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Can Intel Succeed Where All Others have Failed?

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January 07, 2013

Can Intel Succeed Where All Others have Failed?

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By Gary Kim
Contributing Editor

Just how soon there will be a major transformation of the subscription TV business is unknown. But you can add Intel (News - Alert) to the list of contestants maneuvering into a position to benefit from such a transition.


If Intel can get the licensing agreements in place, and that is a tall order, consumers in some initial markets might be able to buy and stream discrete programming channels, and possibly single programs, to their TVs for the first time. 

That would make Intel's New IPTV service a potential game changer for the video subscription business.

The service will be provided by a new set-top box, possibly Intel branded, that will feature a "cloud DVR" feature for better ease of use, as users will not have to program recording ahead of time.

Intel Corp. has been developing an Internet-based television service that essentially would be a "virtual cable operator," presumably offering the same "bundled" approach to video entertainment as offered by cable, telco and satellite-TV operators.

Whether Intel can convince programmers that now is the time to infuriate all the rest of their main distributors is the issue.

At stake are relationships, already testy, with cable, satellite and telco distributors who pay programmers $41 billion a year in licensing fees. Any significant deals with Intel for a streaming service would put huge pressure on those other existing relationships.

Someday programmers will change their minds. But a rational person might argue that the time remains somewhere off in the distance. Ask yourself whether you would jeopardize a business worth billions to gain a new business of millions.

For such reasons, many would argue we are unlikely to see major breakthroughs (“disruptions”) in the video entertainment business, any time soon. Technologists often think that because Internet-based tools can change the way people watch cable TV, such changes naturally will occur. Business issues are the issue, specifically the scores of billions content owners and video distributors make from the current business model.

Consumers likely want to be able to buy only what they want, when they want it. But it is asking too much for a big industry to destroy itself.

Over the top video revenue will grow, of course, but will remain a small fraction of the overall video subscription business, which might represent $170 billion just in subscription revenue (irrespective of advertising and commerce revenue) by 2016.

Digital TV Research estimates global online video revenue of perhaps $29 billion by 2017. But that will occur within the context of a subscription TV business earning about $200 billion in global revenue by 2017.


Edited by Brooke Neuman


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