There’s been a lot of talk – scads of it – about Internet-delivered video eventually replacing the pay-TV companies. Sezmi is a company whose single-play broadband/TV service could replace both traditional pay-TV and Internet-delivered videos.
It uses broadband and over-the-air broadcasts to deliver pay-TV channels and online entertainment and information videos to a single set-top box that’s connected to a TV set, according to co-founders Buno Pati and Phil Wiser.
The set-top box connects the TV set to the Net and also to an antenna of Sezmi’s design that picks up local TV stations’ digital broadcasts.
It’s also a DVR with 1TB of storage.
Sezmi contracts with local TV stations to use their new-found digital spectrum to transmit pay-TV channels such as CNN, CNBC, Bravo, TNT, MSNBC, USA, MTV and Discovery. It can also transmit the pay-TV channels over the broadband connection in situations such as when the spectrum isn’t available.
Additionally, Sezmi offer movies on-demand from studios such as 20th Century Fox Home Entertainment, Lionsgate, Viacom’s Paramount Pictures, Sony Pictures Home Entertainment, NBCU’s Universal Studios (which may soon belong to Comcast), Time Warner’s Warner Bros plus several independent studios. It also has a deal with Sonic Solutions that allows access to Sonic’s Roxio CinemaNow.
What makes Sezmi different is that it integrates into one set of menus:
– Local stations’ broadcasts.
– Traditional pay-TV channels like CNN and Discovery.
– A catch-up service.
– On-demand content.
– Internet-based online video services, although Sezmi uses the failed AOL walled garden that controls access to allow viewers to see only what it wants them to.
By integrating the various services, the co-founders said, they can offer a more diverse range of content, including the entire range of content from partner libraries, than any other pay-TV service. Each person can set up a profile to record his favorite shows. Searching and browsing allow for content discovery and promotional capabilities. Viewers can also specify their preferences and visit custom portals to find categorized content and targeted ads.
Sezmi promises that the cost to the subscriber will be less than what pay-TV services charge because it does not have the expense of building and maintaining a wireline pay-TV network or launching satellites.
Monthly subscription rates are $4.99 a month for local broadcasts, Internet channels and access to pay-per-view services. An additional $20 a month gets more than 100 cable TV networks, with more channels expected to be added. Users must pay for pay-per-view programs such as movies and sports events.
There’s also an antenna to receive the local broadcasts. Sezmi calls it a “smart reception system.” About the size of a cable modem, it connects to the set-top box.
The set-top box with DVR functions and the antenna are expected to sell for $299 or rent for an unannounced monthly fee. One set-top box and antenna is required per TV set.
The two called the Sezmi service “a direct replacement for cable and satellite TV.” Their intent is to sell the service through retailers and phone companies, initially in the US but ultimately everywhere.
After testing with family and friends in Seattle and San Francisco, Sezmi has started a pilot of the finished product in Los Angeles. The company will offer more content when it rolls out in other markets in early 2010. One reason LA was selected is that it has the largest number of residences US that don’t subscribe to any pay-TV services.
In addition to using the broadband connection to help deliver pay-TV channels, it’s also used to allow access to online video services such as Google’s YouTube and to podcasts. They can also use Sezmi’s online video store that, a la iTunes and Amazon On Demand, lets users purchase for download from about 15,000 titles.
The company works with local TV stations to piggyback Sezmi’s pay-TV channels on the stations’ digital signals. Sezmi said its cost for the equipment to do that is not significant. In any event, the company said, local TV stations have been looking for content for their extra digital channels.
Wiser said studies have shown that the number one reason consumers use online catch-up services like Hulu.com is they didn’t record the content on their DVRs. With Sezmi, they can go to the on-demand menu and find what they didn’t record.
He called the service “future proof.” Sezmi, he said, is based on an understanding of how television viewers are evolving.
