ZillionTV Funding: $18.4 Million to Date

ZillionTV, which has created an Internet-based service to deliver free, personalized TV content on-demand, yesterday confirmed it has received $18.4 million through Dec. 31. (See ZillionTV Thinks Broadband TV Wants To Be Free.)

Investors include five Hollywood studios — Disney-ABC Domestic Television, 20th Century Fox Television, NBC Universal, Sony Pictures Television and Warner Bros. — along with Visa, set-top chip manufacturer Sigma Designs, and two VC funds, Sierra Ventures and Concept Ventures.

ZillionTV added that it has been “actively pursuing” fundraising as part of a Series B round. It will undoubtedly need the additional capital as it heads toward the scheduled Q4 launch, with around 100 employees and a business model with a lot of different moving pieces.

So will it fly? It’s an interesting idea. Here’s why:

* They have premium content partners with Disney, Warner Bros., NBCU, Sony and Fox.

* It’s free and on-demand. Like Hulu, but on your TV.

* The service is being designed to show you content tailored to your preferences.

* Its addressable/interactive advertising platform is baked in, ready Day One. (Canoe’s raison d’être is to do this across millions of existing cable set-tops.)

* They want to work with telcos and cable as distribution partners, not going over the top, so the ISPs get a piece of the action. ZillionTV gets marketing support from the ISP partners. And by collocating VOD servers with service providers, the startup (a) doesn’t need to build out and operate gigantic server farms and (b) has some assurance that video quality will be higher than if it went over the public Internet.

Of course, the devil’s always in the details.

Right now one a question mark is ZillionTV’s content lineup. That’s TBD; they’re shooting for 15,000 VOD titles, to be in the ballpark of what Netflix offers via Internet streaming.

But I also wonder whether ZillionTV will be able win deals with major MSOs, who could fear this thing would undermine their current video services. Even Verizon or AT&T, who are pitching either their own multichannel video service or DirecTV, may not be inclined to take the bait.

ZillionTV argues that the TV landscape has tilted irrevocably toward on-demand viewing, and that its service provides a nice, fat carrot to entice subs to upgrade to higher-speed Internet tiers. (ISPs may bundle in ZillionTV as an upgrade incentive.)

But why would a cable operator or telco go through a middleman like ZillionTV to offer this? According to Patrick Gauthier, ZillionTV’s senior vice president of marketing and strategy, because the company is in a position to manage the different content providers and advertisers in the mix, instead of a service provider having to handle that in-house.

Fundamentally, though, if I am selling subscription-based TV service today it seems a bit strange to tell my customers, “Hey, here’s a way to watch TV that’s better than the passive channel-surfing thing you’ve been gettin’ from us for years!”