ZillionTV Thinks Broadband TV Wants To Be Free


ZillionTV has taken the concept of free, ad-supported television and adapted it for the Internet age.

The Silicon Valley startup has developed an Internet-based set-top box that hooks into HDTV sets -- and it has lined up five brand-name TV and movie studios as content partners -- for a service that will deliver a fully on-demand, personalized television experience with highly targeted, interactive ads.

But ZillionTV, which is shooting to launch its service in the fourth quarter of 2009, isn't strictly a direct-to-consumer play. Instead, it's looking to strike deals with telcos, cable operators and other Internet service providers as distribution channels, said ZillionTV CEO Mitch Berman.

"We're looking to partner with the MSOs," said Berman (pictured, left), a longtime cable executive, who has previously worked for HBO, E!, OpenTV and C-Cor. "We don't intend to go over the top."

ZillionTV already has agreements to carry content from Disney-ABC Domestic Television, 20th Century Fox Television, NBC Universal, Sony Pictures Television and Warner Bros. Digital Distribution. Each company is also an investor.

The privately held company would not confirm its total funding to date. According to SEC filings, ZillionTV raised about $14.2 million last year, following a $4 million seed round in December 2007.

Investors include Visa, set-top chip manufacturer Sigma Designs -- which provides the media processor used in ZillionTV's set-top -- the five media companies and two VC funds, Sierra Ventures and Concept Ventures. Berman noted that the media companies collectively hold about a 15% stake in ZillionTV.

In ZillionTV's go-to-market strategy, ISPs would offer the broadband VOD service as an enticement to move to higher-speed tiers. ZillionTV, which streams video in MEPG-4 format, is targeting subscribers with at least a 3-Mbps connection.

The video wouldn't actually traverse the public Internet; rather, ISP distributors would collocate VOD servers in their own facilities for optimal performance. ZillionTV is basing its VOD server infrastructure on Edgeware's flash-based units, which can serve 32,000 streams in a 1-rack-unit "pizza box."

"Telecom providers are becoming service aggregators," said Patrick Gauthier, ZillionTV's senior vice president of marketing and strategy. "Some of those services will generate within the operator."

Here's how it would work: A consumer would pay a one-time "service-activation fee" (the company has not decided what the fee would be) to receive the ZillionTV set-top and remote, which Berman said could be co-branded with an ISP partner.

The viewer would then browse a catalog of VOD titles, whose exact makeup is still to be determined, and would be shown a certain number of preroll ads (which could be interactive) before their selected content plays. ZillionTV's remote uses the motion-sensing technology developed by Hillcrest Labs, and includes no alphanumeric keys.

Berman said ZillionTV is aiming to launch with 15,000 titles. The startup currently is conducting field trials with partners in several markets nationwide.

Besides having no subscription fee, another difference touted by ZillionTV is that it plans to offer a loyalty program, designed to reward viewers for watching programming they're interested in and interacting with advertising from categories they've personally selected.

The loyalty points could be redeemed for material goods -- like a Gap gift certificate, for example -- or for a "material and emotional" reward, according to Gauthier, a former Visa executive: "Maybe you get to watch the new Harry Potter movie one week before everyone else."

In addition, while ZillionTV expects most viewers to opt to watch TV for free, it will also provide a sell-through option. Users can choose to watch targeted and addressable ad-supported content for free; rent content; or "buy-to-own," depending upon what options are offered by each content owner tied to each specific program. For example, television content from NBCU will be available via buy-to-own.

"We've gone from passive viewer where content is pushed to an active viewer who pulls and chooses what to watch, and what marketers to interact with," Gauthier said.

TV commerce is also in the cards. ZillionTV, whose backers include Visa, is working with the credit-card provider to create a way to make purchases through the service. By linking their Visa card with the ZillionTV Service, viewers will be able to purchase products directly from their TV by using a "buy now" button on the remote control.

ZillionTV has about 100 employees, with headquarters in Sunnyvale, Calif., and an office in Santa Monica.