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Cable Technology Feature Article

April 01, 2013

Intel in Content Talks for A La Carte-ish OTT TV Service

By Tara Seals, TMCnet Contributor

Intel (News - Alert), inching closer to launching its over-the-top (OTT) pay TV service, is having productive talks with a range of content providers. If successful, Intel’s launch could provide a competitive shakeup not seen since cable TV appeared on the scene en masse in the 1980s.

The silicon giant is in talks with Time Warner (News - Alert), NBCUniversal and Viacom to license TV shows and films, according to Bloomberg, citing “people with knowledge of the situation.” The Big Media stalwarts—three of the six that are critical (Disney and FOX/News Corp. and CBS are the others)—have signed off on the concept of what Intel is trying to do, the sources said. But the devil of course is in the details.

Intel has made no secret of the fact that it is looking to leverage a set-top box (Intel inside, naturally) to offer a sort of super-Roku proposition. Yes, it would be a box-based OTT play that consumers would buy at retail. However, it would have the look and feel of a traditional IPTV (News - Alert) service, with access to all the channels one would expect from a pay-TV provider.  In addition to live TV, there would be on-demand option and a cloud-based DVR, and subscribers will have multiscreen access across TV sets, computers and mobile devices. It all sounds fairly straightforward—with one exception.

Erik Huggers, Intel’s vice president for media, said last month that Intel expects to provide “smarter” network bundling for consumers. Viewers will be able to simply pick and choose which niche blocks of channels they would like to include in the service, thus determining their own programming lineup (and subscription cost)—to a certain extent. That approach, if successful, would mean that Intel is exploring a final frontier in TV business models, boldly going where no TV operator has successfully been able to go before.

Media companies are not particularly inclined to unbundle their network carriage agreements—in fact, Viacom (News - Alert) and Cablevision are currently in a legal wrangle over that very thing. If Intel wants MTV, it’s probably going to have to carry low-rated Neopets or Shockwave too, and pass the cost/carriage requirement on to consumers accordingly.

But the block-style approach, where consumers can take themed modules in order to build a service rather than build it one network at a time, offers more consumer choice without too much of a radical threat to media’s carriage revenue. So, a kids’ module could contain Nickelodeon and Disney, along with the second-tier Big Media bundle-mates like Neopets.

In and of itself, the back-end model is somewhat protected by that approach—but it’s a huge shift in the way TV is for now sold to viewers, and the move has the potential of causing big competitive headaches for cable, satellite and telco companies.

Considering the high profile that offering consumer choice has had in the news lately, content giants are starting to feel a bit more flexible. “Not just Time Warner, but all of us have to look at these new distribution methods and whether they’re viable,” Time Warner CEO Jeff Bewkes said March 4 at an investor conference. “No one has come along with that yet, and we’d look at it.”

Gaining access to the content for a cost that wouldn’t require Intel to price the service out of the going market rate for TV is of course the key to making the idea work. As the No. 1 chipmaker in the world, Intel has deep pockets, and it’s likely willing to roll the dice on video to help shore up flagging PC market sales. If the service is compelling enough—and if it can price the channels well enough to make a decent margin (and it can’t be too hard to improve desktop chip margins), then the financial model will work.

The sticking point of course is the a la carte approach.

It all remains to be seen, but Bloomberg’s (News - Alert) sources said that discussions with the remaining companies were in the works. Talks with FOX are about to kick off, while Disney and CBS are “at a more preliminary stage.”

Edited by Brooke Neuman

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