Digital Media

One major obstacle seems to have been settled in Comcast's quest to buy NBC Universal from General Electric--how much to pay for it.

Both companies have reportedly agreed on a price of $30 billion for GE's movie and TV unit, according to sources cited Monday by Reuters and The Wall Street Journal (subscription required for full story).

The agreement on the worth of NBC Universal (NBCU) is a major step toward paving the way to create a new, privately held company that would combine NBC's TV stations and Universal Studios with Comcast's TV and cable stations. NBCU's Web properties include iVillage and the online video site Hulu, in which it is a co-owner along with News Corp. and Walt Disney Co.

Under the terms of the proposed deal, Comcast would own a majority 51 percent slice of the new entity, with GE owning the remaining 49 percent.

Further, the two companies have discussed an option whereby GE would sell off all or most of its ownership of the new company to Comcast over the next seven years, according to sources cited previously. Recent reports say that GE and Comcast have now decided how to price the new entity after the deal goes into effect so that GE faces no problems selling off its remaining stake.

The valuation of NBC Universal was seen as a major challenge in advancing the deal, according to sources. Comcast naturally was intent on maximizing the value of its own networks and minimizing the value of NBCU to limit the amount of up-front cash it would need to invest in the new firm. Latest reports say that Comcast would inject anywhere from $4 billion to $6 billion into the new entity.

However, both companies have reportedly agreed to base Comcast's final cash payment on NBCU's financial performance before any finalized deal closes. If its performance tanks, Comcast could end up paying less.

Other challenges remain, too. French media giant Vivendi owns 20 percent of NBCU. Vivendi has reportedly told GE that it wants to sell its stake but has yet to voice approval on any deal of its own. A valuation of the company's 20 percent ownership is currently being discussed, said the source cited by Reuters.

Of course, even if Vivendi agrees to a deal and all looks good, regulatory approval would be required, especially since Comcast would own a huge chunk of national and local media outlets. The Journal said that people close to the talks believe regulatory approval could take at least eight to 12 months.

Comcast's bid for a majority stake in NBC Universal was first revealed in early October.

Requests for confirmation to GE and Comcast were not immediately returned.

Helped by cost cuts and by growth in Internet and phone subscribers, Comcast on Wednesday reported a 22 percent jump in earnings for its third quarter.

The cable provider saw net income of $944 million, or 33 cents per share, for the quarter ended Sept. 30, compared with $771 million (26 cents per share) in the year-ago quarter. Sales also rose, hitting $8.8 billion, up from $8.5 billion in 2008's third quarter, though revenue was slightly below analysts' estimates.

Comcast's third-quarter sales

(Credit: Comcast)

For the quarter, the number of TV subscribers dropped 2.7 percent to 23.7 million from 24.4 million a year ago. But the loss was more than offset by gains in Internet and voice, two services that Comcast has marketed heavily, especially as part of its Triple-Play service.

The number of Internet subscribers rose 6.4 percent to 15.6 million, while Comcast phone customers jumped 20 percent to 7.3 million. Overall, the company saw a quarterly increase in customers of 3.4 percent to 46.8 million. Subscriber growth helped boost third-quarter sales for the cable segment by 2.8 percent to $8.4 billion.

Comcast Internet and voice customers grow.

(Credit: Comcast)

With a focus on trimming costs, capital expenses declined 6.1 percent to $1.2 billion, due in large part to lower spending at the company's cable divison.

"The strength and resilience of our businesses combined with our continued emphasis on expenses and prudent capital management helped us achieve healthy operating and financial results in the third quarter," Brian Roberts, chairman and chief executive officer, said in a statement.

Comcast revealed no new details over its intent to acquire a leading stake in GE-owned NBC Universal. Early last month, reports surfaced that the company wanted to buy a 51 percent chunk of NBCU, with GE owning the rest, to create a new joint venture. If it goes through, the deal could transform Comcast into a major media powerhouse, with control of NBC as well as variety of TV networks and cable stations.

Networking giant Cisco Systems announced another acquisition this week. This time the company said it will buy the set-top division of a Chinese digital cable technology company.

Late Monday, Cisco said it would pay a total of about $44.5 million for the set-top unit of DVN. It will pay $17.5 million upfront, and the remaining $27 million will be paid over four years, based on the unit achieving sales milestones.

The deal is expected to close in the first half of next year, and it is subject to the approval of regulators and DVN shareholders.

Cisco is also partnering with the rest of DVN to provide joint customers with expanded services.

