Sezmi, the next-generation subscription TV provider, is discontinuing as of December 28th its "Select Plus" $19.95/mo tier of service which launched in the LA market last February, with distribution from Best Buy. Going forward, Sezmi will focus its U.S. efforts on enhancing its lower-end, $4.95/mo "Select" tier. In addition, the company has decided to shift away from licensing digital spectrum from local broadcast stations for content delivery, and instead will use an all-broadband delivery model. Dave Allred, Sezmi's Chief Marketing Officer walked me through the changes.
Dave explained that Sezmi received positive feedback from its Select Plus subscribers in LA, but that the big challenge to rolling it out aggressively was securing the local broadcast bandwidth. Sezmi had actually signed broadcast deals to expand to 4-5 key markets, but the deals were expensive, and with the FCC's efforts to reclaim unused broadcast spectrum, Dave said negotiations had slowed as broadcasters became more cautious. Though Sezmi has always touted the multi-network delivery model, it needed to make a decision whether to stay the course, and follow a slow, market-by-market rollout, or just shift to broadband-only, which it did.
The issue that arose next was that some of the cable networks with whom Sezmi had license deals for Select Plus precluded delivery of their linear content over broadband-only networks. These channels were part of bundles, so Sezmi couldn't just break out channels that did allow broadband delivery and continue carrying them. Faced with these constraints, Sezmi decided to call a time-out on Select Plus and reformulate the product.
The Select Plus tier in LA currently did not have all have the major cable networks and I've speculated in the past that a challenge to Sezmi's low-pricing strategy would be that gaining all deals required to compete effectively against incumbent pay-TV providers might not be feasible, or would possibly bust Sezmi's budget. To the contrary, Dave said that all the deals were done, but they were contingent on a wider Select Plus rollout.
With Select Plus terminated, Sezmi intends to beef up the Select tier - which to date has included mainly local broadcast channels along with access to certain online video content, plus DVR and an enhanced, customizable UI - with subscription VOD content packages license from cable and other providers.
The key is that no licensed sports programming will be included. Dave said Sezmi's research found that just 25% of pay-TV subscribers feel ESPN and other sports channels like regional sports networks are must haves. As a result, non-sports fans, or casual ones, are effectively subsidizing tiers that include sports though they get no value from them. This is the main point I made in my recent post "Are Live Sports Pay-TV's Albatross or Its Firewall?" That's not to say there won't be any sports available via Sezmi; just that if it is it will be through separate subscription services like MLB.tv. Sezmi research also showed that consumers want an alternative to incumbent pay-TV operators and that some are increasingly comfortable with broadband-only services.
With the new plan Sezmi could appeal to would-be cord-cutters who are non-sports or casual sports fans who prefer an integrated UI, DVR and online video experience. Of course Sezmi will now be similar to what TiVo has been delivering for some time, and also with combinations of Hulu Plus, Netflix, iTunes/Amazon VOD and maybe an HD antenna.
It remains to be seen whether Sezmi can brand itself distinctly as it begins a nationwide, broadband-only rollout. Even as it pursues this new plan domestically, Dave said Sezmi is continuing its work internationally, licensing its core technology/delivery platform to operators seeking to a triple or quadruple play bundle. Sezmi recently announced a big deal in Malaysia and it is fielding interest from other countries too. A second deal will be announced shortly. Upfront licensing revenue is helping fund U.S. efforts, reducing the need to raise more money from investors.
Sezmi has always been a high-risk, capital-intensive proposition (it has raised almost $100 million), given its cutting edge technology/delivery model and goal of elbowing its way into the highly-competitive, deep-pocketed pay-TV landscape. It's not yet fully clear what Select will morph into in 2011, or how attractive an option it will be in a very noisy, murky video world. Time will tell.
VideoNuze is the authoritative online source for original analysis and news aggregation focused on the burgeoning online video industry. Founded in 2007 by Will Richmond, a 20-year veteran of the broadband, cable TV, content and technology industries, VideoNuze is read by executive-level decision-makers who need to get beyond the standard headlines and achieve a deep understanding of online video’s disruptive impact.