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

January 9, 2009

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.


Economy watching: Comcast earnings waaaay up

November 4, 2008

Tracking the economy has been a thankless job lately. Things go down, you draw conclusions, things go up, you draw different conclusions, then things get all messy again and all bets are off.

But one thing will hold true in this recession: consumers love them some video, preferrably free video.

I wrote about this in a Forrester Report which I blogged about recently. Which is good for online video, and probably even good for cable generally. However, I did have some warnings to offer cable companies which are future oriented — that consumers will shy away from premium content packages and premium tech for the home (like multi-room DVR). Because of that, you won’t see the effect of the recession on this quarter’s earnings. So I may yet prove right in a way that affects cable’s financial performance. But for now, things couldn’t look shinier for one Comcast.

Betsy Schiffman captured this nicely at the Epicenter blog on Wired.com last week in what is definitely going down as one of the best titles ever:

Cockroaches and Comcast Will Inherit the Earth

Her clever reference to the fact that cockroaches are suspected of being able to withstand just about any devastation that we could wreak on the planet, may overstate the case for cable a tad, but only a tad if you consider that Comcast CEO Brian Roberts was able to report on beating earnings per share estimates by a full 4 cents, and seeing a 38% rise in profits over last year. 

The point here is that cable holds most of the right cards for surviving the digital video transition. As long as it plays them right. In the case of Comcast, one of those cards is very strong financing from their own operations. No need to go out to get cash in a credit-squeezed market. That’s a great hand to have right now as economic ups and downs continue their game of ping-pong.


Web stream of my speech at the Forrester Consumer Forum

October 28, 2008

Imagine my surprise to find out that one of the bloggers on the front row of the Forrester Forum streamed my keynote speech live. You can see the archive of the stream here. It begins with Carrie Johnson’s kickoff to the forum and then at about minute 11, she introduces my keynote. It’s not the best quality image or audio, but if you’re really interested in the speech, here it is in its glory.

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Samsung adds Netflix to latest Blu-ray players

October 23, 2008

We’re witnessing the one dramatic change in the world of physical media. Now Samsung has joined LG in making Blu-ray players that also stream Netflix movies and TV shows. This Netflix strategy is the little engine that could:

  • People first said it was weak because the content was so second-string. Netflix has recently fixed that by adding Starz and some Disney movies. 
  • Some complained that a dedicated $99 box from Roku (though priced to sell), wasn’t enough to move the market. However the LG Netflix/Blu-ray player showed that there was real depth to the strategy.
  • The deal with Microsoft’s Xbox 360 to put Netflix content in the game console proved there’s a true multi-platform play there.
  • Now Samsung’s entry shows that this is going to become a big deal across multiple players in the CE and computing world.

Lessee, Netflix 4, everybody else, 1.

With Steve Jobs again this week referring to the Apple TV as a “hobby” in order to downplay previous expectations, this leaves Netflix clearly in the driver’s seat when it comes to over-the-top delivery to the TV. Maybe not in volume yet, but it will.

The biggest issue here is what this means for cable. Netflix has set its sights not on Blockbuster or even on iTunes, but on Comcast, Cox, and Time Warner. The Netflix solution pulls content automatically from your DVD rental queue, provides an easier-to-use interface than VOD, and now has as much good content as a typical VOD system, this makes cable cord-cutting that much more possible.

This Netflix move could prove to be the most important wildcard of 2008. Now if only there wasn’t a recession hanging over these Blu-ray players

Are you Netflixing your TV? Will you? Do tell.


Blu-ray player finally sells at $199

October 21, 2008

Had a quick exchange with Erik Gruenwedel yesterday on this topic which led to my quote in his piece on Home Media Magazine’s website, Best Buy Sells Blu-ray Player Below $200.

James McQuivey, principal analyst with Forrester Research, said he is surprised by the price cut since Blu-ray manufacturers he spoke with in 2007 said it was not economically advantageous to go below $299, much less $200. 

