On Tuesday, Intel's (INTC) Erik Huggers gave an interview (you should watch it) about Intel's new venture in the realm of TV entertainment. Although he didn't reveal what Intel's brand will look like or what its set-top box will be called, he gave us a lot of info about Intel's new service.
Some people, like fellow contributor Dana Blankenhorn, are already disappointed and believe that Intel's foray into the world of television will most likely be a failure. I take a more optimistic view and I believe that this has the potential to be such big a success for Intel as the iPhone was for Apple.
The new service will be essentially a cloud based TV that plans to replace your cable or satellite subscription. However you'll still have to buy channel bundles. Mr. Huggers ruled out an "à la carte" TV which means that you won't be able to cherry pick the channels you like the most.
However, he said there will be a more flexible bundle system which means that customers may be able to customize their channel bundles either by adding channels they want to some "mandatory" selections or they may be able to pick whatever they like as long as they pick a minimum number of channels.
The service will provide customers with live TV, an on-line archive of every program that was aired and a variety of on-demand content.
Mr. Huggers stated that because there is no device or platform able to offer the experience Intel wants to offer, the company decided to create an electronic device that will change the way we use TVs and make it as intuitive as the iPad's user interface.
One feature that this TV box will have, is a camera whose job is to monitor TV users and adjust the proposed content along with their preferences. It will enable a "user account" experience to our household TV. When dad sits down to watch, the TV box will propose football games, comedy shows or whatever he usually watches. However, when the kids sit to watch TV it will propose the latest Disney cartoons or other shows for children.
On the revenue side, this feature will allow for highly personalized advertising and content-targeting benefiting both content creators and advertisers.
Mr. Huggers also revealed various other details. The service is intended to expand over time and be available across all platforms and devices. He also said that the will use a video codec that will be at least 50% better than H.264, helping consumers to stay well below the data caps wireless carriers have put in place. He also said that the box will be upgraded continually, unlike the set-top boxes that exist today.
The most critical element for this web TV to work is execution. Intel has assembled a high-quality team with marketing people from Apple, supply chain experts from Jabra, home media specialists from Microsoft's Xbox division and so on.
One of the most promising things Mr. Huggers said is that they work with everyone. If Intel manages to deal and co-operate with the majority of content providers, then it would have an extremely big lead over the next guy who may try to compete.
Keep in mind however that mistakes will happen at the beginning. However, if they are small and manageable they won't pose a problem to Intel's market share growth. After all, even Apple's first iPhone needed major improvements when it was first launched.
As Mr. Huggers said, this won't be a value play but a quality one. That means that the device won't be cheap. Now let's assume that the TV box will cost $150 and that the subscription fee will be around $150 per month or $1,800 per year.
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Assuming that Intel will manage to seduce just 10% of the households with cable or satellite TV, it will end up with 9.5 million subscribers. That's $17.1 billion of new recurring revenue plus a one-time revenue of $1.4 billion from box sales. For intel that would be a 32% increase in revenue and 20% increase in net income, assuming a 15% net profit margin. Now picture a 30% market share scenario and you'll immediately understand just how big this venture's potential are for Intel.
This is something to just keep in mind about Intel. I wouldn't suggest acting on it until we have more detailed information or the actual product is launched.
Sentiment: Strong Buy
This is going to be an interesting product introduction. I believe that this was the thing that Steve Jobs had his eye on. Had he lived a couple more years I believe that Jobs was the vision to take on the cable companies and go for content directly from the networks. This would have bypassed cable and satellite.
In my opinion, the main problem is that the cable companies own their boxes. Have you been around when they are installed? My FIOS box needed authorization from Verizon to be installed. If you ask them I'm sure they would say "we do this to ensure a quality experience" when in reality they simply don't want third part vendors selling boxes to us directly
My question is how will this work? Will this be yet another box you can rent from your cable company? If so it will most likely be a cable box with an Ethernet port that would both stream cable and IP TV. A nice solution but you'll be spending $5 to $15 a month on a box that the cable company pays $72 for in bulk. The cable boxes are a cash cow for the cable companies.
At your house you have the cable come into your home at one point, often near the electrical panel. From here separate cables run to each room in your house. If you were going to place one master DVR/tuner in your house it would have to go here. You would need a somewhat sophisticated little computer system most likely mounted on the inside of your house or garage to act as the brains of the system. For about $4-$6 a month you could rent a cable card and get all your TV channels. The box over your TV would have to tell the your computer near your distribution point to change channels. It would also need to have an eitherent cable plugged into it. Doing all this would mean that you could enjoy your cable plugged into a box over your TV like it is now and get the benefits of TV and IP TV without additional cables.
Another solution that I working with now is to use an HD Homerun style box. It takes the TV signal and broadcasts it out over your Ethernet. The good news is you can watch TV on any computer including laptops with wifi. The bad news is that when we want to watch TV on a TV we first have to fire up the XBox, then call up a Windows Media PC to grab the TV signal and point it toward the XBox. It looks fine, I've enjoyed it using a small Atom based PC as the Media Center. The problem is that it takes a minute to fire up the Xbox, so if you want to simply turn on TV quickly, it's not happening. And the cable is out of the equation. Everything uses either Cat 5 cables or wifi. The HD over wifi actually works great as long as your near the router.
Or Intel can just do everything over IP, This would mean they would cut out the cable companies. A bold move. They would need to fight for content against the cable companies. Very often for consumer the cable companies are part of the equation when it comes to bringing in internet into the home.
My thinking is that Intel doesn't have the market presence to sell directly to the consumer. What makes most sense is that what they will offer are high end rental cable boxes you get from your cable company. The boxes will have Ethernet and wifi along with the direct cable line input. Every other solution will be too complicated for consumers. This may be the one thing that helps keep TV relevant. I think consumers are pulling the plug on cable more and more over time for IP TV.
I do not understand the play but then again, I did not see why people would want an Ipad so I am not great at this future thing when it comes to tech gadgets. I would bet against this thing but, as I say, most all of us missed out on the Apple story when it went into new things.
I however do like that Intel is attempting to get directly into retail with sales of its products. I heard that Intel will use another company name when selling this TV BOX system, but it will be fully Intel owned with another name. A separate branch of Intel.
Looks like everyone is going to go against Apple using the Apple playbook.
Seems to me that Intel will have a distinct advantage in price of the boxes and of the quality.
I see that Comcast is working with Intel so there you go.
Perhaps things will surprise us yet.
TV Internet boxes and system
Intel is changing slowly but the BIG money is still there to be made with CPUs in servers should Intel breakout far ahead of its competition.
I say Phones is where it is and the Watch from Apple with Intel as well.
He also said that the box will be upgraded continually, unlike the set-top boxes that exist today...
plus a one-time revenue of $1.4 billion from box sales.
I wonder how Intel's foundry partners (FPGA, Network processors) would fit into the picture - it's all about data transfer isn't it
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The arrangement with closely held Achronix Semiconductor Corp., to be formally announced Monday, is designed to produce a variety of programmable chips with unusually high performance. Such chips could help boost the capabilities of computer hardware in applications such as high-speed communications, image-processing and encryption, where customers often must use costly custom-designed chips, Achronix said.
"Some people, like fellow contributor Dana Blankenhorn, are already disappointed and believe that Intel's foray into the world of television will most likely be a failure. I take a more optimistic view and I believe that this has the potential to be such big a success for Intel as the iPhone was for Apple."
[No surprise since Dana is Lucy...]
Sentiment: Strong Buy