• BusinessWeek, Wednesday, May 13, 2009 11:45 AM

Boxee TV is a controversial new startup that has caused more than a few people to ditch their cable and satellite subscriptions. Boxee's free software houses music and video content in a single location. When users buy a cable to connect their PC to their television (which costs $10), then they can enjoy Web programming on a big TV that they'd otherwise have to view on a smaller PC screen. According to founder Avner Ronen, 80% of users make the connection between their PCs and TVs. Boxee already has 500,000 users. Some customers are so satisfied, that they're doing away with their cable and satellite TV subscriptions altogether.

Boxee plans to make money by charging content partners for the right to display their content in premium slots on the service. "There will be parts that the user controls and customizes and there will be parts that we control," Ronen says. He also sees an added revenue stream in distributing applications built by third parties to complement the Boxee experience.

"Understandably, it didn't take long for Boxee to annoy Big Media," notes BusinessWeek's Arik Hesseldahl. In February, Hulu blocked its content from showing up on the Web media service, but later relented. It now allows about 80% of its content on Boxee. Without Hulu, the potential for Boxee to go mainstream is limited, says Michael Gartenberg, an industry analyst at Interpret LLC. "There was a good deal of buzz about Boxee when it first integrated Hulu and now a lot of that is lost," he says.

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