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New internet kids on the TV block

The single TV household and family rows over the remote are becoming a thing of the past.

Instead, as laptops and PCs establish themselves as the next outlet for video, companies are springing up to make it easier to watch television over the internet.

The idea of watching TV or video clips on a PC has become familiar to most consumers. Many people now have high-speed broadband connections in their homes which make it possible to download high-quality video pictures.

YouTube, the internet video site owned by Google, has introduced hundreds of thousands of people to internet TV.

Last year, Ofcom estimated that 44 per cent of all broadband internet users in the UK downloaded video clips or movies.

Devices such as Apple TV, which stream video from the PC to a television set, have also recently started to be launched, making it easier to bring the internet into the living room.

“Levels of broadband going up, more people watching video on PCs and products such as AppleTV . . . All these things are coming together to create a perfect storm for internet TV,” said Mike Davis, analyst at Ovum, the research company.

Many of the clips viewed online, however, tend to be short and small. Quality varies and it is not always easy to find the clip you want or ensure you can view it on your PC.

Making internet television look and feel more like traditional television is the next challenge for the industry.

Companies proposing to do this are creating a great deal of excitement in the investor community.

Blinkx, the internet video search company, saw its shares rise 44 per cent following its listing on Aim this week.

The company is valued at Pounds 129m despite the fact that it is expected to have revenues of just Pounds 2.3m this year and is not expected to make a profit for at least two years.

Joost, a similar company, recently raised Dollars 45m (Pounds 23m) in an investment round led by Index Ventures and Sequoia Capital. Investors included Viacom, the media company and Hong Kong’s Li Ka Shing Foundation.

Joost was founded by Niklas Zennstrom and Janus Friis, who have a great record as creators of Skype, which was sold to Ebay for Dollars 2.6bn.

Babelgum, a third internet TV company, has not sought financing because it is backed by the deep pockets of Silvio Scaglia, the Italian billionaire founder of Fastweb, the broadband company.

Mr Scaglia recently made Pounds 148m from the sale of his stake in Fastweb and is investing some of this in Babelgum. He has spent Euros 10m (Pounds 6.78m) so far and has pledged up to Euros 70m more over the next three years.

The approaches of these companies differ.

Blinkx was formerly the consumer arm of Autonomy, the Cambridge-based software company that provides search technology to 16,000 businesses. Blinkx offers technology that allows people to search for internet video quickly and easily. It aims to be, in effect, the “remote control for internet television”.

Video search is quite tricky to get right as understanding what is being shown in a picture is much more difficult than simply searching for a keyword. Blinkx uses a combination of speech recognition and mathematical analysis to “understand” video images.

The website allows people to search for a video clip in the same way they would type in a search term into the Google website.

Blinkx aims to search and index everything on the web. “If it is out there, we will find it,” promised Suranga Chandratillake, chief executive.

In addition, Blinkx has partnerships with 150 content companies, whose websites are indexed more thoroughly in exchange for Blinkx getting a share of their advertising revenues.

Joost and Babelgum, on the other hand, are positioning themselves as content aggregators, gathering a large but ultimately limited set of videos and TV shows on to their own internet site, where they ensure a seamless, high-quality viewing experience. They will sell advertising against this content.

“Blinkx could be a little bit like the Wild West, throwing up a set of links, where you are not sure what the content will be like. When you are in active searching mode in front of a PC you can cope with that, but if you are relaxing in front of a TV, it may not be the relaxed video consumption you are used to,” said Adam Daum, chief analyst at Gartner, the research company.

However, the challenge for Joost and Babelgum, which both plan to launch this summer, is whether they can get enough key content on to their sites. They could be caught in a Catch-22 - without content they will struggle to attract an audience, but without large audience figures, they will struggle to get the content deals.

“It is the content, at the end of the day, that matters - who has the hottest content,” said Ovum’s Mr Davis.

Joost has made a strong start in signing a lot of mainstream content, including deals with Endemol, National Geographic and CBS as well as Viacom properties such as MTV and Comedy Central, the channel that pioneered the South Park animation series.

Babelgum is taking a more niche approach. It has signed deals mainly with independent film studios, and will, at least initially, focus on material that is not shown on regular television.

“You can watch Sex and the City and CSI on traditional television, so we don’t see a big incentive for people to switch to internet television to see that. We want to create additional material and think the real novelty will be being able to watch things that do not get distributed through the usual channels,” Babelgum said.

With Joost and Babelgum not yet launched, it is hard to say which model will be the winner. The new internet TV companies themselves are hedging their bets by indicating they will be happy to borrow from each other’s business models.

Niche specialist Babelgum says it plans to include more mainstream material on its site in the future, while Joost has plans for more niche content to sit beside its big-name shows.

Blinkx is planning to launch an aggregation site similar to Joost and Babelgum later this year that will sit alongside its free-for-all web searching site. It is also working with Zinwell, the Taiwanese plasma TV manufacturer, to build an internet set-top box along the lines of Apple TV.