It might be the depths of winter in Sweden but things at Stockholm based Voddler are really hotting-up. Despite being only available in Sweden, the video on demand service being labeled as “Spotify for films” already has almost 500,000 users and recorded one million streams being accessed across its peer-to-peer network in January. However, such rapid progress hasn’t been without its problems. As I reported yesterday, Voddler has temporarily been suspended until March 8th after a security breach of the desktop client and now all their energies are focused on the release of an exciting YouTube style web client due for launch on March 8th.
With a Europe wide roll-out expected by the end of the year (although no North American date set as yet), Voddler is quietly poised to emerge out of the Swedish tundra and take the video entertainment industry by storm. Despite beta teething problems, I was thoroughly impressed with the app when I tried it on both Windows and Mac a few weeks ago. A few weeks ago, I finally got the chance to go behind the scenes at Voddler to find out more about what could be one of the most successful entertainment applications of the year.
I was introduced to Mathias Tönnesson, the enthusiastic Vice President of Business Development at Voddler who joined the team after being convinced that its pioneering technical infrastructure and “freemium” business model was onto a winner. A quick guided tour around the work in progress at Voddler’s new offices indicate how rapidly the company is growing. Having recently moved from Stockholm’s old town, the company now occupies a spacious new media complex on the outskirts of the city. After giving me a detailed overview of the basics behind Voddler, I sat down with Tönnesson for OnSoftware to find out more about this exciting project. The interview is transcribed in full below or you can watch the entire half hour video here: Part 1, Part 2, Part 3.
Note that this interview took place on February 9th so it was before the recent decision to suspend the service temporarily until March 9th.
OnSoftware: For those that don´t know, tell is what is Voddler and what do you do?
Tönnesson: Voddler is a very unique advertising based video on demand service launched in Sweden. We have close to one thousand titles at the moment, ninety percent of which are free. You have around two minutes of adverts at the beginning and the rest of it is free.
OnSoftware: And why the name Voddler?
Tönnesson: It comes from VOD i.e. “Video on Demand”.
OnSoftware: For most internet startups such as Voddler, it can be very hard to attract investment. You’ve just announced another new 2.5 million Euro investment deal with Eqvitec. How have you been to attract such investment so far?
Tönnesson: I think it’s the quality of the product we are offering. I obviously can’t go into too much detail about the various partnerships we have but I think it’s the technique, that’s the important thing that attracts investment. The Voddler net streaming technology which is a world unique product and secured by over 30 patents of how you stablise video, how you put movies out over a P2P network, how the network takes slices of data from other users and puts it all together in DVD quality. Everything is secured by the 30 patents and that’s what brings attention to the final product because investors see it as a fantastic technical platform.
OnSoftware: What’s your basic business model?
Tönnesson: Our basic business model is to have a big advertising base. The model is called “Freemium” so it’s a connection of free and premium content. Ninety percent of our catalog is free to watch and ten percent is content that is only one or maximum two years old which you have to pay a small fee to access for 24 hours. So our model is a big base of users enjoying advertising based content attracted by viral marketing, and invites etc, get everyone happy and then for those that have the need for newer moves, you pay a small fee for access to them.
OnSoftware: Do you plan to keep that model in place or do you think its going to evolve as the company grows?
Tönnesson: No. I think we’re very very happy with the model. The advertising base generates great revenue already to our content partners. Some of them were quite surprised in December when they go their first cheque because it is very rare that you pay more than the minimum guarantees. So we’re very happy. We sell a lot of advertising, we’ve got five guys dedicated full time to that so we will definitely keep it – as a rule of thumb – ninety percent of the content will remain free in our catalog, ten percent should be transaction based.
OnSoftware: Whats the criteria for distinguishing what is free and what is premium content?
Tönnesson: Some movies are available in different windows. After the cinema release, they enter the DVD window, and then the DVD to buy window. We would love eventually to be able to make new releases free. For example we recently published the new Swedish film “Surrogate” on our premium service.
OnSoftware: Do you think you will ever get to the stage where you are able to publish films on Voddler at the same time as they are released at the cinema?
Tönnesson: We hope. Of course, we need to work very very closely with our content owners. But for example, Avatar is the most downloaded film ever on Pirate Bay. And I think if you would allow a window of opportunity for viewers to watch it on Voddler at the same time as the American cinema release, I think you’d find thousands and thousands of Swedes watching it legally, and paying for it. And I think you would find a lot of people willing to pay a lot of money – not just three Euros or even nine Euros but even as much as thirteen Euros for the opportunity to watch it in DVD quality, in a comfortable environment with Swedish subtitles, I think a lot of people would actually pay that. In that way, the distributors will be earning money that would other be lost to illegal downloading.
OnSoftware: Is it any coincidence then that Voddler was released around the same time as the Pirate Bay ruling?
