7 Reasons why Joost could fail…

...and one reason why it probably won't.

Joost is the new, new thing in Internet Video. Pronounced 'juiced', it is an interactive software for viewing video over the Internet using peer-to-peer TV technology, and also has some social networking features that allow chatting and networking while viewing video. Niklas Zennström and Janus Friism, who create and founded Joost, are also founders/creators of Skype and Kazaa).

If they did Skype and Kazaa, they must be smart, right? But very smart people sometimes make very big mistakes. Sometimes it is because they remain glued to their old paradigms. Below I describe some of the mistakes they have made – some in the core concepts of the technology and business model.

1. Joost relies on Streaming Video versus Download & Play. I have written a lot about this here and here and I won’t repeat it. The point that needs to be made is that with Streaming, you cannot guarantee Quality of Service (QOS). Even with excellent bandwidth on both sides, you can still get jittery, jerky and stalled video at least some of the time, because of the all nodes in between that are outside your control. With Cable TV you get excellent quality 100% of the time. This is one of the reasons IPTV has not been successfully deployed although people have been trying for more than a decade.

This is the first mistake made by the creators of Joost. I believe they simply accepted the prevailing paradigm that Internet Video means Streaming Video. Instead, downloaded content guarantees QOS because it is local and today’s storage mechanisms are robust enough to deliver even HD quality video seamlessly. Ultimately, it is not about the cool technology – it is about the user experience.

There is of course another twist to this. A lot content providers prefer streaming, because they feel that if it never leaves the server, it is safe from piracy. So Joost may have been forced to use Streaming Video by the content owners. However, it is a misconception that Streaming Video cannot be copied. There are numerous utilities out there that will download the content behind any streaming link.

2. Worse, Joost uses (or at least plans to use wherever possible), Peer-to-Peer Streaming Video. First, like server-based Streaming, guaranteeing QOS is not possible. It is even harder with Peer-to-Peer (P2P), because there is no control over the bandwidth of the peers. For example, someone streaming to you may suddenly decide to engage in some other activity that affects their bandwidth to you, and the stream delivered by them becomes choppy and jerky. They may even shutdown their device altogether and you lose whatever they were supposed to transmit to you. Can you say "massive overhead"? See also this Wikipedia article on "Peercasting".

According to an unverified source, a Dutch ISP has tested Peer-to-Peer Streaming in the field and found that approximately 40% additional overhead is to be expected in using this technology. It is not clear whether the overhead is in the bandwidth (due to retransmission) or in processing (due to reconfiguration of the sources). However, it makes sense that there is overhead when combining buffers from multiple peers. And if one of the providers becomes unavailable, there will be tremendous overhead in reconfiguring the others.

P2P works best when downloading, as BitTorrent has shown. This is because the download does not have to be sequential like a stream and there is plenty of time to download missing portions of the file later. Unfortunately, the creators of Joost know peer-to-peer best (both Kazaa and Skype are P2P applications) and people have a tendency to use the technology they know best – even if it is sometimes inappropriate.

3. It essentially duplicates Cable TV. Using a broadcast model and channels with a fixed schedule, instead of allowing time shifting and VOD. To be fair some channels on Joost are VOD, but again, in terms of relative volume of VOD content vs. broadcast content it is the same as Cable TV. Another reason why IPTV has not been successful – there is not a sufficiently compelling reason for a consumer to switch. There is the promise of additional content but that has not materialized and even where it has, there has not been so much additional content, that consumers are willing to switch to IPTV (with its disadvantages) and abandon Cable TV.

4. No user contribution possible. Content has to be approved by Joost. This is a big deal. No company in the world can conceivably license all the content in the world. Even if someone had a lot of money (several trillion dollars in readily available cash), they still need the time and resources to contact every content-owner to license their content. If they don’t have cash, they will be spending huge resources on negotiating content rights and royalty payments (possibly several trillion person-days!) – some licensing contracts run into a hundred pages or more! And of course they will be competing with other players who are willing to offer a higher royalty or show a larger installed base (the dark specter of Redmond always looms in the background).

What is needed is a model where a content owner simply adopts the technology and can control pricing, distribution, everything. Like the DVD platform – all the content owners had to do was to create the DVD. They didn’t have to negotiate with anyone because they already owned the rights. I can’t help plug L3 of course, but that is one of is strengths – no rights negotiations are required, the content owner simply convert their video into the L3 format.

5. Their software is open source. At least large portions of it apparently are – see this article. If significant portions of the software are open-source all the code must be open source according to my understanding of the GPL (the licensing protocol for open-source software).

Although this is definitely a weakness, it is not a very big deal. Once they are successful (or perhaps they are doing this even now since they have plenty of money), they can rewrite the code. And frankly, the bigger challenges, as the same article points out, are on the business end.

6. It is a lean forward experience only. A successful video deployment on the Internet will be one that provides both a lean-back and a lean-forward experience with the emphasis on the former. You cannot change the behavior of the vast majority of consumers who are used to and want the lean back experience of watching video on TV. It may work for 25 year olds, but most geeks who design this software forget that not everyone is their age.

7. Joost could be regulated like a Cable Franchise. See this article for a good overview of possible regulation (the authors do make a case against regualtion). Although many companies providing IPTV are arguing that they should not be regulated in the same manner as Cable TV, they may not win that battle. AT&T in the US, MTNL in India, China Telecom, all of them are fighting the respective regulators. AT&T has even gone to congress to pass a bill that would allow them to obtain franchises nationwide rather than from each municipality. Until such a law is passed, Joost has a problem.

…and one reason why it probably won’t. A Venture Capitalist once said that he never looks at the business plan or financials. He simply looks at the quality of the team. According to him, a good team can fix a bad business plan (perhaps even bad technology?), but a bad team can mess up even the best business plan. So, a team like Zennstorm and Fris can fix the problems Joost has. Of course, I think they can only fix it by using L3 technology. :-)