Rovio has been calling these efforts “one of the world’s biggest video networks,” and Brightcove’s Executive Chairman Jeremy Allaire, whose company is powering Rovio’s video streaming, told me Tuesday that he sees this as an inflection point for video franchises. But what do the famous birds and their disdain for pigs really mean for the future of television?

These birds are up to something

First of all, Rovio’s move into the world of original video programming is pretty ingenious. The company established an audience with its games, and now offers its ad-supported video series through the very same apps — no additional installs needed. “They clearly are in a really powerful position,” said Allaire.

Essentially, the company is using its games as very effective trojan horses, in turn demonstrating how iPads, Android tablets and mobile phones have become an important piece of of the puzzle when you’re in the entertainment business. It also shows how much they’re starting to change the game for the TV industry.

Netflix started its streaming efforts on PCs, but most of its streaming is nowadays happening on connected devices. Game consoles like Sony’s PS3 and Microsoft’s Xbox 360 are seeing the lion’s share of use, but devices like Apple TV are growing quickly as well. Netflix owes these devices its success. Without ways to get its content on the TV screen, the company would have never been in a position where it could spend $100 million on a show like House of Cards.

Rovio, on the other hand, is primarily a mobile company. Mobile devices are where people are playing Angry Birds, and it will be where they’re going to watch their weekly episodes of Angry Birds Toons. If the show turns out to be a success (and that’s still a big if) it could turn out to be the first big original programming success story for mobile devices.

And that could have an impact on the industry beyond birds and pigs, by signaling the industry that it doesn’t have to rely on traditional distribution mechanisms anymore. “You can establish a new programming franchise over the internet” thanks to mobile and connected devices, argued Allaire in our conversation.

When pigs fly

However, the flip side of this is that Angry Birds Toons also raises the bar for content companies to stand out and actually reach the consumer. It’s hard to compete with 263 million monthly active users. Heck, it’s hard to compete at all in a sea of millions of apps if all you have to offer is yet another show.

“In some sense, the business model hasn’t changed at all,” admitted Allaire. You still need to have highly compelling content, you still need to market that content effectively — and doing both  effectively is likely going to cost you a lot of money. And if you’re in mobile, you’re going to also need a really good app.

Birghtcove learned that lesson the hard way over the last couple of months when it failed to establish its app cloud offering, which was meant to provide publishers with an easy way to deploy HTML5-based apps with a native wrapper across a variety of platforms.

Turns out that publishers actually prefer to have true native apps that take advantage of each platform’s strengths and features, which is why Brightcove discontinued app cloud in February. “If you want a premium video experience, you got to put your best foot forward,” acknowledged Allaire when I quizzed him about its app cloud.

The bottom line is that Rovio may demonstrate new ways to enter the game — but that doesn’t mean that the rules have changed. To find large audiences, you still need to be big yourself or partner with a bigger platform.

That’s good news for Rovio and companies like Netflix and YouTube – but not necessarily for a startup looking to change the future of television.

“Mark Zuckerberg was dead wrong, and it was shameful for him to throw HTML5 under the bus because Facebook had an outdated and poorly written hybrid app,” Brightcove CEO Jeremy Allaire wrote in an open letter to tech and media leaders that calls for an end to the “religious wars” on mobile platforms.

Allaire’s gripe is that companies like Facebook and Apple are abandoning support for hybrid apps which are built with much of the same code used to display a website in mobile browsers. With the hybrid approach, publishers can rely on universal HTML5 code to get their apps out quickly on multiple platforms and devices while also using some native code for features that count.

Facebook recently eschewed the hybrid approach, claiming it offers a sub-par user experience. Allaire suggests that this is a smokescreen, and that Facebook and Apple have undercut the viability of HTML5 in order to develop their own private eco-systems.

Some might accuse Allaire of sour grapes since a turn to proprietary platforms threatens Brightcove’s App Cloud service which relies heavily on HTML5. But that doesn’t make his point his less valid.

The larger issue here is about standardization. Recall that for much of the 19th century, there were no standards for everyday items like screws or lightbulb threading. Imagine if a carpenter needed a special, proprietary screwdriver for every job site? Allaire makes the same point for the app economy:

Since 1994, our industry has created millions of jobs in the web development industry.  Proprietary native platforms are limiting the available labor in the app economy, hurting our productivity. [...] Every institution on the planet wants to invest in reaching users through apps on consumer devices, but we have a deep deep labor shortage because of these religious wars.