The DVN unit being acquired makes products that connect digital signals to televisions. Cisco already makes and sells set-top boxes for customers around the world through its Scientific Atlanta division.

Cisco sees a big opportunity in the Chinese cable market, which it says is the largest in the world with 160 million subscribers and with an additional 200 million subscribers expected to become customers in the next few years.

China is in the process of moving its cable subscribers to digital. The government has mandated that all cable be digital by 2015, Cisco said. Today only about a third of Chinese cable customers are using digital cable.

This is the fourth acquisition that Cisco has announced since the beginning of October. The company has spent about $6.2 billion in total during this shopping spree.

SAN FRANCISCO--Cable companies get a lot of criticism from the Silicon Valley set for being some of the ultimate 20th century corporate dinosaurs. Or, as Web 2.0 Summit conference organizer John Battelle put it, "a dead duck."

So the head of Comcast, a company that's taken loads of heat from tech experts--for imposing bandwidth caps, poor customer service, and an alleged failure to innovate on both broadband speeds and the convergence between television and the Web--was an interesting choice to kick off the summit event here on Tuesday. But Comcast CEO Brian Roberts spun his company to the audience as springing from the same kind of entrepreneurial spirit that the Bay Area prides itself on.

He spoke of how he took over the reins of the company from his father, who according to legend was able to make an early strategic acquisition thanks to the winnings from a Tupelo, Miss., poker game the night before. "Similar to probably almost everyone in this room, (he) wanted to work for himself, wanted to start his own business."

He previewed new features for the Comcast video hub Fancast, which it launched slightly under two years ago at the Consumer Electronics Show. The new beta of Fancast, which will launch by year's end, will make new on-demand content available online, much of it unavailable in outlets like iTunes--and integrated with DVR boxes--to Comcast cable subscribers who already pay for HBO. About two dozen content providers have signed on board, and as Roberts scrolled through the preview, he noted that there were about a thousand movies available.

Comcast CEO Brian Roberts

(Credit: Comcast)

Battelle, interviewing Roberts onstage, called it "video-on-demand on steroids."

The Associated Press, referencing a briefing this week with executives at Comcast's Philadelphia headquarters, helped fill in some of the details about the service, noting that it would include such popular cable shows as HBO's "Entourage" and AMC's "Mad Men" and for now is being called "On Demand Online."

The AP said Comcast subscribers can initially watch shows and movies only on their home computers after being verified by the cable system. Online viewing, at least in the beginning, will be restricted to those who get Internet service through Comcast, not through competitors like phone companies, the AP said.

Back at Web 2.0 Summit, Roberts also said that Comcast investments in broadband technology are, in part, what has facilitated the explosion in Web innovation.

"We're going to keep investing, because we believe there are great ideas in this room and in this country and in the world," Roberts said. "In the same way, it's unthinkable that a Google or a Yahoo or a Facebook or a Twitter would be happening if we hadn't made those investments (in broadband infrastructure) 15 years ago."

Battelle asked Roberts why he believes the U.S. lags behind in broadband technology advancements. Roberts replied, "I think that that's just not true."

(The audience laughed uncomfortably.)

"We have the same equipment (as other countries), the same wires, the same infrastructure, why is the adoption different is a different question. It's not the availability and I don't think it's the lack of speed," he continued. "You get to digital literacy, you get to what language it's in, do you have the right PC or a PC at all...I don't believe the infrastructure providers haven't done enough."

As for Net neutrality, an issue where Comcast has been a frequent villain after imposing bandwidth caps and interfering with peer-to-peer file-sharing software, Roberts was vague.

"We welcome that discussion, that scrutiny, and we're going to be an active participant," he said. "The few limited examples, including our own, that have gotten notoriety usually get dealt with in ten seconds, and changes get made, because this is new technology."

More recently, it's bubbled into the press that Comcast is in talks with General Electric to obtain a controlling stake in its NBC Universal property. Conveniently, GE chief Jeffrey Immelt was slated to speak later in the afternoon at Web 2.0 Summit.

"You and Jeff Immelt must have finished the NBC deal back in the green room," Battelle joked.

Roberts replied facetiously, "It's all done."

Instead of a bloody price war between cable operators and phone companies in the TV market, battle lines are now being drawn over who has the most compelling new features.

Digital video recorders, on-demand services, and more recently Web sites such as Hulu.com have taught people that they don't have to be beholden to a TV schedule. But the TV industry is about to be shaken up even more as phone companies and cable operators, which are all vying for your viewing eyeballs, add new features to their services to lure customers.