“That’s what happens when an economy goes south and people are staring at the prospect of leftover inventory,” McQuivey said. “Like any other market-driven panic, this one will lead to copycats. I don’t expect the $199 to be common, but every retailer will want at least one model at that level, if only to seduce people into that section of the store.” 

The quote is interesting just because it comes from some intense conversations I’ve had with the Blu-ray manufacturers who have tried to forestall a price freefall on standalone Blu-ray players. These conversations happened because my colleague JP Gownder wrote in September 2007 that the ideal average price point for consumer adoption of Blu-ray was a shocking $204. It’s no surprise people making these boxes didn’t like that.

But the moment a retailer like Best Buy crosses the $200 threshhold in fear of a tight economy, it does force everyone else’s hand. Except companies like Pioneer, of course, that are playing at the ultra high-end (although Google did find one Pioneer model at $299 online).

The thing we can’t really get into in an article like that is that the discounted players are always Profile 1.1 players, not Profile 2.0, which means they don’t support the Internet-derived interactivity called “BD-Live” that the industry is hoping will shape how people value disc-based media in the future. So by selling people these players at low prices today, we inadvertently inhibit later uptake of BD-Live-capable players.

So, with that in mind, will you run out and get one?


My take on how economy will affect video

October 15, 2008

As I have been promising/threatening, yesterday I completed my take on how a down economy will affect various types of video in the home. Forrester clients can read the full analysis here. 

Something I can share with everyone, client or not, is an interesting analysis I did on consumer spending on audio/video hardware. One of the questions I wanted to answer was what % of entertainment spending do affluent consumers account for. It turns out, a lot. In fact, the 45% of US households that earn more than $50K a year account for 79% of entertainment “fees and admissions” and 62% of audio/video equipment spending. That’s a lot. Interestingly, these wealthier consumer have been increasing their spending on audio/video tech less aggressively than average over the past few years. 

From the 14 October 2008 Forrester Research report, "Video Devices Vulnerable In A Down Economy"
From the 14 October 2008 Forrester Research report, 

Video Devices Vulnerable In A Down Economy

I get all of this from the Bureau of Labor Statistics’ Consumer Expenditure Survey (a datasource which, if you know how use it, can answer many of life’s most important questions, and it’s all free).

Just as Jefferson famously said that “the tree of liberty must, from time to time, be refreshed with the blood of patriots and tyrants,” it is similarly true that technology markets must, from time to time, be challenged with a lackluster economy. Not quite as big a deal, but you get my point.

Overall, the losers are new technology platforms like standalone Blu-ray and premium content subscriptions. The winners — at a very critical time for all involved, I might add — are free online video services like Hulu.com and Fancast, including Netflix’s streaming services, newly enriched with additional content. So while Netflix has warned it won’t hit 9 million subscribers as originally hoped in 2008, the millions it does have will rely on the service more than before.


First evidence HDTV sales might get hit by recession fears

October 14, 2008

I mentioned last week when the Dow was plummeting that I was polishing off a piece for Forrester on what a downturn does to video entertainment in the home. That report is due out tomorrow, so I’ll bring it up then, but notice that today’s Wall Street Journal reports the first evidence that HDTV sales might be headed for a crash. Check it out at: Economic Woes Hit HDTV Sales – WSJ.com

This is interesting in light of last week’s assertion from the CEA that TVs and other A/V hardware weregoing to grow 4.7% this year despite a looming recession. If I had to bet, I’d bet on zero growth for the category.

Zero growth is not as drastic as it sounds. This is a category that’s notoriously elastic in a down or up economy, according to Current Expenditure Survey data that I’m citing in my piece later this week. However, specific subcategories and even brands can still grow. Take Vizio, which will be the low-cost substitute to which more people will turn. The Wii will sell out again (though fewer games will sell than hoped, while game rentals will go up a notch). Maybe the enormously popular Wii Fit balance board will slow down, but that’s a big maybe (have you tried it? sooooo cool). And I’ve already written about the Flip camera’s likely ability to weather the storm

So bad news it not bad news all around. The people who sell rice are thrilled right now. Rice always goes up in a down economy.