By Steven Levy Newsweek
May 14, 2007 issue - Disruption isn't what it used to be. Niklas Zennström and Janus Friis are known for marching into an industry and turning its business model into chopped meat. They made deadbeats of the music business with tune-sharing Kazaa and rendered telcos speechless with call-for-free Skype. Then a funny thing happened. After selling Skype to eBay for $2.6 billion, the pair paid more than $100 million to the record labels for Kazaa reparations. "That litigation meant we have a huge amount of understanding for [a big industry's] issues," says Friis, a 30-year-old Dane. This set the stage for a different approach in their next venture—a kinder, gentler sort of disruption.
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The current target? Television. Their new project is Joost (pronounced like "juiced"), and the point is "to change the way people consume TV," says Swedish native Zennström, 41. This time around, it's more lovefest than war. Joost wants to be safe as milk for studios, an ace sales tool for advertisers and a permanent addiction for anyone with a broadband connection. Let YouTube fight off Viacom in a copyright lawsuit; Joost has signed Viacom as a content partner.
Load the free service, which went public last week, and your screen fills with video, essentially making your computer into a TV. It's not DVD quality, but it's watchable. The reason it looks better than similar ventures is that, like Kazaa and Skype, it makes the most of peer-to-peer technology, a fast and economical way to distribute bits. Everything on Joost is on-demand: no worrying about schedules. Since it's on the Internet, Joost has interactive features like chatting with friends while watching.
Related Content Q&A: Joost Founders Aim to Transform TV
But the key to Joost's future is programming, and that's where the founders' newfound respectability is making a difference. The 100-plus channels that Joost carries include the mundane (MTV's "Laguna Beach"), the retro (The Lassie Channel), the brutal (Fight Network) and the cutting edge (Indie Flix). And better stuff is coming. New deals include the Turner Network (Adult Swim cartoons, CNN stalwarts like "Larry King Live") and Sony Pictures Television (library gems like "Charlie's Angels"). NEWSWEEK has also learned that Warner Brothers Television is the next bigfoot shoe to fall; WB president Bruce Rosenblum says he's starting a Joost science-fiction channel (with choices from "Babylon 5" to "My Favorite Martian") and a "Before They Were Megastars" channel (example: "Growing Pains" with a then unknown Brad Pitt).
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Internet TV came one step closer to reality as startup web broadcaster Joost recently announced that it signed a deal with Warner Brothers to host some of its WBTV-branded content. This deal, along with content deals with other television providers, lately Time Warner and Sony Pictures Television, makes Joost (pronounced "juiced") the sweetheart aggregator and provider in the coming on-demand, freely distributed online TV broadcasts.

Joost bills itself as an online community where viewers, "can watch what you want, when you want, in full-screen eye-quality proper TV." The service currently provides about 150 channels, although the availability of some channels varies by country or region due to copyright restrictions. Viewers can navigate screen menus to make programming choices, and then use “widgets” from drop-down menus that allow users to interact with the programming.

"Widgets include a clock, integration of instant messaging, RSS/News feeds and a chat room for the particular channel being viewed on the screen. Users have the ability to opt out of the widgets during viewing or can easily access them from the mouse-activated menus," according to John P. Gamboa of ''the Dailey Aztec''.

The development efforts at Joost are backed by technology-savvy web entrepreneurs Niklas Zennström and Janus Friis. The two used Internet peer-to-peer networking to create Kazaa, and then later Skype. The cutting-edge music file sharing and telephony implementations of these two applications, some say bleeding edge, appear to have had an affect on the approach being used now by the two at Joost along with co-developers. The copyright infringement-plagued Kazaa was sold to Sharman Networks in 2002. Skype was sold to eBay in October 2005 for $2.6 billion. In July last year, Kazaa settled with music record labels by making a $100 million payment as reparations for illegal file sharing activities employed by users of the application that enabled the distribution of copyright-infringed music files.

Kazaa became a copyright bust. Skype became a jaw-dropping hit, and a hit in the jaw of telcom carriers whose management of voice transmission became undermined by the sub-set of Internet users with broadband connectivity and peer-to-peer web awareness. The evolution is distinctively one-way. Online broadband peer-to-peer connectivity is here to stay after a nasty birth.

"People are looking for increased choice and flexibility in their TV experience, while the entertainment industry needs to retain control over their content," said Joost chief executive officer Fredrik de Wahl. "We’ve married that consumer desire with the industry’s interests."

The "marriage" of TV content to "consumer desire" is the hot-spot that media conglomerates are still seemingly trying to figure out as they dispense their less valuable content for Internet consumption. Joost has managed to secure some rights to webcast programming, but the content is not the highest quality broadcasted TV programming currently available through established subscription cable and satellite distribution channels, or even free airwave TV.

Underlying the concept of Internet TV is the distribution of content in a way that is more efficient than the existing model. Peer-to-peer networking over the Internet makes programming available when a user asks for it. The 'on-demand' feature of this approach frees up space in the distribution pipeline and provides feedback to the aggregator to know exactly what is in demand. It gives a middle-man the leverage to negotiate with media conglomerates and then manage a pipeline flooded with unviewed content, thereby conserving bandwidth. It also lets viewers opt for free online TV programming through content arrangements made by the web broadcaster, who acts as a gateway to the programs. However, it is not an advertising-free service.

The Joost hoopla is partly spurred on by its expansionist decision on May 1 to allow users of the Beta version to distribute 99 invitations to other people who could become Beta users.