Feb. 12, 2013 at 4:22 PM ET
Intel, the world's top chip maker whose fortunes are eroding under the popularity of mobile devices, will enter the hotly competitive market of online television this year with a service that will both stream live content and provide content on demand.
It marks a shift into unfamiliar territory for Intel and draws it into a potentially costly market in which it lacks experience, relationships or internal expertise. Intel will be competing with heavyweights like Apple, Amazon and Google that believe the $100 billion cable television ecosystem is ripe for change.
Intel's service would be centered on a set-top box and would offer smaller bundles than those currently offered by cable operators, Erik Huggers, vice president and general manager of Intel Media, told the AllThingsDigital "Dive into Media" conference on Tuesday.
Asked if Intel has inked any content deals, Huggers said the company is working with providers and said he is confident Intel will have a compelling product to launch this year.
"We have been working for (the past) year to set up Intel media, a new group focused on developing an Internet platform," Huggers said. "It's not a value play, it's a quality play where we'll create a superior experience for the end user."
Intel has struggled to get its virtual television service off the ground due to unwillingness on the part of major media content providers to let the company unbundle and license specific networks and shows at a discount to what cable and satellite partners pay, according to sources.
Silicon Valley has been taking aim at the U.S. cable television market — dominated by major distributors such as Comcast (the majority owner of NBC Universal) and DirecTV Group and program makers like Walt Disney and Time Warner — because it is seen as ripe for disruption for reasons ranging from shifting viewer habits to ever-increasing programming costs.
Intel's plan, if successful, would go further than products currently offered by Apple, Amazon and Netflix by offering live programming as well as on-demand content.
Intel's set-top-box will also have a camera that could be used to automatically steer content and ads toward specific users.
"There is an opportunity to offer a bundle that can be curated by the consumer, an opportunity to create smarter bundles," Huggers said.
Some media executives are skeptical that Intel will be able to convince content providers to agree to terms that are attractive enough to make its service viable, a view shared by Bernard Gershon, head of digital consultancy GershonMedia and a former Disney senior vice president for strategic planning who helped Disney develop its online strategy.
"The chance that Intel launches is zero," Gershon, who speaks with media and digital executives, told Reuters at the conference. "They haven't cut any deals with any content companies, and they are not offering something that differentiates itself enough on service or price to get the deals done."
Analysts see Intel's leap into Internet television, along with its growing focus on smartphones and tablets, as a way to diversify beyond the slowing PC market.
"The question you have to ask with Intel is, Is anything they do big enough to move the needle?" said Stacy Rasgon, an analyst at Sanford Bernstein. "You're not going to make or break the company on something like this."
Huggers previously worked at Microsoft and the BBC, where in 2007 he launched iPlayer, an online service letting viewers catch up with programs they missed on regular television.
"The model we envision is a model where live television and catch-up television live in the same paradigm," Huggers said.
Copyright 2013 Thomson Reuters.