Tönnesson: Complete coincidence. But of course it was very good for us. And I think Voddler was used by some politicians as a good example of a way films and video can be watched legally over the internet. The launch of Spotify in Sweden has stopped a lot of people downloading music illegally because its so easy to get access to the music and with Voddler too, a lot of people have actually stopped downloading films illegally because its easy access to good movies.
OnSoftware: In the development of Voddler, did you learn much from Hulu in the US or even the failure of Joost?
Tönnesson: Hulu have a great model. Fantastic content, a very easy user interface etc. Joost had a fantastic P2P base but there of course they had the problem of allowing viewers to access good quality content which was their problem. The Hulu model proved to the market that it should be easy to access great content and that is the great lesson we can take from them. Easy access to content makes people willing to use the service and of course Hulu have a great business model with the advertising base so that way you get even more users. What makes us differ from Hulu is that we have our patented technology that enables us to stream movies cheap so that we can offer a lower price to customers, a greater content library and we can give money back to our content owners so they’re happy with that.
OnSoftware: So far you have deals with about fifteen different movie studios. Is that set to increase?
Tönnesson: Yes, the main ones are Disney, Paramount, Sony and all their subsidiaries and then we have several Swedish distributors. Our goal is to have one hundred percent of the Hollywood studios by this summer, today we have approximately sixty percent of them and we are in early discussions with the others to get their content. Now that we are making steps into Norway, Denmark and Finland, we are very eager to make deals with distributors in those countries too to serve audiences in those countries.
OnSoftware: Do you think it’s been easier to get the movie studios on board due to the success of Hulu?
Tönnesson: Absolutely. However, even if we share a lot of similarities with Hulu, I would say that we have totally different technical fundamentals to work from. Hulu’s challenge is to continue making the service profitable for content providers, the infrastructure we have on Voddler makes it easier and cheaper for us to distribute the movies. So we can give back more to the content providers and end users in the form of a greater library of free movies.
OnSoftware: Its clear one of your big selling points it the Voddler technical infrastructure which you have thirty different patents on. Is this something that took many years of design and development?
Tönnesson: Absolutely. Voddler was founded in 2005, so actually five years ago now, and so these five years have been spent just developing the model and technology. It was only a year ago that work started on making it a public product. So its taken many many years of development.
OnSoftware: So it’s safe to say your infrastructure is light years ahead of even YouTube for example?
Tönnesson: Yes I think YouTube would enjoy fantastic benefits from our technology. Because of course, their major cost is streaming i.e. distribution costs. Today they are owned by Google and so of course they can handle these technology costs easily but if they were able to lower it, they would be able to have even greater content. And I think this is one of the main reasons you haven’t seen Hollywood movies on YouTube yet. With their current technique, you can’t stream one and a half hours of DVD quality film in a cost effective way.
OnSoftware: What then are the most challenging parts of developing Voddler? Would you say it’s the content side of thing or the technological side?
Tönnesson: One challenge is that we want to be able to give our end users, the chance to use as many platforms as possible. Today we are available on the Mac and Windows platforms.
Any plans for Linux?
Tönnesson: There are plans for Linux, there are plans for many things. We want to develop our own Voddler box like Boxxee have done in the US. And so all these things are in our roadmap. But platform development is an issue – it’s a wild world out there especially on the PC platform getting all the anti-virus programs to work properly with Voddler, DSL modems etc. so that’s the area we’re currently working very very hard on at the moment since we launched our beta in the Fall. We have solved thousands of issues and today we are very very proud of our service. Of course there is a long way to go before everyone is happy but we’re very very pleased so far.
OnSoftware: But is sounds like so far, you’ve got the basic technology in place, you’ve got the content deals in place and so its mainly a case then of developing the desktop client and web client and perhaps most importantly, getting the content online now.
Tönnesson: Yes absolutely and that is our challenge. We’ve listened very closely to what our end users want to what our content providers want during this beta testing stage and we’re now in the process of developing an alternative desktop client based on Adobe Air which we’re very hopeful and we’re also doing a “YouTube” variant of Voddler where you have very easy access to the content and you’re just one click away from actually watching the movies. So, “Hollywood movies one click away” that’s the goal.
Do you think in hindsight, because some people have “complained” about the functionality of the desktop client as its designed more for using with a TV and keyboard at ten meters away, do you think it would have been better to have launched the web client first and then gone onto the desktop client?
Tönnesson: I think the history we are actually bringing with us is to give the end user a fantastic customer experience. It comes with the viewpoint that you sit in your sofa with a big TV screen and you have a fantastic one and a half hours watching a movie, I think that legacy actually makes it easier for us to take the step out onto the web. I think if we had started on the web, I think we would have forgotten about the ultimate aim is to provide a fantastic environment for watching movies with great picture quality etc and I think that’s really important. So I’m really happy that we’re starting with the 10 meters away idea and then in phase two, making the content even more available to a wider audience.
