Sezmi opens the door to a new kind of set top box

I have written a lot over the past two years about the future of the set top box, both on the cable and satellite side as well as on the consumer retail side. On the consumer retail side, there are boxes that are designed to simulate the cable DVR experience like those sold by TiVo (and as announced at CES this week, by Digeo). And there are those designed to provide over-the-top video experiences like the Roku Netflix player, the Apple TV, and the like. 

Though TiVo has tried to provide the best of both worlds — its DVRs can play a wide variety of over-the-top content from online streams to Amazon Unbox video on demand — because it requires a cable subscription, it ends up feeling like a more expensive version of cable.

So far, no one has seriously offered a DVR that doesn’t require cable or satellite service, even though 60% of what people watch is offered for free, over the air, via antenna. And in most major markets, it’s broadcast in HD.

Let’s do some thinking: imagine a DVR that pulls down CBS, ABC, NBC, FOX and PBS from the air, in HD quality, so you have continuous access to the vast majority of content you are interested in. You pay no subscription for this content. And because you’re one of the 62% of US households with broadband, you also have access to millions of online video experiences, some of which are free and others — like Blockbuster OnDemand and Amazon UnBox — are pay-per view experiences that are at least as good as what cable offers, with the extra advantage that they can be managed with a PC.

This DVR could be sold at retail for a few hundred bucks. It would carry no subscription fees and for at least 20% of the population, it could replace cable. Only the people who have to have Showtime and HBO would be left out in the cold, as long as ESPN, Discovery, and CNN keep putting so much of their content online.

Welcome to the world of Sezmi (as in “open Sezmi” — cute, eh?): an over-the-air DVR that adds online video. And if my estimations are correct, you’ll be seeing Sezmi sold by major retailers later this year.

sezmiThink about it — for those of us who spend $100 a month on cable, wouldn’t Sezmi’s value proposition be a great relief? That’s what Sezmi is banking on and the retail partners it’s in hushed conversations with here at CES. I sat down with Sezmi yesterday in their private suite at the Venetian (much nicer than my discount room at the Sahara, I’ll confess). This is a company I’ve been following since they were just a rumor in mid-2007 and were called Building B. They re-branded as Sezmi in 2008 and I last met them at NAB last year where they talked about offering their set top box to tier 2 telcos as a way to compete with cable without having to lay miles of fiber. At the time, I told them that the telco solution was nice, but that I thought they stood a chance of offering this box at retail and that 20% of the population would be interested. That’s 22 million households. That’s more people than have an iPhone. In other words, it’s a target worth pursuing.

Imagine how pleased I was yesterday to hear that they are pursuing both avenues aggressively — working with telcos as well as going straight to retail. I have no doubt we’ll see the boxes in retail later this year. And I’ll be one of the first customers in line. In my case, I won’t be replacing cable, I’ll be adding TV to another room of the house that currently doesn’t have it. That’s a use case I haven’t even modeled and would potentially open a much bigger target audience. Even those economics are attractive, because the additional DVR in my spare room would run me $14 a month — more than $150 a year. One Sezmi box, even if it were priced at $300 would pay for itself after two years of use.

This is Sezmi’s potential even without considering the very elegant consumer interface their box offers or the potential solution they have to solve the ESPN, Discovery, even Showtime problem over time.

Too bad Sezmi wasn’t in retail for this past holiday season. In the words of one retailer who is in talks with Sezmi: “If we had this thing in stores last October as the recession hit, we would probably have 5% market share right now.”

Agreed.

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8 Responses to Sezmi opens the door to a new kind of set top box

  1. TV Guru says:

    Sezmi business model does not work. Its engineering team has never completed a product ready for sale. Show demo is a canned product, does not work in real world.

    The license fee for cable TV programming is huge. each company demands at least $0.25 million/quarter even you have no customers. Requirement of receiving TV signal on air will exclude most potential customers. People buy cable TV because they get bad TV signal. Digital TV requires solid TV signal.

    Personalized TV sounds good in theory. It never worked in reality.

    Online TV content delivery require huge broad band pipeline. Sezmi potential partners are local 2nd tier telco which only has ADSL. It can’t provide that bandwidth.

    Sezmi set top box costs $400 each. If it charge too little, it will lose money big way. If it charge too much, no one will pay. Would you pay $35/month for 20 or so cable channels? worse, these cable channel contents are delivered non-real time.

