After RCN, McCourt looks to Internet video investments

eCommerceInvesting in the next big thing: Using the Internet for downloading and viewing video

By: Lauren Otis
   The media and telecommunications industry is considered one of the most volatile business sectors there is. Yet David McCourt has spent most of the past 25 years identifying and successfully capitalizing on opportunities in the ever-shifting media and telecom realm.
   Although he has had his setbacks — the biggest being the implosion of Princeton-based RCN Corp. in the telecom bust several years back, forcing a corporate reorganization and prompting him to step aside as CEO in 2004 — Mr. McCourt has one of the better track records in this topsy-turvy business, having founded, operated and sold successful cable system providers and telecommunications companies on three continents.
   Today Mr. McCourt believes he has identified another important and potentially lucrative media trend: the rapidly increasing use of the Internet for downloading and viewing video.
   With characteristic confidence, Mr. McCourt has backed up his beliefs financially, through Granahan McCourt Capital LLC, the private Princeton-based investment management company he currently heads.
   In a recent interview, Mr. McCourt discussed the Internet trend towards video, the business opportunities he sees emerging from it, and companies he has invested in that are capitalizing on those opportunities.
   While past media and telecom growth focused on building vast high-technology communications networks and the Internet Protocol infrastructure for consumers and businesses, "the future, at least as I see it, is all about the applications that are delivered over this network and what you do with these applications," Mr. McCourt said.
   What he calls the "march of video onto the Internet" has been progressing at a huge pace in recent years, Mr. McCourt noted. Three years ago there were approximately 5 billion video downloads off the Internet; two years ago this number rose to 14 billion; and last year there were 20 billion video downloads from the Internet, said Mr. McCourt.
   With this explosion in video content online, some forward-looking companies have been developing ways to profit from this trend, Mr. McCourt said. "We went out and looked for companies that were supporting where we thought the technology was going," and invested in them, he added.
   One of those companies was Narrowstep Inc., with offices in London, New York and Princeton, which offers continuous television-like video programming over the Internet. A lot of people put video on the Internet, noted Mr. McCourt, but Narrowstep has developed a proprietary "end-to-end delivery system," named TelvOS, which allows customers to "monetize" their Internet video offerings through advertising, subscription, on-demand and other revenue-generating means.
   Narrowstep has production facilities for clients or it can simply take a customer’s video content and put it on the Internet. The company currently has over 100 24/7 "always on" Internet channels running, said Mr. McCourt. In February, Granahan McCourt was lead investor in a $ 7.4 million purchase of Narrowstep stock and warrants. (Narrowstep (NRWS.OB) is currently publicly traded over the counter.)
   Narrowstep’s technology enables it to capitalize on the Internet phenomenon of "narrowcasting," or reaching small dedicated communities of people with a common interest who are spread around the globe but can gather together as an audience on the Internet. CyclingTV.com and visitLondon.com are two examples of Narrowstep channels which bring together a global audience over the Internet, said Mr. McCourt.
   There might be 1 million bicycle enthusiasts spread around the world, but not enough in any one city to support a traditional 24-hour-a-day television channel, he said. But an Internet channel, such as that set up by Narrowstep, can not only reach all of these enthusiasts, but can target them with cycling or other advertisements fitting their demographic.
   Similarly, with visitLondon.com "only people who are going to take a trip to London are going to care about that channel, but globally that is actually a lot of people," Mr. McCourt said. Another recent Narrowstep job was being hired to set up both live and on-demand Internet broadcasting for the International Paralympic Games held in Torino, Italy, in March of this year.
   During Internet broadcasts Narrowstep has the ability, through TelvOS, to track who is watching and where with a high degree of accuracy, enabling advertisers to target ads quite specifically, said Steve Beaumont, Narrowstep’s president and CEO.
   "We can tell by the push of a couple of buttons how many countries are watching, how many people are watching, what ads they are watching — there is a whole raft of information we can obtain," Mr. Beaumont said. Advertisers will love such a targeted audience, Mr. McCourt said, because they can not only target and tailor their message to a very specific demographic, but through Narrowstep they can also track audience response and quickly refine their ads.
   Citing one hypothetical example, Mr. McCourt said a company like Coca Cola could roll out a new drink product on an Internet channel, targeting males age 18 to 30 who were interested in a particular sport, and could advertise on the same day in London, Paris, New York, San Francisco, Sidney and Dubai. After this initial ad campaign, the company could look at the results on day two and refine its ad by day three, something impossible to do in the realm of big-budget ads shown on broadcast TV, he noted.
   If an event is being broadcast by traditional means in a certain market — a soccer match being shown on German network television for example — Narrowstep also has the ability to black out its Internet broadcast of the event in the German or other relevant market, and thus not infringe on the rights of traditional media companies, while still streaming video to the rest of the world via the Internet, Mr. McCourt said.
   Mr. McCourt said Granahan McCourt Capital also has investments in other companies seeking to capitalize on the trend towards delivery of video and other content over the Internet: Akamai, which partners with other video-streaming companies, providing e-business infrastructure solutions and software; VitalStream, a global provider of integrated content delivery services enabling businesses to broadcast digital media and communications worldwide via the Internet; and Terremark Worldwide, a provider of Internet infrastructure and managed services.
   In the fast changing world of online media, "it’s not clear what companies will be winners and losers," Mr. McCourt said. "What is clear is the way young consumers view and deal with their video content is changing and changing for good."
   Traditional video production, marketing and distribution have always been the province of television networks and Hollywood, but consumers’ behavioral change in seeking out video on the Internet, combined with the technological change of the Internet now being able to supply such streaming video programming to them, has brought about a cultural shift which makes it difficult for old media companies to compete, Mr. McCourt noted.
   This "convergence of all these changes, that is where we like to be," said Mr. McCourt. "Today video over the Internet is a secondary source for primary content, or a primary source for secondary content. Tomorrow it will be a primary source for primary content, that is the way it is moving," he added.
   "We believe the trend is right, we don’t know which company is going to be successful, but we are comfortable the trend is right," he said.