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While YouTube has been the darling of video-sharing sites online — letting anyone become a video star — Cambridge, Mass.-based startup Brightcove has quietly been working in the background to become the go-to video services company for professional content owners and media companies such as Dow Jones, Newsweek and The New York Times. Rather than creating a big hub for the world’s quirkiest video moments, Brightcove has focused on the technology that will let content owners show video on their own site; sell or rent video downloads; or place advertising on their videos.

Only after Brightcove had signed up thousands of video publishers and media companies did the company set up a portal to showcase their videos. And it’s far from being a YouTube or MetaCafe, with almost all videos coming from commercial outlets, and no community elements such as comments on video or user ratings. While lovers of viral video might shun such a slick, commercial offering, Brightcove has a bevy of fans among the professional video crowd, and you can customize the look of the video player on your site.

Two important milestones have helped put the startup on the media map recently. Barack Obama announced his intention to possibly run for president via a video on Brightcove, and his campaign actually set up a special video channel on Brightcove to promote Obama. That follows on the Brightcove video channel for Democrat Deval Patrick, who won the governorship in Brightcove’s home base of Massachusetts last November.

The company also recently announced it had raised a whopping $59.5 million in third-round funding, pushing total investments to $81 million and a possible valuation of over $200 million. The investors include the New York Times Co., Barry Diller’s InterActiveCorp (Diller is on Brightcove’s board), Hearst Corp. and AOL.

Why are all these Big Media companies placing their bets on Brightcove? Because there’s so much change and uncertainty in the online video marketplace, these companies hope that Brightcove can be part of the solution, helping them make money from their online video while also protecting their content from the video-sharing hoards. Brightcove offers a multitude of options for video content owners:

> They can upload video, use the Brightcove player on their own websites or blogs, and use it for free if they allow Brightcove to sell ads before or after the videos. Brightcove then shares those ad revenues 50/50 with the video owner.

> They can sell their own advertising on the videos, and pay Brightcove a fee depending on how many people view the videos and how much advertising they sell.

> They can set their own price for video rentals or video sales, and then give 30% of the proceeds to Brightcove.

> They can run absolutely no advertising on the videos, not sell or rent the videos, but simply pay Brightcove for the bandwidth costs of serving up the video.

> With the launch of the Brightcove.com portal, video owners can get their videos promoted on that site as well.

One media client, the Independent Film Channel, thinks that flexibility is what sets Brightcove apart from the pack of video tools companies and websites. Evan Fleischer, IFC’s vice president of alternative programming and strategy, called me from Sundance to tell me that the ability to offer paid video was what won him over for Brightcove.

IFC is on the small side for a media company, and we have the ability to be flexible [with Brightcove], which is very important,” Fleischer said. “That means not just flexibility in the video we offer but across the board. When it comes to business models, if we want to do ad-supported video we can do it through Brightcove, whether we sell [the ads] or they sell it. There’s a ton of flexibility and in this day and age, with a company the size of ours, in the current environment — where no one knows what the future holds — having the flexibility with Brightcove is great for us, because we’re set to go with whatever we want to do.”

And yet that flexibility and versatility might also make it hard for Brightcove to be successful in so many areas of online video. It’s the peanut butter problem that Yahoo had from spreading itself too thin in trying to do too many things. Technology executive Gil Zino explains Brightcove’s challenge on his blog:

From TVs to mobile devices, we’ll consume online video content everywhere. So, this is a HUGE space. And actually that is a danger for Brightcove as well. They still appear to be trying to fill multiple roles in the space. Meanwhile, there are many formidable competitors emerging, and some of them are more hyper-focused on specific aspects of building the future of online video.

And you can’t count out Google/YouTube in any part of the online video equation, as the giant recently pushed deeper into video syndication and advertising, two areas Brightcove is trying to nail down.

Aiming for the Long Tail of Video

Brightcove’s founder and CEO Jeremy Allaire, who was formerly the chief technology officer at Macromedia, told me the huge influx of cash would help the company meet its goals in many areas of online video, while also expanding overseas. He would not share any details about revenues, profitability or even video streams served to the thousands of publishers signed up for the service.

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Jeremy Allaire

However, comScore Networks did tell me the Brightcove.com portal’s traffic hit 879,000 unique visitors in December 2006, up sharply from 181,000 unique visitors in August 2006. But when you compare Brightcove traffic to YouTube and MetaCafe on Alexa, Brightcove looks like it’s flatlining.

But perhaps that’s beside the point for a company that would be happy serving the tons of medium-sized video producers along the Long Tail with a business-to-business video offering — instead of getting caught up in a video-portal war. Allaire said he’s working with comScore to get them to accurately gauge how many videos are streamed across the entire network of sites running their videos, and not just the portal.

The following is an edited transcript of my recent phone conversation with Allaire, in which he stressed how much Brightcove was focused on the needs of content owners over that of the millions of video-sharers.

Why did you need to raise nearly $60 million in funding recently?

