Softbank pays US$20 million for stake in Ustream

The Japanese company could eventually own more than 30 percent of Ustream

Ustream, a service that provides live video streaming across the Internet, has attracted US$20 million in investment from Japan's Softbank and is planning an expansion into Asia, it said Tuesday.

The investment by Softbank gives the Japanese company a 13.7 percent stake in the company and could be followed by additional cash. Softbank holds options that, if exercised by July 2011, could see its investment reach $75 million, at which time it would become the single largest shareholder in the company with a stake of more than 30 percent.

Explaining why Softbank wasn't making the entire investment immediately, Softbank CEO Masayoshi Son told a Tokyo news conference, "We have learned recently that instead of investing a lot at the beginning, investing portions over time will help maintain healthier relations [with the target company] and maintain free cash-flow."

"We do not want to have any veto but would like to be a strategic partner," he said.

Ustream also said it expects additional funding commitments from other investors in the U.S. and Asia. It didn't name the investors.

"Asia offers a significant, untapped market opportunity for streaming video," said Ustream founder and CEO John Ham, in a statement. "Softbank will enable us to develop this opportunity and deliver on our vision of live streaming video everywhere. We look forward to deploying these resources to accelerate our growth in the United States and Asia Pacific."

Ustream had previously raised $11 million in a March 2008 financing round led by Doll Capital Management (DCM) so the money from Softbank considerably adds to its finances.

The tie-up with Softbank could open doors for Ustream at other companies in which Softbank has invested. Softbank holds stakes in a string of Internet ventures across East Asia and is the largest shareholder in Yahoo Japan. It also operates Softbank Mobile, a nationwide cellular network in Japan that had 22 million users at the end of 2009 and is the sole carrier for Apple's iPhone in the country.

Ustream streamed the Tokyo news conference at which the investment was announced, attracting an audience of several hundred people.

"In the era of Web 2.0, Twitter is equivalent to the newspaper and Ustream is equivalent to TV stations," said Son. "With the live streaming users can exchange messages on Twitter so it's not one-way but interactive."

Ustream began operations in March 2007 and has grown to attract more than 50 million viewers per month. Viewers can watch live broadcasts through Flash video in a Web browser in a manner similar to YouTube. Ustream also archives broadcasts for later viewing.

A live stream it offered of the inauguration of U.S. President Barack Obama attracted 3.8 million viewers and a live red-carpet show ahead of the American Music Awards 2009 drew an audience of 3.4 million.

Usage of the service has expanded with the launch of an application for the iPhone that allows for live streaming from the handset to views on the Internet. More than 1.5 million copies of the application have been downloaded.

Last week Ustream launched a desktop application that allows professional content providers the ability to offer a more polished feed of their video.

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