Interview: Josh Goldman, CEO of Akimbo Systems

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Akimbo Systems offers a subscription-based broadband programming service that features a wide array of mainstream and niche content, ranging from standard cable fare from such companies as National Geographic and Cartoon Network to videoblogs produced by amateurs. (Note: just yesterday, Akimbo announced that it has signed a deal with Major League Baseball's interactive media company, MLB Advanced Media, under which the latter will provide its service with premium programming, including condensed games, highlight clips, replays of the previous season's key games, and more.) The $9.99-per-month service is currently accessed via a special, $199 set-top box, equipped with an 80GB hard drive, capable of storing over 150 hours of downloaded content, and with an EPG that features extensive information on and video previews of available programming offerings: Akimbo subscribers use the EPG to select programs from the service's library, which are then automatically downloaded to the box for future viewing. Akimbo CEO, Josh Goldman, recently spoke to [itvt]'s Tracy Swedlow about the company's plans to distribute its programming on Microsoft's Windows Media Center and other platforms; about announcements it expects to make over the coming months; about its strategy to differentiate itself from emerging competitors in the broadband programming space, such as TiVo; about how a videoblog called Rocketboom is proving to be one of the most popular offerings on its service; and more.

[itvt]: Could you tell us a little about your company?

Goldman: Akimbo has created a service that delivers video-on-demand over the Internet for viewing on consumers' televisions. Therefore we serve both consumers who are looking for more choice in programming, and content owners who are looking for new ways to distribute their content. We started by carving ourselves a niche in specialty content. A year ago, we began signing up content providers, and mostly it was people who had not gotten distribution for their programming in the US on cable or satellite.

[itvt]: Was your strategy originally to be exclusively a provider of niche content?

Goldman: No, but that was a key component of the strategy and an area where we believed we'd get the most initial traction. We've always believed that this technology--VOD over the Internet--both creates a new market for people who haven't gotten distribution before, and provides a powerful way for big cable networks and movie studios to monetize their content. It applies to both. The premise of our company is that we can bring the cost of delivery down radically. And, if you can do that, what happens to the market for content? The experience of every other medium shows you that the market explodes. Take what's happened with the written word, for example: the process of putting your writings out to the world has gone from print, where it was usually prohibitively expensive, to desktop publishing and "e-zine" or Web publishing, which made it a lot cheaper, and now to blogs--this democratized form, which is very cheap, if not free, and very easy. And, at the same time as it's gotten cheaper and easier, it's become two- way and interactive: consumers have become producers of content. The same thing has happened with audio: podcasting is that democratized form of content for the audio world and it's becoming one of the most exciting and dynamic areas of audio and content distribution. And it's now happening for video as well, with things like videoblogs. In all these different media, people who before would have been unlikely to find a market for their content can now do so. So we think that one of the most exciting areas of this industry is enabling this democratized form of video to reach the market.

[itvt]: Would it be fair to say that your business is moving more downstream, as it were, towards democratized video content, than more upstream towards mainstream content?

Goldman: Because we're focused on protecting our lead in this space, we've found it's important right now to do both. We started, you might say, in the middle with content that was commercial but that didn't get distribution--everything from yoga lessons to foreign movies to cooking shows to extreme sports. Because the Internet is now available for delivery and because infinite amounts of storage are now available, we can take this kind of content directly to the consumer, and there are no limits on the amount of content we can offer. So, as I said, we sort of started in the middle, and we've actually gone in both directions: we've gone down the content "tail" towards videoblogs and we've gone up into libraries of content from large cable networks, such as A&E, the BBC, the History Channel, TCM and Cartoon Network. And I think this is just indicative of the fact that this is a technology that applies whether you're large or small. It's a very economically attractive technology.

[itvt]: Do you find that your customers are more interested in Akimbo's niche content or in its more mainstream offerings?

Goldman: That depends on the consumer. I think in many cases, people are acquiring Akimbo devices and subscriptions to get the niche content--to get the stuff they can't get anywhere else. We've had great success with Chinese language television shows and movies, and we're now launching Indian movies and TV shows as well. This is because there's great, pent-up demand for that kind of content, and it's important enough to some groups of people to have it that they will go out and acquire a special device to get it. But once you have a device that you bought because it allows you to watch, say, Chinese movies or independent films or yoga lessons, then you start to explore and you discover things like Rocketboom, a videoblog that, by the way, has done amazingly well for us.

[itvt]: How well is Rocketboom doing?

Goldman: I think it's currently our second or third most popular content provider out of our 140 or so channels, and it's close to reaching the top. Lately, TCM and iFilm have been numbers one and two on our service. What's amazing about Rocketboom is that it's sticking, too: it isn't just people trying it once and deciding it's not for them, it's generating daily downloads. People are watching it every day.

