Boxee Battles Big Media

The streaming video startup has charmed Apple and Linux users and alarmed networks and cable providers. Now Boxee aims to serve Windows

By Arik Hesseldahl

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Like many people who own a PC, Avner Ronen found himself watching more and more video online. But he wanted to view it on the TV in his living room as well as on his laptop. "I got together with a bunch of my friends and we realized we were watching streaming video on the Web a lot more and using our TVs a lot less," Ronen says.

But they couldn't find technology that did a good job of bridging the gap between the PC in the home office and the TV in the living room. So they created the software themselves. "We just wanted to build something that we would use," says Ronen, who emigrated to the U.S. from Israel in 1999.

The result is Boxee TV, software that grabs video and music downloaded onto a PC and then houses it in a single, easy-to-navigate location. It also lets users pull together content from a range of online video and music sources, from CBS's (CBS) CBS.com and Last.fm to Viacom's (VIA) Comedy Central and Time Warner's (TWX) CNN. Better still, when the PC is connected to a TV set with a cable that can be had for $10, Boxee lets users enjoy programming on a big TV that they'd otherwise view on an often-tiny computer screen. Ronen says 80% of users make the connection between their PCs and TVs.

Some fans ditch cable subscriptions

Boxee was first released in mid-2008 to users of Apple (AAPL) Macintosh computers and machines running the Linux operating system. Already the software has developed a large, devoted following of almost a half million users. At the same time, Ronen and his pals have sprinted past where tech companies large and small have sputtered for the better part of a decade. For instance, Microsoft (MSFT) created the Media Center PC concept in 2002; while lots of people have purchased the entertainment-friendly machines, few connect them to a TV.

Ronen and his associates are tapping into the growing move to get entertainment as readily online as via other media, including the TV. As of March, U.S. consumers watched 14.5 billion online videos, up from 11.5 billion in March 2008, according to comScore (SCOR). Some users find watching TV with Boxee so satisfying that they're doing away with cable and satellite subscriptions altogether. "My roommate and I agreed that we didn't want to pay for cable anymore, so we watch Boxee," says Michael Galpert, a 26-year-old Web entrepreneur who resides in Manhattan.

For now, Boxee is free to users and producers of the content available through the service. Ronen has raised $4 million in venture capital funding from Union Square Ventures and Bijan Sabet of Spark Capital. Once Boxee has amassed a sizable user base, Ronen plans to charge content partners for the right to display their content in premium spots. "There will be parts that the user controls and customizes and there will be parts that we control," Ronen says. He also envisions generating sales by distributing applications built by outside developers to complement the Boxee experience.

News Corp.-NBC venture fights back

To succeed, Ronen will need to win over the media companies and content producers that can make more money by broadcasting via TV—where advertisers pay big money for commercial time—than they can online. Hollywood is putting an ever increasing portion of its programming onto the Web, but at a measured pace. Advertisers who pay handsomely for 30-second TV spots don't want to compete on the same screen with cheaper, shorter ads associated with online video. "Broadcasters pay about $20 billion a year to content owners to carry their programs, and then sell TV advertising against them," Ronen says. "They didn't think people would bring it from the small screen to the big screen so soon, if ever."

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