Why "Inside the Box" Thinking Is Doomed

Is Sezmi really a new thing?

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    NEWSLETTERS

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    WPVI knocked off the air by transformer fire.

    A Bay Area startup that's poised to take on big cable and satellite is hitting the airwaves Monday for a three-month trial period.

    Belmont-based Sezmi, running its test period in the Bay Area and LA, claims it will help consumers get rid of cable or satellite sevice and offer a way to get movies, TV and a DVR in one box.

    Therein lies the problem -- consumers have to buy or rent a box.

    The service will send local broadcast channels through the public airwaves and pay-TV channels will come through thanks to deals the company makes with local broadcasters.

    Sound familiar?

    You might think past lessons might have taught Silicon Valley startup Sezmi something.  Akimbo. Roku. Even Apple has failed with its Apple TV.

    The company compares itself to the giant of media hubbing.

    "Sezmi is doing for TV what Apple did for music – taking a very fragmented set of options (TV, PC/Internet video/DVRs/single-use streaming boxes like roku etc.) and delivering an end-to-end solution for the consumer that comes at a very affordable price."

    But, here's the lesson: The consumer doesn't want another box to watch TV.

    Belmont-based Sezmi's plan -- to sell or rent out a box so you can use it to watch TV -- is slightly different than previous iterations. Instead of just using a broadband connection, which it does, it will also add a broadcast TV component.

    In its LA test market, the Sezmi service will send cable content like Comedy Central and TNT over the broadcast spectrum to Sezmi boxes. Think cable without the cable.

    That's clever. TV stations are starving for income, and would gladly hand over some spectrum to a hot startup with cash. It's also good engineering: DTV signals are good, fat connections to the home.

    But the model violates our rule. Quite simply -- the consumer will not buy another box to watch TV.

    The problem is threefold. First, there's the cost. Sezmi eventually plans to charge consumers $299 for the device. Keep in mind cable and satellite charge little to nothing for the same service. But fear not, cost-conscious TV lovers, there's a way you can get around buying that box. Rent it. The Sezmi media player would cost "a few dollars a month" to rent.

    The second problem is technical. People are reluctant to add wires and boxes to their already full entertainment centers and Sezmi will rely on the consumer for hookup. Cable has a guy who comes to your house to handle the ugliness.

    Third, the device will rely on an internal HDTV antenna to receive its signal. The reason most people use cable or satellite is to get away from dependence on a hard to tune antenna.

    A spokesman for the company points out that with Sezmi, viewers can watch live TV as it happens, seemlessly, along with a signal heading right into the TV. So, if you want to watch what you normally do on TV, you can do that as the show airs and not have to wait for it to be recorded in the system's memory in order to watch it.

    And the service offers another function that they say will help them stand out from the rest -- personalization. Every member in the house can have a specific set of favorites that can be programmed per set of eyes under the same roof.

    One service -- and only one -- has been able to deliver television content to the consumer without a problem: Netflix. Why? Because the company isn't spending its cash subsidizing a box.  It's happy to let other companies, like Roku or Microsoft (Xbox) or Sony (Playstation3) supply the box.  Your Internet broadband company provides the connection.  All Netflix has to do is supply the content.

    Even TiVo, which has easily the most delightful user interface in the history of consumer electronics, often fails to make a quarterly profit and it doesn't supply any content at all. Its handicap?  It's the box, again. TiVo has to build a box for every subscriber.

    So, good luck, Sezmi, with the ambitious idea that so far has not worked for the biggest of big names.