Allaire concludes by calling for an “ecumenical” approach to end the current sectarian approach to development. His letter also points to a Brightcove blog post that sets out a longer version of his thoughts.

Update: In response to a reader request below, here is the full text of the letter:

Subject: Ending the Religious Wars over Mobile Platforms – an open industry letter

Date: November 15, 2012 3:47:48 AM PST

To: undisclosed-recipients:;

Hi-

All of us are blessed to be participants in this marvelous and dynamic internet tech and app economy.  But we’re also cursed with internal strife and religious wars over mobile platform technology that are hurting our economy.  Since 1994, our industry has created millions of jobs in the web development industry.  Proprietary native platforms are limiting the available labor in the app economy, hurting our productivity.

Mark Zuckerberg was dead wrong, and it was shameful for him to throw HTML5 under the bus because Facebook had an outdated and poorly written hybrid app.

Hybrid apps as a bi-partisan solution to the religious mobile platform wars are too important to our economy.  Every institution on the planet wants to invest in reaching users through apps on consumer devices, but we have a deep deep labor shortage because of these religious wars.

Steve Jobs, god bless his soul, was also wrong — well, perhaps, just deceptive — with his Thoughts on Flash and public flogging of Adobe.  Killing support for Flash on iOS was not a benevolent move to save consumers from slow and crash-prone software, nor a resounding vote for open, HTML5 based content apps.   No, it was merely a flanking maneuver to protect Apple’s proprietary native app development model.  While Apple has gone on to deeply enhance the iOS native APIs, they’ve barely moved the needle on support for HTML5 inside of native apps.

Again, hybrid apps are essential to getting the technical economy highly productive, and that’s essential to getting the global economy more productive.

Adobe smartly acquired PhoneGap — a hybrid app development platform — to answer this corporate and industry need, but since then the technology has gone stagnant, with little innovation.

The industry needs better hybrid app platforms, and that’s what we’re doing.

On my blog, I have a lot more to say about all of this, how we got here, and what the industry and Brightcove is doing about it.  Take a look, it’s a quick read.

http://blog.brightcove.com/en/2012/11/bipartisan-solutions-ending-religious-wars-over-mobile-platforms

The industry needs all of us to make this happen.

Thanks,
Jeremy Allaire
Founder and CEO, Brightcove

(Image by WilleeCole via Shutterstock)

Second-quarter losses narrowed 38 percent to $4.3 million. Meanwhile, the Boston-based company also announced that it has acquired cloud-based video encoding firm Zencoder for $30 million.

Zencoder, which raised $2 million in April, touts more than 1,000 customers, including TwitVid, PBS, Posterous and CollegeHumor, and its open source Video.js player is widely used.

“The acquisition of Zencoder not only strengthens our Video Cloud online video platform in a key technology area, but it also signals our expansion into standalone cloud services that developers can use as building blocks for custom systems,” said Jeremy Allaire, chairman and CEO of Brightcove, in a statement.

Brightcove reported 4,697 customers to end Q2, a 43 percent year-over-year increase. During the quarter, the company added 365 customers to its “express” service and 78 customers to its “premium” offering. New businesses included Parametric Technology, Quintiles, Chrysler and Princeton Review.

Shares of Brightcove were up 2.45 percent to 15.04 on the Nasdaq.

The Cambridge, Mass.-based company also reported shrinking losses of $4.3 million, down 26 percent from the first quarter of 2011.

Despite incurring losses of $17.8 million last year, Brightcove has largely inspired investor confidence, with the company’s initial public offering raising $55 million.

However, since peaking on March 20 at $24.80 a share, Brightcove stock has slipped, closing Thursday at $19.00 a share.

A staff of two dozen – or no operations at all?

“Do we have a China strategy? The answer is no.” Brightcove President & COO David Mendels

Ask Brightcove about China, and you’ll get a rather tight-lipped answer. “We don’t have significant operations in China,” I was told a few weeks ago by Brightcove President and COO David Mendels, who added: “We never made a decision to enter China as a market.” Mendels wasn’t very keen on talking about the subject at all, but to his credit, answered some of my questions anyway. His key point: There is no story about Brightcove in China. “Do we have a China strategy? The answer is no,” he told me.

