Karate channel stance: Narrowstep

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NEW YORK -- R. Anthony Cort launched a martial arts channel called MAC Experience last month via his media firm Breakthrough Interactive Group, but he didn't do it in a deal with big cable or satellite TV operators.

Instead, with his channel stuck in limbo because of a lack of major distribution agreements, he struck a deal with Narrowstep Inc., a 4-year-old IPTV and Internet video technology firm based in London with offices in New York and New Jersey.

"We looked at (EchoStar) and DirecTV, and they thought we might work together as well," Cort said. "There are 28,000 martial arts schools in 4,400 cities in the U.S. alone, so the potential interest (in martial arts programming) is huge. But the costs associated with building a traditional network without the support of a major media company behind us became daunting."

To break through via one, on-demand channel on a cable operator's systems, Cort estimated he would have needed at least $107 million in cash to invest. To get up and running with a broadband video-on-demand channel plus five other video channels over the Internet using Narrowstep cost him about $100,000, he said.

MAC Experience was up and running within a week of signing with Narrowstep.

Welcome to the new-media world, in which cable operators continue to square off with networks over carriage fees and regulators have been discussing possible a la carte payment for video content. The system of selling advertising at big upfronts remains under pressure, and demand for cable networks' ad inventory has looked sluggish. Yet Internet ad spending continues to rally.

Enter Narrowstep, which helps potential programmers sidestep such issues and monetize their content digitally.

The company offers video -- and even radio -- programmers a means to run their often niche-oriented channels affordably through what it calls a "television operating system."

Narrowstep already has developed and won hundreds of patents for its content-delivery platform, which it branded TelvOS.

TelvOS allows programmers to deliver local video and audio content to PCs or TVs with Internet-connected set-top boxes or Internet-enabled mobile phones or computers.

Any fledgling network or established brand can upload its content through Narrowstep's TelvOS site, then manage the programs and sell ad inventory.

Among the 50 clients that use Narrowstep's delivery system are such niche players as GolfBug.tv; the European Affairs Channel; Premier.tv, which is Christian TV on-demand; Real Estate TV; cycling and field hockey channels; extreme sports channel High.tv; as well as branded entertainment offer Land Rover -- Go Beyond.

CEO Stephen Beaumont said that Narrowstep is "almost the inverse of television, which brought general content to local audiences through a single device. This brings local content to global audiences on multiple devices."

The company's board members include former ESPN CEO Roger Werner and telecom guru David McCourt.

The company's business model of renting out a system -- either in a browser-based form or on a licensed basis -- has worked well in other industries. Intuit, a tour de force in financial services, achieved success with the model for its accounting systems Turbo Tax and QuickBooks.

Narrowstep generates recurring revenue by charging a license fee for the use of its system and services. But it also takes a share of revenue generated from ad sales via its systems. Narrowstep founder and chief strategy officer Iolo Jones compares the company with Google's AdWords program because, along with content delivery online, it enables channels to put their ad time up for sale in a bidding process.

AdWords, alongside Yahoo! Inc.'s Overture program, introduced the mass market to search-based advertising and made open auction ad sales of online ad inventory an industry standard.

So far, Narrowstep's channels account for 7.5 million monthly streams, the company said. Within these programs, more than 1 million ads are served per month. Narrowstep channels have attracted more than 750,000 unique views per month, with viewers at IP addresses in 160 countries, the company said.

Narrowstep's shares have traded between 53 cents-$1.90 during the past year, but some predict a big upside for the company.

For the quarter ending May 31, Narrowstep reported revenue of $1.1 million.
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