VCs betting on Widevine's data-encryption software

Widevine Technologies Inc. has raised nearly $21 million in the last year from venture capitalists betting first on video-on-demand and second on the hope that Seattle startup's software will be an integral part of the next generation of television services.

The video-on-demand idea has been slow to catch on, especially in the United States. That means services companies such as Widevine, which makes software that encrypts the video programming to safeguard it against piracy, have had to hold on while the market matures.

Led by 28-year-old president and CEO Brian Baker, a former Advanced Radio Telecom executive, the 35-employee company was founded in 1999 and has raised $41 million in venture capital to date.

Video-on-demand services such as those recently rolled out by cable giant Comcast Corp. enable viewers to download programming to their set-top boxes and watch it at their leisure. But movie studios and others providing content for the service don't want people viewing their programming without paying for it, Baker said.

"The movie industry is trying to stay ahead of the technology so they don't end up where the music industry is today," he said, referring to the ongoing battle between music publishers and online file-sharing companies that allow Internet users to listen to copyrighted music for free.

Widevine last summer landed its first major carrier customer, Taiwan-based ChungHwa Telecom Co. Ltd., which has 10 million subscribers, Baker said. The company has five other customers, but he won't say who they are.

Widevine's best hope might be that its system is based purely on software, differentiating it from hardware-based competitors such as Scientific-Atlanta Inc., Motorola Corp. and United Kingdom-based NDS Group PLC.

That's one of the reasons why VantagePoint Venture Partners of San Bruno, Calif., led the startup's latest financing, a $13 million round secured early last month. The company landed $7.8 million in June.

"We certainly have the fundamental belief that as the broadcast world moves to completely different ways of distributing content over Internet protocol networks, they're going to need new ways to protect that content," said Cynthia Ringo, managing director at VantagePoint and a Widevine director.

Since Widevine's approach is completely software-based, it's less expensive to install and maintain and more easily upgradable than hardware devices, Ringo said.