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Babelgum says the cuts will allow it to streamline its business to “ensure continued growth.” The company told paidContent that it will continue to develop applications from other locations, spreading the operations from its shuttered offices across those in London, Milan and New York. But there are questions as to whether Babelgum will continue to develop technology or keep focusing on content investment.
Babelgum is backed by deep-pocketed billionaire investor Silvio Scaglia; he invested €50 million ($73 milllion) in the company in 2008, and has said he plans to spend €40- €60 million annually on the company over the next 2-3 years. But the recent cuts could mean he’s losing patience while waiting for a return on that initial investment.
The office closures come not long after a Babelgum executive detailed plans for an extensive — and expensive — plan to spend many millions of dollars obtaining and developing exclusive, original content. Then-executive vice president and chief revenue officer Michael Rosen told NewTeeVee in October that Babelgum had ramped up operations in the U.S. and that it had a “mandate to launch 10-15 content initiatives per month.” Rosen has reportedly since left the company, according to paidContent.
Babelgum isn’t the only web video aggregator trying to differentiate itself in a market dominated by YouTube (s GOOG), which still delivers about 40 percent of all online video streams in the U.S. Veoh, which was founded around the same time as Babelgum, laid off a number of employees earlier this year as it shifted its focus to developing its video compass technology from that of content. In the meantime others, like Dailymotion and Metacafe, have been trying to cash in on the growing consumption of online video.
Babelgum has also suffered from a lack of strategic focus. On the technology side, the company began as a P2P-based streaming provider, but shifted to browser-based Adobe (s ADBE) Flash streaming earlier this year. Like Joost, which also launched as a P2P-based video provider, the slowness with which it moved from proprietary technology to streaming based on a widely adopted video platform may have also held it back from attracting wider user adoption.
Update: Babelgum issued the following statement after our story ran.
This week Babelgum announced to its staff that it would be consolidating its operations into its London, Milan and New York locations. This decision is a natural response to the company’s growing focus on content and viewers, following Babelgum’s commercial launch earlier this year.
Despite the current economic climate, Babelgum remains one of the very few aggressive players in the new media arena. In the past two months, Babelgum has: 1) pioneered the release of Sally Potter’s “Rage” – the first time a narrative feature film with A-list talent premiered on a mobile video application; 2) launched the innovative Babelgum Metropolis Art Prize (chaired by Isabella Rossellini) to seek out the world’s best and edgiest video artists; 3) launched numerous new series – including Hayden Black’s “The Occulterers” – originally created, and exclusively produced, for its mobile and online platforms; 4) premiered the latest Weezer video “(If You’re Wondering If I Want You To) I Want You To” as an exclusive; and 5) entered into a partnership agreement with RingTales to exclusively premiere the new Dilbert and New Yorker animated series.
The company continues to streamline its approach and improve its cost effectiveness to ensure its continued growth in future years. Other major content and partnership deals will be announced before the close of 2009.