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Sezmi takes another step back from the pay-TV market

September 26, 2011 |  7:38 am

Sezmi, over-the-top, pay TV, cable competitor In case anyone thought competing with cable TV operators would be easier in the broadband era, Sezmi's experience should disabuse them of that notion.

Belmont, Calif.-based Sezmi told subscribers late Friday afternoon that, starting Monday, it would no longer be offering a pay-TV service directly to consumers.

"Sezmi has changed its business focus to providing our product and technology platform to service providers, internationally and in the U.S., who are interested in providing broadband video services to their customers," it said in an explanatory e-mail.

The company's service -- a combination of over-the-air broadcasts and on-demand video through the Internet -- had been available in 36 cities across the U.S., but the signs of trouble had been evident for some time.

Initially, it planned to offer a low-cost package that included local and cable networks delivered over the air, with the cable programming being broadcast on airwaves leased from local broadcasters. The networks' programs would be enhanced with personalized advertising and other content delivered through the Internet, along with on-demand shows and movies. To tune in the programming, the company developed a special indoor antenna and a high-capacity digital video recorder with TiVo-esque capabilities.

The full Sezmi service made its formal debut in Los Angeles in early 2010, priced at $20 a month. But it didn't have some of the most popular (and expensive) cable networks, such as ESPN and HBO. Those deals supposedly were still being worked out. And as Sezmi expanded across the country, it did so without any cable networks -- just local broadcasts and video on demand, which it offered for $5 a month.

Last December, the company notified subscribers in Los Angeles that it would no longer carry the two dozen cable networks that had been in its lineup, and it slashed its price to $5 a month. President Phil Wiser said the company was simply shifting technologies -- instead of delivering cable networks through leased airwaves, it planned to provide that programming on an on-demand basis through the Internet. The shift would help it extend its service across the country, Wiser said, by eliminating the need to lease airwaves in each city from local broadcasters.

Now, Sezmi is changing course again, pulling out of the consumer business in favor of supplying its technology and service to telecommunications companies that want to add pay TV to their product lineup. That's been Sezmi's approach outside the U.S., and it has announced deals with telecom providers in Mexico and Malaysia.

Numerous companies have tried to challenge cable operators over the years, but they've been deterred by the enormous up-front costs of building a network to deliver video. DirecTV and Dish Network succeeded by eliminating the need to run cables from home to home, beaming programming from a few (astronomically costly) satellites -- and persuading their customers to cover all or part of the cost of the equipment in their homes. AT&T and Verizon have also gained a foothold in pay TV, by taking advantage of the networks they had already built to deliver phone and Internet service.

What made Sezmi promising was that, like the satellite operators, it had found a way to eliminate the investment in wires. But it's hard to compete with cable if you can't offer a complete alternative, and Sezmi's channel lineup had a lot of missing pieces. Company executives argued that they weren't trying to appeal to people who were happily paying $80 to $120 a month for 500 channels of programming -- they were aiming mainly for the millions of people across the country who don't have pay TV, or those who'd prefer to watch shows on-demand instead of on a network's schedule. Sezmi will now be trying to win over those customers with the help of other companies' brands and marketing muscle.

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-- Jon Healey

Photo credit: Jon Healey

Healey writes editorials for The Times' Opinion Manufacturing Division. Follow him @jcahealey

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