Wednesday, December 20, 2006

Success Factors for GridNetworks

Note: For background information on my interest in GridNetworks, please read my previous posts:
Challenges of High Quality Video Delivery

GridNetworks, what's my Interest? Part one.

GridNetworks, what's my interest? Part two
Based on my observations of startup universe, I believe that every startup needs to have at minimum two success factors, one on profit side and one on cost side, to succeed.

Profit-side Success Factor

For GridNetworks (GN), the profit-side success factor is dependent on the number of distributors of high-quality content willing to pay for using GN infrastructure, irrespective of whether they are well-known content distributors with large content library like Disney or niche distributors leveraging long tail phenomena like Reeltime.

Some might argue advertising may be a viable option. I seriously doubt viability of an infrastructure intensive play like distributing high quality video solely based on advertising. Capturing $10 in advertising while paying $28 for delivery doesn't look like a viable business proposition to me. See, Comment on A-List Blog may result in high traffic and Internet Video Business Challenges.

A subscription based viewer model may become viable option for predictable delivery quality once the delivery infrastructure has achieved a critical mass of viewers, content, participatory nodes and content distributors. Most probably, only to be realized in next phase of GN.

To be continued ...


  1. What it comes down to is that the viewer must be willing to pay for the content. You are right - an ad supported video site will not be able to afford very high quality video. But Blockbuster and Net Flix have proven that users are willing to pay a few dollars per view, so high quality content is a viable business right now. User created content is another matter entirely, especially since users have shown no willingness to pay for amateur video.

  2. Michael,

    Thanks for your comments from the trenches. What high quality video content and viewers do you see suitable for early adoption?

    As evident by iTunes, viewers are willing to pay for quality mainstream video content downloaded over Internet for later viewing. Based on my experiences with Comcast On Demand, most likely viewers are willing to pay for video content streamed over Internet, albeit they will expect superior quality, consistent delivery and video suitable for large screens and on multiple devices.

    Even with a dedicated cable connection to TVs and dedicated video distribution infrastructure, Comcast On Demand has issues and inability to deliver HD video during peak load periods. If the quality and consistency in delivery over Internet are not met, viewers may be turned off to paid high quality video streaming.

    But such issues also excite me on the potential of scalable hybrid CDN P2P solutions like GridNetworks. May be GN look ways to help Comcast improve On Demand.