Joost raises $45 million in funding

BRUCE MEYERSON

Associated Press

NEW YORK – Joost, an Internet-based TV service being launched by the creators of Skype and Kazaa, said Thursday it has raised $45 million from five investors including CBS Corp. and Viacom Inc. and an influential Hong Kong telecommunications executive.

Index Ventures, a European venture capital firm, and Sequoia Capital were the lead contributors to the investment. The fifth participant is Li Ka-shing, chairman of Hutchison Whampoa Ltd. and Cheung Kong Holdings, who invested in Joost through his charitable foundation, the Li Ka Shing Foundation.

Joost, which recently expanded a trial of its TV service to more users, transmits video with peer-to-peer technology, the signature approach that co-founders Janus Friis and Niklas Zennstrom used to launch the hugely popular Skype calling and Kazaa music-sharing services.

P2P relies on the shared computing power and bandwidth of its users to transmit data, rather than serving it all directly to each user from a central data center. With P2P, the more people using the system, the better quality the transmission will be, making quick adoption especially crucial to Joost.

Skype proved so successful that it was purchased by eBay Inc. for $2.6 billion, but Kazaa drew the legal ire of the music industry as users downloaded music without paying for it. A settlement last year will lead to a redesign of Kazaa, which is no longer owned by Friis and Zennstrom.

No copyright troubles are envisioned with Joost, which has gone the mainstream route by signing deals with major content providers, including its new investors. Viacom, for example, has agreed to let Joost show content from MTV, Nickelodeon, Paramount and Comedy Central. Overall, Joost says it now has 150 channels of video.

Now that a sizable number of consumers have high-speed Internet access, online video viewing has taken off, as exemplified by the explosive popularity of YouTube, acquired by Google Inc. in November for $1.76 billion.