Struggling To Find A Sustainable Business Model, ZillionTV Lays Off Staff

ZillionTV screengrab

ZillionTV, the streaming video set-top box-maker that’s backed by media giants like *Disney*, *Fox*, *Sony* and Warner Bros., has laid off an undisclosed number of staff. A former employee, now blogging at XYHD.tv, reports that the company let go roughly a third of its 100-member workforce; ZillionTV would only confirm with MCN that it “realigned its resources,” as part of a shift in its overall business model.

The company emerged from stealth mode in March, with the idea that it would provide an ISP-supported IPTV service, complete with a rewards program that encouraged viewers to watch ads. Customers would only pay an “activation fee” for the free ZillionTV box; with no subscription revenues, the goal was to get users to upgrade to higher data plans with their ISPs (and likely get a rev share). Investors clearly bought into the idea beforehand: After raising a $4 million first round from VCs in early 2008, ZillionTV added around $19 million more from backers like Visa and the big media companies, including an $8.8 million add-on earlier this year.

At some point in the past few months, though, ZillionTV concluded that the ISP-supported route wasn’t sustainable on its own. It pushed the launch back into the latter half of 2010, and said it would also offer a direct-to-consumer version of its box. CEO Mitch Berman explained to MCN that only working with (and waiting for) the ISPs would limit ZillionTV’s potential market penetration — though, with the service still supposed to be free, it’s not clear how or whether there will be enough ad revenue to support its direct-to-consumer iteration, either.

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