As TV Wars Grow, Azuki Expands Video Delivery Tech to First Screen

Here’s some potentially big news in the world of Internet TV. This tech sector is dominated by giants—think Comcast, Verizon, Cisco, Microsoft, Netflix—but that doesn’t mean a smaller company can’t play with the big boys.

That company would be Azuki Systems, based in Acton, MA. The five-year-old startup has rolled out new software this week that aims to help cable and telecom companies compete better in the age of on-demand video and multiple screens.

Azuki sells its video-delivery software to a mix of cable and telecom service providers, as well as content owners like Showtime, Epix, and other channels. The startup is known primarily for helping its customers deliver video to mobile phones and tablets—the so-called second and third screens. But that’s changing as of this week.

What’s new is that Azuki is now expanding its ambitions to target the first screen—your main television set—in a major bid to be in every home, and on every device. Its latest software is designed to give cable companies in particular a one-stop “container” in which all their video can be delivered to all the different screens; this is the “TV everywhere” idea, which hasn’t fully happened yet because of digital rights issues and stalled agreements with networks.

But cable companies and telecoms still own a big piece of the puzzle: connections into homes. (Not to mention many billions in revenue.) And that’s why Azuki is doubling down on them for its customer base.

“Owning the infrastructure is an advantage for them, but they need to expand their business model and be inclusive of over-the-top [pure Web] players and other Internet services,” says Cheng Wu, Azuki’s CEO and co-founder (pictured). “The service providers need someone to help them move to a more open architecture, keep their investment intact as much as possible, but help them move to a new landscape.”

Azuki says its software allows cable companies to shift more of their old video resources to broadband Internet, where more of the future’s money is to be made. And do it so as to limit the effort it takes to rework and maintain different video-delivery systems for each kind of screen. The technical details involve shifting spectrum resources from quadrature amplitude modulation (the digital video format for cable known as QAM) to broadband Internet video in a more efficient way than has been available to date.

What does this all mean for consumers? More personalized TV options, according to Azuki. Right away, a cable company using the software could offer features like multi-screen browsing and time shifting on any device—so when you switch to a new channel, you can rewind and see what you missed, for example. But the bigger goal is to let people watch what they want anywhere, anytime, using existing cable infrastructure.

Down the road, that would mean the old electronic programming guides—the scrolling list of what’s on your 500 channels— “would not exist anymore,” Wu says. “Every guide is personalized. You have yours, I have mine. As you deliver video service, every channel has the contextual intelligence of who you are and what content is being requested that might be relevant to you. It has to be scalable. You’re talking about an Internet problem, not a town problem.” And, of course, personalized channels could lead to personalized advertising—which could be lucrative indeed. (A number of software companies are working on personalized TV/video discovery apps, such as NextGuide.)

It’s a big vision, all right. But a small company like Azuki has to navigate some pretty choppy competitive waters. Besides other video tech startups, it has to outmaneuver Cisco, which Wu calls the “800-pound gorilla” in the sector. (Wu sold a previous company of his, ArrowPoint Communications, to Cisco for $5.7 billion in 2000.) From Wu’s perspective, Azuki is trying to open up and commoditize video-delivery technologies that Cisco would prefer to keep locked up.

And then there are the pure Web players—the Netflixes, Hulus, and Aereos of the world. These companies are popular with consumers, but their business models have some challenges; Wu points out that Netflix is not very profitable. And Fred Sammartino, Azuki’s director of product management, says any cable company or telecom should be able to provide huge libraries of on-demand video on any screen within a few years.

Meanwhile, streaming-video device maker Roku raised $60 million last month as it ramps up competition with Apple TV, Google TV, and consoles like Xbox and PlayStation. “Apple TV can be thought of as … Next Page »

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