So what's it mean for you, the consumer? Well, it's not likely to mean lower prices on the services you already buy. Verizon Communications has already started moderately increasing the price of its service bundle for new customers. But what it's likely to mean is that consumers will get a lot more bang for their buck. When it comes to TV, that means a lot more access to the shows and movies you like, when you want to watch them, and on any device you want to view them on. At least that's the promise.

Whether the dream lives up to the expectation is another story. While some of these new services are being rolled out as we speak, some are still being tested and aren't quite fully baked. But at the very least the revolution is quietly under way and TV viewing could be a whole lot different in just a few short years.

"I think what we (Verizon and AT&T) are doing is pressuring the rest of the market to respond," said Shawn Strickland, vice president of Fios product management for Verizon Communications. "So Comcast can't just respond to what we are doing in a single market, but they have to respond to AT&T too and it drives innovation in the entire market."

For years, not much had changed in terms of the TV viewing experience. Programmers would highlight their popular shows and vie for top ratings in Nielsen surveys. And viewers would sit back and enjoy their favorite shows. Aside for some competition from satellite providers, for the most part, the cable industry had enjoyed a near monopoly on the TV market. That is until the phone companies came along with their dreams of marrying Internet technology to the TV.

Who would have thought just a few years ago that it would take the old stodgy phone companies to stir things up in TV? But that is exactly what's happened as AT&T has entered the TV market with its U-verse service and Verizon Communications has taken on cable operators with its Fios service.

In just a few short years, these phone companies have gone from playing catch up to their rival cable providers, to actually leading the industry in terms of innovation with new interactive services that leverage their Internet-based networks.

But the cable industry hasn't sat idly. The major players in the market, namely Comcast and Time Warner Cable, have been upgrading their networks to add more capacity both to their Internet services and to their video services. And they've been forging ahead with new digital video recording features and video on demand content. Now, they are about to take the biggest plunge yet into the uncharted territory of online on-demand access to TV shows and movies.

For consumers these new services will soon offer broader access to more content, on more screens and at times that are convenient for viewers and not TV programmers. And thanks to the wonders of the Internet, consumers will also be able to interact with what they're watching.

More interactivity for viewers
For the phone companies, the future of TV is also about deepening the experience and providing more interactivity for viewers. For Verizon's Fios customers this means being able to discover new shows by checking what is the most popular content being watched in their neighborhood. The company also offers sports and news widgets, and its working on social-networking applications that will integrate TV viewing with Twitter and Facebook.

For AT&T's U-verse customers it means taking a TV event and providing a deeper dive. During the PGA Masters golf and the March Madness NCAA basketball tournaments this spring, AT&T partnered with CBS Sports to provide Web-based applications to coincide with TV viewing (CNET News is owned by CBS.) During basketball games, statistics and scores were added to March Madness fans' online brackets so they could be viewed as the games were unfolding.

And Masters golf fans were able to view multiple video feeds on their TV screens to keep up with action at different points on the course. Viewers could also check the score board online to see how the leaders were shaping up. And this information wasn't just available online or on TV, but using an application for the iPhone, it was also available on mobile devices.

"With this kind of experience viewers start to have more control and a deeper engagement with the content," said Jeff Weber, vice president of video products for AT&T. "This is very clearly for customers who care about these types of events, but it gives them an opportunity to be engaged in a way they couldn't before."

But Weber also acknowledged that viewers were primarily interested in watching these sporting events. And he said there was a fine line between balancing the deeper richer experience with not interfering with the primary activity of TV viewing.

"At the end of the day, the killer application is still watching TV," he said. "So we needed to deliver ESPN with as good a quality or better than the cable companies into the living room. But now that we have done that, we are pushing ahead to make it a much richer experience for the consumer."

Verizon's Strickland said adding interactivity to the TV viewing experience also increases the opportunity for advertisers. And it offers a new way to monetize the TV viewing experience.

"The TV is the best entertainment storefront out there," he said. "People spend an average of six hours a day in front of the TV. And interactivity with that audience provides a lot of opportunity to advertisers."

This aspect of the new television age may or may not appeal to consumers. But the truth is that providing TV service and creating content is expensive. And as more people gravitate toward watching recorded TV shows and skipping advertising or even viewing video on demand content, TV providers and the programmers that create the content need to find ways to make money to augment losses in the traditional business model.

Because the phone companies have built their networks using IP technology, they've been able to push the envelope in terms of interactive features. And in the case of Verizon, its fiber architecture has also given it a considerable amount of bandwidth capacity to push the envelope in terms of on-demand services. As a result, today Verizon is offering more than 100 channels of high-definition content. And it's able to match cable competitors in terms of video on demand services.

