4C - leaderboard - 4-25-18

Analysis for 'Building B'

  • Sezmi - Building B Portends Major Disruption to TV Industry

    Builidng B, the stealthy, well-funded startup I wrote about last December, is at last pulling back the curtain today, unveiling "Sezmi" as its new name and releasing details of its end-to-end system for delivering traditional television programming and broadband video directly to the TV.

    I got a preview of Sezmi (pronounced "SaysMe") at a private briefing with company executives at NAB 2 weeks ago. Upfront I want to offer a huge caveat that I only saw the system in demo mode so I cannot vouch for its performance in actual, scale situations. That said, if the system works as described, then I would rank Sezmi as the most promising approach I've yet seen for bridging the currently separate worlds of broadband video and TV. Sezmi could well be the first bona fide broadband/on-demand competitor to cable TV and satellite operators.

    First things first. Sezmi should not be confused with broadband appliances seeking to bridge broadband and TV, such as AppleTV, Vudu, Akimbo and others. I am an avowed skeptic of all of these. Sezmi does not focus on delivering broadband video as an add-on to existing cable/satellite subscriptions. Rather, it is looking to replace these providers by combining the best of the traditional linear broadcast/cable network model with broadband, on-demand, digital video recording, personalization, social networking and ease-of-use that many of us now consider second nature.

    Sezmi is a complete system, providing an antenna, set-top box and remote control to the consumer. One of Sezmi's key innovations is "FlexCast," which leverages multiple delivery networks to get broadcast/cable channels and broadband video into the home. In fact, the traditional channels are the bedrock of Sezmi's service offering, enabling it to be a true competitor to incumbent video providers. Sezmi leases digital broadcast space from local stations to efficiently deliver these channels, which can be watched in either familiar linear mode, or in recorded on-demand mode (note the initial set-top box comes with 1 terabyte of storage, soon to be 2 terabytes). For broadband video, it makes use of the existing broadband ISP connection.

     

    Sezmi creates an entirely new, and exciting user experience that digital media enthusiasts will instantly recognize, and I believe, value. These include the remote control with an iPod-like scroll wheel, no numeric keypad and one-touch personalization for family members. There is also the on-screen navigation, which groups shows by episode, and presents them in personalized home page-like settings. And there's targeted contextual advertising, allowing familiar click-through options.

    Recognizing that a direct-to-consumer approach would be costly and slow to scale, Sezmi has adopted a partner-centric go-to-market strategy. It is working with ISPs, telcos and others who seek entry to the video services business. Buno Pati, Sezmi's CEO/co-founder told me he expects consumer pricing would be approximately half of today's digital cable tier, including HD and DVR capability. I suggested that might imply a $35-40 per month fee. While not confirming that number, he said he wouldn't disagree with my estimate.

    If Sezmi can work out its economics with partners and deliver that pricing to consumers, it would be a very compelling alternative to today's cable/satellite offerings. The key is to whom? In my briefing many types of customers were mentioned: analog subscribers, new HD TV purchasers, over-the-air households, and others. Given how ground-breaking it service is, in my opinion Sezmi needs to go after digitally savvy audiences first.

    Today the company is announcing only that it is commencing trials in pilot markets and expects commercial launch with partners later this year. All eyes will be on Sezmi to see if it can execute on its bold vision. If it does this is a company that has major disruptive potential.

    (Note - very coincidentally, Sezmi CEO/co-founder will be on my Digital Hollywood panel next Wed, May 6th at 10:45am)

     
  • TidalTV: Another Well-Funded Aggregator Goes For It

    (Note: This is the first of a series of posts with companies participating in the 2008 Media Summit, a premier industry event which will be held next week in NYC. VideoNuze has partnered with Digital Hollywood, the Media Summit's producer, to provide select news and analysis coverage.)

    Investors continue to show lots of optimism about the broadband video aggregator category. The latest data point is TidalTV, a new entrant that announced last week it has raised $15 million from NEA and Valhalla Partners. This comes on top of a crowd of well-funded startups: Joost ($45M+), Veoh ($40M+ to date), Building B ($17.5M), Vuze ($32M+), Hulu ($100M) and many others who are attacking this space in one way or another.

    To better understand how TidalTV will distinguish itself from the pack, yesterday I had a lengthy briefing with CEO Mollie Spilman. She provided her first extensive remarks about TidalTV's game plan since last week's announcement. (Thanks to my old friend Tom MacIsaac, former CEO of Lightningcast, for facilitating the introduction. Tom recently launched Cove Street Partners and is as smart a player in the broadband video ad space as anyone around.)

    The first thing to know about TidalTV is that it is pursuing mainstream users, not early adopters. This targeting pervades all its decision-making: site design is clean and approachable (Mollie said Apple is their role model), content is professional/well-branded only (no UGC), user experience incorporates a traditional linear programming sensibility combined with full on-demand access and advertising mimics traditional pods, while also integrating new broadband-only formats.

