Intel Kissing OTT Goodbye?

OnCue, the proposed over-the-top (OTT) video service that Intel Media once planned to launch by year's end, is now on the auction block.

According to Bloomberg, Intel Corp. (Nasdaq: INTC) is reportedly seeking $500 million to rid itself of the servers, set-tops, and software that would have been the foundation for a new pay-TV service. But, even though several suitors have expressed interest, industry analysts doubt Intel will get even close to that sum for its aborted venture.

While Intel was still championing the Internet TV experiment as recently as this past summer, rumors started circulating in September that the chip company might be ready to abandon the business. Verizon Communications Inc. (NYSE: VZ) has emerged as the prime suitor for OnCue. But Bloomberg reports that Samsung Corp. and Liberty Global Inc. (Nasdaq: LBTY) have also met with Intel executives, although how serious they are about any potential acquisition is difficult to tell.

Initially, Intel promised to launch its budding OTT video service before the end of 2013, riding on the big pipes of cable operators, telcos, and other broadband providers. However, without any content licensing deals on the books, the company quickly lost its footing in the race to challenge incumbent cable, satellite, and telecom providers.

Intel is not the first pretender to walk away from the business either. Microsoft Corp. (Nasdaq: MSFT) memorably abandoned its plans to mount an alternative pay-TV service in 2012, also due to high licensing costs and the difficulty of securing necessary content agreements. But Google (Nasdaq: GOOG) and Apple Inc. (Nasdaq: AAPL) are among the companies still toying with the idea of launching their own subscription services. (See Microsoft Puts Pay-TV Plan on Pause and Google, Apple Pitch Pay-TV Services.)

Bloomberg says that Intel hopes to have the sale of OnCue completed by the end of the year. But industry analysts and other experts don't expect Intel to get anywhere near the $500 million it's reportedly seeking. On TiVo Inc. (Nasdaq: TIVO)'s earnings call late Tuesday, for instance, TiVo President & CEO Tom Rogers pooh-poohed the notion that OnCue could be worth that much.

— Mari Silbey, special to Light Reading Cable

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DOShea 11/27/2013 | 10:28:05 AM
Licensing How are giant companies like Intel and Microsoft getting this far into OTT ventures without realizing the abomination of content licensing economics? They might want to have someone at least monitor the industry headlines before they invest hundreds of millions in this kind of thing.
KBode 11/27/2013 | 10:41:04 AM
Re: Licensing Agreed. In early press statements they were so certain that THEY would be the ones to break the content licensing logjam that companies like Apple, Google, Microsoft and many others could not. I remember statements suggesting that those companies failed because they simply weren't smart or aggressive enough, not that the entire licensing field is rigged specifically to prevent these kinds of disruptive solutions from coming to market.

The $500 million price tag certainly seems ambitious.
craigleddy 11/27/2013 | 11:09:36 AM
Re: Licensing It's astonishing, isn't it? How many times will Silicon Valley companies try to conquer television, only to get their heads handed to them? Intel did a lot of things right but the economics of TV content are an obvious obstacle. 
Carol Wilson 11/27/2013 | 12:23:32 PM
Re: Licensing So Craig, you missed a great revenue opportunity. You could be advising Silicon Valley giants to stay as far away from video entertainment as possible and saving them millions in the process. 

Come to think of it, I could have done the same thing...me or anyone of several dozen folks I can name. 
Liz Greenberg 11/27/2013 | 1:54:51 PM
Re: Licensing Meanwhile we are still stuck with cable companies etc. who force us to pay for extra unwanted channels just so that we can see the few channels that we can't find on the internet.  It would be wonderful if we could only get the content providers to open their thinking and sell to Intel, Microsoft, Apple, and anybody else who wants to distribute their content!
bosco_pcs 11/27/2013 | 1:55:41 PM
Re: Licensing Maybe one shouldn't broadside SV when Intel's track record in branching out is not so pristine, to put it diplomatically. Its management is great in operational excellence, but innovations and out-of-the-box thinking? Readers can be their own judge
Carol Wilson 11/27/2013 | 2:17:19 PM
Re: Licensing The content guys are too addicted to the money they make from the big deals with cable and IPTV players - in many respects, it's the content folks driving these megachannel lineups. You can't get ESPN without also getting their 16 other channels. 

So I put some of the blame for the current bloated systems on the greed of the content folks as well. 
Liz Greenberg 11/27/2013 | 2:23:47 PM
Re: Licensing You are right...if only they would value they actual consumer of the content!  Although sports fans probably don't mind getting all 16 channels of ESPN but they probably do mind that the only way to get some channels is to go through the right ISP!
Carol Wilson 11/27/2013 | 2:25:47 PM
Re: Licensing Sports fans are probably not the best example because live sports drives up the cost of everything for everyone, even those who, for reasons I can't fathom, don't pay any attention to sports. 

But your point is well-taken. Even sports fans wind up paying more because they can't get just the channels they want, they have to get what the content provider wants to sell. 
Liz Greenberg 11/27/2013 | 4:13:32 PM
Re: Licensing Exatly Carol, why should non-sports fans pay for sports fans and vice-vera.  A la carte service is really the solution to the problem but it seems that cable, satellite and any other TV providers a loathe to give that choice to customers.  It seems as if they would rather people go to services like Netflix or Hulu instead.  A potential revenue losing proposition if you ask me.  The younger generation is more tied to the internet than TV so it would seem that the writing is on the wall, the only question is how long.
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