[itvt]: Why do you think it has done so well?

Goldman: The only conclusion I can draw is that people are looking for new and offbeat types of entertainment, not just entertainment from the big brands. This is the same phenomenon that has resulted in blogs and in podcasts. Rocketboom doesn't really have much brand recognition, unless you're really into videoblogs, but when you see it on your TV, when you can lean back and watch it, I think that levels the playing field. I think people maybe see it as a "twenty-something" version of the Daily Show or something. It's very well done and usually makes you either laugh or think? sometimes both.

[itvt]: What kind of business relationship do you have with Rocketboom?

Goldman: We really value and support the democratization of media that they represent, and so we basically take on all the costs. Rocketboom doesn't pay us anything. We've agreed to just put it out there, and to handle all the hosting and the encoding. We offer it free to our subscribers, so we don't make anything off of it. We do this because it makes Akimbo more attractive, and, because it's been so popular, we're very supportive of them.

[itvt]: Does Rocketboom make any money from the relationship?

Goldman: No, not directly. They are looking to find ways on their own to commercialize what they do, but right now they want distribution-- they want to get their name and content out there--and we're happy to do that for them.

Actually, as I'm sure you're aware, Rocketboom is a little unique among our content providers in not selling anything. Most of our providers, even the small ones, will put some of their content up for free and some of it up for pay-per-view or for a monthly fee. We help them package and price it, and then we put it up and, if consumers do buy the pay-per-view or the premium content, then we share that revenue with the content provider. That's a more typical business arrangement, even for the small content providers.

[itvt]: Do you attempt to secure some kind of ownership of the ultra- niche content you offer on your service?

Goldman: Typically, the content providers own the copyright; we are purely a distribution mechanism, but you may well see some "Akimbo- exclusive" content on the service in the near future.

[itvt]: Do you demand exclusivity from the niche content providers on your platform?

Goldman: In most cases we do not, but as we undertake more promotional activity and joint marketing, then we would likely wish to solidify the relationship and gain investment of resources on both sides. Exclusivity is one way to do that, but there are several ways to accomplish that goal.

[itvt]: You recently announced plans to start offering your content through cable set-top boxes. Are you also interested in making deals to deliver your content to mobile phones and other devices?

Goldman: Yes, we've been planning that from the beginning of the company and are now actively exploring that with partners. Now that we're one of the largest aggregators of content out there, we are getting approached by people who would like to use our content on other platforms, and we are definitely looking at those kinds of deals. There's nothing we can announce right now, but the answer to your question is: yes, we are interested in exploring those kinds of opportunities. In the future, you'll be able to get our content on cable boxes, satellite boxes, DVD players, and other platforms. We're busy doing work to enable Akimbo on many different devices.

[itvt]: Do you plan to license your content to cable operators and other third parties? How will third-party delivery relationships work for Akimbo?

Goldman: Our strategy is that, when we enter into distribution deals with other platforms, it is purely in order to get more customers: customers who will pay us for video--for pay-per-view programs, or for subscription-based services such as our Chinese and Indian programming. We're in the business of selling video and helping our content partners to sell video. So if a major cable operator said they wanted to build Akimbo into their set-top boxes, that's not something we'd charge them a license fee for: in fact, as content was purchased, we'd collect the fees from the consumer, and we'd share those revenues with the cable operators as well as with our content partners.

[itvt]: Do you have any distribution agreements in place with third parties yet?

Goldman: In October, we'll launch our first distribution partnership, which will be with Microsoft for the Microsoft Windows Media Center. Anyone with a Windows Media Center device in their home will suddenly have access to Akimbo. They'll see a message saying, something along the lines of: "Do you want to try Akimbo? The first month is free, and then, if you like it, it's $10 a month plus fees from premium and subscription services." So we'll still be making money by selling video to consumers; it will just happen to be through another device, not our own box.

[itvt]: When you make content available to cable operators, will that content be hosted on their VOD systems or only on your servers?

Goldman: We've designed our systems to be able to handle either case. Today, we host all of our content, but our client devices can retrieve programming from other servers and systems as well.

[itvt]: Did you start out pursuing a strategy of delivering content only through your own, proprietary set-top boxes, and then decide to adjust that strategy at a later stage? Presumably the apparent failure of Disney's Moviebeam service would call such a proprietary hardware- based strategy into question?

Goldman: No, from the very beginning we were convinced that offering content purely on our own branded devices was not a viable strategy. From the start, we wanted to be on other devices. We never believed that our box would become the central set-top box in homes or anything like that. That's not the business we're in. We're out to distribute video-on-demand, to collect the world's largest library of video and make it available on-demand on all kinds of devices and to help consumers sort through this massive library and discover great content. We're absolutely not device-centric at all. From the very beginning we said we'd put out a device to show that this is doable and to get some subscribers using it and to show content providers that we could do it safely and securely and cheaply. So now we've done that; but the plan was always to move away from being reliant on any particular device and to be the operator of a service that works on lots of different devices.

