Joost has signalled that it needs to change its business model , as GigaOm notes:

In what is likely to be a major shift in the company’s strategy, peer-to-peer startup Joost is going to stop making its desktop client. The decision to suspend the client is likely to be announced soon, I am told. The company is going to a browser-only strategy, in which much of its content is going to be available through a browser-based player. Joost, I am told, will release a small plug-in that would embed itself in the browser and allow you to grab files using the P2P technologies. The web client is likely to have better quality than average video sites.

As we (and many others, I hasten to add) noted 6 months ago after we had completed an analysis of the Web TV market*, companies that had a business model that was copying stuff you could get anywhere else, and had an irritating-to-user approach (p2P video being a whole different ball of wax vs low budget p2p audio):

Low Value, Low Cost businesses have Subsistence Economics - if they can get very compelling content (niche stuff, maybe porn) and keep operating costs low via viral marketing, low bandwidth streams, minimal chatter in the system, and attract sufficient low rent Ad revenue (I doubt much of this will be subscription) or have an offset model (the moolah is made elsewhere, maybe sell-through of DVDs etc) then it can work

So, they have now moved to a model which is browser based - risk is that it increases overall cost, so unless they can increase content value they are risking being:

Low Value, High Cost - the deadpool. In essence, if they cannot justify an incremental value on the service to attract more / higher value Ads or subscriptions over low cost operators, or the model has intrinsically higher infrastructure and / or customer capture costs, they will fail.

In other words they may as well be tilting (or Joosting) at Windmills unless things change. Their issue at the end of the day is not really the technology, its the content. There not a lot, its not great, you can get it elsewhere with less hassle.

So - how then to get content value up? Joost look like they are reaching for the Social Media panacea, but we think it may be too late. Services like Twitter and Facebook have already sucked up a lot of the Chatterati who would be early adopters, and iPlayer, Hulu and a string of “download on demand” services have grabbed the quality high ground (we pretty much thought a year ago that Hulu signalled the end of Joost’s current business model). We suspect they are not going to get the commercial content at reasonable prices now - the majors have placed their bets

The other option is to use the cash remaining to go to places where content values are still very low and use the technology to enter them - mobile and gaming machines are examples, or enabling people to put content onto Joost that currently is not captured - the “pro-am” coverage of the Greenbelt concert on Qik being an example.

Add value in that way and then sell to someone who wants to enter is a viable option for a decent exit now, perhaps even a viable business.

*We will be producing a for-sale report in a month’s time on this subject