That may be true today, but Brightcove’s past dealings in China were a lot less black and white. The company had a significant R&D staff in the country starting in 2006, which I’ve been told by someone with knowledge of the operation consisted of up to two dozen people. It tried to hire additional staff as late as March 2010 – only to shut down its entire operation in Beijing and completely pull out of China by the end of that same year. Most of the Chinese staff was let go at that time, and only a few made the transition to Brightcove’s corporate headquarter in Cambridge. (Medels and a Brightcove spokesperson didn’t want to comment on the company’s R&D efforts in the country.)

So why did Brightcove leave China? The company apparently told its Chinese staff that it wasn’t able to grow the team fast enough – but that seems an unlikely reason, given that many other U.S. companies maintain successful R&D operations in the country. The decision may at least in part been motivated by Brightcove wanting to take things further and sign up Chinese clients – only to realize that China is a tough market for outsiders.

China’s unique challenges

Mendels talked a little bit about this during our conversation as well. “It’s an interesting place,” he said, without specifically referring to anything Brightcove has done in the country. And he cautioned: “It’s a tricky place to do business in.”

That’s especially true for anyone in the online video space. China has a complicated regulatory environment for online video companies, which forces them to get multiple licenses for things that don’t require any dealings with the government at all in most other countries. Want to stream videos from a website to a desktop? Then you need to become licensed as an online video platform. Want to deliver the same video over the same network to a set-top box? That makes you a TV network, which means you need a different license.

Adding to this are unique infrastructure challenges. China’s Internet population is growing rapidly, but most users access the network with comparably slow connections, which is why local players oftentimes optimize streams for 500 Kbps to 1 Mbps. Servicing Chinese clients requires to adapt to these challenges, which can take time. Brightcove may have felt that it didn’t have this time, especially as it was trying to ramp up its internatinal business elsewhere, and prepared for an IPO.

Brightcove’s team is still there

The irony of Brightcove leaving China is that its former staff is now proving the company wrong: Most of Brightcove’s employees have since been hired by Video-TX, a local video platform provider that openly references its Brightcove heritage on its website.

The company, which received a strategic investment from the Chinese CDN Chinacache soon after Brightcove left the country, has been offering Chinese customers what Brightcove could have offered – and was able to sign up a number of high-profile clients including the Shanghai Media Group, the large newspaper China Daily and state TV network CNTV. I’ve been told that there is no ill will against the former employer amongst the team, but there is an acute sense that this could have been done by Brightcove as well. Said one person involved in both efforts: “We didn’t set out to build our own company. We set out to build Brightcove China.”

This isn’t to say that Brightcove made a terrible mistake leaving China. Rather, Brightcove’s adventure in China goes to prove that the country can be a lot more nuanced than it is perceived in the U.S. Stories about U.S. companies doing business in China often fall into two categories: Either, they describe a gold-rush-like opportunity – or a repressive regime that companies should avoid entirely. Brightcove’s experience is much closer to the actual experience many have when doing business in China: It’s a complicated market that requires a long-term commitment – and not everyone has the stomach to stick around.

In its S-1 IPO filing, Brightcove acknowledges: “We have incurred significant losses in each fiscal year since our inception in 2004 – our operating losses will continue or even increase until … at least the end of 2012.

The reason for the losses has been rising expenses – in particular, ballooning marketing spend as Brightcove has pushed to win Asia and Europe contracts especially. “Our ability to continue to maintain our overall gross profit will depend on our ability to continue controlling our costs of delivery,” the S-1 acknowledges. “Sales and marketing … will continue to be our most significant operating expense.”

The firm has $24.6 million cash and equivalents – enough to last 12 months – and has been growing fast. Video streams Brightcove serves has jumped by 72 percent over the last year to 700 million per month, and half-year revenue is up 40 percent to $28.3 million. In July, Brightcove videos reached 165 million unique viewers through over 85,000 websites.

Problem is, “We are currently dependent on revenue from a single product, Video Cloud,” the firm says. In May, Brightcove announced an ambitious expansion from just video with a new App Cloud suite that will allow publishers to write apps one time for multiple operating systems and web platforms. It was a clear attempt at diversification ahead of an IPO or sale…

“We do not have any experience with customer adoption of our App Cloud product because it has not been released yet,” the S-1 acknowledges. The tool is currently in beta test but will launch as freemium with an annual subscription.

Brightcove has a U.S. patent: “In April 2011, we were issued a U.S. patent covering aspects of publishing and distributing digital media online.”

