Kit Digital Pays $27M for Sezmi's Leftovers

LR Cable News Analysis Jeff Baumgartner, Senior Editor, Light Reading 1/6/2012

Kit Digital is paying $27 million to acquire the assets of Sezmi Corp. , a startup that once had big ambitions to pitch consumers on a cheap alternative to cable TV that relied on a mixture of over-the-air and broadband-fed video distribution.

Kit is paying $16 million in cash, the balance in stock, and will pick up 18 Sezmi patents.

Sezmi, which raised north of $90 million during its five-year life, has been in the midst of a strategic overhaul after it struggled to attract customers. In September 2011, it announced plans to shut down its direct-to-consumer video service in favor of one designed to help service providers deliver services over the top. Grupo Iusacell of Mexico and YTL Communications of Malaysia were among the early takers.

Before that change, Sezmi sold a $4.99 per month service called Sezmi Select that included a menu of VoD titles and some broadcast TV channels and required a specialized, broadband-fed box. Sezmi briefly tried its hand at a higher-end, $19.99 service called Select Plus that was limited to Los Angeles and featured a slimmed-down, ESPN-free cable TV package delivered over spectrum leased from local TV stations.

Why this matters
The acquisition by Kit should ensure that Sezmi's technology and ideas will live on and give its new strategy a chance to pan out, particularly with larger service providers that may be leery of committing to a troubled startup.

Prague-based Kit, which provides video management software technologies to Liberty Global Inc. (Nasdaq: LBTY), NBCUniversal LLC , Sky and Verizon Communications Inc. (NYSE: VZ) and counts more than 2,450 customers, believes its new Sezmi unit will pull down at least $20 million in revenues in 2012.

For more
Read more about the life and times of Sezmi.

— Jeff Baumgartner, Site Editor, Light Reading Cable