The Boxee Rebellion

There are few startups that can fill concert halls with loyal users just to show off the next version of their products. Boxee is one of them, and it did so last week when it unveiled the latest version of its software, which is shipping with the newly released Boxee Box.

The event was a success by any measure, with about a thousand people attending and many more tuning into the live stream. However, the launch of the Box itself, which is produced by D-Link, hasn’t been quite that smooth.

First, Boxee had to delay its launch from June to November because it switched from an NVIDIA (s NVDA) to an Intel (s INTC) processor. Then there’s the premium content: Owners of the Boxee Box will be able to rent Hollywood blockbusters from Vudu (s WMT) and access subscription offerings from Netflix (s NFLX) and Hulu. However, none of those are available yet. Vudu is supposed to be rolled out in a few weeks, with Netflix following later this year. There’s no launch date for Hulu Plus yet.

Some users really don't like Boxee's new UI.

Finally, there’s a mini-rebellion by some of its most vocal users. The Boxee forum currently features a 10-page long “petition” thread demanding Boxee roll back the user interface (UI) changes introduced with the newest version, and numerous users have complained about the fact that the UI emphasizes online video sources over locally stored media — an issue Boxee wants to resolve with an update in the coming weeks.

However, some also feel betrayed by the fact that Boxee partnered with content owners. “People do miss the fact that you could access Hulu,” Boxee CEO Avner Ronen admitted during a Skype call yesterday. Boxee had a very public spat with Hulu close to two years ago, with Hulu blocking Boxee and Boxee releasing workarounds to gain access to free broadcast TV streams.

Hulu once again started to block Boxee last week.

The cat-and-mouse game eventually ended, and Hulu content has been available via Boxee ever since  — until last week, when Hulu decided to once again block Boxee’s users, including those using the company’s existing PC software. Ronen made it clear at last week’s event that the company won’t roll out any further workarounds. “No hacky stuff,” he said, and a slide read: “Truce. It’s okay, we’re pals now.”

Friendships like these come with obligations for Boxee, one of which being that the Boxee Box emphasizes content security over hackability. In other words: Don’t expect to get root access on the device any time soon. Not with Boxee’s help, anyway. “It’s just the reality we have to face,” Ronen said when asked about content security measures like these, adding: “There is no way around it.”

Other choices have more to do with the fact that Boxee now has to deal with paying customers, as opposed to early adopters willing to crash test the latest beta. The company weeded out its applications repository, making sure that apps available on the box actually work as advertised. Ronen told me that developers have to expect more stringent quality control during the app approval process. “We need to mature,” he told me. “People pay $199 and expect a different experience.” However, expert users are still free to add any app through third-party repositories.

Digg still hasn't recovered from its recent redesign.

It can be a short path from hip to has-been in the tech world — just ask anyone still working at Digg. The Boxee team seems determined not to let this happen. Ronen told me he spent the last four days answering emails, forum comments and tweets, and the company has already announced a number of tweaks to deal with some UI issues.

Making up for some of the newfound content restrictions might be much more challenging — but Boxee is by far not the only one facing these challenges. Google TV (s GOOG) has struggled with the fact that all major broadcasters have blocked access to their videos on the web. Apple (s AAPL) even scrapped its ambitious TV subscription plans and is now offering little more than access to its iTunes store on its Apple TV device. (Check back later this week for a full review to see how Boxee measures up to Google TV and Apple TV.)

The fact that the entire industry is struggling with these issues could actually benefit Boxee. Billion-dollar companies like Google have more leverage when facing off with broadcasters than a small, scrappy startup, and Boxee can instead concentrate on differentiators like its own app platform and advanced social integration. Competing with two huge corporate giants is something that actually works quite well for Boxee’s rebellious image. Comparing its own product to Google TV and Apple TV, Ronen concluded: “I definitely think we are still the underdog.”

Image courtesy of Flickr user rafael_mizrahi.

Related GigaOm Pro Content (subscription required):