Late last week Sezmi, the startup pay-TV replacement provider raised another $17.3M, bringing its total raised to date to $92M. Sezmi has intrigued me from the start both because of its clever hybrid broadcast/broadband delivery architecture and its ability to be a full substitute for existing pay-TV services. Now, as Sezmi is poised to begin expanding is rollout, its value-pricing approach could find its mark with recession-weary consumers.
As I described last week in "Are Pay-TV Providers Getting Hit By a Perfect Storm in Q3?" increasingly expensive incumbent pay-TV services are up against a belt-tightening process that households across America are going through. While cable and satellite now eat up 1.4% of discretionary spending, negative income growth, higher savings rates and chronic unemployment/under-employment are forcing many households to re-evaluate their entertainment spending. Forking over $80, $100 or even $200+ per month to their cable, telco or satellite provider is no doubt coming under closer scrutiny.
This context is giving Sezmi a potentially big opening. Though its "Select" service, which is priced at $4.99/mo and available in 36 markets, only provides access to broadcast channels, for households with basic needs, or for those looking for a solution for a second/third TV set, "Select" could be a good fit.
Sezmi's big bet however, is on its "Select Plus" service, which launched in LA in February, and is still only available there. That's the potential "cable-killer" service, priced at $19.95/mo. It includes cable TV networks from Turner, Viacom, NBCU and Discovery, but still lacks networks from Disney/ABC, Fox, Scripps and Rainbow. That means anyone considering switching to Select Plus in LA today would forego popular shows like NFL Monday Night Football (ESPN), Glenn Beck (Fox News), Food Network Challenge (Food Network) and Mad Men (AMC). As I wrote earlier this year, that's a tough sell. In addition, Sezmi's online video selection today is limited to YouTube and some video podcasts.
Sezmi needs to seal distribution deals with these key cable networks. If/when it does so, the $19.95/mo fee could creep up a bit. But Sezmi is sensitive to pricing, recently reducing the cost of its receiver to $150, down from $250. That upfront cost was arguably the biggest obstacle to adoption. But now with Sezmi in the middle of the range of connected devices like Roku, Apple TV, Google TV and boxee - but distinguished by the added value of being able to drop your pay-TV service - Sezmi is bound to get further consideration. And distribution deals with Best Buy and Amazon will help make Sezmi part of the point-of-sale conversation.
Even though Sezmi has raised $92M, it's still in its earliest days. Gaining awareness and name recognition are big challenges ahead that require deep pockets. I've thought of Sezmi as needing a big network partner with lots of existing customers at some point (likely AT&T) to really make its model work, but no partnership has materialized yet. In the mean time, the national rollout of Select Plus and the addition of more cable channels are what to watch for this holiday season. In these penny-pinching times, Sezmi's value proposition could resonate well.
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.