Intel Corp. (INTC:US) said it plans to begin selling a set-top box offering Internet-based television service this year and is confident it can obtain programming.
Eric Free, a vice president and general manager of the Santa Clara, California-based chipmaker, outlined plans for the product and service today at the TV of Tomorrow conference in San Francisco.
“Ultimately we want to deliver a better form of television,” Free said. “We’re very confident we’ll get the content we need to launch later this year.”
Intel, the world’s largest semiconductor maker, plans to offer pay television through Web connections, creating new competition for incumbent providers like Time Warner Cable Inc. (TWC:US) and DirecTV. (DTV:US) Intel has been testing the service among employees as it seeks programming from media companies such as Time Warner Inc. (TWX:US), Comcast Corp.’s NBC Universal and Viacom Inc. (VIAB:US)
The company hopes to build a customer base on par with satellite services, Free said. DirecTV had 20.1 million customers at year end, while Dish Network had 14.1 million, according to company reports. Intel hasn’t provided pricing details yet.
Consumers increasingly view TV on their own schedule, wherever they are, Free said. They would prefer an experience at home where they don’t have to wade through hundreds of channels and can purchase and view shows based on their interests, he said.
“One of the places where innovation really hasn’t happened, at least not at the pace of your phone, your tablet or your laptop, is really within the pay-TV stack,” Free said.
Intel rose 1.3 percent to $23.88 at the close in New York. The shares have advanced (INTC:US) 16 percent this year, compared with 11 percent for the Standard & Poor’s 500 Index.
With its own set-top box, Intel is betting it can create a flexible service that gives subscribers more choices over the channels they receive and better ways to navigate content, Erik Huggers, general manager of Intel Media, said in February. Intel plans to offer live channels and on-demand programming.
Time Warner Cable and other pay-TV operators are offering incentives to media companies to withhold content from Web-based entertainment services such as the one Intel is pursuing, people with knowledge of the matter said this month. The incentives can take the form of higher payments, or they can include threats to drop programming, the people said then.
Networks such as Time Warner’s CNN, NBC Universal’s USA Network and Viacom’s MTV would give Intel critical mass to offer consumers an alternative to established pay-TV services.
Time Warner, NBC and Viacom had signed off on the broad outlines of the proposed service, people with knowledge of the situation said in March, with some aspects to be settled. Other network owners weren’t as far along, the people said then. The company must negotiate on local levels as well, which will make Intel’s planned nationwide rollout occur on a staggered delivery schedule, Free said.
The chipmaker has been working closely with Nielsen and content providers to find “the appropriate value and appropriate balance between consumers and business,” Free said. One stumbling block for content providers has been measuring the digital audience to gauge the effect of advertising, he said.
“We’re tempered by the practical business realities of the industry,” Free said. “While we are in somewhat of a green field, that green field is strongly associated with an existing field that may be less green.”
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