Cable upgrades
But the cable companies haven't been sitting on their hands for the past few years. They've been upgrading their networks and innovating too. Comcast already has Docsis 3.0 technology, which greatly increases broadband speeds and network capacity, in at least a dozen markets. Time Warner Cable was one of the first companies to introduce its start-over solution that allows viewers to start a TV show from the beginning if they come into the show late and haven't recorded it.

But the boldest move by the cable companies is about to get off the ground. Leveraging existing relationships with TV programmers, cable is striking deals to put more video content online. The popularity of Web sites such as Hulu.com, which offers mostly broadcast TV shows for free online after they air, along with other free online video programming, has spurred the cable companies into action.

Time Warner Cable has been trialing a service with HBO that allows people in Milwaukee to watch on-demand HBO TV shows and movies on their laptops. And now Comcast and Time Warner, the media conglomerate and former parent company of Time Warner Cable, are working together to test a new authentication system for accessing Turner Broadcasting content from TNT and TBS.

On Wednesday Comcast and Time Warner announced their new plan to provide authentication to securely distribute video online to cable subscribers. The companies highlighted the importance of allowing their viewers to access content, which they've already paid for via a cable subscription, from anywhere, anytime and on any device.

"This a very logical next step in the evolution of TV," said Brian Roberts, CEO of Comcast during a press conference Wednesday in New York. "Comcast alone has had 12 billion on-demand streams. iTunes has had about 6 billion downloads. This is how consumers want to get their content."

Jeff Bewkes, CEO of Time Warner agreed. "Consumers have spoken," he said. Bewkes added that putting video online for viewers to watch anytime they want on any device will greatly expand the audience and actually provide more revenue opportunity for advertisers. He used HBO as a perfect example. He said that when the company decided to add HBO content on demand for free that viewership went up and people were able to follow more shows. He said he is willing to work with any TV provider to make the Time Warner content available elsewhere.

While it's important to give people a choice in where and when they watch something, Bewkes also noted that the most important thing is simply providing access to the content.

"There has been so much focus on broadband," he said. "But don't miss the importance of the video on demand aspect. Whether its over a set top box or broadband, it will have a dramatic increase in audience."

Seriously?

(Credit: Matt Hickey)

Go to ESPN360.com. Click on the link at the top that says "Watch Now," and see what happens. You'll either be let in to the viewing area or, more likely, told that you can't access the content because of your Internet service provider.

Why? Ars has it that Disney, the parent company of ESPN360.com, has partnered with certain ISPs to provide exclusive access to its premium content. If your ISP isn't a Disney/ESPN partner, tough luck. This, of course, violates the ideals of Net neutrality.

The Net neutrality position is, in a nutshell, that no matter who you get your Internet access through you should have access to the same Internet as everyone else.

But the large corporations have started using their influence to sell features to the large ISPs at prices that smaller ISPs can't match. Besides the Net neutrality issues, this is troubling.

And not just for the customers: A pop-up actually recommends to customers who don't match the viewing criteria that they change their ISP to one of its partner providers so they can. It actually says:

ESPN360.com is available at no charge to fans who receive their high-speed Internet connection from an ESPN360.com-affiliated Internet service provider. ESPN360.com is also available to fans that access the Internet from U.S. college campuses and U.S. military bases.

Your current computer network falls outside of these categories. Here's how you can get access to ESPN360.com...Switch to an ESPN360.com affiliated Internet service provider or to contact your Internet service provider and request ESPN360.com. Click here to enter your ZIP code and find out which providers in your area carry offer ESPN360.com

With the exception of college students and the military, Disney wants you to switch your ISP to get full content. This blatant throwing of corporate weight has gained the attention, though, of an unlikely group: the American Cable Association, a group that has historically been against Net neutrality is lobbying the FCC to intervene on their behalf. Now that the mega-corps are using their power to push the smaller cable providers aside, it seems they've realized the threat, and have asked the FCC to investigate such actions.

On the surface this seems like a fairly small issue. One site working with a handful of large providers will not kill the Web as we know it. That being said, this kind of thing is a slippery slope, and Net neutrality proponents often point out that if this kind of behavior is tolerated now, it will make laws to curtail acts like this harder to enforce in the future. We'll follow this story and keep abreast of any others like it that pop up.

The fight for Net neutrality is young, and this particular action might end up being an important precedent. Content partners offering special services depending on which provider customers use hasn't worked well in the cell phone industry and nothing points to it working in the cable industry, either.