Jeremy Allaire: We wanted to be in a position to grow as fast or faster than the market over the next two years. The capital that we raised allows us to invest in our product lines, it allows us to expand our sales and marketing as a company, and allows us to operate in Europe and Asia. We have about 110 people working for Brightcove today.

What sets Brightcove apart from all your competitors, from consumer video sites like YouTube and from video tools companies?

Allaire: We started with a very different vantage point in the industry back in late 2005 or early 2006. We wanted to design a distribution platform that was built with the needs of content owners and media businesses in mind — as opposed to the needs and interests of consumers. As a result of that we spent an enormous amount of time with TV networks, music labels, news companies, magazine companies, brand marketers, as well as hundreds and hundreds of broadband startups and independent production companies. A really broad range of folks. We wanted to make sure that the distribution network that we built really worked for their interests.

We’re starting from that vantage point and are working outward from that. It’s a very different vantage point than companies that started [by figuring out] how to let consumers share content or publish content. The result is that the platform that we’ve created is a very rich and sophisticated platform that allows the media owner to run a business with all the forms of programming and revenue generation and user experience that they desire. That’s a critical difference.

Our [portal] is very new, so it’s too early to say how that will evolve and compete in the marketplace. We’ve partnered with thousands of different producers and commercial media organizations to exhibit and promote their content and that’s what we’re doing at that site today.

As far as what you’re doing for media companies, how does it differ from what companies such as Real Networks or The Feed Room have offered in the past?

Allaire: We were the first company to put together all the pieces in a completely on-demand, self-service online application. It certainly wasn’t the case in these prior companies that required a lot of customization and multiple vendor relationships. We wanted to be as simple as: If you’re a media owner, and you have rights-cleared media, then you can launch your business through us in a day. And we’ve met that objective now.

We had the advantage of being late to market, as the streaming video market has been around since ’97. But it has only become a real commercial opportunity in 2006. So jumping into the market with a contemporary architecture, with a contemporary service, using all the best practices in the market, allows us to leapfrog where these earlier folks had been on the platform side of the business.

Without getting into total specifics, can you explain how a deal with someone like Dow Jones would work financially?

Allaire: We operate an Internet TV service and platform. In a self-service manner, you can program your own broadband channels. You can distribute those through your own website, you can syndicate your content to other websites and you can participate in various video search engines and aggregation sites as well. On top of that, you can choose whether you want the content to be promotional, ad-supported or charge money for it.

If you want to sell your own advertising, you can use our broadband ad products. You would use your own sales force to sell those ads. In that case, you would pay us on a CPM [cost per thousand] basis, on the basis of your success with consumers. That CPM rate varies based on your scale. If you’re an MTV Networks you’d have a different scale then if you are a smaller media concern. That’s how we’re generating revenue. So if you control your ad space and content, then we charge you on a CPM basis.

So if you are Dow Jones, you would pay Brightcove for use of the network or allow Brightcove to sell ads into the content?

Allaire: With those companies, it’s kind of like a cell phone plan. When you sign up for a cell phone, you commit to a certain amount of time [on a contract]. When you’re paying for our platform, you are committing at some level, so whether you sell a penny in advertising or not, you still owe us for your commitment.

Meaning that you commit to a certain amount of traffic, or what do you commit to?

Allaire: You are committing to a certain volume of traffic. It’s the identical product, but if you’re committing to selling your own advertising — which is the definition of a media business — then you’re paying us on a CPM basis.

Contract lengths vary, but are typically two to three years, and minimums are in the thousands [of dollars] per month. They can modify that minimum commitment over the life of the contract.

Working with all the media businesses as your investors and as your clients, how have you seen their mindsets change over the past year, and what still needs to change?

Allaire: A lot has changed. In 2005, when we were starting out, the real business initiatives out of those companies were few and far between but there was a desire to look at [online video]. In 2006, we saw a lot of growth in media companies realizing that if they hadn’t already launched [an online video business], then they were saying ‘we need to launch a form of this business online.’ But a lot of them, like the music labels, newspaper companies, magazine companies, even brand marketers, are examples of companies who are saying, ‘Video’s a real growth opportunity for us, the CPMs are higher, it’s a quality experience that takes advantage of the broadband consumer.’

Dow Jones went from zero in video to producing a meaningful amount of video and featuring that pretty prominently, and the same for The New York Times. So 2006 was a year when people said, ‘We’re going to start a business here,’ without a real clear sense of what content would be successful or a sales strategy. Now we’re starting to see companies move into a more sophisticated way of thinking about it. At the inception of the content they’re starting to think about how to produce for this medium, and how that programming is integrated across their media and cross-promoted.

And we’re starting to see people look at how to go beyond the first wave of advertising such as pre-roll ads [that run before video content], and say, ‘What can we do that’s better for the consumer? What can we do of higher value to the marketer?’ This year will see expanded investment in these businesses.

You’ve talked about having an open platform and an open distribution system, but your portal has no comments on the videos and no way to rate videos. It looks pretty closed to me.

Allaire: When I talk about an open platform, I’m really talking about publishing and distribution of content. It is an open platform, because any professional creator — and I’m not including consumer-submitted content — can participate in this distribution system. They can sign up and begin distributing and they can start earning revenues.

