last year, it grew by 126 percent.
Joost started on the wrong foot. For instance, it required consumers to download a video player, whereas Hulu started with a simple and clean interface, Hallerman said.
It belatedly scrapped the player last October to offer a Flash video site, long used by Hulu, YouTube and other sites. Joost also doesn't offer some of the most popular TV shows, such as "Heroes" or "24."
A simple interface "is not to be underestimated," Hallerman said. "They lost momentum."