  2. Dave Zatz says:

    DISH Network started selling a purely OTA HD DVR last month, the DTVPal DVR. I assume VOD is coming to it. (TiVo works fine as a purely OTA DVR with the added Internet content of Netflix, Amazon, Flickr – though it does come with that monthly fee.) Though probably not the same level of Internet interaction that Sezmi advertises. However, Sezmi’s story has been shifting in terms of how they deliver/market it with the initial focus partnering with regional telcos. I doubt you’d see an unsubsidized $300 box…

  3. James McQuivey says:

    DAVE: I did not see the DISH OTA DVR. I’ll have to look it up. I’ve never tried to go OTA with a TiVo, assuming that the fee issue makes going OTA less likely for consumers. Naturally, I’m not bothered by the shift in the story since it’s a shift I encouraged them to make, but you’re right about the price. I am nervous about that. I assume the cable-replacement theory requires a sub $300 price.

    TV Guru (nice name): You make some sharp statements about Sezmi. I differ with you — I’ve seen the box work, they have published the results of their trial in the Northwest. While I agree with many of your concerns, you appear not to be aware of the shift in model I was discussing — it doesn’t require tier-2 telcos nor does it require the bandwidth you suggest. But overall you make some good points, such as the cost, as Dave also points out. And you’re right about Personalized TV never working in reality so far, but that’s why I think Sezmi is worth looking at today. The Personalized TV experience is better in Sezmi than in anywhere I’ve seen it. If it fails, feel free to call me on it, but I’m still cautiously optimistic.

  4. TV Guru says:

    James,

    Don’t ever believe what company claims. In fact, Sezmi has completely abandoned Northwest market. Yet, it was able to fool people in its PR. If it is a public company, it’s leaders would be in jail for fraud…

    [comments edited out 17feb2009 because they bordered on libel: there was reckless disregard for rules of evidence and clearly malicious intent. As owner of this site, I reserve the right to remove such comments at any time.]

  5. TV Guru says:

    http://displaydaily.com/2008/05/05/sezmi-unveils-new-ota-subscription-tv-service/

    the above article is interesting. I quote one part below. In my view, USDTV was performing better than Sezmi and costed investor less money:). mark my words here: Sezmi will get no more than 15K sub and will file for bankruptcy in next 6 months.

    Readers may recall that a similar service was attempted and failed not too long ago. Salt Lake City-based USDTV had secured a $26M investment from major broadcasters to start and operate an OTA subscription service, but filed for bankruptcy after failing to generate more than 15,000 subscribers. The service, which went off the air in 2007, had similarly planned to offer “privatecast” programming, by leasing ancillary data space from DTV broadcasters.

    [I'm leaving this comment in because it's actually a good point, and one that is worth discussing. USDTV didn't have the same opportunity to provide subscribers with online content. The idea was similar to Sezmi's, but the timing was terrible. I don't see them as similar concepts, rather Sezmi is the model taken to the next level. James 17 Feb 2009]

  6. IM No Guru says:

    True I’m not a guru but let me take a wild guess on this one…..TV Guru is one of the 20% of Sezmi’s employees that was let go last November.

    Did I hit this one on the head?

    Anyone who claims that a LIVE, working demo which was seen by many of us in Vegas during CES – again a LIVE demo (as in watching local television as it is broadcast) – was canned, was probably him or herself canned as part of the layoffs Sezmi had last November.

    Its an unfortunate reality right now for many people across the country. However TV Guru’s unfortunate experience with the Sezmi company has absolutely no bearing on the product itself. I, myself am excited to see more competition emerge for the larger companies like DirectTV, DishNetwork and the cable companies. Whether its Sezmi or any of the other options that are up and coming out there.

    No matter who you are, what you think of the organization or the technology, if you saw with your own eyes the working product (including live local tv, cable channels, youtube videos, etc.), LIVE (right in front of you). It looks pretty cool and I apologize, but its also hard to read some of the garbage that gets posted and not respond.

    Folks, you’ll have to decide for yourself. And truthfully, I wish you only the best TV Guru.

  7. PostItChild says:

    Sezmi is a bit of a throwback to ON-TV, a short-lived over the air subscription TV service in the late 70’s founded by Norman Lear.
    http://www.medianewsandviews.com/2009/11/sezmi/

  8. j merritt says:

    $100.00 says that as of today, Sezmi will not operate at my house, and I have excellent OTA reception for Los Angeles and Orange Couty based broadcasters. It is a technically and financially bankrupt system. Pity the VC fools who are backing this one.

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