Competition for Cable & Satellite? Says Who? Sezmi.

Sezmi is a startup out of Belmont, California that hopes to win subscribers from cable and satellite providers by providing a cheaper, on-demand and real-time television viewing service for a select selection of the more popular broadcast and “cable” channels.

The evolution of Sezmi.

This new company is born from the ashes and founders of the defunct USDTV service that burned through its cash from investors such as Fox Television Stations, Hearst-Argyle and LIN TV, but ultimately ceased operations back in March 2007.  Previously under the stealth name “Building-B“, Sezmi recently unveiled their new commercial name and are again trying to entice the interest of broadcasters into donating part of their digital television data stream in order to help make their business model work.

The basic idea is that a subscriber household will have a DVR-style set-top box for each TV and an antenna the size and shape of a small bookshelf speaker that will be used to receive data via over-the-air digital broadcasters or “existing broadband infrastructure” to fill in programming gaps and provide a back-channel to the Sezmi mothership for usage monitoring.

The Sezmi setup.

The “existing broadband infrastructure” isn’t detailed, but expected to consist of services such as WiMAX, EV-DO and/or broadband in the home from DSL (maybe).

The San Jose Mercury News has a good article graphically detailing the operation of the service and points out one of the problems they may encounter is that the big phone companies are already providing video services via Verizon’s FiOS and AT&T’s U-Verse in direct competition to this service.  Therefore, the target market for this product becomes not only very small, but extremely difficult to convince to sell to.  MSNBC also has an AP article discussing the service and mentions the possibility that Sezmi could partner with smaller telco companies to help bundle and roll their service out.

Adding to Sezmi’s obstacles, broadcasters will be very reluctant to sign on with Sezmi and fork over portions of their available bitstream since they are currently looking forward to the revenue potential from mobile DTV.  The coming mobile service broadcasters hope to reap profits from, when the mobile standard is agreed upon later this year and is rolled out in Q1 2009, will eat between 4.5mb and 5mb of their limited 19.39mbps datastream.

Since almost all major broadcasters currently provide an HD and an SD stream (e.g. NBC, ABC and CBS affiliates), an HD and multiple SD streams (e.g. PBS and some affiliates) or multiple SD streams (e.g. independents and ION Media Networks) the addition of the mobile stream will already prove to be a tough pill for them to swallow (and to encode along with everything else).  However, it is easy to argue the benefit to broadcasters of providing a free mobile DTV stream to all those mobile phones, in-car entertainment systems and portable TVs than it is to pitch the benefits and shared revenue model of an encrypted subscription stream feeding a small minority of set-top boxes scattered about a few disgruntled, former cable and satellite customers

If history is any guide, the average American is happy willing to pay (and pay more each passing year) for the convenience of hundreds of channels, many of which they don’t watch, that comes out of a single coax and feeds their TV or set-top box.  Adding an antenna, even if it is a “smart” antenna, for the subscriber to get a fraction of what their cable, satellite or telco provider can offer seems to be a bet on long odds, even at a comparatively discount price. I’m going to bet on the lazy, fiscally irresponsible American than I will on this service.  Any takers?