Intel's Web TV is beginning to look like the most overhyped product that never gets launched, but that doesn't stop the PR machine from continuing to sell the live TV streaming concept.
Like so many other articles on this topic the author understates the problems any outsider competing directly against the cable operators for delivering live TV. The Barron's author does give some attention to the most recent battles Intel has experienced acquiring content and seems to suggest that if the content issue were solved the way would be paved for Intel's success. They refer to the 1992 FCC mandate that forced cable operators to sell affiliate programming to satellite operators, suggesting a new mandate could be done to force MSOs to sell content to Over-The-Top-Operators. The big difference in the example is that satellite operators already have their own distribution directly to consumer's TVs. All they needed was content and they were done. But OTTP operators have neither their own distribution nor content so they would have to buy the content then turnaround and use the cable operator's own bandwidth (which is not unlimited) to deliver the same content cable operators already deliver.
The Barron's article seems to suggest that Eric Huggers was genius for not pursuing the $4.5 billion annual settop box chip business but rather preferred to chase the $500 billion of live TV business market. However I am not impressed with this business judgment. Intel has a very good chance of winning the settop box chip business while getting Intel's security architecture into households which could be strategically valuable to Intel - but they have virtually no chance of taking the cable operator's live TV business. So if the Barron's piece is true Huggers' seems to be walking away from a valuable piece of incremental chip business that leverages all of Intel's strengths, to instead chase a pot of gold at the end of the rainbow.
MSOs have no choice but to change their business model. They're losing subscribers to the streaming Internet providers by the boatload. Its not a matter of 'if' but 'when'. Intel will play the 'monopoly' card if they have to, and believe me, they will have a lot of support if they do go that route. Intel is trying to go the 'partnership' model first as that will be the easiest/fastest to get their foot in the door, and once they do, watch out.
Cable cutters are cutting to reduce total expenses. Some are willing to do without live HDTV and drop their monthly video bill from about $140/mo to $18/mo to Netflix to stream movies and get movie DVD's but they aren't cutting cable to pay someone else the same $140/mo the cable company charged to stream the very same content they were willing to do without.
Cable companies may need to change but Intel's service isn't the answer to those that cut cable to save money.
I had assumed the much hyped Apple tv product would look like this. Apple has the infrastructure to sell direct to end users and handle a recurring revenue model. The cost to Intel to set up distribution would be prohibitive.
One of the most common mistakes inexperienced entrepreneurs make is to believe the most attractive opportunity is the one with a really huge market. In a meeting with VC's the comment usually goes something like, "There is this gazillion dollar sized market and if we only capture a small percent, we'll all be rich". Hearing this statement a seasoned investor may end the meeting, or if they are the mentoring type they may say something like, "No that's not interesting, but show me a product you can sell to 1,000 people who are not friends or family and we may be interested". The problem is that it doesn't matter how big the live TV streaming market is if it's unobtainable to Intel.
One comment at the end of Barron's piece by Huggers seems to suggest Intel is slowly acknowledging the futility of their original "go it alone" dream where Huggers suggest that there are "all kinds of opportunities" to partner with incumbent cable operators. Partnering to help cable operators launch a cable branded streaming service may have been viable but not likely now after Intel first tried to take it all for themselves.
Quote: Partnering to help cable operators launch a cable branded streaming service may have been viable but not likely now after Intel first tried to take it all for themselves.
I don't think the doors are closed. Intel hasn't launched its service yet, so I suspect they haven't burned any bridges.
As they mentioned in the article, cable/satellite can be induced to provide their infrastructure for Intel's service if they can get the same or higher level of monetization for their infrastructure with higher broadband speeds and or a percentage of revenues as an example (with falling cable/satellite subscriptions, even staying at the same level may be attractive). I suspect all kinds of deals can be done.
Intel has shown remarkable consistency in terms of not competing with their customers (OEMs) even though device prices/margins have been vastly higher than CPU/SoC price/margins - which should be encouraging to all prospective partners in the TV and other markets.