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Cable/Video

Scaglia Joins P2P Video Pack

A new peer-to-peer (P2P) video startup, Babelgum, announced today it would offer its service to beta testers later this month.

Babelgum is in an early stage of development and has a long way to go to catch up with online video stalwarts Joost and YouTube Inc. in terms of content and audience. (See P2P Camp Swarms Video, BitTorrent P2P Store Goes Live, and Skypsters Fast Forward to Internet TV.)

A key advantage of Babelgum is its founder, Silvio Scaglia, who has deep pockets and a proven track record. Scaglia founded Italy's FTTH and IPTV trailblazer, Fastweb SpA (Milan: FWB), in 1999 and was CEO of Omnitel, which is now Vodafone Italy , Italy's second largest mobile operator.

Scaglia has provided all of Babelgum's initial funding of €10 million (US$13 million) and has secured the funds to provide several tens of millions of euros per year for the next few years, according to Erik Lumer, Babelgum's CEO and other founder. To help fund Babelgum, Scaglia raised €222 million ($292 million) in January by selling 5 million of his FastWeb shares, which reduced his stake from 25 percent to 18.7 percent. He remains FastWeb's largest shareholder.

"What they have got going for them is money," says Heavy Reading's chief analyst, Graham Finnie, who has taken Babelgum and Joost for test drives. "But [Babelgum] needs quite a bit of work. They're up against Joost, which has gotten further with a more complex set of features and more content."

But Scaglia isn't concerned about trailing the pack right now. "This is a discovery phase where it's important not to be alone," he says.

Babelgum will start its beta phase at the end of this month with 500 hours of "decent" content, but it wants to build an "immense" library. Babelgum will mostly offer niche and hard-to-find programming that users can ultimately tailor to their likes.

The programming available today is video news clips from Associated Press and Reuters and sports video clips from IMG. There is also some niche programming such as documentaries and short films on special interests like travel or cooking. One of the channels is called Trailer TV, where users can watch movie trailers. [Ed. note: Commercials are the entertainment?]

Users of Babelgum number in the low thousands, says Lumer. The company needs to increase this audience over the next year to test the platform and gather feedback from content distributors, potential advertisers, and users. Lumer says he needs millions of users before he can approach advertisers and he doesn't expect that amount until some time next year.

During the beta phase, Babelgum plans to add social networking and customization features. Viewers will be able to offer feedback on what they're viewing and connect to other viewers. Users will also be able to create "smart channels," which will house content they like. Eventually, Babelgum will add content to this channel based on user input, such as which programs were fast-forwarded or paused.

Light Reading talked to two Babelgum users who weren't impressed but acknowledged that the company was at a very early stage. "There's not a lot of difference between Babelgum and Joost, but Babelgum hasn't scored the content that Joost has," says James Enck, an analyst at Daiwa Securities SMBC Europe Ltd. He found Joost easier to navigate.

Heavy Reading's Finnie says the picture quality needs to be improved: "This is not nearly up to TV quality."

It's early days for Babelgum. Founder Scaglia even says that it's too early to talk about a business plan. "It's a leap of faith, but I am personally convinced that this technology is here to stay. I am ready to finance this alone for the necessary time. Maybe in a year from now we can talk about the business plan."

"This is a land grab," says Finnie. "Everyone recognizes that a huge amount of entertainment will be delivered over the Internet and that you can make money from it."

The name Babelgum is meant to convey "diversity of culture," says Scaglia. " 'Babel' historically means all the world in one place, and 'gum' keeps everything together," he says. [Ed. note: Huh. Always thought "Babel" meant incomprehensible chaos.]

The company is headquartered in Dublin where it uses data centers from Interxion . It has 30 employees and plans to grow to 150 by the end of this year.

— Michelle Donegan, European Editor, Light Reading

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