The beginning of the end of Joost?

TechCrunch reports on Joosts' travails:

Joost’s two year old online video service was a pretty darned smart idea when it first launched.

Instead of streaming video through the Joost website, users would download a Mozilla-based client and watch it there instead. The user experience could be more tightly controlled. And more importantly, the Joost client had built in person-to-person file sharing. That meant Joost had lower bandwidth bills. It also meant that Joost didn’t need to worry about overloading servers while showing live events - users would just grab the stream from others automatically.

No, it was a dumb idea from the start, we and many of the Web TV people said so for the reasons that it eventually did fail.

Today they announced they’re discontinuing the software application altogether, but they aren’t saying why. It’s clear that Joost’s strategy has been fluid over the last few months as they try to figure out a way to compete with the much more successful Hulu. It’s honestly not clear that they really can. Joost doesn’t offer anything particularly unique or compelling to users over competing sites with proprietary content (Hulu with Fox and NBC, TV.com with CBS).

Joost raised a big $45 million round of financing way back in 2006. It’s not clear how much of that is left. If they want to succeed they’re going to have to do something pretty radical.

If one was writing this as a case study, the kinder cut would say that it was very early days, they took a calculated risk on a technology option, and the market went the other way. The unkind cut would say that Joost was the classic "Dumb Money" Bubble play - people who knew little about Web TV backed guys with $45m not because they knew about Web TV, but because they were highly regarded for selling a web phone arbitrage service to other guys who knew little about VoIP. To paraphrase Monty Python, this is not usually a successful method of selecting investments.

So what to do now? One option is for Viacom and CBS to "do a Hulu" in essence, and make Joost the Web TV conduit for their content. That will at least build some value in the business which would allow a sale or merge in future, as well as give the option of continuing as a standalone. That will not be cheap. The other option is to do distribution deals with successful players for their content (YouTube is looking....) and leave Joost to the deadpool. One of those is a low cost option, the other is not.

Gloomy prediction for 2009 - Joost sold for scrap in Q2. The "stay the course" option would be more interesting to see but the business case is far harder to justify.