Broadcast News: Any Company Can Run Its Own Show By SHELLY GARCIA Senior Reporter In coming months, local auto body shops will be able to get video broadcasts of industry news, educational programs and product information transmitted directly to their locations using nothing but a low-cost PC and television monitor. The pilot program is at the forefront of a relatively new mode of wireless communication designed to provide customized broadcast programming without the need for satellite uplinks or cable hookups. If it catches on, the system just may catapult Sequoia Broadband Inc., a 14-month-old company in Sherman Oaks, to the center of an emerging communications model delivering broadband television and video-on-demand services through PCs. “You can run a whole television station from one laptop,” said Kenneth S. Lockhart, president and CEO of Sequoia. “We’re going after people who are not broadcasters and helping them set up TV networks.” Sequoia’s two co-founders, Lockhart and Chief Technology Officer Andy G. Lean, formerly worked on similar software development at an IBM unit. When IBM closed the unit to refocus its new media efforts, the two raised about $500,000 from seed money and the proceeds of a convertible debt issue to pursue the business independently. In January, Sequoia secured another $2.5 million investment from Freedom Rider, a spinoff of a Hong Kong technology investing company, a nest egg it is hoped will see the company through the third quarter of this year, when Sequoia hopes to lock in enough business to support itself. In addition to training and disseminating information to remote locations, the platform can also be used to air advertising messages customized for multiple locations. Department store retailers, for example, have traditionally run videotape programming showing runway models wearing a manufacturer’s latest line of clothing accompanied by a narrative that discusses the season’s trends, or a cooking demonstration that shows the use of specific kinds of appliances or cookware to help promote sales. In-store videos, however, must rely on clerks to continually rewind the tapes. And typically that’s left TV monitors to air grainy static for long periods instead of the programs for which they’re intended. “We do away with the distribution of videotapes and CDs,” Lockhart said. “It’s very difficult for the retailer to get compliance when they’re relying on store employees. They’re only 40-percent successful in getting what they want played.” Unlike video, the broadband delivery can also customize the content to each individual location. In chain beauty salons, for instance, broadcasts that air in waiting areas can feature information about the salon’s services along with advertising from neighboring retailers, like coffee houses, who want to take advantage of the wait time to boost sales. Because it can be customized, each location can carry distinct advertising messages from the stores in the individual strip mall locale. For retailers, the difference between a reliable playback system and one that is not can mean the difference between added revenue and lost income. “It ends up making astounding revenue streams because they charge their vendors for putting this on,” Lockhart said. “But if they’re going to count on it for a revenue stream, the first thing they’re looking for is a guarantee that it works.” If video is unreliable, cable and satellite transmission is extremely expensive and requires a high degree of technological know-how. Companies using the Sequoia software can buy it outright for an average investment of about $250,000 and host it themselves, if they have the expertise, or they can subscribe to Sequoia’s hosting system for a monthly fee of $150 to $200 per location. “For service providers and enterprises, it’s not uncommon for them to spend $1 million for software that goes throughout their organization,” Lockhart said. Despite the potential use for the systems and presumed demand, Sequoia did not find a very receptive financial community in its search for funding. “It was torture,” said Lockhart of the search for financing that took about nine months and several dozen pitches. “Even though we’re not a dot-com, because our technology is using the same types of networks, we got lumped in with Internet and streaming video companies,” Lockhart said. “What was hard to do was explain to people we are not offering something a hundred other companies were offering who just went out of business.” Sequoia ultimately sold Freedom Rider, a spinoff of New World Infrastructure Ltd. in Hong Kong, on the idea because it was interested in using the technology for several media projects in its own home country and in the People’s Republic of China. Such delivery systems take personalized advertising a step further than traditional marketing that relies on the demographics of the audience alone by placing the messages in environments where customers are likely to be most receptive to them. “Getting people meaningful content at a meaningful location is the next area,” said Peter Lee, a media industry consultant based in Calabasas. A consumer who sees a message about a sweater on the Internet or TV, for instance, may not be moved to make the purchase, Lee explained. But that same shopper who sees the message while walking down an aisle in the store where that sweater is available may well take action. “Now all of a sudden (an advertiser) gets better coverage, better demographics and better return (for their ad dollars),” Lee said. With its pilot program about to get underway, Sequoia is actively marketing its technology and hopes to have a signed contract by the end of the year. If all goes as planned, the company expects to be self-sustaining in 2003. From there, Lockhart said, the potential is enormous. “What we envision is that TV service and the ability to deliver TV as part of your communications will become as ubiquitous as the telephone,” he said.