ZillionTV adds direct-to-consumer sales, Skitter tries its hand

ZillionTV has been quietly running trials and speaking to service providers in the past six months since announcing its on-demand video service in March. The startup is making some noise today and responding to a tough competitive environment with an expanded distribution strategy, including a direct-to-consumer pilot offering and plans to embed its subscription-less service in consumer electronic devices.

ZillionTV CEO and founder Mitch Berman said that the company has been watching the industry closely and monitoring trends to evaluate the best distribution path. While it will still primarily pursue partnerships with communication service providers, it is looking at a direct to consumer and embedded offerings to make the service available in areas where it is not sold through a partner. 

“In addition, it makes sense to pilot this because broadband penetration in the United States is continuing to climb,” Berman said. “More consumers have access to Internet speeds of three megabits per second or more, so we are coming out of the dark ages. That combined with many consumer electronics manufacturers who are interested in selling devices by adding value to their play has all culminated in this announcement where we are setting everyone up for more announcements to come.”

ZillionTV, a partnership of major movie studios and Visa, gives consumers the option of renting, purchasing or viewing targeted ad-supported videos free on-demand from within the network. The service uses a Hillcrest Labs-build remote control, small set-top box and requires a 3-Mb/s or higher Internet connection.  During the past six months of closed market trials, Zillion has expanded its program library, which now includes more than 60 content providers, up from 30 in March, as well as expanded its advertising base. Berman said ZillionTV has also enhanced its Viewer User Interface (VUI), content security and consumer privacy setting.

The company is positioning its service as a way for a CSP to augment its DSL or existing TV service. It is not about cord-cutting, Berman said. That means partnering with telcos that don’t yet have a video service, many of which are in the independent market; although Berman said it is targeting all tiers, including AT&T or Verizon. “We are looking to augment and help these telcos straight up by delivering a great on-demand service and then we’ll be working on the live TV partnerships as time goes on,” Berman said.

“We want to learn before we flip the switch,” he added. “We have time to do this right. I’m under no pressure to get out there because others are in the market. We believe if you deliver a very powerful service that consumers enjoy, you’ll win. That is what we are endeavoring to do. We are very being cautious and being very careful in what we learn and do.”

The vendor hasn’t announced any CSP or CE partners yet, but Berman said it is in discussion with several. Some telcos in the US are beginning to embrace the OTT strategy, popular in Europe, as well. To name a few, Qwest CEO Ed Mueller has expressed interest in using OTT to build a hybrid video strategy, and small telco Toledo Telephone partnered with Vudu to add video to its DSL service.

SKITTER.TV COMES ON TO THE SCENE

For telcos that are considering going OTT, there is no shortage of vendors to choose from to help them in the process. The list of companies offering some form of OTT service includes Vudu, Roku, Netgear and the now cheaper AppleTV. Startup Skitter.TV is the latest to unveil a service, except its platform is based on offering the telco an alternative to full-blown IPTV, not circumventing them or augmenting what they already offer. Skitter hosts headend hardware and software for the telco and supports encoding, delivery and monetization of Internet and broadcast TV services across any device, including the TV, PC, mobile and gaming devices.

The company introduced its TV service last week and is in already in trials with several tier-two and -three telcos, according to president Robert Saunders.  He said that the service can significantly reduce network operation expenses for entertainment companies and content delivery networks, such as NetFlix , Hulu, and Amazon.com. Skitter.TV’s software and program guide include HD and SD multi-screen video combining linear and on-demand content.  Saunders said that unlike IPTV, telcos can expect a return on investment beginning day one.

“The focus for Skitter initially was to create a video product offering for tier two and three markets to offer a competitive video product that is actually a profitable video product,” Saunders said. “It’s based on a really simple concept: 50% of people who watch TV watch local off-air broadcast television channels exclusively. Our vision was could we take and encode that content and combine it with all the Internet TV into a seamless product that the telephone company could offer to its customers.”

Skitter’s vision is that a telco can offer a class of DSL service that includes TV, Saunders added. Given that every local TV channel is very low cost, $1 to $2 per month for the content, he said, telcos can start with a small number of channels and scale their service as it attracts more subscribers. There is no limit to the number of channels they can add, Saunders said, it’s just a matter of market focus.

“Our focus is to create this converged product that can be deployed today at a very low cost that can be grown to be as rich of an IPTV product as the phone company wants to grow it as,” Saunders said. “It will grow as the business case matures for that phone company.”