Sure, for a year now, YouTube has trailed Hulu in the number of TV shows and films it offers, but in recent months all the momentum appeared to be with Google's video site.

That was until Thursday, when Hulu announced a partnership with Disney that at least one industry analyst believes has smashed YouTube's chances of becoming an online hub for top TV shows and feature films.

Disney will provide Hulu with full-length ad-supported episodes from ABC, SoapNet, and ABC Family. Some of the shows include "Lost," "Grey's Anatomy," "Ugly Betty," and "Scrubs." Some Disney films will also appear on Hulu, the ad-supported streaming video site formed by News Corp. and NBC Universal. Hulu has now locked up content from three of the largest six film studios.

As for the other three, Sony Pictures has deals to provide a small amount of long-form, ad-supported content with both Hulu and YouTube. Warner Bros. has largely kept long-form content off the Web, and Paramount, which provides Hulu with some TV shows and a smattering of films, is unlikely to join Google-owned YouTube anytime soon. Paramount's parent company, Viacom, has a $1 billion copyright suit pending against YouTube.

What this all means is there just aren't that many other places for YouTube to acquire high-end content.

"(The Disney-Hulu deal) is not good news for YouTube," said James McQuivey, an analyst at Forrester Research. "Any hope of creating a professional-content business has probably disappeared."

A YouTube spokesman issued this positive-spin statement: "More content coming online in more places is a win for consumers and provides further validation of the growth of the online video market."

Cable sector should jump on Hulu
Besides Hulu, the big winners in the Disney partnership--which also involves Disney taking an unspecified equity stake in the video site--could be Comcast, Time Warner, and the cable industry.

Some of the major cable operators have griped in recent months that some of their subscribers are dropping cable in favor of watching TV shows and films online. Now, according to reports, the cable guys are seeking ways to compete on the Web.

Up until now the cable companies have had to negotiate with individual studios. Hulu potentially provides a way, according to McQuivey, to obtain a wide swath of TV shows and films with a single handshake. He also sees the opportunity for offering premium Hulu services, which might make sense at a time when Hulu continues to offer fewer and fewer episodes from popular shows.

Man of the hour: After signing blockbuster deal with Disney, will Hulu CEO Jason Kilar partner with cable industry?

(Credit: Greg Sandoval/CNET Networks)

"Comcast can tell NBC and News Corp., 'We want to put your Hulu system in front of our subscribers'," McQuivey said. "'But we want to give our customers more. If Hulu is posting four episodes of a show online we want our subscribers to have 12 episodes.' I'm 90 percent certain sure these conversations are already happening."

"In order to get Hulu," McQuivey continued, "you have to be high-speed broadband customer and maybe also spending top dollar on TV services."

What would Hulu receive in return? McQuivey said maybe the cable companies would share subscriber revenue with the site. He added that Hulu is probably making decent revenue on ads, but advertising is tougher online. Hulu, he said, "might look at cable to help accelerate some of their revenue potential."

Tougher to sell ads online? McQuivey might be guilty of a gross understatement. Anybody who spends any time on Hulu has noticed the growing number of paid service announcements. Last year at this time, site managers trumpeted that they had sold out of ad inventory. Hulu hasn't made any such announcements lately.

While advertising is down for nearly everyone in media, there is a growing skepticism in Hollywood that the ad-supported online model can generate the kind of revenue the studios see from broadcast, cable or DVD sales. One industry source told me that "to generate a worthwhile profit from an online broadcast, you have to throw in lots of ads, and that will only prompt viewers to log off."

As for McQuivey's idea that Comcast could negotiate to obtain more shows, the studio source said that there's a reason why Hulu is carrying fewer episodes from shows than it once did. There's concern in Hollywood that offering too many episodes may cut into DVD sales. The source said the studios see big revenue from the sale of DVD versions of TV shows. Asked whether the studios have seen a sales drop-off yet, the executive said, "No."

Of all the major studios, only Sony Pictures appears willing to offer consumers access to a wide variety of full-length feature films on an ad-supported basis. This week, the studio announced that more than 100 movies, including "Spiderman 2," "La Femme Nikita," and "Candyman," were available at Crackle.com, the studio's online video site.

McQuivey said that after doing an analysis on the problem, he's also doubtful ad sales can generate meaningful profits. Ads alone won't make the Internet a "replacement model," he said. "You're going to have to look at some kind of subscription model."