Do you know how many titles you have online so far?
Tönnesson: Today we have around eleven or twelve thousand titles. We have published around 850 of those. Ninety percent of those are free movies, ten percent are premium movies and everyday we publish another twenty.
OnSoftware: So publishing the films is a very slow and manual process?
Tönnesson: It’s slow and in some cases, its very manual yes. Sometimes we receive fantastic content straight from a hard drive. Other times we receive Betamax tapes. The nice thing of course about our technology is that we have unlimited bandwidth and unlimited storage space so we wouldn’t have any problem matching Netflix who have something like one hundred thousand available titles.
OnSoftware: The format of films on Voddler at the moment is that you have around two to three minutes of adverts at the beginning – a maximum of five minutes – and then the film plays uninterrupted. Do you think that advertisers might put pressure on you to put adverts within the films themselves?
Tönnesson: They would love to have ads everywhere. But we have made a decision that our advertising is before the movie. There will be implemented a pause ad so that when you pause a movie, you will see advertising but that will be the only advertising within the movie because it should be a great customer experience. I don’t want a situation as on Swedish TV where you get programs breaking every ten or twenty minutes and then there’s a break for the news, a break for something else etc and you ruin the quality time with that movie. It should be that, from start to finish a fantastic quality film and great customer experience and that is our rule of thumb and that’s what we want to achieve. And we have no problem with that because the technology we are using allows us to have just a few minutes advertising at the beginning to make the movie profitable.
OnSoftware: How new will the latest content be? Whats the lead time for putting a movie online?
Tönnesson: It will be down very much to our content owners. We would of course love to have great content as early as possible but we fully respect the business model of the content providers.
OnSoftware: So take an example like Avatar that you mentioned earlier, how long would it be before viewers could expect to see that on Voddler?
Tönnesson: Traditionally you can say that Avatar will be released on DVD about three months after the cinema release. And it could be expected to be available for free on Voddler after two years. Voddler is about providing great quality content early but its also about bringing alive the long tail of movies so for example if you want to watch Flashdance, which I think was released around 1984 – a long time ago – if I go to my local video store, they don’t have it so I can’t get it but of course if I can have an electronic copy on Voddler I would happily watch it.
Why is Voddler only available in Sweden at the moment?
Tönnesson: You need to start somewhere. And as with Skype or Spotify we are a Swedish company so we start with the home market and testing it to make it really high quality. Last week we opened up our Norwegian beta invite queue so now Norwegians can enjoy our launch there later this spring. We will open our queues for Denmark and Finland in a couple of days or a couple of weeks so we’ll soon have the whole of Scandinavia waiting in our queue and we will be launching Voddler as a live service in all Scandinavian markets before the summer. In the Fall, we have plans for a launch in mainland Europe and the UK.
OnSoftware: Any plans for the USA?
Tönnesson: There are always plans but of course it’s a big and different market. We need to prove ourselves in the Scandinavian market.
OnSoftware: At the moment do you know how many users you have and do you know how many people are waiting for invites?
Tönnesson: Right now we have a little more than 400,000 active users. Since launch we’ve distributed over one million movies. Last month, we reached one million movies streamed on the platform which we are very very happy about – extremely happy about.
OnSoftware: And what’s been the general reception to Voddler so far? Have people been quite positive about it, have you have much press coverage for example?
Tönnesson: All the plans we had over the summer have been achieved. We’ve found a customer need that wasn’t being catered for and we have catered for that need. Even if there is more to come such as a better user experience, better movies, adding TV series etc. we’ve found a need for people wanting to watch great Hollywood movies in a legal way.
OnSoftware: Voddler frequently is referred to as “Spotify for Movies”. Do you think that’s a fair comparison?
Tönnesson: We’re very happy with the connection that some customers are making. I think the business model is quite similar i.e. an advertising base for a great product, we’ve also used the viral approach to marketing but then of course movies and music differ in the way the business is structured, how access to content is structured. Of course, we would love to have 12 million free movies available in our library but we have things to think about such as movies require 2.5GB of bandwidth to stream so its much more technology driven to deliver the high quality. Also, a song can be as little as two and half minutes long whereas we are dealing with films of one and a half hours long. So I think the comparison with Spotify is very much around the business model and marketing strategy but then the products are totally different but Spotify are great at what they do.
OnSoftware: Of course that could be a big challenge for you as you roll-out in the rest of Europe. Not everywhere has as good an internet infrastructure as Sweden and bandwidth limitations is something that you can’t really control isn’t it?