Our goal is to be a supplier of content for what we call IVOD--Internet Video-on-Demand--as well as a new area called "Download to Own." We are right now discussing partnerships with makers and suppliers of various kinds of devices and services, looking to provide them with content for on-demand downloading and purchasing. We operate on the belief that the world's library of video content is not currently available to people and that it ought to be. We want to make it possible for you to get any TV show, any movie, any high school sports game, any corporate training video, any foreign language show, and any film strip you saw in grade school. All that should be available. A huge amount of content is starting to be available in the audio sphere. In the print sphere, you can get almost any article in almost any journal on the Internet. But in the TV sphere, content usually airs then is gone. It's very hard to go get your favorite Brady Bunch episode or the last season of your favorite reality TV show. We want to enable what we believe could be a very big market: on-demand access both to content that was on TV and to content that was never on TV.

As for Moviebeam, though, I think the problem with their service was that it wasn't personalized, it didn't allow you to create your own collection of content based on your unique tastes or interest: the content on your box wasn't necessarily what you wanted, it was what somebody at Disney thought should be in that month's delivery. So everyone's Moviebeam box looked exactly the same: the content choices were very limited. And that's really contrary to what people expect from digital media these days. It would be as if you bought an iPod and then every month your iPod filled up with what someone at Apple thought would be the songs you ought to choose from and listen to. That's just not how things work today. The way to appeal to this generation of consumers is to give them unbelievable choice--large libraries of content from which to personalize their experience. Moviebeam instead provided a very limited selection of mainstream movies.

[itvt]: TiVo just announced a trial of a broadband programming service with IFC, and has made no secret of its plans to begin offering more broadband video content. To what extent do you see TiVo as a competitive threat and what will be your strategy for differentiating yourselves from them if they do make a major push to become a broadband programming service? Also, how do you differentiate yourselves from smaller emerging competitors, such as DaveTV?

Goldman: This is a big opportunity and an attractive space, so we expect to see growing competition from both established companies and from new start-up companies. We have two big advantages that we will emphasize and continue to develop: first is a three-year lead on the development and deployment of this type of service. Second is our large base of signed partnerships for great content, the largest in the industry. We've become very good at managing hundreds of content relationships and aggregating video from all of them, as well as the myriad related activities like reporting, billing, metadata management, promotions, and joint marketing. Those are extremely valuable skills that will be hard for emerging companies to duplicate. It's also an area where a lot of larger companies just don't want to spend their time-- which makes us a valuable partner.

[itvt]: Could Internet video search engines have a negative impact on a company like Akimbo, by making it easy for consumers to find specialty video content?

Goldman: Quite the contrary: by making the discovery of Akimbo content even easier, video search can be an incredible marketing tool for us. Search engines on the Web have enhanced the value of great libraries of content. Think of how you use Google to find a movie review or an article from an obscure digest, or a discussion about a hobby. The search engine makes you aware, and then sends you over to the provider for the article. We look forward to this being possible with video, and are actively enabling our library to be indexed by existing and emerging search services.

[itvt]: Could you talk about any content protection issues you've faced, and how you've resolved them?

Goldman: I actually think that this problem is becoming less of an obstacle, simply because Digital Rights Management technologies that exist today can adequately protect content and enforce usage, re-use, and re-distribution rules that content owners want to establish. Our platforms today use Microsoft's DRM, and the industry seems to have determined that it is very secure and should not prohibit compelling monetization opportunities that consumers are increasingly demanding.

[itvt]: How are you marketing your service?

Goldman: We do some Web marketing on our own, but most of the marketing of our service is done through our content partners. Many of our content partners are now referring traffic to us, saying, "If you want our titles, Akimbo is the best way to get them." Soon, we expect our service will be marketed through distribution partners as well.

[itvt]: You mentioned earlier that your Chinese language programming is very popular and that you are launching an Indian programming package. Do you have plans to market your service more aggressively to immigrants in the US?

Goldman: Yes, we think that households with first- and second- generation immigrants are an extremely attractive market for our service, as the technology allows delivery of culturally important content that is otherwise not economical to distribute.

[itvt]: GoldPocket and Concurrent recently announced that they are integrating their technologies in order to add interactivity to on-demand content. Do you see value in adding interactivity to non-linear/time- shifted TV programming?