Maybe he's on to something. "With respect to how (YouTube) will get monetized, our first priority is on the advertising side," Eric Schmidt, Google's CEO, said after Google reported first-quarter profits earlier this month. "We do expect over time to see micropayments and other forms of subscription models."

For an industry that's supposedly struggling to keep up with customer demand for more bandwidth, the nation's two largest cable operators seem to be doing pretty well.

This week Comcast and Time Warner Cable each reported strong earnings, in spite of the fact that Time Warner has said recently that it needs a new business model to handle growing broadband demand.

Comcast beat analysts' expectations and increased profits 5.4 percent to $778 million. Time Warner Cable's profits fell 32 percent, but this was mostly due to costs associated with the split from its former parent company, Time Warner. The company's revenue was actually up 5 percent to $4.4 billion when compared to the same quarter a year ago.

Comcast also increased revenue by about 5.3 percent to $8.4 billion.

Meanwhile, both companies reduced capital spending. Comcast cut capital expenditures by 19 percent to $1.16 billion. And Time Warner Cable cut its spending by 18 percent to $33 million. For broadband specifically, Time Warner increased revenues 11 percent to $1.1 billion.

The companies also increased subscribers. Time Warner added 225,000 new broadband users and 166,000 new voice-over-IP customers during the quarter. Comcast added 328,613 high-speed Internet customers, down 33 percent from the previous year, and it added 298,433 digital phone customers, also down about 53 percent.

Even though Comcast isn't adding new customers as quickly as it did a year ago and Time Warner's profits aren't as high as they were a year ago, the companies are still adding new subscribers and making money. And yet they are also cutting capital spending.

This financial reality is very different from the one Time Warner Cable has been touting recently, as it tries to explain why it wants to start billing customers based on how much bandwidth they use. Outraged consumers mounted loud protests when the company said it would expand trials of the new billing system. Time Warner backed off the plan for now. But the company still argues that it must do something because the current business model is "not viable."

Time Warner's views are shared throughout the industry. Kyle McSlarrow, president and CEO of the National Cable & Telecommunications Association, supported Time Warner Cable's trials in a blog post stating that they "may serve the vast majority of their customers better by reflecting the growing reality that some consumers utilize far more high speed bandwidth than others."

Smaller cable operators are already starting to meter bandwidth, according to a recent article by the Web site Broadcasting & Cable. Sunflower Broadband in Northern Kansas has been using metered pricing for the past four years. And Wave Broadband, which provides service in Oregon and Washington, is about to launch metered billing on its network.

The chief operating officer of Sunflower Broadband, Patrick Knorr, says bandwidth-based billing is the only way to manage infrastructure, the B&C article said. He believes that with all the high-definition content being downloaded that there is no way a cable company could keep up with demand at current flat rate prices. And like Time Warner's CFO, Landel Hobbs, Knorr says that consumption-based billing is "unsustainable."

But when cable operators add customers and cut capital spending on infrastructure, it doesn't seem as though they are even attempting to keep up with customer demand for more bandwidth. And the fact that they are still making profits also shows that they have the money to spend. So for consumers--who already feel they pay too much for broadband services compared to people living in other countries--Time Warner's argument that it has no choice but to meter traffic is a hard to pill to swallow, especially in this economy when so many people are financially strapped.

Joost is actively seeking a buyer and the beleaguered video service has told cable and satellite providers that it could be their online video solution, said sources close to the companies.

Time Warner Cable is one of the companies that has expressed interest in Joost, the sources said. Spokespeople for Joost and Time Warner Cable said they don't comment on rumor or speculation.

Joost is a story of missed opportunities, bad luck, and the folly of thinking whiz-bang technology alone is enough to forge a winning entertainment site.

Joost launched in 2007 with seemingly everything going for it. The company's founders are Janus Friis and Niklas Zennstrom, the same pair who founded Skype and Kazaa. The thinking in the media was the site couldn't lose with Friis and Zennstrom's peer-to-peer technology, which was supposed to be more efficient and provide higher-quality video.

Two years later, and after the company struggled with management shakeups, technology setbacks, as well as a failure to land top TV shows and films, Joost's traffic and content library are mediocre at best. In the Web video sector, Joost has fallen far behind the leaders: YouTube and Hulu, the site formed by NBC Universal and News Corp.

The latest setback came earlier this month when Sony Pictures did not renew its licensing agreement with Joost. At about the same time, Sony Pictures was striking a licensing agreement with YouTube, the much larger and more successful Joost rival.

It should be noted that CBS, which owns CNET News, is investor in Joost.