Boxed out

Startup Boxee lets consumers watch web videos on their TVs. So why are some networks and studios fighting it?

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By John Patrick Pullen

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Boxee's Ronan is breaking the traditional TV model.

(Fortune Magazine) -- When Hulu, the online video joint venture of GE's (GE, Fortune 500) NBC and News Corp.'s (NWS, Fortune 500) Fox (and now Disney's ABC), launched last year, CEO Jason Kilar said its mission was "to help people find and enjoy the world's premium content when, where, and how they want it." Perhaps what he meant to say was, "Anytime, anywhere, anyhow - except on a TV screen."

Hulu is trying to keep its web videos out of the hands of tech upstart Boxee, a content aggregator that lets consumers play web videos on TV. Apparently some networks may value an old-media revenue stream even more than the new ventures they tout in news releases.

Since the 1970s networks have had two main ways to make money: Sell ads and collect high-margin licensing fees from cable and satellite operators for the right to distribute their content. "We are big fans and supporters of the cable model," says J.B. Perrette, president of digital distribution for NBC Universal, who also sits on Hulu's board.

Boxee's software, when run on a computer that can connect to a television (like AppleTV), lets viewers essentially bypass the cable operator, and networks fear that Comcast (CMCSA, Fortune 500) and others will want to pay them less if traditional viewership drops.

Hulu in February asked Boxee to stop linking to its content. Boxee refused, and the two companies' web programmers have played cat-and-mouse, blocking and relinking the video feeds, ever since.

Some industry insiders think online advertising has the potential to make up some of the licensing revenue the networks fear losing. CEO Mike Volpi of online video aggregator Joost says websites now can charge as much as $45 per 1,000 page impressions, up from $1 per 1,000 four years ago.

Boxee is definitely onto something. The cable guys themselves are pursuing Internet video solutions: Satellite operator EchoStar (SATS) acquired Slingbox to offer content streaming to customers, and Time Warner Cable (TWC) and Comcast will announce "on demand" services this year.

But Boxee founder Avner Ronan thinks it will be many years before Boxee and its knockoffs hit the mainstream. "This is why it's a bit frustrating that [the entertainment industry] is trying to resist it so much," he says.

Perhaps media companies aren't resisting Boxee at all - maybe they're just trying to box the company out.  To top of page

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