Posts for 'Akimbo'

The last few days' news about Akimbo and Starz's Vongo service, two of the earliest players in broadband video delivery, shows how risky the broadband video market can be for pioneers.

Akimbo - which has closed its doors after raising approximately $50 million since 2003 - demonstrates that misjudging the key characteristics of an early market can be devastating. Akimbo's faulty assumptions included:

• Anticipating that consumers would be willing to buy a broadband-only set-top box, despite overwhelming research to the contrary.
• Expecting that consumers would be willing to pay yet another monthly subscription fee, although broadband's value proposition was still in its infancy and consumers were already complaining about the high cost of cable/satellite subscription services.
• Building its initial content strategy using a pure "Long Tail" approach of aggregating lots of niche programmers, not grasping that Long Tail models only succeed when "head" content - in this case from broadcasters and cable networks - is also included.

As these misjudgments became obvious, the box was dropped, select cable programming was added to the content lineup, pricing was changed and management was overhauled. Ultimately in February '08, the whole company strategy was blown up, as Akimbo unsuccessfully tried to get a toehold in the already over-crowded white-label content management/publishing business. But once a startup is in a deep hole, it's almost impossible to climb out.

Meanwhile, Starz's announcement yesterday with Verizon, of its first "wholesale deal" for broadband delivery of its programming, shows additional risks for early players. Yesterday I caught up with Bob Greene, EVP of Advanced Services at Starz, for whom I did some consulting work several years ago on Vongo's predecessor service, Starz Ticket.

Starz launched Vongo in early '06 as a broadband-only subscription and download-to-own service, featuring programming it had under contract, plus other categories it later added. Vongo went to market direct-to-consumer and through device partners like HP, Samsung, Toshiba, Creative and Archos, but Vongo's growth has been modest as the broadband subscription category has yet to really take off.

Vongo's larger goal was getting deals done with existing service providers like cable, telco, and broadband ISPs. But this aspiration ran into the buzzsaw of incumbents' intransigence, illustrating that reliance on ecosystem partners, who often have divergent motivations, can be very risky. In this case, Vongo's would be distributors perceived Vongo as less as an opportunity to grow the market and tap new consumer behaviors, and more as a potential long-term end-run, with immediate threats to profit margins and cash flow contribution.