The Backstory: Why Get into the TV Business?

 
Erik presented his plans and got funding from mother Intel on December 8, 2011. In less than 12 months the Intel Media team had built all of the pieces of the puzzle. They'd built the streaming device, the OS, the web services infrastructure, the video infrastructure, everything. Erik told me that he'd never seen an organization move that fast in his career. To the objective outsider, this either means that Intel is putting a ton of support (think: cash) behind this project, or it's going to be half baked. Based on some of my own snooping, I don't think it's the latter. Which then begs the question, why was Intel so eager to go off and build an IPTV service and do all of this work? And why did it have to happen so quickly?
 
I didn't ask Erik the first question, although I think the answer is obvious. Intel's present success is very closely tied to the PC industry. It's trying to break into the established ARM smartphone and tablet industries to help go where the industry goes, but it does so as a late comer and is currently enjoying all of the struggles associated with that. The TV industry however hasn't really been revolutionized, and it's ripe for change.


The Boxee Box, one of many Intel powered solutions for the TV

We've seen high profile attempts to empower the big screen with devices like the Apple TV or Google TV. Smaller players have made similar attempts (e.g. Boxee Box, Roku). All of these boxes attempt to stream existing cloud based content to your TV, but they don't fundamentally replace a cable TV subscription. For some users, the content you can currently get on any one of these platforms is good enough to augment a cable TV subscription, while for others it's good enough to cut the cord entirely. For cord cutters, the gaps in content that remain are filled by content owner websites (e.g. southparkstudios.com) or through piracy. None of the existing platforms offer a universal solution for live TV either, you sort of have to hope that whoever is broadcasting whatever you want to watch in real time is kind enough to stream it - or you have to wait and watch it later.
 
The TV market today looks a lot like the smartphone market did not too long ago. There are established players, but no one is really doing it perfectly. There are good ideas, but no platform that unifies them all. Intel is interested in the TV market because it is a consumer facing business that's detached from the PC industry, and one that's ready for a revolution. Getting in early and generating revenue that's detached from PCs would help Intel grow its revenue base, diversify a bit and likely keep investors quite happy. The side benefits are obvious. Any solution here would need a fairly heavy cloud platform to drive it (you have to store, transcode and stream all of that content), plus if you really do pull off a good internet based TV strategy it simply drives usage of all other computing devices as you'd want to be able to stream/consume content on as many different screens as possible.
 
The "why do it?" question is an easy one to answer, but figuring out whether or not Intel can do it is a different one entirely. Intel certainly has the cash to pull off a dramatic play in the TV space. It also has the ability to customize silicon to put fears to rest of its TV solution being a giant pirate box. However, Intel hasn't traditionally done well in the consumer facing software/services department. 
 
Intel does a great job of building fast silicon, validating it and optimizing software for it, but when was the last time you saw Intel build a gorgeous UI? Even Intel's reference Ultrabooks don't really ooze confidence that the company knows how to build a real consumer device, software, service or experience. The skepticism here is understandable and warranted.
 
The only solace Intel can offer to the skeptics is the fact that Intel Media is staffed by a combination of Intel insiders as well as from others outside of the company. Erik naturally stressed hiring from Google, Apple and Netflix. Erik himself came from the BBC and admittedly isn't much of a chip-head to begin with. The proof will be in the pudding. Intel hasn't publicly demonstrated anything, it hasn't announced pricing or a channel lineup. With a product launch sometime in 2013, we won't have to wait long to see how this plays out.
What is it? What I'd Like to See
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  • Sprigjr - Thursday, February 14, 2013 - link

    I love anandtech. Reply
  • artvscommerce - Thursday, February 14, 2013 - link

    I often have that same thought. Just make sure you don't say that in ATOT! It never ends well.. Reply
  • spazmedia - Thursday, February 14, 2013 - link

    Anand,
    Intel will undoubtedly build an amazing product to access content. However the BIG problem, and I mean big, is getting the license to distribute the content. All the content producers (studios) need to be on board. This is not a trivial task and armies of lawyers will be involved. Intel can spend all they want but they have absolutely no presence, from a negotiation perspective, in the entertainment business. In fact if they were serious about this project they would have sought out partners. What complicates matters further is that these same studios also own cable networks. They have no interest in divesting of those interests.
    Reply
  • Khato - Thursday, February 14, 2013 - link

    One interesting perspective to take on this though is that Intel has a chance at negotiating purely because they aren't in the entertainment business. As you correctly point out, when the content owners also have a stake in the cable networks there's no reason for them to license content for any less than what they get from the cable networks as a whole... which basically requires the cost to the consumer to be higher in order for the third party to make a profit.

