Venice Project Hailed As Next Viral Sensation

As the much anticipated "Venice Project" prepares to launch, at least one major research outfit predicts that the online venture will do nothing less than create a new model for online video.

In a report released Wednesday listing predictions for 2007, market research firm In-Stat forecasts that "The Venice Project's P2P video project will be the big viral media sensation of 2007." The project, formed by the founders of Kazaa and Skype, will result in "a new model for cost-effective distribution of video and a new platform and business model for content producers--both big and small--to monetize their creations," stated the report.

The In-Stat white paper adds that the two founders "have an amazing track record with building disruptive P2P platforms (Kazaa, Skype). They also understand that they have to integrate a business model that is acceptable to content creators into the platform and they have developed a targeted advertising model that may enable them to provide this."

In-Stat's bullish outlook comes as the Venice Project this week starts to open up beta-testing of the service to a much larger group of users. The ambitious effort aims to combine TV-quality video with the interactive and community features of the Internet. The system is also designed to keep down the cost of video distribution by relying on peer-to-peer technology rather than a large group of servers.

Several other companies are using P2P platforms to distribute video online including BitTorrent, Veoh Networks and Kontiki. Earlier this month, BitTorrent received $20 million in venture capital funding, and in late November announced plans to begin offering movies and TV shows online next year from major entertainment companies including Paramount Pictures, MTV Networks and Twentieth Century Fox Film. The company announced a similar deal with Warner Bros. Home Entertainment earlier this year.

But Gerry Kaufhold, a principal analyst at In-Stat, views the Venice Project as a more innovative melding of the Internet and TV. He said the service would allow users to create their own customized versions of TV shows or other content, within the limits of copyright. "Communities online will have the tools to tweak the content so it's amenable to their tastes," said Kaufhold.

By allowing consumers to modify programs, media companies may hope to increase viewership for shows beyond traditional TV audiences, he noted.

The Venice Project creators, Janus Friis and Niklas Zennstrom, have emphasized that unlike file-sharing platform Kazaa, which triggered a wave of lawsuits, their new enterprise will operate within the bounds of intellectual property laws. A post on the Venice Project blog last month stated: "The Venice platform is provided by content owners directly, and it's all protected with the highest standard of encryption and we are working within the Digital Millennium Copyright Act (DMCA) framework to ensure that it complies with appropriate content protection and ownership regulations."

While the project to date has been very much under wraps, thousands will now be invited to preview the service in beta. Each user invited will get to invite other testers. "The next months will bring many additional product features both on the end user and content provider side of things. And, importantly, more and more content," wrote co-founder Friis in a post on his personal blog on Tuesday.

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