Elemental Technologies Looks to Hit Home Run with Streaming Video for TV and Web Content

If you watched last night’s NCAA men’s basketball championship game on the Web, or followed any of Major League Baseball’s opening day action via video on your mobile phone, then you have an idea of the market that Elemental Technologies is trying to tap.

Elemental, a Portland, OR-based video processing startup, is announcing today its most ambitious product to date: a real-time video encoding system that will let broadcasters, media companies, and cable networks stream live video to any type of device across any network. It could be a significant step toward the company’s ultimate goal of letting consumers watch video on any device. That means watching live events as the action is happening with a smooth and seamless experience, instead of getting a jittery picture or waiting for the video to load.

The new product is based on Elemental’s core approach of using off-the-shelf graphics processing units (GPUs) and smart software to do video processing much more efficiently and cheaply than conventional systems that use central processing units or specialized hardware. The difference between this and its two previous video products—a post-production system and an on-demand server—is that “Elemental Live” works in real-time as the video is being sent from a camera to the viewer’s device. The company has filed five patent applications on its technology.

“We spent a ton of time building an interface that’s really easy for anyone to use,” says Sam Blackman, the CEO and co-founder of Elemental. “The product line is fleshed out now.”

Of course, the Major League Baseballs, Turner Broadcasting Systems, and NBCs of the world already have streaming video systems in place. But they don’t always work that well, and they tend to be costly. So the question is whether Elemental can deliver much better live-video performance, such that it immediately drives up traffic and advertising revenues for these big networks. One promising sign: CBS Sports has reported that its ad revenues from streaming video are increasing without taking away from its TV-based revenues, such that the revenue per viewer is becoming nearly constant—regardless of whether they watch on a PC, TV, or smart phone.

Meanwhile, Elemental has been busy signing up new partners to help get its technology into wider use. It recently added Hewlett-Packard and Lenovo as distribution partners. Its list of allies also includes Adobe, In-Q-Tel, and Nvidia. The company also has recruited Bruce Chizen, the former CEO of Adobe (and a relatively new venture partner at Voyager Capital), to its board of directors.

Given the exploding and competitive video processing market, what advantages does a small company like Elemental have? “We can innovate faster than our competitors can,” Blackman says. “We can do customer support better too,” he says, because the company built all its own video compression technologies, so its development team knows all the intricacies of what might go wrong.

The biggest challenge, Blackman says, “is around the fact that we’re selling a new technology. Broadcasters make their money around having video streams working 24/7 and never going down.” So there is a natural aversion to risk with a new video processing system. “We convince them that they can trust their business on a GPU system,” he says. But he admits, “Getting that national momentum” around its technology has been challenging. Nevertheless, Elemental has roughly doubled its revenues in the past year and is on pace to become profitable in 2011.

Elemental was founded in 2006 and raised a $7.1 million Series A round in 2008, co-led by Seattle-based Voyager Capital and Cambridge, MA-based General Catalyst Partners. The company has just under 30 employees, and Blackman says it has been investing a lot of resources in its national sales team and its R&D efforts, including its intellectual property protection.

“We are working aggressively to patent the technology,” he says. “We expect to see some get granted in the next year or so.”

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