Q&A: Kontiki’s Eric Armstrong

Kontiki, an early commercial peer-to-peer platform provider, formally acknowledged today that VeriSign has sold the company back to its investors at MK Capital. We wrote the news story this morning, but just got a chance to check in with the newly independent company’s president, Eric Armstrong, to talk about Kontiki’s strategy, its experience at VeriSign (which he said remains a minority investor in the company going forward), and the role of software in video delivery. A lightly edited transcript follows.

NewTeeVee: So should I be congratulating you? Are you happy with this turn of events?

Eric Armstrong: I can’t explain how happy we are. When Mike [Homer] started this company with a few other folks from Netscape, they wanted to do what Netscape did for text and images for video, that was a simple, low-cost [way] for people to publish media over the Internet and corporate intranets, that would democratize media. And I think we’ve done that. Last month Kontiki systems delivered over 3 million videos.

In terms of new customers, you mentioned in your story that you hadn’t seen them, but the Hulu of the UK, Project Kangaroo, is going to use us, so they’re buying our system for the second time. In the U.S. we’ve got tens of major organizations and we deliver videos worldwide. Now we’re going to get back to our roots, making Kontiki peer-to-peer software that’s very secure, and highly manageable.

NewTeeVee: How is that different from what you were doing at VeriSign?

Armstrong: VeriSign bought us because they had a vision that I think was very aspirational, to build a three-screen business: broadband, mobile and television — and we were the broadband part. When they changed CEOs last year they really changed their vision for the company, and they were very upfront about that. The focus of VeriSign was to use Kontiki for a managed service, like a CDN, and we’re really interested in the software.

Some P2P companies are like iTunes in that they sell movies and TV — like Joost, or even BitTorrent. Another P2P service is like Pando, a P2P CDN. We are like none of those companies; we build P2P software that we sell to our customers and then they launch their service.

NewTeeVee: So where are the untapped markets for that business?

Armstrong: Any large media company that wants to monetize their content over the Internet at high scale. Any CDN that doesn’t want to launch P2P. A telco or MSO. Or any enterprise company — most of our customers are global businesses that use us to communicate.

NewTeeVee: Is that split the same for revenue?

Armstrong: Yes.

NewTeeVee: Were the published numbers for the transaction price (about $40 million by Dan Rayburn) terribly off?

Armstrong: I’d have to let either MK Capital or VeriSign comment. Update: According to a regulatory filing, the price was $1 million plus the stake in Kontiki. (paidContent)

NewTeeVee: What are the assets, including people, remaining with Kontiki today?

Armstrong: Our patents, all our technology, all our products — over 90 percent of the people that joined VeriSign as Kontiki have stayed. In fact, we’ve gotten bigger since then.

NewTeeVee: Looking back, do you regret being bought by VeriSign if they were going to shift away from your business so soon after?

Armstrong: Whenever there’s a change in the CEO there can be a big change in strategic direction. At the time we were very excited about the direction that Stratton [Sclavos] was taking us. But all of our customers are software license customers.

NewTeeVee: Did you sign up any hybrid P2P-CDN customers? What’s going to happen to them?

Armstrong: We did sign up some CDN customers. Our customers that were just using the peer-to-peer component, we maintained; the ones that were not P2P customers, we found another vendor for them — we went out to our competitors and they took them.

NewTeeVee: What will MK Capital’s role be going forward?

Armstrong: They’re an investor, they have two members on the board of directors. They are heavily interested in the business for the long term.

NewTeeVee: I had seen on the BBC blog that the ratio of web use vs. the Kontiki player is 8:1 — so what will Kontiki’s role be for the project going forward?

Armstrong: They expect the ratio to skew more toward downloads over time, especially as the quality increases. You can’t really stream HD content because the pipes aren’t big enough. Plus one thing they haven’t implemented is the equivalent of an Internet DVR, where you book the shows you want to download in advance.

Also, some people complained on the iPlayer blog that the Kontiki service does not support Mac, but it does. We’ve had it available for over a year, but they (the BBC) still haven’t found a Mac DRM solution [so it hasn’t been released to iPlayer users yet].

NewTeeVee: So do you still have a strong relationship with the BBC?

Armstrong: Very strong.