ZillionTV’s Set-Top Plan: Mix Ads, Paid Content, T-Commerce

To borrow from Morrissey — stop me oh-ho-ho stop me, stop me if you think that you’ve heard this one before. A new startup wants to deliver premium content to your big screen TV over the Internet! ZillionTV formally took the wraps off its new TV set-top box/premium content delivery service today, promising to do just that. But is this well-connected startup scrappy enough to survive the cutthroat world of set-top boxes?
It’s a tune we’re all familiar with by now, but the Sunnyvale, Calif.-based Zillion does set itself apart in a few ways. First, as Zillion will tell you, it is not a set-top box company — it’s a service company. To Zillion, set-top boxes are a necessary stop-gap measure to get content to the TV via the Internet. As more TV sets become connected to the Internet, the service will migrate to a boxless solution.

Until that point, Zillion, like its set-top competitor Sezmi, will sell its boxes through ISPs and not through big box retailers. The “box” actually doesn’t look like much of a box. It’s long, sleek and slender. It sports the typical connections (RCA jacks, USB, HDMI) and uses a motion-sensing remote control (built using Hillcrest Labs technology). As is the fashion now, the Zillion will stream all of its content. Because the company is working with ISPs, it says its video streams will be more reliable than those of its competitors. Zillion says it has agreements with 16 ISPs that service 10 million homes.

Zillion currently has 15,000 titles in its content library, which isn’t too shabby considering Netflix (s NFLX), which has been streaming for well over a year, has just 12,000 titles. Of course it doesn’t hurt that major Hollywood studios like Warner Bros. (s TWX), Sony (s SNE), Twentieth Century Fox (s NWSA) and NBC Universal (s GE) are all equity partners in the site.

The company has another big partner in Visa (s V), which participated in Zillion’s reported $4.01 million Series A round raised in December of 2007 along with Sierra Ventures and Concept Ventures. Having Visa should come in handy as Zillion plans to truly differentiate itself by generating revenue through a mixture of a la carte content purchase/rental transactions, T-commerce and advertising.

But Zillion is up against big-name heavyweights. Netflix is establishing a nice beachhead with its streaming service by getting it onto a broad array of devices. Amazon (s AMZN) is making VOD moves, adding its service to the $99 Roku. And of course you can’t count out Apple (s AAPL) and its “hobby,” the Apple TV. But the biggest impediment seems to be the incumbent MSOs. Comcast (s CMCSA), Time Warner (s TWC), AT&T (s T), and Verizon (s VZ) all offer ISP and video services, and the cable companies are angling to move into online video delivery.

Plus, Zillion may have pedigree backing from major Hollywood studios, but that’s no guarantee of success. Do either Movielink or CinemaNow ring any bells?

Faced with odds like that, you’d think ZillionTV would run to the somber embrace of Morrissey, but Zillion believes now is the time to strike because the entire video industry is in a state of flux. More people are starting to get comfortable with the notion of getting their video outside of a traditional cable or other multi-service operator — and the market has no clear-cut winner yet. Tune in during the fourth quarter of this year, when ZillionTV becomes commercially available.