Intervu streams ahead behind the scenes

Intervu, a San Diego, California-based firm founded in 1995 when streaming media was barely in its infancy, has consciously chosen to keep a lower profile, its executives say, opting instead to be the "silent partner" of companies that want to offer streaming media but also wish to keep their own brand at the forefront.

Working behind the scenes, Intervu is ready to step in at virtually every point in the process of streaming media on the Web, from production to encoding to building audiences and, perhaps most critically, for greasing the notoriously creaky wheels of the Internet for bandwidth-intensive audio and video.

As other players in the streaming media space have grabbed headlines and heady Wall Street valuations, Intervu has been inking deals with media giants such as NBC, Microsoft, and Bertelsmann. Over the Memorial Day weekend, Intervu teamed with cable's TBS Superstation to Webcast two NASCAR events on the TBS site.

But the road has not been completely smooth for Intervu--the company has yet to earn any significant revenue and has seen its stock lose 50 percent of its value in recent months. And it faces daunting competition from its better-known brethren such as RealNetworks and Broadcast.com, both of which are in stronger financial positions. Broadcast.com, for example, was acquired by Yahoo earlier this year.

Still, analysts say Intervu's moves into the lucrative business-to-business space and a recent third round of public financing have put it in an enviable position as the streaming media industry catches fire.

"Intervu has a big lead in the streaming infrastructure market," said Bill Gramas, analyst with L.H. Friend, which underwrote in part Intervu's first two public offerings. "They're providing a very needed service for audio and video. They're the industrial-strength guys."

Although Intervu wears many hats as it helps its customers stream media, its bandwidth and infrastructure business sets it apart from Broadcast.com, which provides hosting services but has focused on content aggregation, and RealNetworks, which provides hosting and content aggregation but whose focus so far has been on providing clients and servers.

The Internet was not designed to transport files as large as video and audio clips, and bandwidth is the most formidable hurdle standing between streaming media and a full-scale deployment that will seriously challenge the television networks.

The widespread adoption of cable and other broadband technologies promises to ease the crunch for individual users but simultaneously threatens to make the situation worse for the Internet as a whole, since "last-mile" bandwidth expansion will only increase the demands made on backbones and network access points.

"Streaming media services are very much like the utility company," said Jae Kim, an analyst with Paul Kagen Associates. "There are periods of huge activity that pack the system, and you need an infrastructure that can accommodate those huge peaks, but for much of the year you may never need it.

"If you go to a company like Intervu, they have a huge system in place and can meet the traffic demand far more efficiently than if you're running T3s into your building," he added.

Another part of Intervu's strategy has been to create--and try to patent--a system of distributing multimedia content throughout a network of servers, engineered to serve content from the best server based on physical proximity and traffic. Intervu has applied for nine patents on the system, three of which are in the last stages before approval, according to the firm.

Although Intervu's "Network" resembles in principle the process known as "caching"--in which copies of frequently accessed content are kept nearer to end users to prevent unnecessary travel over the Internet--its system more closely resembles those marketed by firms such as Sandpiper Networks and Akamai than the better-known caching product offered by Inktomi.

Like Sandpiper's Footprint, Intervu's Network piggybacks on Internet service provider server facilities to deliver content from the most advantageous place.

Inktomi recently got its own feet wet in the streaming media space with a product that caches RealNetworks' streams. Inktomi also invested in Sandpiper.

In addition to encoding, production, and multimedia advertising services, Intervu offers tools for letting users sign up to tune into events and be reminded of them whether or not they are online.

Intervu boasts relationships with NBC--which holds a 7.5 percent stake in the company and coproduces the content site VideoSeeker.com--Bertelsmann, CNN, Turner Broadcasting, Bloomberg, Quokka Sports, Saatchi & Saatchi, Vcall, and MSNBC.

NBC is an investor in CNET and a coowner of Snap.com. Under a deal announced this month that has yet to close, CNET will own a small stake in NBC's new Internet property, NBCi. CNET is the publisher of News.com.

Intervu also has close technology and service relationships with industry giants Microsoft and Intel. Intervu provides streaming services to Microsoft, and the two companies collaborated to link the Office and PowerPoint 2000 products to the Intervu Network.

The golden egg
But the customer that has analysts seeing the most green is German media giant Bertelsmann, which is using Intervu's services to put more than 8,000 compact discs online so that distributors can sample them before ordering. While this particular application may seem modest, the same idea could be extended to the distribution of all kinds of multimedia products over the Web.

"This is going to be huge," said L.H. Friend's Gramas. "Where are we going with the Web? It's not going to be buying books and CDs--that's the early milliseconds of this medium. What consumers want is to call up Terminator 2 when they get home and watch it, or watch CNN when they want to watch it."

Sunny future, past the storm clouds
Though hopes are high for Intervu, its present is problematic. The firm has lost money every quarter and has an accumulated deficit of $26.4 million. For the quarter ended March 31, revenues were up to $1.2 million from $113,000 in the first quarter of 1998. The company's net loss for the first quarter was $3.1 million, down from $5.8 million for last year's first quarter.

Gramas predicts the company won't break even until the third quarter of next year.

As a result of its recent third stock offering, underwritten by Prudential Securities and five other investment houses, Intervu has more than $100 million in cash, which gives it a substantial advantage over its nearest infrastructure competitors, according to chief financial officer Kenneth Ruggiero.

Intervu plans to use the money to double its sales force by the end of the year, step up its marketing efforts, expand the media delivery centers that power its distributed network, and to continue to develop software tools that automate the process of publishing and promoting audio and video content.

But Intervu's third round wasn't the windfall it might have been. In the time it took to bring the offering to market, Intervu's stock fell from a high of 82 to its current value in the low 40s. The offering was priced at $36 per share.

Intervu and its competitors ultimately may rise and fall on the comparative success of two distinct business models: one promoting a brand and aggregating content under it, a la Broadcast.com, and the other providing services in relative anonymity.

"Intervu doesn't want to stand out," Paul Kagen's Kim said. "But they may have taken that strategy too far. Consumers don't want to go to various sites to find content. They want a one-stop Web site. That doesn't mean they have to dilute the brand of the content partners."

Indeed, Intervu has gained attention and business from companies that questioned the degree to which key players were diluting their brands, analysts say.