     

    In short, TidalTV's making a bet that given how nascent broadband video adoption is among mainstream users, there is ample room to become the brand/destination of choice by providing an experience that feels more similar to traditional TV than to online. Though Mollie says that Apple is TidalTV's heaviest influence, I see clear parallels to AOL from the mid-late '90s. Recall that AOL's pervasive consumer-friendly UI, content and marketing (the Steve Case mantra) enabled it to crush all the dial-up ISPs which had more techie, complicated orientations. Watching AOL's rise made me a big believer that consumer-friendliness can indeed be a meaningful competitive differentiator if executed really well.

    AOL is an interesting point of comparison because TidalTV's founder Scott Ferber was a co-founder of Advertising.com, which was sold to AOL in 2004, albeit after the Case era ended at AOL. Mollie was at Ad.com for 6 years as well. Other TidalTV executives come from Ad.com, Joost and Fox. The Ad.com lineage helps explain why TidalTV has chosen to invest significantly in optimizing its advertising capabilities rather than building a lot of its own publishing or delivery features (note TidalTV is all Flash-based streaming with no downloads and no P2P).

    TidalTV has some interesting challenges ahead. First is content. It sounds like the company has made substantial progress in deals to obtain content from the "top 50 brands" which includes not only broadcast and cable network fare, but also print, online publishers and others who produce professional video. Yet Mollie concedes that "90% of TidalTV's content at launch could probably be found somewhere on-air or online," as content providers increasingly pursue widespread syndication. TidalTV's opportunity is to pull the content together in a neat, intuitive manner that mainstream users appreciate.

    TidalTV will do so by using a "faux linear" presentation, which entails it becoming a "digital programmer," assembling its partners' shows into their own channelized formats (e.g. "The CSI Channel"), with traditional linear air times. For example, if you come to the site at 4pm, you'd see "what's on now" on multiple channels. At launch Mollie anticipates offering 10-15 channels, all on a revenue share basis with providers. This presentation approach is meant to appeal to mainstream users by providing a tangible link to a TV-oriented experience. If a user clicks to start watching, a linear "feed" will start playing, including ad breaks. However, TidalTV will also offer all programs on a full, on-demand basis as well.

    But to illustrate how complicated the content acquisition terrain is for 3rd parties like TidalTV, consider Hulu, the NBC/FOX JV. It has insisted that prospective syndication partners take the Hulu player if they're to gain access to popular shows like "Heroes" and "24." Doing so could break TidalTV's user-friendly design. Mollie acknowledged this challenge, but felt confident that in examples like these, there should be adequate incentives to work out an arrangement. Then there's ABC, which to date has not pursued syndication aggressively. If it maintains its ABC.com centric approach, simply not making its programs available to 3rd parties, that leaves aggregators with obvious holes in their offerings. This would be especially challenging for a site like TidalTV, which appeals directly to mainstream users. Speaking generically, Mollie said that TidalTV's neutral "Switzerland" approach (i.e. no investments from media companies) should help in all of its content negotiations.

    Driving traffic is another key issue. With other players in the market already, they've had a chance to build their traffic, though not necessarily in TidalTV's core target audience. For instance, Veoh alone says it's getting 20M+ unique visitors per month. To jumpstart traffic, Mollie said that TidalTV is prepared to fund an aggressive marketing plan, testing direct marketing, search, offline ads, outdoor, SEO, viral, PR and other tactics.

    TidalTV expects to offer a geo-based limited beta in the Maryland, Virginia and DC area in late March, expanding to a national beta in mid-April. I'll be getting a peek at the beta product next week, so I'll have more to say then. Though it's still far too early to make a definitive assessment of TidalTV's chances of success, I like the fact that Mollie repeatedly uses the word "experimental" in her comments. That's a recognition of how early-stage this market space is and suggests TidalTV will stay flexible and open to all approaches to find success.

    What do you think of TidalTV's chances? Post a comment and let everyone know!

     
  • Broadband Video on TV is a Mirage

    In yesterday's WSJ, Nick Wingfield wrote a lengthy article outlining the 5 key challenges encountered by the myriad devices aimed at bringing broadband video to TVs. He lists them as: consumer resistance to adding another box, complications in setting them up, cost, lack of content and slow downloads.

    The article has a generally optimistic tone, posing "solutions" to each of the challenges. You're left with the impression that mass-scale broadband video on TV could actually happen sometime soon.

    At the risk of being the "skunk at the picnic," I have recently come to believe that broadband video on TVs is a mirage, tantalizingly close yet in reality nowhere on the horizon. Unless there is some new box or approach I've yet to hear about, I've regrettably concluded that broadband video will be tied to computers, and select mobile devices, for a long time to come.

    The minority of consumers who will actually see broadband video on their TVs will either (1) shell out big bucks to buy a broadband appliance such as Vudu or Apple TV, (2) tackle the challenge of connecting their TVs via wireless networks (3) use a device built for another primary purpose, such as Xbox 360 or TiVo, to selectively augment their viewing with broadband-delivered choices or (4) use a service provider that has decided to throw in a few morsels of broadband video.

