Cut-rate Integrated Service

Sezmi soft-launches its hybrid box
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LOS ANGELES
Silicon Valley's Sezmi Corp. soft-launched its hybrid entertainment service last month in Los Angeles after a year-long tease that included demos at the 2009 NAB Show. The service combines "a personalized" menu of digital terrestrial broadcast programming, select cable and Internet options, and a library of on demand content. It does so through a 1 TB DVR/set-top box, advanced reception system and unique integration and display.

Sezmi's goal is to convince consumers to "forget high-priced cable and satellite services or piles of cobbled-together set-top boxes and tangled cables," according to the company.

"As consumers continue to migrate to more of an on-demand consumption mode, they should be able to access all forms of content in a consistent manner," said Phil Wiser, the company's co-founder and president. "Systems today segregate live programming from DVR content from on-demand programming, even within the same service. We've integrated them altogether and presented all of that to the consumer in a unified manner."

Catering to personalization "beyond the user interface," said Wiser, is central to Sezmi's marketing campaign, and even factored into choosing the company's name.

"There are two elements: one is 'says me'—it is about me," he said. "The other connotation is 'Open, Sesame'—a new world of television."

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The Sezmi kit includes an HD media recorder, the receiver, remote control, Quick Start Guide and an instructional DVD. And, if that isn't eye-catching enough, there's the price.

THE COST

There are two types of participation: "Select" ($4.99 per month) and "Supreme" ($24.99 per month).

Select's entry level includes all of the local terrestrial broadcast channels; access to on-demand library content of movies, cable fare and podcasts; and YouTube, according to David Allred, Sezmi's senior vice president of marketing and product management.

"For an additional $20 a month [the Supreme option], you can also get access to our cable channel lineup," Allred said. "The channels that are currently part of our pilot are represented by four content partners, NBC/Universal, MTVN, Discovery and Turner."

There are additional costs. Although access to the on-demand library is free, Allred noted that "the majority of it is rental or purchase." Subscribers must also purchase and self-install Sezmi's kit for $299. There is no arrangement yet for equipment rental.

"We expect that [rental] will probably be in the $10-12/month range," Allred said. "It will likely be added in as part of our pricing options down the road in a few months or so."

THE KIT

Consumers accepted into the pilot program are mailed the Sezmi kit, which includes the HD media recorder (set top box), the receiver, remote control, Quick Start Guide (one-page printed instructions) and an instructional DVD, according to Wiser.

"Once you get through that initial setup process, [the system] will prompt you to set up the user [interface], the name of the user, the user's [designated button] color on the remote [control]," said Wiser. "Then we walk you through a process where you can describe the types of programming that you prefer [shows , genres]."

Wiser stated that no personal information would be shared with third parties.

"We can let an advertiser target a campaign for a certain demographic, undefined users associated with a certain kind of programming," he said. "The parameters to which we would target are something that we are still defining—obviously sex and age would be a key element of that."

TECH SPECS

"The thing that makes this work so effectively is the integration of the reception system with the set-top box itself," Wiser said.

Sezmi management declined to discuss what made its smart dynamic system better than anything else, other than to credit its success to its Chief Technical Officer, Michael Youssefmir, a 15-year veteran of the wireless broadband and data technologies industries.

"The basic approach was informed by the advances in the cellular side of the industry [which] have not been applied to the broadcast reception channels," said Wiser. "We designed our specific physical elements to be optimized for the reception of the DTV broadcast frequency range."

Reception was one of the criteria in selecting users for this year's soft launch. According to Allred, proprietary algorithms determined whether a user's address fell into one of three zones: green (highly confident users will receive all local broadcast signals), yellow (a chance they might not receive all of these channels) and red (not enough broadcast power in that particular area to receive a high quality picture).

"We have gone through a process of taking publicly available reception data and tools that are available and then modifying those based on our field testing to correlate to our indoor reception performance," said Allred. "There's typically some step down from an outdoor antenna's coverage area to what we can expect in an indoor setting."

Generally speaking, he said 75–80 percent of the homes within a DMA would be covered. The bulk of the pilot testing is being done in the green zone, though, he said, reception elsewhere is also being tested.

"We are doing a little bit of testing in some areas that are probably on the fringe of what we would normally accept because we are looking to finetune some of these tools," he said. "There are some on the border line of yellow and green."

SOFT LAUNCH

The Los Angeles soft launch is designed to gauge market response and ensure the company was operationally prepared for the volume of orders coming in.

"The response has been phenomenal—it has been outstripping our ability to really keep pace with the number of customers who have signed up for the pilot," said Allred, although he declined to disclose how many signed up. "We're a little bit backlogged in getting some of these units out to people's homes."

Although Allred indicated that the service was "fully launched," he noted that the only way to sign up for the service was through www.sezmi.com. He said management would present additional sales points when it announces its roster of distribution and content partners during the Q1 2010 formal launch.

A BIG JUMP

Analysts are excited by the prospects of a cheaper alternative to cable and satellite TV, but are taking a wait-and-see attitude until more details unfold. But one interesting caveat was noted by Gerry Kaufhold, principal analyst with In-Stat.

"People are reducing pay-per-view and premium services, but they haven't been too keen on switching service providers to save a buck," he said. Kaufhold attributed the holdout to cable and satellite TV's triple play bundling propositions with Internet and phone services. "The broadband services are like an anchor that keeps them from switching," he said. "This makes the Sezmi proposition more questionable."

Allred said management is still evaluating the scope of the Q1 launch. "If we can achieve our sales [and inventory] goals and everything else through just L.A., we may just launch in L.A.," he said. "If we feel we can take on an additional market, we may extend it."