Goldman: I think there are markets where interactive TV makes sense. One that jumps to mind is education and distance learning. However, I don't happen to be a big believer that consumers want interactivity with their entertainment programs. Every year for the past 20 years has been hailed as the year of interactive TV and yet--outside of being able to access content on-demand, record it, play it back, and so on--people are not that interested in interacting with content. Sure, there are a few exceptions to my rule. American Idol was very successful at getting people to interact with TV content, but in a very limited way: pick the singer you think should win--that works. But choose your own ending for the soap opera, or pick your own angle on the sports coverage?those things have been tried over and over again. There's a novelty factor, but consumers haven't typically responded well to those things. No one's embraced it, even though it's been technically doable for some time. On the other hand, I do think the idea of response is valuable: "Hey, that was interesting, give me more information," or "Let me take part in that survey"?that sort of thing has potential, but I don't think it will be a major application outside of particular markets like distance learning and a few others. Our platforms are devices based on PC's and they're broadband-connected, so it would certainly be possible for us to add interactivity where it makes sense.

[itvt]: Do you think that conditions are in place today that make a business model like yours possible and that weren't in place previously?

Goldman: Yes. Today it's possible to make money on distributing content, even if the potential audience for that content is very small. Five years ago--even three years ago--if you attempted to aggregate and distribute niche video, the costs of doing so would be so high that you'd almost certainly fail. Companies tried it and failed because they couldn't get millions of subscribers who wanted to watch, say, Korean television shows. But now that the costs have come down to such an extent that, in order to make money, you only need a few thousand Korean-speaking homes that want your service, distributing niche video has become a viable business.

At the same time, consumers have now become accustomed to getting customized media: they do it with RSS feeds for their morning news, they do it with their "My Yahoo" pages, they do it with blogs and with podcasting. They've also become more amenable to getting their media from a wide variety of sources, many of which are not at all mainstream. So, big social trends like these have definitely helped make our business viable. Another major development that helps us is the wide availability of broadband Internet access; and, at the same time, codecs have gotten more powerful, and home networking has become easy and ubiquitous. All of these trends enable a business like Akimbo's to work today, whereas it would have been too far ahead of its time just a few years ago.

[itvt]: Do you have an "exit strategy"? You have a lot of venture capitalist companies backing you--what are their goals in funding you?

Goldman: As an entrepreneur, I don't think of exit strategies--at least not in the sense of exiting the business before it becomes a very large, self-sustaining company. So my goal is to build a big successful company that makes significant profits enabling this new Internet VOD market. What happens beyond that is more for the investors and board members to be thinking about. But, as CEO, my goal is to build a standalone, successful company. I'm always wary of entrepreneurs who talk about an exit strategy. It implies to me that they don't really believe in building a viable business, but are just looking to sell something to somebody. That's not what I want to do. Of course, if you build a good enough business, then exits will emerge--but they shouldn't be planned from the beginning. One of the reasons we went after some of the biggest and most successful VC's is that they take a long-term approach: they look to build big, successful companies, not to sell them to the first buyer who offers a reasonable return. I didn't want investors that wanted a fast return. I wanted investors who could help me build, as I said before, a big, successful standalone company.

[itvt]: What kinds of announcements should we expect from Akimbo over the coming months?

Goldman: You'll see some really interesting content deals that we are about to sign--both deals with large, mainstream, branded content owners that are household names, as well as deals that go deeper into niche markets we think are attractive. We have 140 content partners today and that will grow dramatically. On the distribution side, you'll see us on other devices. It will become very clear that we aren't a hardware company, as we'll be making some announcements that show we are emerging on other devices. And then you'll also see various technical innovations. We're investing a lot in technologies for the discovery and navigation of video. Now that we have 4,000 titles growing to 20,000, it's becoming harder and harder to navigate that library. It doesn't work to put listings on a grid like you see on TV or to put them in folders like with a PC. So you'll see us announce technologies and methods for helping you find great videos that meet your needs. These will be available not just on our box but anywhere you have Akimbo service. It will be part of the Akimbo experience to have recommendations and other neat ways to discover content, based on feedback from other people like you, or on expert ratings, or on what your friends find most interesting. What we're planning will be in some ways like what Amazon has done to help you find books, toys and DVD's, or what iTunes has done to help you find their content. Those are good examples of companies that have made efforts to address the discovery problem as their libraries have gotten huge. We'll be the first to apply these technologies to video: helping people discover video content that corresponds to their interests is a difficult problem and a very interesting one. Discovery and navigation technologies will definitely be a big area of activity and investment for us. So those are the three areas in which you can expect to hear announcements from us in the coming months: new content deals, new distribution deals, and innovations for navigation and discovery.

[itvt]: Can you say how many subscribers you have today?

Goldman: We don't disclose subscriber numbers now, but it's no secret that the bulk of our subscribers will come from our distribution deals: partnerships like the one with Windows Media Center, and others that we expect to announce shortly.

URL: http://www.akimbo.com

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