    Those of you with good memories will remember that in a Broadband Directions newsletter at the end of 2007 I wrote bullishly about Apple TV's ability to become the breakout convergence device, if only Apple opened up the box to all broadband content. Instead Apple has kept the box closed, available for iTunes downloads and selected YouTube videos. Consequently it has been a flop.

    To help explain why products succeed or not, I tend to reach for Prof. Clayton Christensen's abiding lesson that people "hire" products to do "jobs" they have to be done. In other words, products that meet the buyer's true desires are the ones that succeed.

    For me, the "job" that consumers increasingly want "done" is to be presented with an integrated, easy-to-access service (not just a new box) that offers all video programming they value in an on-demand manner and priced appropriately. That's a tall order, but ultimately one which will drive wide-spread success of any new product in this space.

    Some of the possibilities include TiVo, which believes in this "seamless" philosophy, though it is still dependent on current service providers (cable, satellite, telco) to deliver programming. ICTV has a very interesting approach, though it is also reliant on existing service providers. Building B is taking a bold approach that seems to meet the full test for success, though it's still too early to know whether they can successfully execute on their vision.

    But hodge-podge, costly broadband appliances just create new inconveniences while only partially addressing true consumer needs. As a result, they're not going to find a broad market. And so, barring some other new innovation, most of the world will still be watching broadband video on their computers and some mobile devices for a long time to come.

     
  • Building B Has Cable and Satellite in its Crosshairs

    Building B is major league stealthy company with an audacious vision for how consumers will access video content in the future. If it succeeds current multichannel video service providers (namely cable and satellite providers) will feel the brunt.

    Building B has a blue chip executive team and pantheon of accomplished investors and advisors. It made headlines a few months ago when it announced a $17.5M funding round led by Morgenthaler Ventures, OmniCapital and Index Ventures.

    Last week I had a briefing with Buno Pati, CEO/Co-founder and Phil Wiser (Chairman/President/Co-founder). They are both highly-experienced and successful technology executives who are also quite PR savvy. They know how to stay on message and close to their stealthy script. I needed to use my "virtual crowbar" persistently to try to pry a few new morsels of information out of them. From what I learned, it's a pretty cool story. Following is what I learned about what the company.

    The company's plan rests on a number of key assumptions:
    • TV must be the center of the consumer video experience, and today's service must be redefined
    • Access to broadcast content is critical for success
    • On demand, high def is in, linear, standard def is out
    • Open access to robust wireless networks will be prevalent
    • Advertising will be key value driver in the future
    • Price of storage is going to virtually zero;

    Given all this, in Buno's words, "Building B's opportunity is to unify, simplify and deliver a video experience to consumers at a more palatable price." This simple sounding statement belies an excruciatingly tall order.

    The company is creating a next generation set top box of sorts that will deliver the gamut of video: TV, movies and broadband. Buno and Phil don't see their box as comparable to ones from say Akimbo, Vudu or Apple TV. These are really broadband-only augments, whereas Building B aspires to be a full-on substitute for cable or satellite. Their box will be able to access content through both wired and wireless delivery infrastructures. One engineering challenge is to match content with the optimal delivery network. So for example, one-to-many broadcast networks might be delivered over wireless while niche and interactive content would use broadband.

    But Building B doesn't see a model selling the box at retail (though Phil concedes this might be a secondary outlet). Others have tried and failed at retail. Rather, its go-to-market strategy contemplates partnering with service providers like telcos and ISPs which want or need to be in the video business, but don't have the stomach or cash to upgrade their networks to do so.

    Building B plans to develop a video entertainment service offering incorporating its box which can be made available turnkey to partners. These partners could include smaller telcos, particularly in rural areas, which have traditionally stapled on a satellite offering to fill out their triple play bundle. Or they could be larger telcos like AT&T or Verizon, who might augment their fiber rollouts with Building B's approach. Or they could be broadband ISPs, portals and others who aspire to be in the video business.

    A key hurdle for Building B is assembling a fully competitive video lineup to what today video providers offer. This is no easy feat. Cable programmers in particular are reluctant to make advantageous deals with new distributors for fear of antagonizing existing cable and satellite affiliates. Yet Buno feels confident that Building B will gain access to major cable networks' fare, on demand, and on deal terms that are both economic to the company and non-disruptive to these networks' current arrangements. Accomplishing these deals alone would be noteworthy.

    Lastly, Building B envisions delivering a personalized and easy-to-access service. Buno speaks of having a "dumbed down approach" aimed at satisfying only primary consumer needs and routines. Given its emphasis on HD, this is the part of the Building B vision that must necessitate a colossal hard drive in the box to cache content for ready access. Indeed, Buno said the company is "betting heavily that the price of storage is going to zero." If this assumption is off the bill of materials on storage alone could bust the box's budget.

    Listening to Building B's vision, it's hard not to get enthusiastic about the world it seeks to create. As a consumer it would be thrilling. Yet the technology landscape is littered with ambitious would-be contenders whose aspirations foundered when faced with real-world engineering, marketing and business model challenges. Building B is simultaneously climbing tall mountains in multiple directions. If it succeeds, it will become a big-time disruptor of today's business models. It's going to be fun to watch it try.

     
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