“We estimate our total addressable market for online video platforms to be approximately $2.3 billion in 2011, growing to approximately $5.8 billion in 2015.”

“We will likely encounter significant, growing competition in our business from many sources, including portals and digital media retailers, search engines, social networking and consumer-sharing services companies, broadband media distribution platforms, technology suppliers, direct broadcast satellite television service companies and digital and traditional cable systems. Many of our present and likely future competitors have substantially greater financial, marketing, technological and other resources than we do. Some of these companies may even choose to offer services competitive with ours at no cost as a strategy to attract or retain customers of their other services.”

Brightcove’s investors are listed as Accel, AllianceBernstein, Allen & Co., Brookside Capital, General Catalyst Partners, Hearst, IAC (NSDQ: IACI), Maverick, Transcosmos and New York Times.

But the S-1 says AOL (NYSE: AOL) and NYTCo (NYSE: NYT) are no longer holders. The company has raised $103 million to date, according to Crunchbase (unconfirmed).

“We have signed a new lease for over 80,000 square feet of office space in Boston, Massachusetts,” the company says. “We expect to move into these new headquarters on April 1, 2012.” Also: “We plan to pursue acquisitions.” The company currently has 288 staff.

Although president David Mendels enjoyed a $225,00 salary equal to CEO Jeremy Allaire’s, Mendels was by far the company’s highest-paid executive, thanks to receiving stock and option awards worth $4 million.

The company ended 2010 with $43.7 million, a 78.4 percent increase over the previous year. As for the losses, in the first six months of this year, the company was in the red to the tune of $9.7 million. It expects the losses to continue at least through the end of 2012.

Brightcove has been working on expanding its online video platform by building apps for smartphones, tablets, social networks and TVs. In May, Brightcove CEO Jeremy Allaire introduced a new product/service suite, the Brightcove App Cloud, which lets developers write, publish and analyze apps, as part of a unified system intended to capitalize on the growth of social media and connected devices.

Earlier this year, AOL (NYSE: AOL) revealed that it had sold its shares in Brightcove for $17 million in cash in Q4, as it sought to find some savings in the middle of a major shopping spree. The stake in Brightcove stemmed from a $16.2 million round the video company raised back in 2005 from AOL, IAC (NSDQ: IACI) and Hearst.

The timing of Brightcove’s filing comes as many other companies looking to go public have been feeling a little gunshy. While there have been 96 IPOs this year, according to an AP item, citing Renaissance Capital’s tally, Dealogic identified 17 deals have been either suspended or completely abandoned in August. That’s the highest number of IPO withdrawals since December 2008, when 18 offerings were rescinded.

To be sure, most stocks have been hit hard since the stock market went haywire, following Standard & Poor’s downgrade of the U.S.’s debt rating. That volatility partly explains the quick rise and fall of widely anticipated filings from Pandora (NYSE: P), which saw a nearly 20 percent drop in its stock from its filing date, and LinkedIn (NYSE: LNKD), which erased about 26 percent of its share price from its early peak. But it also reflects wider uncertainty about these companies’ ability to reach and maintain profitability amid the threat of a double-dip recession.

Nevertheless, Groupon is still expected to file its IPO in the next few weeks. Certainly, these companies are not looking at the short term stock movements, but are considering the proposition ahead for dominating their respective areas of digital music distribution, social networking, daily deals and, in Brightcove’s case, the importance of cloud storage and video that is not bounded by a particular device (i.e., the PC vs. mobile vs. TV) and is instead managed across a variety of technologies and outlets.

Brightcove has raised more than $100 million, including $12 million in a fourth round earlier this year. Reports put its revenue last year at $80 million, near the $100 million figure usually associated with top candidates to go public.

Business at Brightcove is booming; reports have put the company’s 2009 revenue at about $80 million, up 50 percent from a year ago. Still, Brightcove continues to face steep competition from established players like Comcast-owned ThePlatform, which has recently talked about targeting smaller customers, as well as new entrants, like Google (NSDQ: GOOG) — which at one point had been said to be interested in purchasing Brightcove — but bought online video platform Episodic just last week.

Brightcove had raised a huge $59.5 million third round three years ago and subsequently received additional funding to launch a Japanese subsidiary. With this new funding, Brightcove will have now raised more than $100 million. The new cash comes from Accel Partners and General Catalyst Partners. Existing investors, including AOL (NYSE: AOL), Hearst, AllianceBernstein, Maverick, and Brookside Capital, also participated.