[opendtv] Coming Soon: Intel's Must-See TV

From: Craig Birkmaier <craig@xxxxxxxxx>
To: OpenDTV Mail List <opendtv@xxxxxxxxxxxxx>
Date: Sat, 22 Jun 2013 08:32:25 -0400

http://online.barrons.com/article/SB50001424052748704311204578551361662471502.html?mod=BOLFeed#articleTabs_article%3D1

Coming Soon: Intel's Must-See TV

Full disclosure, dear readers—I'm not a TV viewer. I chucked the set years ago
and mainly watch things on computers.

But then, television hasn't changed much in decades, so I feel I'm still
qualified to opine on the boob tube's future. And two weeks ago, I was
fortunate enough to glimpse a possible part of that future at the Santa Clara,
Calif., headquarters ofIntel, where I saw a TV service that is novel, elegant,
and highly desirable, even to a television Luddite like me. The service faces a
number of hurdles, including potential obstruction by the cable and telephone
industries, but what I witnessed could take Intel in a thrilling new direction.

Sometime this year, the chip giant will offer a set-top box at retail, with a
subscription service that brings you live television over your broadband
Internet connection.

It is, in industry argot, an "over the top" video connection, requiring no
actual TV package from the four major "multiple system operators," or MSOs, as
they're called— Comcast, Cablevision, Time Warner Cable, and Charter
Communications—or from Verizon Communications and AT&T.

WITHOUT GIVING TOO MUCH AWAY, the user interface seemed to hover beautifully
above the currently playing show. An elegant simple menu made it easy to switch
between channels or to pick and rent a recent film. It was light years from the
cumbersome garbage that takes up most of the screen when using a standard
cable-channel picker.

There was a wide array of popular channels to choose from that would be
familiar to any couch potato, though the final lineup is still being
formulated. Equally important, when you hit the button on the remote, the TV
seemed to jump to the next channel faster than is typical on cable. There also
is a time-shifting aspect that goes beyond DVR, allowing you to go back through
recent episodes.

One wonders: Why hasn't TV always been this way?

Others who've viewed the project are enthusiastic, too. "The No. 1 thing I
noticed was speed," says Patrick Moorhead of Moor Insights & Strategy. Intel's
horsepower in the set-top is partially responsible for this, but multiple data
centers that Intel is building to serve video also were a factor. "A lot of the
value comes from what they've done on the back end," says Moorhead. "They have
the highest-performance Intel servers and video-encoding technology." And he
notes, "This is live television," unlike other over-the-top offerings, like
those from the TV network consortium Hulu, Apple's AppleTV, Netflix, or closely
held Roku, which merely provide on-demand content from a back catalog. "It's
something I've never experienced before" in an Internet offering, Moorhead adds.

No less thrilling is the fact that Intel, which makes $53 billion in yearly
revenue from selling chips, and spends billions to make them, is becoming both
a hardware and software vendor.

The project is the effort of Erik Huggers and his staff of 350 people. Huggers,
40, won praise for developing the iPlayer for the BBC, a piece of video
software that allows one to follow the channel's TV and radio broadcasts. He
came to Intel two years ago to advance efforts to sell chips to set-top makers.
He made a bold move in telling his boss that the $4.5 billion TV-chip market
wasn't desirable. "The market was split up between 20 or more silicon
providers, and it was a race to the bottom on prices," says Huggers. "I said,
'I don't know how we ever turn that into a profitable market.' " Instead, he
pleaded, "Release me to go after the $500 billion television market in a very
different way." He got his wish.

If Huggers has a hit, Intel will get not just set-top revenue, but also an
annual payment stream from subscriptions, after splitting fees with content
providers. It's also a smart way for the chip giant to diversify.

Numerous unknowns remain. Intel isn't disclosing the price of the box or the
service. The box itself will inspire an iPhone-like techno lust, Huggers
assures me, though I didn't see the final hardware. But will people be willing
to pay Intel on top of paying for broadband and for Netflix, Hulu, etc.?
Huggers contends that Intel's service will "surprise and delight" viewers with
a constant stream of new features, making it more and more valuable to them.

More prickly is the art of the deal. In his bunker at Intel, Huggers has on his
desk a bowl of genuine shark teeth. They are a reminder that in closing deals
with content providers—HBO, AMC, ABC, CBS (CBS), etc.—the fight for content
rights can be brutal. And Intel's service must have the right channels or it
just won't fly.

Huggers won't say how many partners he has signed, but, he maintains, "We see
incredibly serious engagement on the part of every programmer we talk with. I
feel very good about our ability to get the right terms to move forward."

But content providers are hardly the most difficult obstacle. Time Warner and
Comcast both have over-the-top offerings, in the form of tablet and smartphone
apps that let you watch video away from the TV set. Neither wants to lose the
value running over their coaxial lines.

In a recent report, media analyst Rich Greenfield of BTIG Research wrote that
some cable operators have gotten content holders to agree to what would appear
to be "anticompetitive" contracts that prevent them from licensing to "classes"
of distributors such as Intel.

GREENFIELD THINKS THERE ARE WAYS in which all parties can be satisfied. "If you
are a content provider, why would you not want more avenues to distribution?"
he asks, while noting that, for the cable operators, "selling broadband at $100
a month can be a lot more compelling, versus $50 for pay TV, especially at the
very high margins of broadband versus video" if a partnership can be struck.

Huggers maintains there are "all kinds of opportunities" for incumbent
broadband providers to partner with Intel.

If push comes to shove, there is precedent for the U.S. government to encourage
video on new platforms. In 1992, Congress compelled the cable operators to sell
affiliated programming to the new broadcast-satellite companies, notes Blair
Levin, a fellow with the Aspen Institute. Says Levin: "If, in a year's time,
things are going just fine" for Intel, "it diminishes the argument for
government intervention" to open up the field of video distribution. "If not,
well, it probably strengthens that argument."

I certainly hope that it works out for Intel; as a potential subscriber, I'm
ready for it. Sometimes, even TV Luddites like to watch The Big Bang Theory.

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[opendtv] Coming Soon: Intel's Must-See TV

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