A recent study by Cisco Systems (CSCO) estimates that mobile video traffic will increase more than fifteenfold by 2015. For ESPN (DIS), HBO (TWX), and other conjurers of content that traditionally have formatted their programs for TV screens, it isn’t simple to accommodate this shift. Orders come from gadgets with different screen sizes and operating systems. That means videos must be delivered in as many as 250 technological formats.
Elemental Technologies, a 53-person startup based in Portland, Ore., is trying to solve that problem. The company makes a squat, pizza-box-size device that houses fast video processing technology. Install it in a server farm, and it speedily optimizes videos for whatever device sends in a request—be it an iPad, Android phone, or Internet-connected TV. The result is a crisper, smoother viewing experience, says Michelle Abraham, research director at In-Stat, a research firm. Elemental has raised $16.6 million in venture capital, and Comcast (CMCSA), ESPN, and HBO have became customers in the past 13 months, the company says.
Elemental boxes cost between $26,000 and $36,000, depending on what functions are required. They churn through videos to create multiple versions optimized for different variables, such as screen size, resolution, operating system, and plug-ins. When someone requests a video, the server transmits one that’s just right for that user’s device. Elemental’s boxes use Nvidia (NVDA) graphics chips, which specialize in superfast video manipulation, instead of relying only on traditional PC processors. Graphics processors historically have been used for video games and 3D imaging, says Sam Rosen, senior analyst at market consultancy ABI Research. “Elemental is the first to test it out with video processing,” he adds. “The potential is gigantic.”
Elemental’s box can process video 5 to 10 times faster than its competitors, including Cisco, Envivio (ENVI), and Harmonic (HLIT), says Sam Blackman, the company’s chief executive officer. Cisco and Envivio both dispute that characterization. HBO says it uses Elemental boxes for its HBO Go service, which delivers the company’s programming to mobile apps on the iPad and other devices. The boxes can format a two-hour movie in 16 different ways in 24 minutes.
Elemental has advantages “not seen in other products,” says Tom Lattie, a vice-president at Harmonic. An Elemental box does process certain types of video more quickly than Harmonic’s, “but at the end of the day, what customers look for is a breadth of offerings,” he says. Where Elemental is focused on Web video, Harmonic also has tools for optimizing video shipped over cable and satellite networks. Early next year, Elemental plans to introduce a cloud-based product so that smaller websites can use Elemental’s technology without having their own data centers or owning a video processing box outright. “There’s a lot of art and science that goes into” the technology, Blackman says.
And potentially a lot of money coming out of it: Market researcher Frost & Sullivan (FRSU) expects the global market for video transcoders, just one piece of Elemental’s video processing products, to more than triple between 2010 and 2017, to $230 million. Elemental, which started in 2006 but has attracted most of its customers in the past 18 months, expects sales to surpass $10 million this year. “Elemental is gaining traction,” says Marty Roberts, vice-president of sales and marketing for thePlatform, a Comcast subsidiary that distributes and monetizes online videos for five of the largest TV providers in North America. Says Bruce Chizen, former CEO of Adobe Systems (ADBE): “It’s the only startup board I am on, and that says a lot.”