Stream weaver
Abacast finally hits its stride
Portland Business Journal - October 27, 2006
by Aliza Earnshaw
Business Journal staff writer

An Internet broadcast technology company is proving that being first to market is best -- even if it takes the market a few years to catch up with you.Six years after inception, Abacast Inc., in Clark County, is finally growing as its founder had predicted.

After several years of layoffs and careful cash management, Abacast is now growing revenue 12 percent per month, more than doubling 2006 revenue over the previous year, said Mike King, the company's president for the past three years. The company, he said, has been profitable for 18 months. King would not disclose exact revenue, but said that Abacast now brings in less than $5 million per year. He expects revenue to double again in 2007.

Abacast is now staffing up, and moving its office next week from Washougal, Wash., to Camas. The company has 15 employees, and is actively seeking five more, as it makes a push to get more people downloading and using its technology.

That's key to getting more radio and television stations interested in using Abacast's service, which can significantly cut expenses for Internet broadcasters.

Simply put, Abacast technology is a form of peer-to-peer broadcasting. Instead of sending one media stream to each listener, Abacast employs underused bandwidth on listeners' own computers. This allows broadcasters to increase audiences, without having to add bandwidth for every new listener or viewer. Abacast customers who offer their listeners and viewers both the company's media player, which enables high-speed transmission, and the company's lower-speed service generally save 50 percent to 55 percent on their bandwidth costs, said King. They could save still more if they offered only the higher-speed service. But that involves asking viewers and listeners to download the player. Though it takes just a few minutes, some broadcasters are reluctant to do that, said King.

Still, Abacast's software not only lowers Internet distribution costs, it makes them predictable, said Doug Fontaine, Webmaster for KATU.com, the online presence of Portland broadcast company KATU-TV. "I'm paying Abacast a flat monthly fee, for basically unlimited use," said Fontaine, who first began using the company's streaming service about three years ago. That means that when big news is posted, and the Web site suddenly has 10 or 20 times the visitors it usually has, KATU.com does not pay any more to serve these extra viewers with live video.

That was proven when Mount St. Helens became active again two years ago, sending a plume of steam and ash into the air and driving lots of curious people to view KATU's 24-hour live video of the volcano. Though Abacast did not charge KATU.com any extra for increased viewing, that wasn't the case for KATU's archived, on-demand volcano clips. The bandwidth charges for providing these "went sky-high," said Fontaine. "But Abacast was predictable."

Dan Huntington wasn't thinking about costs when he first got the idea for Abacast. Soon after his family got broadband, he noticed that his teenage sons were using the Internet almost exclusively for music and television. But Huntington was disappointed by the quality of streaming music, and soon understood why. As it adds new listeners, an Internet broadcast company must purchase more broadband capacity to deliver its product, tempting broadcasters to get by on as little as possible. Huntington decided that by employing underused bandwidth, he could raise transmission quality.

Though Abacast's technology was well received early on, legal fights over downloading slowed media companies' move to the Internet, and Abacast's sales slowed, too.But copyright issues have been largely resolved, and the market has picked up again. Last year, Internet radio listening grew 50 percent, according to Arbitron/Edison Media Research, reaching 30 million listeners per week. And it's slated to continue growing at 20 to 40 percent per year, said Kurt Hanson, publisher of the Radio and Internet Newsletter, an online publication based in Chicago. That rapid growth could make Internet broadcasters take another look at Abacast's technology, said Hanson. "As webcasters' actual bandwidth costs go up, Abacast's solution will look more and more intriguing." The company is well positioned in its market, with an established brand for its peer-to-peer technology, he added.

Abacast's potential has attracted some sophisticated investors, including the company's five-year board chairman, John Fluke of Fluke Venture Partners in Seattle. Though Fluke himself liked Abacast, his firm did not make an investment.

That lack of interest from professional investors could change now that the market is more mature, said King and Huntington. Investment banker Goldman Sachs just funded Limelight Networks Inc., a larger, well-known Internet content distribution company, to the tune of $130 million. Abacast could also be a prime acquisition candidate for newly flush Limelight or market leader Akamai Technologies Inc., the $280 million-plus giant of the industry.

aearnshaw@bizjournals.com | 503-219-3433