“We recognized that a completely new end-to-end offering was required to meet the needs of both consumers and content providers,” Wiser said. “Viewers do not want to be limited by the linear structure of typical services. Content providers, who have invested heavily in their content libraries, are not embracing the free online advertising model with its questionable economics as the best way to adapt to the digital age. Sezmi solves both of these problems in a way that revolutionizes television for both the industry and its customers.”
He lists five advantages to Sezmi over traditional pay-TV services: personalization, content from all the major pay-TV channels, a large library of movies from the major studios, “easy” discovery of on-demand content and availability of all the local TV stations such as ABC, CBS, FOX, NBC, My Network, CW, Telefutura, Telemundo and Univision.
Wiser also said Sezmi has solved the major problem of consumers not being able to receive local station’s digital broadcasts. It uses the latest antenna technologies to build what it calls the highest-performance over-the-air TV antenna ever built.
The mobile digital TV that local stations are beginning to deploy, he said, will be a complimentary service to Sezmi.
Sezmi is not talking about who it’s trying to do deals with, but it’s no secret that:
a) Qwest does not have but probably needs a pay-TV service other than DirecTV that it can bundle with its wireline phone and broadband service and the Verizon Wireless mobile phone it’s reselling.
b) The cost for AT&T and Verizon, which are also reselling DirecTV, to build a wireline pay-TV network is prohibitive – more than $20 billion for each. And even then, the new network won’t connect to every home.
AT&T is short-arming its network by mostly running the fiber cable to the neighborhood, not all the way to the home. That leaves AT&T short of bandwidth compared with the 100 Mbps DOCSIS 3.0 networks the cable TV services are building. It leaves Verizon short on connecting every home in its footprint to its 100+ Mbps FiOS network. It could very well be that the prohibitive cost to run fiber to every home is what prompted Verizon to sell off some of its footprint in recent years.
Sezmi estimates that AT&T and Verizon will be able to reach only about one-third of the homes in their footprints with wireline pay-TV. Sezmi could quickly provide them and Qwest with pay-TV service in any markets where the national networks – ABC, NBC, CBS and FOX – have local affiliates. That’s a much, much bigger area. And they’d be less dependent on DirecTV, too.
c) There are hundreds of smaller local phone companies in the States that have not run fiber to the home or even to the neighborhood. Sooner or later, they’ll need a pay-TV service to compete with the cablecos.
d) Every telco outside the States is also looking for a way to quickly and inexpensively provide a pay-TV service throughout its footprint. It would be a major feat for Sezmi to put together the local content in each country, but it could be done – especially if the telcos roll up their sleeves and help.
Assuming Sezmi works as promised, the question has to be asked: Who would be interested in acquiring Sezmi? The answer would include the major telcos and the companies that supply equipment and services to the telcos – from Cisco to Alcatel Lucent, Thomson and Ericsson.
Cisco’s main set-top box rival, Motorola, is a candidate, too, assuming it gets its ownership and finances sorted out. Motorola, despite its ownership uncertainty, this week said it’s acquiring BitBand, which makes IPTV infrastructure and software plus products for on-demand content-delivery networks.
Then there’s the recently more ambitious UK-based set-top box maker Pace, which acquired Philips’ set-top box business in May 2008. It wants to make a big dent in the US market because its newest set-top box is clearly aimed at US cablecos.
There’s also Apple, Amazon and Netflix, all of whom are becoming major distributors of digital entertainment videos to homes.
Then there’s Sony, which already has its finger in every piece of the digital media pie: movies, TV shows, TV sets, set-top boxes, portable media players and online video service (PlayStation Network), plus standalone and portable gaming consoles.
We exclude Microsoft because its MediaRoom IPTV software will succeed big-time only if the major telcos offer a wireline pay-TV service. But then again, it might want to hedge its bet. And it’s got an online service; portable media players; a video gaming console and service; (Xbox Live) and, most importantly, lots of cash.
What Sezmi has to do now is a) make sure the service works as promised and b) keep making content deals such as with ESPN and Disney for the sports and family market. There are currently no FOX shows except for the local over-the-air FOX channel; no regional sports shows; and no FX, HBO or Showtime.