Open Sezmi

Startup Sezmi is beginning to get some notice–in a short piece on NewTeeVee, and a longer one on Forbes. Sezmi is aiming to become a new video distribution platform, combining over-the-air broadcast and internet delivery. While their strategy is ambitious, I have some doubts.

What it gets right:

• Video on Demand. These guys seem to get the transition from channels (called “nothing more than playlists for shows” by Sezmi co-founder Phillip Wiser) to VoD.
• Storage vs. Delivery. Storage is still cheaper, and Sezmi will “pre-load” it’s Terabyte box with some content, based on the results of a predictive software algorithm.
• Navigation. Sezmi is developing a viewing guide that will combine traditional TV fare with internet content, in customized “channels” that automagically group content by category.

What it doesn’t:

• Content. None announced yet, and Sezmi is attempting to extract per-sub pricing from the networks that’s identical to what the telecablecos pay. Good luck with that.
• Pareto’s Rule. The model relies on the fact that only a few shows account for most of the viewing at a given time. True enough. But take away the option for (or even impede) viewing that occasional odd show, and you’re D.O.A.
• Inertia. Such a new paradigm will create difficulty with viewers who are more interested in plopping down in front of the tube than in learning a new technology, box, and way of viewing TV. Certainly not impossible, but not easy either. At least with TiVo (TIVO), consumers could always default back to their old habits if they wanted–Sezmi will require jumping in with both feet.
• Cost Structure. This is where the wheels fall off, I think. Sezmi claims it can deliver TV for half the cost of cable, not having to pay for physical pipes. But it must pay to lease extra local broadcast spectrum. And it piggybacks on telecableco internet pipes that are largely cross-subsidized by the very content distribution it aims to disrupt. Let’s see how long that lasts. Not to mention beaucoup marketing and subscriber acquisition costs just to get off the ground–investments that incumbents like Comcast (CMCSA) and Time Warner Cable (TWC) have largely made.

My bet is that this will get lots of press, a few rollouts, and ultimately fail. If Sezmi is able to get some of its predictive algorithms right and create a useful way to combine internet and TV programming into a single guide structure, someone will buy it eventually–at a price disappointing to its VCs–for that technology alone.

Otherwise, Sezmi simply becomes Sezyu.

Disclosure: I hold no position in any of the stocks mentioned here.