Tönnesson: Yes but take the Spanish market for example. They don’t have internet penetration as much as Sweden but if you look at the metropolitan areas such as Barcelona and Madrid and all the other major cities, they have a fantastic infrastructure so that’s no problem. I’m very happy that in Sweden, Telia has pre-launched their 4G network and we tested Voddler on it and it was a fantastic customer experience. You could really take your laptop anywhere and watch an HD movie wirelessly, on the network. It’s a small glimpse of what will be possible and available in two or three years everywhere.
OnSoftware: Why does Voddler require 13GB of hard drive space to run because its quite a lot?
Tönnesson: It is quite a lot even if you consider that laptops today have around 250GB of space on their hard drive.
OnSoftware: Although that quickly gets filled up!
Tönnesson: It does but they fill it up with illegal downloading. We only actually request 10GB so that different parts of the movie can be distributed on the P2P network. The extra 3GB is used simply at the beginning to buffer the movie when you start it, throughout the adverts etc. That is of course to prevent problems if there is an error in your wireless network at home or if your DSL modem needs to be restarted to ensure the quality of the stream.
We talked a little bit about Spotify earlier, they’re also based in Sweden and ad based. Have you had problems attracting advertising to Voddler?
Tönnesson: No, it’s gone very well. We have a different quality of advertising to Spotify because its TV or cinema commercials not radio commercials and the metrics are understood much better by advertisers than radio so its actually easier to sell them.
OnSoftware: And of course potentially far more lucrative?
Tönnesson: Absolutely, and that’s what helps the business model.
Why do you think that Sweden is such a fertile ground for software development at the moment such as Spotify and Voddler?
Tönnesson: I think it comes back to the “glory days” of the new millennium when there was a lot of internet entrepreneurs based in Stockholm and they understood the what could be done on the internet. When the crash same, everyone had to re-position themselves and now they are coming back. Many of them are the same people or people that were inspired by the Swedish success around the millennium. And I think that’s why Skype came, that’s why Spotify came, that’s why Voddler came, it’s from the heritage of being internet pioneers.
One of the things that drove the success of Spotify was releasing it on mobile devices. Obviously there are technical limitations on you doing that at the moment but is that something you’re looking at for the future?
Tönnesson: Absolutely, we have started a project already on one of the platforms – I can’t say which one now – and we are looking at the technological possibilities of P2P networks on mobiles and streaming 2.5GB of movies on them. We are also investigating what features can we bring such as can we allows users to see what their friends are watching, watch trailers, can I watch small clips of the movies etc. I think it will come to the mobile platform by summer.
Do you have any plans to integrate Voddler with social networking sites such as Facebook and Twitter?
Tönnesson: One of the things we are doing with our web client is to make it easier for people to share content on social networking sites. It will be easier to use things like Facebook Connect, review movies, and generally share with users piers. It’s a logical next step for us.
Will there be a slightly extended recommendation system because at the moment all you do is give it a star rating out of ten?
Tönnesson: Absolutely. We have plans to integrate with Apple Genius for example and make a more user generated recommendation system. When you have ten thousand Hollywood films to choose from, how do I know what’s good? Of course, I know the Blockbusters but there are a lot of great films that have won Sundance, Cannes etc which are high quality movies.
Will you have films that are dubbed or only those with subtitles?
Tönnesson: I think the rule of thumb should be that we cater to the customer needs i.e. our end users. If there’s a need for movies dubbed in the French or Spanish market for example then, of course.
Do you have any plans to integrate Voddler with user generated review sites such as the Internet Movie Database or Rotten Tomatoes?
Tönnesson: Absolutely. If you look on our customer forums, there are a huge number of people asking us to integrate with sites like the IMDB so yes, of course we will do that.
A final word for OnSoftware readers?
Tönnesson: I really wish all your readers would go to our customer forum and sign-up and leave their comments of how they want to develop the product, problem they’ve found, how they can make it even better, tips and tricks for people. I personally read them myself and yesterday night I found some great posts about is it possible for us to support DLNA for broadcasting it on TVs, Xboxes etc. Keep posting your posts!
OnSoftware: Well I’m sure if you offer a few beta invites you’ll get a lot of responses ☺
Tönnesson: Of course, of course!
OnSoftware: Thank you very much Mathias, it’s been very interesting.
Tönnesson: Thank You.
It was clear from interviewing Tönnesson that he wholeheartedly believes in the Voddler project and particularly the advanced P2P technical infrastructure behind it. However, during this interview there was no indication that Voddler may be planning to close-down the desktop client until the web client is released although of course at that stage, there had been no security breach. Tönnesson showed me a few mock-up images of the web client and it looks like it will offer everything the desktop client did but with the advantage of easier mouse navigation and a familiar YouTube style interface that everyone is familiar with. Hopefully, it will be the launchpad Voddler needs to really make an impact on the film industry. However, I still think between now and then, they urgently need to expand their catalog of films, particularly those released within the past few years.