Sezmi Corp. , a startup that tried to take on MSOs and other pay-TV operators with a low-cost hybrid broadband- broadcast delivery platform, is shutting down its direct-to-consumer video service.

The company notified subs on Friday afternoon that it would scuttle that service starting Monday (Sept. 26) and instead focus on striking deals with service providers. Sezmi's trying to soften the blow by letting customers rent movies and TV shows for free through Nov. 1.

"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," the company said. Sezmi, which was not immediately available for comment, has not disclosed subscriber numbers.

Sezmi and its hybrid video service originally set out to disrupt the TV market with a low-cost video subscription service. Its entry-level Sezmi Select service sold for $4.99 per month and included a DVR with 1-terabyte of storage (which sold for $150), access to a menu of VoD titles and a lineup of broadcast TV channels. A higher-end Select Plus, limited to Los Angeles, ran $19.99 per month and included a slimmed down cable TV package that included some popular channels like Nickelodeon, MTV and VH1 (but no ESPN) that was delivered over spectrum leased from local broadcast TV stations. Sezmi shut down Select Plus in late 2010.

Sezmi, which has raised more than $90 million, is now pitching its hybrid approach as a turnkey product to help service providers pipe video services to tablets, TVs, smartphones and other IP-connected devices. Among recent wins, Grupo Iusacell of Mexico picked the Sezmi platform to power its Totalplay video service.

Why this matters
Sezmi is the last startup to try and fail to win gobs of customers with inexpensive, no-fills TV packages and couldn't make its model work despite a crummy economy and a budding cord-cutting trend. US Digital Television LLC (USDTV) also had designs on a hybrid approach based on cheap video subscription packages, but managed to sign up just 4,000 subs before going belly-up in 2007 after its primary investor pulled out.

Cable MSOs, meanwhile, are starting to get wise to the fact that the tough economy and pricey subscription rates are causing them to lose subscribers by the hundreds of thousands each quarter. Time Warner Cable Inc. (NYSE: TWC), for example, pledged last week to expand the availability of TV Essentials, an ESPN-free tier that's priced at between $30 to $40 per month. (See Q2 Video Scorecard: Cable, Satellite Get Creamed .)

For more
Read more about Sezmi's roller-coaster ride.

— Jeff Baumgartner, Site Editor, Light Reading Cable