Informative article on the topic by the NYT. The piece highlights just some of the hurdles Intel or anyone else will have using the cable company's infrastructure to build a viable business delivering OTT live TV in direct competition to the cable companies.
Even if it is proven that Comcast is leaning on other content creators not to cut content distribution deals with Intel, which is arguably anti-competitive, the remedy for that bad behavior doesn't alter all the other market and regulatory advantages cable companies enjoy over Intel. Set aside for the moment that the FCC, FTC, DOJ, Congress and the courts have for years supported the rights of cable companies to bundle content, to place caps on the amount of monthly data delivered to customers, and to give special advantage to the cable companies own streamed IP services over competitor's offerings. Intel's ambitions for OTT live streaming simply isn't good business strategy.
B its own admission Intel said it is willing to pay far more than the market value and far more than cable companies pay for the same content. Just on the economics of this one parameter alone Intel is at a competitive disadvantage to cable operators to deliver the same type of service Intel wants to deliver. And any cable operator could do it, streaming technology is very mature and well understood.
Maybe Intel has a D.C.-based lobbying firm that has convinced them they can bust open the entire cable industry on their behalf, but this is the classic lobbying industry sales pitch. The lobbying firm will take the money, create some media attention, have some articles placed in the media like the NYT but at the end of the day not enough will change to make this a good opportunity for Intel.
Excerpt - I think this was just released. I'm only pasting a portion of the article. Later on the author states that the executive heading up Intel Media has left the company.
Sneha Shah (Seeking Alpha):
I am positive about Intel (INTC) stock as I think the company has one of the strongest competitive barriers in the fast changing technology industry. The company has got a huge manufacturing lead in semiconductor manufacturing, which has given it a virtual monopoly over the PC and server processor market. The company has also invested heavily in the last two years to make an entry into the mobile processor industry, which is starting to bear fruit. The stock remains undervalued compared to the broad market indices and gives a nice dividend yield as investors remain skeptical about the company's mobile prospects. The company recently announced a new venture - Intel Media. This division will sell set top boxes for TVs and compete with a wide variety of companies like Apple (AAPL), Comcast (CMST), Netflix (NFLX) etc. While I remain highly positive about Intel's foray into the mobile devices market, I think Intel's TV entry will prove to be a dud. The company's strategy seems to have little differentiation, in a highly competitive market with very strong players. Intel has little expertise in acquiring and distributing content and I do not think it can leverage its manufacturing strength in this area. Recent data indicate that the company is being forced to pay much higher rates for content. I think Intel will fail in this business and should focus on its core business of making chips. Despite my misgivings about Intel Media, I remain highly positive about Intel's stock for many other reasons and think that it offers one of the best ways to invest in the technology space.
It's important to separate two very different initiatives Intel seems to be pursuing simultaneously. The first and most highly publicized is the Intel branded Web TV project lead by Eric Huggers that aims to deliver live OTT TV services to consumer's homes and compete directly against the cable operators' HDTV video services. This project is an Intel branded service from start to finish.
In my opinion, this is the media project that was hugely flawed, poorly conceived and had near zero chance of succeeding against the vast array of assets and advantages cable companies can bring to bear on any wannabe competitor.
Second there is the classic Intel business model that leverages it's world-class chip design and manufacturing capability to get design wins in devices such as cable modems and settop boxes cable operators and other telecom companies sell to their customers. This model is a very good fit for Intel's strengths and resources and this should be a great long term opportunity for them. Moreover design wins in the TV/entertainment and consumer electronic space probably displaces ARM which is even better for Intel.
It may be that Intel's Web TV streaming project will be allowed to just fade away without ever launching and they'll say getting their chips inside cable settop boxes and cable modems was what they really meant all along. So be it. As they Intel saying goes, "Hurry up and do the wrong thing fast, so you can start doing the right thing".
I've been thinking maybe Intel should punt on this venture and just focus on their primary lines of business. However - I don't know enough about what's going on behind the scenes. Maybe there is opportunity there, but from what I can see, it seems like just a distraction. Anyone disagree/agree? I'm open-minded on this.
IMO, the set-top box may emerge as a big market in the next few years. If you look at the TV, the "brain" of it really resides in the set-top box. Just like Intel is in the "brain" of the computer/tablet/smartphone, Intel needs to be in the "brain" of the set-top box.
Furthermore, it also appears to me that the set-top box and the gamebox (xbox, playstation etc) are merging. Intel has been investing heavily into voice and gesture controls. I believe it is for incorporation into the set-top/gamebox devices of the future.
The battle for living room dominance has not yet begun, but I am glad to see Intel is spearheading the efforts to change the current status quo.