The open distribution system is that it can be distributed anywhere, and we operate an open syndication marketplace as part of that vision. If you want to syndicate your content, you can list it on Brightcove.com, where you’ll find over 1,200 different content offers from a thousand different publishers. In the same way that eBay is an open distribution system for goods, our syndication system is an open marketplace for broadband programming. People can also set their own prices.

The first phase of our [video portal] was really a way to provide a vehicle to exhibit high quality professional content from a wide range of channels. You’re going to see a huge amount of innovation in that part of the business where you’ll see more opportunities for consumer participation.

You also require Windows Media format for pay video, so that’s not playable on the Macintosh on Linux platforms. Is that something that might change?

Allaire: Absolutely. Our approach for how we manage assets is to support any device. We started out with the web, and we wanted the best format for viewing over the web. We then looked at pay downloads and talked to a huge number of copyright holders about that, and they all felt very confident and comfortable that the Windows Media format was the right one for that, knowing that there were no alternatives for secure media on Mac and Linux.

Clearly, the moment that there’s a secure format on those platforms, we’ll be there. We also allow output in MPEG, and distribute content to TiVo in an MPEG format. If there’s a meaningful device opportunity then we’ll support that. If you’re video-blogging, you don’t care and you want your media everywhere; but if you’re a media company, there’s a reticence to having your content flow out.

*****

What do you think about Brightcove’s service? Have you used it, and if so, what did you like and dislike? Can they be successful by offering these video services to media companies and professional video producers? Share your thoughts in the comments below.

UPDATE: James Maduk, an online marketer, has been using Brightcove over the past couple months and wrote on his blog that “they do a couple of things remarkably well…and a couple that frustrate me to no end.” I contacted him to find out what was frustrating him.

In a nutshell, he doesn’t like the payout system for pay video through Brightcove, with the company sending a single payment on the 5th day of the following month. He also didn’t like the lengthy video conversion and preparation process on Brightcove.

“In my case, I have nearly 1,000 individual sessions broken down into courses and bundles on 100 sites,” he said. “To move to Brightcove I’d have to edit my existing links in all my sites from the existing links to Brightcove links, but still keep the existing system for all of the customers who have already downloaded media/products…With Brightcove it takes work to prepare all these videos for a player: content conversion, graphic stills, previews, thumbnails, long descriptions, short descriptions, etc. for each individual session. “

Also, in comments, Todd Zeigler of Bivings Group says that he has tried out Brightcove and was frustrated by the complex interface. “I’ve played around with it and found the user interface for managing videos slow and frustrating, due in large part to the myriad of features you describe,” he writes. “I prefer tools that are simpler to use. Of course, I’m also not trying to make a living by selling ads.”

Allaire responded to Maduk’s gripes by saying that the pay video service just went into beta recently, so it will be improved. Plus, having to reconfigure large amounts of video is just par for the course when you use different video services, he says.

“[Maduk’s] big comment about the prep work he needs to do on a large [video] library — there’s really nothing that we can do about that,” Allaire said via email. “Production/post-production in video is what it is, and what we do provide are some simple image capture and encoding and uploading tools to assist with these tasks. One of the unfortunate things about video is that a) there are so many different formats, b) that nearly any form of distribution requires a different format and encoding, and c) that it’s still computationally expensive to do any of this stuff — which leads to people being frustrated that there’s no magic answer to content preparation with a lot of media.

“All paid downloads do offer full-screen support — streamed videos offer an enlarged/maximize view that is higher quality, and we’ve just rolled out very high quality full screen on Brightcove.com, which is now being rolled into all of our players.”

UPDATE 2: There’s a fantastic roundup of online video sites reviewed by PC Magazine, including a good overview of Brightcove. Check it out, especially if you’re considering what site to upload your video.

Also, I heard from Jonathan Brust, senior director of marketing at The Feed Room, who explained via email how his 8-year-old video service differed from Brightcove:

The FeedRoom was founded in 1999 as a consumer portal featuring aggregated news content supported by advertising. We entered distribution deals with other sites as well and built a sizeable ad network. We modified that model after it became evident it was not one we could control, since we did not own the content or ultimately have much control over the distribution.

As such, since 2001, we have offered end-to-end, ‘white label’ video solutions for other companies — Fortune 500 corporations, large government agencies, and media organizations — and are no longer an aggregator or destination site. Aggregation and syndication is where companies like Brightcove, Roo, and a host of others are primarily focused, that is, as ‘B2C’ [business-to-consumer] consumer destinations. Essentially, these companies provide Long Tail content publishers a cheap way to get their content online and monetized, with a revenue share on ads. They also provide ‘white label’ solutions for the larger media companies.

In comparison, The Feed Room delivers solutions tailored to the unique needs and business models of our customers. We do not sell ads for them or syndicate their content. Our sole focus is to build and maintain full-service solutions that give our customers control over their online video environment, such that they can customize the look and feel, sell their own ads and syndicate as they see fit.

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