    Intel potentially has an interesting play here in that they don't need to make money on the content. Initially at least I'd imagine they'd be fine with just making money on the hardware and having the content portion be at cost... and in that case the sales pitch to the content owners would be the advertisements aspect. If the content owners could actually be making more money through Intel's IPTV due to greater ad revenue than they do through with the current system... well, why exactly wouldn't they give it a try to see if it pans out?
    Reply
  • mrdude - Thursday, February 14, 2013 - link

    ad revenue is only one aspect, and it's actually not favorable for them. Ads online aren't greeted with the same obliviousness. People are well aware of ads online and hate them with a passion. If the ads are done the same way they are on television - which would essentially be the same exact viewing experience as watching it over the air - then where's the benefit?

    I don't see this going anywhere unless the big content providers are able to make a significant profit. Breaking up the stranglehold on content, packaging and service, is a move in the opposite direction, though. Unless the providers are making the same amount of money, or more, per-customer, they won't bother. But unless this is significantly cheaper than cable or satellite subscription, viewers won't care.
    Reply
  • ricardoduarte - Thursday, February 14, 2013 - link

    I honestly think that this might work, like anand pointed out correctly intel needs a backup strategy from the sinking PC business, and they are (in my opinion) the best company to change it all. Imagine how this model would simplify infrastructures for cable operators ( i dont know about US but in EU usually they provide internet and tv tied in their infrastructure).
    This approach would allow them to reduce infrastructure costs greatly, while keeping costumers attached to it, the way i see it, if a cable operator is to adopt this, they would use it as an excuse to replace tivo (i use virgin in uk) or recording boxes, and charge a premium on top while things on their side a being upgraded to eventually do a full switch.
    If you think about this cable operators would only have to worry about delivering the content, and internet connection service, which would reduce their costs greatly (if intel isn't too greedy).

    The only thing that makes me wonder is if cable operators will be happy to depend of intel, because by using this model intel could in theory dictate the price of cable and annoy a lot people.

    If intel are clever enough they only build the sdks for the cable boxes and leave the UI's to be done by content providers so they can create a branding illusion.
    Reply
  • mrdude - Thursday, February 14, 2013 - link

    "If you think about this cable operators would only have to worry about delivering the content, and internet connection service..."

    While bandwidth and connectivity may be great in the UK, there are many people in the US who live in rural areas. As a result, the infrastructure costs wouldn't actually be decreased but potentially increased as they'd have to add a much bigger web presence, consider the issue of hosting, servers, etc. These are all things they already have, but having millions of people demanding 24/7 uptime and fast speeds is another story entirely.

    Furthermore, there just aren't many people who have cut the cord. The content providers are making money hand over fist and data caps are still the norm. Neither of those looks like it's going to change anytime soon.

    This model would work if there was an untapped market so big that it would allow for these companies and providers to deviate from their current pricing schemes and content delivery systems. There isn't, though. And without an incentive ($$$), it just won't happen.

    I understand Intel needs to diversify given the threat from below, but this just doesn't look like it's the right direction nor the right time.
    Reply
  • new-paradigm - Thursday, February 14, 2013 - link

    We have the same problem in the UK. Connection out in the sticks is not always great... although broadband over phone is at least usually able to give a couple of megs download speed. Reply
  • ricardoduarte - Thursday, February 14, 2013 - link

    We have the same problem in uk with data connection.
    With the right video compression algorithms such as HEVC (http://en.wikipedia.org/wiki/High_Efficiency_Video... efficient caching and the right software bandwith usage would be greatly reduced.

    If this method would be in place providers could focus more in offering more bandwith than maintaining sattelites, and expensive cable services, and all the other infrastructure that runs along internet cables.

    I am not saying that this will happen overnight, but that this has a much higher chance than rokus, googleTVs, appleTV, its for sure.

    Because if intel does it properly there are true economical benefits to this strategy, which is the main cause to why nothing has being done with TV yet, because the current model works and is finantially viable. If intel manages to prove that this one is much better, operators will change.
    Reply
  • Khato - Thursday, February 14, 2013 - link

    What manner of online ads are you talking about though? The absolutely pathetic ads that you get with most all of the free streaming services? Those are indeed a joke and just go to show how much those content providers need an actual solution. (Who's to say that there wouldn't be a free subset of programming equal to what content providers currently offer but using this superior user experience/infrastructure Intel is supposedly putting in, of course that'd just be streaming to a browser/app not the dedicated hardware.)

    But no, the key advantage here with advertisements would be that they could be the same as what's normally on tv, but targeted to a specific set of parameters. aka, the hardware processes the images from the camera to see who's watching (note that I'd be extremely surprised if there was any possibility of it transmitting images, just the parameters it can gather from them.) It could technically even pause the show (and the commercials!) when the viewer gets up and moves out of view. A commercial that you know a targeted audience is watching is definitely worth something more than the system as it is today.

    And the real thing to keep in mind is that this is simply the way to get their foot in the door. Once the media conglomerates see the advantages of this model there's a lot more than can be done. Eventually might even be able to get rid of the commercials if willing to pay a bit more.
    Reply

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